Period 1: The Early Years (1850–1900)
Some observers define the early years of purchasing history as beginning after 1850. There is evidence, however, that the purchasing function received attention before this date. Charles Babbage’s book on the economy of machinery and manufacturers, published in 1832, referred to the importance of the purchasing function. Babbage also alluded to a “materials man” responsible for several different functions. Babbage wrote that a central officer responsible for operating mines was “a materials man who selects, purchases, receives, and delivers all articles required.”
In the textile industry, the selling agent often handled purchasing and was also responsible for the output, quality, and style of the cloth. The selling agent was responsible for all purchasing decisions, because the grade of cotton purchased was a factor in determining the quality of the cloth produced. Customer orders were transformed into purchase orders (POs) for cotton and subsequently into planned production.
The greatest interest in and development of purchasing during the early years occurred after the 1850s. During this period, the growth of American railroads made them one of the major forces in the economy. Railroads were vital to the country’s ability to move goods from the more developed Eastern and Midwestern markets to less developed Southern and Western markets. By 1866, the Pennsylvania Railroad had given the purchasing function departmental status, under the title of Supplying Department. A few years later, the head purchasing agent at the Pennsylvania Railroad reported directly to the president of the railroad. The purchasing function was such a major contributor to the performance of the organization that the chief purchasing manager had top managerial status.
The comptroller of the Chicago and Northwestern Railroad wrote the first book exclusively about the purchasing function, The Handling of Railway Supplies—Their Purchase and Disposition, in 1887. He discussed purchasing issues that are still critical today, including the need for technical expertise in purchasing agents along with the need to centralize the purchasing department under one individual. The author also commented on the lack of attention given to the selection of personnel to fill the position of purchasing agent.
The growth of the railroad industry dominated the early years of purchasing development. Major contributions to purchasing history during this period consisted of early recognition of the purchasing process and its contribution to overall company profitability. The late 1800s signaled the beginning of organizing purchasing as a separate corporate function requiring specialized expertise. Before this period, this separation did not exist.