Developing purchasing's foundation.

Historians like to pronounce that an understanding of the future depends on an understanding of the past or that our past is our window to our future. Why should supply management be exempt from such a prevalent perspective? In this article an attempt has been made to document the development of key ideas and concepts in purchasing and supply management in the United States and Canada from 1830 to 1940. An understanding of supply's evolution may not only assist today's supply practitioners and academics in placing current practices and theories in context but also in charting our future.

Against a backdrop of periods of war and peace, prosperity and recession and an evolving legal, technological, political and social environment, we can trace the growing awareness that effective purchasing and supply management is a key contributor to organizational success in both the public and private sectors. We can also see that practitioners were the key movers behind these 110 years of professional growth and that academics interested in the field did not start writing about it seriously until the 1930s.

The really exciting aspect of this historical trek through our field is that it reveals the origins of many ideas we proudly cite as today's insights and developments. We are finding the seeds that led to the growth of the body of knowledge covering the supply management field. This is also a cautionary tale for doctoral candidates claiming a past lack of research and understanding of their current thesis topic and their discovery of new truths.

The choice of time-period covered is quite arbitrary. The original intent behind this research was to cover the complete 1830-2007 period in one paper. However, the extent and depth of material uncovered in the years before 1940 led to the realization that one paper could not do proper justice to the topic. It was, therefore, decided that the 1940-2007 time slot would require at least one, if not two more papers.

The authors also decided to include extensive quotes in their original form to share the richness of the language and the authenticity of the points raised.

Clearly, purchasing and supply activities were carried out throughout all of history. Even the ancients in creating structures like the pyramids or great cities, conducting wars on a massive scale, and engaging in commerce over large geographical areas, needed supply and logistics expertise to support these initiatives. The 1830 start was chosen to include Charles Babbage's text. Moreover, the United States and Canada saw significant growth in industry after that date, necessitating greater attention to the supply area. The cut-off date of 1940 was just before World War II, but after the Great Depression and after academics had seriously joined practitioners in growing the field of supply knowledge and promoting the teaching of purchasing at the college and university level.

During this 110-year span many truly interesting developments took place as the following material will show. The material has been organized into four time spans. From 1830 to 1900 the first literature covering the field of purchasing appeared. Between 1900 and 1920 local associations of practitioners were organized followed by the creation of the National Association of Purchasing Agents, Inc. (N.A.P.A.) in 1915. World War I created an unprecedented upheaval of markets. Also during this period, materials management, centralization, and outsourcing of the purchasing function were topics raised in articles and texts. The 1920 to 1930 period saw the term "scientific purchasing" gain prominence as well as the adoption of ethical standards. And the 1930-40 decade not only covered the Great Depression, but also saw significant developments in governmental purchasing, performance, measurement, purchasing education, legislation and serious discussion as to the scope of supply management.

THE 1830-1900 PERIOD

During the period from 1830 to 1900 the first recognition of purchasing was in the general management literature.

In the United Kingdom, Charles Babbage in 1832 had already identified the need for supply expertise. He referred to mining firms (one of the major industries in that time period) and noted in discussing proper organization structure that "... a materials man selects, purchases, receives, and delivers all articles required" (Babbage 1932). This likely was the first written acknowledgement of the materials management concept.

An 1870 article opined that judicious purchasing could save big bucks in construction costs, to wit: "After a bill of the necessary amount of lumber has been prepared, it will be found an economical practice to communicate with lumber dealers in various parts of the country, for the purpose of determining the price for the kinds of lumber required. In this way, a shrewd and judicious builder or buyer may often save from twenty to fifty percent on the price of his lumber" (Author Unknown 1870). Therefore, the savings potential and profit-leverage effect of purchasing were known many years ago.

In 1887, the first book devoted specifically to purchasing appeared. The railroads around the turn of the century were probably the largest organizations in the United States. The author, Marshall M. Kirkman, Controller of the Chicago and Northwestern Railroad, recognized the crucial impact of purchasing: "The intelligence and fidelity exercised in the purchase, care, and use of railway supplies, influence directly the cost of construction and operating, and affect, therefore, the reputations of officers and profits of owners ..." On the potential contribution of a savvy purchasing agent, the author stated: "To be able to buy its supplies at the lowest possible figure is of enormous value to a company, and a capable purchasing agent, it is probable, can save his employer a greater sum through the exercise of experience and intelligence, than any other officer of like grade" (Kirkman 1887).

