Period 5: Materials Management Comes of Age (Mid-1960s– Late 1970s)

The mid-1960s witnessed a dramatic growth of the materials management concept. Although interest in materials management grew during this period, the concept’s historical origins date to the 1800s, when U.S. railroads organized under the materials management concept during the latter half of the nineteenth century. They combined related functions such as purchasing, inventory control, receiving, and stores under the authority of one individual.

External events directly affected the operation of the typical firm. The Vietnam War, for example, resulted in upward price and materials availability pressures. During the 1970s, firms experienced materials problems related to oil “shortages” and embargoes. The logical response of industry was to become more efficient, particularly in the purchase and control of materials.

There was widespread agreement about the primary objective of the materials concept and the functions that might fall under the materials umbrella. The overall objective of materials management was to solve materials problems from a total system viewpoint rather than the viewpoint of individual functions or activities. The various functions that might fall under the materials umbrella included materials planning and control, inventory planning and control, materials and procurement research, purchasing, incoming traffic, receiving, incoming quality control, stores, materials movement, and scrap and surplus disposal.

The behavior of purchasing during this period was notable. Purchasing managers emphasized multiple sourcing through competitive bid pricing and rarely viewed the supplier as a value-added partner. Buyers maintained arm’s-length relationships with suppliers. Price competition was the major factor determining supply contracts. The purchasing strategies and behaviors that evolved over the last half century were inadequate when the severe economic recession of the early 1980s and the emergence of foreign global competitors occurred. Overall, the function was relegated to secondary status in many companies. Dean Ammer’s classic 1974 article in the Harvard Business Review categorized top management’s view of purchasing as passive, risk averse, and a dead-end job. Ammer felt overcoming this perception could be accomplished by active purchasing, which is measured in terms of meeting overall company objectives and contributing to bottom-line profitability.28 He argued that the purchasing executive should be part of nonpurchasing decisions, for the entire organization loses when purchasing is not part of the organization’s consensus on major decisions.29 Finally, Ammer suggested that the function should have sufficient stature to report to top management or a division manager. However, this happened in only 37 percent of his responding firms.