During the 1890s several articles appeared in the Railroad Gazette discussing subjects such as the duties of a purchasing agent, benefits of standardization, inventory quantities, disposition of surplus, and analysis of value. And at the end of the 19th century, J. Slater Lewis emphasized the importance of purchasing when he wrote in his book on factory organization that, "The economical purchasing of stores is one of the most important factors in the successful administration of a manufacturing establishment." He also warned that "... the lowest price is not by any means always the cheapest" (Lewis 1896).

Therefore, it is clear that, even before the year 1900, the need was evident for a supply function, with appropriate roles and responsibilities, staffed by knowledgeable individuals who were guided by more than price considerations alone. The seeds that would give birth to specialization, value, total cost of ownership, profit leverage, market analysis and overall contribution to the organization had already been sown over one hundred years ago.

THE 1900-20 PERIOD

The 1900-20 period was particularly interesting from the evolutionary perspective on the supply field as it introduced materials management, centralization and outsourcing of the purchasing function. The latter part of this period also included the start of the N.A.P.A. as well as World War I and its immediate aftermath. (N.A.P.A. was changed to NAPA, then to NAPM and ISM decades later.)

A 1900 article commented on (1) the need for buying personnel to have a knowledge of business methods in addition to technical or shop training, (2) the need for tact on the part of the purchasing agent and (3) the tendency to give the buyer an excessive workload, by insisting his job include analytical purchasing (Diemer 1900).

Diemer also commented on the importance of proper purchase specifications, supplier relations, and centralized purchasing. For example, "In the recent 'integrated' mode of organization in many industries, involving the combination under one director of a number of geographically separated plants, it has seemed wise to form a new basis for buying, consisting in the establishment of a centralized purchasing department, which takes direct charge of the buying of the larger and repetitional items, supervising at the same time the local purchasing of smaller items at the various plants" (Diemer 1900).

This and other articles in the early 1900s also considered proper specifications, supplier relations, organization of purchasing, workload and personnel qualifications relevant. That a purchasing person was a male was still the norm, however.

Another plea was made in 1905 for giving greater attention to purchasing, saying "When it is considered that buying requires not only keen, shrewd business judgment, but also a vast amount of technical knowledge compactly arranged, it is evident that the systematization of the department of purchasing, too, is worthy of careful research, study and treatment." When one considers the importance of purchasing relative to the other major business activities, the advice of this 1905 author was, "While there is a tendency on the part of the salesman to define his work as that of the man 'who keeps the smoke coming out of the factory chimneys,' and to always carry the idea that he is on the end that brings in the money, yet the relative importance of selling and buying is no more clearly shown by the fact that incompetence on the part of the salesman may bankrupt his firm; on the part of the buyer it is sure to." This author also emphasized "... knowledge of the market," saying "Nor is knowledge of prices more than a beginning of knowledge of market ... The shrewd buyer must look beyond the mere price and must reach into the causes which have made that price, and those that are material in its remaining at that point, or in causing its fluctuation up or down" (Ennis 1905). This was a precursor to today's discussions of analytical purchasing and cost and price analysis.

Also, this author emphasized the materials management concept, saying "It is now the common practice in by far the larger percentage of manufacturers and works to keep separate the purchasing agent's duties as follows: (1) Purchasing of raw material, (2) Storing of raw material and (3) Stocking of finished components. Where conditions are as have been treated before in this article, it will be found that by combining in one department these various functions that not only will factory organization be furthered but the resulting benefits of good factory organization will accrue" (Ennis 1905).

A 1911 book, The Supply Department, advocated a type of materials management organization for railroads, writing, "Unquestionably, the proper organization is an officer in charge of both purchases and distribution, with a subhead to do the buying and another to maintain the stock and have charge of distribution" (Pearce 1911). Evidently, the concept of joining the purchasing/inventory/supply activities organizationally has been advocated and written about for close to one hundred years now. A 1915 book, Materials and Supplies, had separate chapters on "Deciding Whether to Make or Buy" and "How Price and Service are Secured" (Materials and Supplies 1915).

Also in 1915, C.S. Rindsfoos in his book had a chapter on "Strategy," where he stated, "The application of strategy in buying decisions as well as in selling involves a knowledge of human nature and ability to portray ... It is no less essential to know the failings of the seller than it is to conceal one's own desires, weaknesses, and thoughts" (Rindsfoos 1915, p. 69). This chapter contained many interesting suggestions that would fit well into some of the current literature on negotiation. Rindsfoos was President of the United States Purchasing Corporation, and understandably promoted the use of "buying companies" saying, "The author believes there are many reasons why the ideal purchasing department in the not too far distant future will be in the form of a separate company. In fact, one or two such companies are already organized and in successful operation--successful in the savings they effect for their clients no less in the profits they earn" (Rindsfoos 1915, p. 104). This was an early reference to the concept of outsourcing the purchasing function.

N.A.P.A.

Although in several cities local purchasing managers had formed local purchasing associations, Boston and Buffalo were some of the early ones in 1904, it was not until March 1915 that the idea of a national purchasing association became a legal reality. Interestingly, in New York, it was a sales representative, Edward B. Hendricks of the Thomas Publishing Company, who was a key driving force for the birth of N.A.P.A. It was not until 1917, however, that N.A.P.A. became firmly established after an early battle about the constitution. Two key issues were membership qualifications and finances. Most local associations included sales representatives among their members, while N.A.P.A. insisted on full time bona fide purchasing employment as the only acceptable qualification for membership. N.A.P.A. also wanted to acquire all of the financial assets of local associations. After extensive negotiations N.A.P.A. got its wish on membership while local associations retained their financial assets. Thus, Los Angeles, Chicago, St. Louis, Detroit, South Bend and Cleveland joined New York in 1917 to form the founding core of local associations. The first Canadian associations to join were Toronto, Ottawa and Montreal in 1919.

In the early years of N.A.P.A. association activities included a national convention, an exchange bureau for surplus and obsolete stock, a library, round table discussions, and the promotion of standardization.

Over the next decades N.A.P.A. would play a key role in advancing the purchasing profession thanks to the leadership and support of highly motivated and active members from prominent public and private organizations in both the United States and Canada.

World War I

World War I started to have a major economic impact on the North American economy in 1915 and as demand for commodities and all costs of war requirements soared; purchasing managers faced the daunting challenge of shortages, price escalation and loss of European suppliers. Paradoxically, this period of supply difficulties and uncertainty did much to elevate the status of purchasing in both the public and private sectors.

Two universities, New York University and Harvard, started purchasing courses in the 1917-18 academic year (Farrell 1954, p. 31).

The Postwar Period

After the war:

    government and industry found themselves with huge stocks of
    materials and products for which there was no longer the substantial
    market that had been created by the war. The full impact of this
    condition was not felt until 1920, but there were already signs of
    decline in 1919 ... Against the ominous background being created by
    these developments, labor became restless and began to make new
    demands on industry.
    Claiming they were unable to meet the high cost of living (which by
    the middle of 1919 had advanced 77 percent over the 1913 level) more
    than 4,000,000 workers in various industries went out on strike.
    Among the most serious of those strikes were those called by 300,000
    steelworkers and 450,000 bituminous coal miners. The steel strike
    lasted from September 1919 to January 1920, and the soft coal strike
    from November 1919 to January 1920.
    Industrial purchasing agents were to be put sharply on the spot as
    conditions grew worse and worse. From the desperate position of
    having to obtain materials made scarce by war conditions, they had
    to turn completely about and buy with extreme caution in a falling
    market, lest they burst inventories already swollen. (Farrell 1954,
    pp. 47-48)

On the other hand, purchasing men were called on to overcome temporary shortages caused by strikes.

The year 1919 saw the earliest text on public supply encountered in this research (Thomas 1919).

THE 1920-30 PERIOD

The decade from 1920 to 1930 started off badly with both coalminers and steelworkers on strike and a depression from mid-1920 to late 1922. A recovery period from 1923 lasted until 1926 when 3 years of "profitless prosperity" followed until the stock market crash of 1929.

In the 1920-30 period the concern for ethics in purchasing saw the creation of a code of standards that have guided the field ever since. It was also a period in which the term "scientific purchasing" became popular.

The Purchasing Agents Creed

In 1920, N.A.P.A.'s ethics committee developed a "Purchasing Agents Creed" a forerunner of Principles and Standards of Purchasing Practice. In strong male language this creed concluded with "I believe in enthusiasm, the acquisition of business knowledge, progressive methods and success; in the exchange of ideas and accommodation among fellow purchasing agents and in fulfilling all my obligations like a man" (Farrell 1954, p. 55).

The First Purchasing Magazine

The first local association magazine appeared in 1920, the Detroit Purchaser, to be followed by many more in the years following. Typically, these magazines covered a combination of local news as well as articles on a variety of supply issues.

The First Purchasing Text Authored by a Woman

The first purchasing book authored by a woman appeared in 1922. Helen Hysell had strong feelings about the role of the purchasing agent, saying: "The purchasing agent should be in the "crow's nest" or "lookout" of the business craft equally, if not more often, than the sales director. The sales department may figure out its plan for a year ahead, but, without the purchasing agent's cooperation in obtaining the raw materials to manufacture, or the finished materials for them to resell, on terms at a price that will meet competition at the time of the sale, the sales department, as well as the financial department, will be greatly handicapped and the aim of all departments--profit--will be that much lessened if not entirely consumed" (Hysell 1922).

Women and N.A.P.A.

Although the first purchasing text written by a woman had been well received in 1922 and although many purchasing departments included female staff, the question of female membership in N.A.P.A. arose formally in 1923. Paul Farrell's account of this reads: "At a meeting of local association presidents and secretaries at the 1923 national convention, Boffey (Executive Secretary of N.A.P.A.) told of lunching with a young woman purchasing agent who asked why she could not join the association. She reported that there were many women who wanted to ask the same question. "What are we to say to women who wish to join?" Boffey asked. This question set off a lengthy discussion.

Several members pointed out that women should not be admitted because of the awkward nomenclature used for various types of equipment: bastard files, male and female couplings, hermaphrodite calipers, and so on. Sampson, of Detroit, feared that attendance at meetings would lag if women were allowed to attend. Hecker, of St. Louis, gravely cited the case of a woman medical student who sued because of some of the terms used in one of the school's meetings.

Such powerful arguments destroyed any slight chances the ladies might have had, and the admission of women was voted down. There is no record of when the admission of women was finally permitted, but it is a fact that today they are playing a prominent and effective part in the work of the N.A.P.A." (Farrell 1954, p. 70).

Principles and Standards of Purchasing Practice

In 1923, N.A.P.A. had a membership of 3,900 members and 42 affiliated branches. At its annual convention it adopted the "Principles and Standards of Purchasing Practice" the ethical code, which for decades remained unchanged and was hung on the walls in thousands of purchasing offices and reception rooms. This code no longer contained the sexist language included in the "Creed" adopted three years earlier.

The Business Survey

Also in 1923 N.A.P.A. created the National Business Survey. Polling members for this and other surveys was a continuing activity at N.A.P.A. The national survey, eventually changed to Report On Business[R], became one of the most widely acclaimed business indicators in the United States.

N.A.P.A. Developments on Specifications and Governmental Purchasing

The year 1925 saw two interesting N.A.P.A. initiatives come to fruition. After a 3-year effort by N.A.P.A. members, The Dictionary of Specifications was published containing 27,000 specifications. Also in 1925, the national committee on governmental purchasing set up a set of aims:

1. "To make available to all public buyers, information and reports on methods followed and results achieved in the federal government, states, municipalities, and cities.

2. To sponsor and support movements to extend centralized purchasing to new governmental units.

3. To elevate the general character of government buying in urging its divorce from politics; liberation from undue legal restrictions; appointment of qualified buyers.

4. To increase the prestige of government buyers by a continuance of present publicity program to convince the public that purchasing is a profession, requiring definite technical training, and to foster training courses in purchasing in colleges and schools in order to provide skilled purchasers for governments.

5. To simplify existing office procedures through adoption and recommendation of additional standard forms." (Farrell 1954, p. 84)

The Harvard Business Review and Howard T. Lewis

Also in 1925 the Harvard Business Review published two articles on purchasing by unknown authors. "The Status of the Purchasing Agent" and "Spreading Purchases Among Low Bidders." These were followed by a dozen purchasing related articles over the next decade dealing with a range of topics from centralized buying and reciprocity to performance measurement and relations with manufacturing and industrial marketing.

At the N.A.P.A. national convention in 1926, Prof. Howard T. Lewis from the Harvard Business School gave a speech on the potential of the purchasing function and the position in the management structure, a broad perspective fully in line with job descriptions decades later. Nevertheless, the reaction at the conference was that H.T. Lewis was describing the general manager's job.

The Year 1927

In 1927 Mitchell's chapters "Variations in Purchasing Conditions" and "The Operation of the Purchasing Department" were popular references. Mitchell followed his purchasing text with one on production management in 1931 and he combined writing about both fields thereafter (Mitchell 1931).

Purchasing and National Magazine Coverage

The national magazine "Purchasing Agent" first appeared in 1927 and this monthly publication covering a wide variety of purchasing topics changed its name in the summer of 1932 to "Purchasing." Purchasing Agent and its successors including the Bulletin covered a wide range of purchasing topics relating to almost all aspects of the field. Most contributors in the early years were practitioners with significant experience and the ability and willingness to share their insights. Frequent coverage of purchasing topics also appeared in other trade magazines such as Iron Age, Sales Management, Printers' Ink, Advertising and Selling, Factory Management and Maintenance, Textile World, American Machinist, Mill and Factory and Mechanical Engineering.

Standards for Buying and Selling

In 1928 N.A.P.A. developed the "Standards for Buying and Selling." Along with the Principles and Standards of Purchasing Practice of 1923, these two guides for ethical conduct have remained in force for decades.

George Renard

In March 1928 George Renard, a former purchasing and production manager and director of the St. Louis Screw and Bolt Manufacturing Company, became the Executive Secretary of N.A.P.A., a position he would hold with distinction for the next 30 years. In this position, through his guidance and writing, he became the driving force behind N.A.P.A.'s growth and expansion of influence.

More on Scientific Purchasing

Two books of significance appeared in 1928. Both books emphasized the analytical aspect of purchasing, and referred to it as "Scientific Purchasing," a term in vogue then, following the success and impact of the work of Frederick W. Taylor (Taylor, 1915). Taylor referred to the use of his methods as "Scientific Management," because it applied the scientific method of attack to solve management problems. The first purchasing text was written by Norman F. Harriman, who was employed in purchasing by the Union Pacific Railroad. The book stated that: "The science of buying is recognized more clearly in its proper perspective today than ever before. Increasing consideration is being given not only to the first cost but also to the longer range factors of fitness, interchangeability, renewals, replacements, general maintenance, wearing qualities and cost per unit of utility. The tendency to buy at so much per unit of quality or utility, instead of per unit of quantity, is one that will increase. The idea is fundamentally and economically sound" (Harriman 1928, p. 21). Harriman's concept sounds like the beginnings of the 1950s movement referred to as "Value Analysis" Harriman went on to recommend the systematic collection of data by individuals titled "Purchase Engineers" within the department to aid buyers in investigating areas of cost reduction (Harriman 1928, pp. 115, 122-23, 229-30). Thus, the idea of staff purchasing researchers was introduced some 80 years ago.

A second 1928 book emphasized the importance of systematic data collection by specialists within the purchasing department. "The economics division is an extremely important part of the purchasing organization. Broadly the function of this department is to maintain all records relating to the prices of products, to study materials and markets, to analyze the prices paid for commodities and equipment, and generally to point the way to savings through more intelligent specifications and supervision of sources of supply ... Economy in purchasing is not a matter of selecting the lowest of a number of bids, but of knowing that the material bought is adopted for requirements, efficiently produced, and bought at a fair profit to the seller" (Gushee and Boffey 1929, p. 59). These authors give explicit reference to: (1) the need for cost/price analysis as a basis for intelligent price determination, and (2) the concept of a "fair profit" for the seller.

These authors also emphasized purchase timing based on analysis of data. "There are some purchasing agents who believe, or profess to believe, that to buy successfully demands a sixth sense--a sort of intuition or 'hunch' as to the trend of general business and the tendency of specific markets. That belief is utter nonsense. As a matter of fact, the purchasing agent who claims that he follows a 'hunch' in a particular transaction will find, on self-analysis, that his action is really based on what he has read or heard. Market studies, economic analyses, graphic charts accurately and regularly revised, established policies of purchasing to take the utmost advantage of prevailing conditions--these are facilities which are essential to enable the purchasing agent to time his buying most effectively ..." (Gushee and Boffey 1928, p. 99).

Both the Harriman and the Gushee & Boffey books made a strong case, some 80 years ago, for placing major emphasis on the analytical approach to purchasing, and for providing staff research support for the decision maker.

Their thinking was a clear antecedent for the value analysis work developed by Larry Miles at GE several decades later.

Also in 1929 an often quoted text, Governmental Purchasing, by Russell Forbes appeared. (Forbes 1929). It was largely based on thesis research he had conducted while pursuing a graduate degree on public administration at Columbia University. Russell Forbes had joined N.A.P.A. as assistant secretary in the early 1920s. He will be referred to again in the next decade's section.

THE 1930-40 PERIOD

The 1930-40 period, dominated by the Great Depression, from a purchasing perspective saw a number of significant developments in governmental purchasing, performance measurement, purchasing education, legislation and the scope of supply functions.

According to Farrell, "In a continuing effort to advance the cause of centralized buying, Renard sent out a letter in 1930 to a large number of public purchasing agents asking for convincing data on savings brought about by centralized purchasing offices. These data on savings and information on organization and administration were turned over to Russell Forbes, former assistant secretary of the N.A.P.A., and at the time secretary of the National Municipal League. Under the auspices of the N.A.P.A. committee on governmental purchasing, headed by Walter Kirkman of the State of Maryland, the collected information was published in two booklets in February 1931" (Farrell 1954, pp. 103-04).

Measurement of Performance Contest (1931)

"Another feature of the 1931 convention was the presentation of awards to winners of an essay contest sponsored by the N.A.P.A. in conjunction with the National Association of Cost Accountants. The topic was somewhat ambitious: 'What would you suggest as a practical method or yardstick for measuring efficiency and proving the value of the purchasing department, including the form and composition of reports of the department to management, and the basis for bonus or premium awards to purchasing executives or the purchasing department?'

The first two prizes went to members of the National Association of Cost Accountants, and the third was awarded to a virtually unknown purchasing agent, Donald G. Clark, Brown & Sharpe Manufacturing Company, Providence, Rhode Island. Clark's paper received greater comment and interest among the purchasing men, since it was based on practical experience, and it gained for him a reputation that was to grow rapidly. Clark received scores of invitations to speak before meetings of purchasing agents as well as accountants, and soon became a prominent figure in purchasing circles. Within a few years he was to become successively, chairman of the education committee, national president, and Shipman Medalist" (Farrell 1954, p. 105).

The First College Text on Purchasing

An indication of the early recognition of purchasing as a discipline in a college or university curriculum was the publication of the first college-level textbook in 1933, authored by Howard T. Lewis, Professor of the Harvard School of Business. Several items are notable about this first college textbook: (1) It is described as the "Official Publication of the National Association of Purchasing Agents. (2) One of the Research Assistants in Purchasing at the Harvard Graduate School of Business (HBS) who was involved in the writing of this first textbook was Wilbur B. England, who later had a distinguished career in industry, then became a Chaired Professor at the HBS, and later took over this textbook as the primary author. (3) It was used as a text, and in later editions, which included case studies, in the course in purchasing taught by Professor Lewis, and later Professor England, at the HBS, and at other universities. (4) This text has evolved through several editions, and several authors, and still is in publication, 75 years later, now in its 13th edition (Leenders, Johnson, Flynn and Fearon 2006). It is one of, or perhaps the, longest-continually-published textbooks in the field of business in the world.

This pioneering textbook venture by Professor Lewis and the National Association of Purchasing Agents contained material on: "The Significance of the Purchasing Function"; "Organization," with emphasis on when centralization, or decentralization, is appropriate, and how to change from one to the other; "Purchasing Procedure"; "Quality"; "Inspection"; "Quantity and Stores" with an exposition on economic order quantity (EOQ) calculation; "Sources and the Assurance of Supply"; "Price Policies" with discussion of cost analysis as a technique of price analysis; "Speculation"; "Budgets"; "Equipment Purchasing"; and "The Measurement of Purchasing Efficiency." It was a remarkably complete college text for a course in purchasing. H.T. Lewis also authored in 1934, a book of purchasing cases dealing with major purchasing decisions (Lewis 1934).

In 1933 there were only nine schools offering separate courses in purchasing. Purchasing was included, however, as a part of other courses in 25 schools. Within 5 years, purchasing was being given as a separate course in 24 schools, and 63 schools included purchasing topics in various other courses.

Commercial Bribery 

The N.A.P.A.'s long fight against commercial bribery, involving co-operation with the Federal Trade Commission and various state agencies, received a boost in November 1933. President Roosevelt in an executive order interpreting commercial bribery provisions of all NRA codes said: "No member of the industry shall give, permit to be given or directly offer to give anything of value for the purpose of influencing or rewarding the action of any employee, agent or representative of another in relation to the business of the employer of such employee, the principal of such agent or the represented party, without the knowledge of such employer, principal or party. Commercial bribery provisions shall not be construed to prohibit free and general distribution of articles commonly used for advertising except so far as such articles are actually used for commercial bribery as heretofore defined."

In the Bulletin, George Renard pointed out that "The N.A.P.A. with several other organizations has been sponsoring such a law for more than ten years. Another complete project" (Farrell 1954, pp. 118-19).

Russell Forbes

The aforementioned Russell Forbes was referred to by Farrell as follows: "A major contribution to purchasing in general and to governmental purchasing in particular was recognized at the (1934) convention by the award of the Shipman Medal to Russell Forbes, former assistant secretary of the association." Forbes was cited for "brilliant research work in governmental purchasing ... for authorship of laws ... covering public buying ... for zeal and effort in serving as consultant on matters of public buying ..."

At the time of the award, Forbes was Commissioner of Purchases for the City of New York. He had helped write those provisions in the city charter setting up a centralized purchasing department, and had in effect been told by reform Mayor LaGuardia, "you wrote the act, now you administrate it. The offer of the post had come almost simultaneously with one from New York University that might have made Forbes a dean at the university. He passed up this 'chance of a lifetime,' and out of a sense of duty and adventure took the New York City job in 1933" (Farrell 1954, pp. 120-21).

The Scope of Purchasing

The N.A.P.A. Pamphlet 22 in 1935 showed the results of research by Professor Erwin H. Schell of MIT on the topic of responsibilities of purchasing departments.

E.H. Schell in commentary on his research raised the issues of status and scope of purchasing; a clear predecessor to supply chain management.

"When is it proper to give a high rank to an industrial function? The answer turns on the fundamental fact that industry is inherently made of human stuff. Those functions, which report to the higher officials as a matter of natural right are those which enjoy intimate and exclusive relationship with some distinct and important group of individuals to whose interest the company directly administers. The sales executive enjoys this relation to the customers who constitute the company's market; the financial executive likewise to the fiscal interest, the production executive to the operating employee group, the technical executive to the creative, scientific and engineering group. The purchasing agent enjoys this relation to that inescapably essential group--the suppliers of the company's material requirements.

It is this specific body of contacts peculiar to the purchasing function that entitles the executive to a place in the higher coordinative zone.

Such privilege is accompanied by corresponding obligation. The purchasing agent, to justify his rank, should maintain strong command over company-supplier relationships. When he has shown such competence in these areas that general officials to whom he reports place implicit confidence in his technique and judgment, then he has attained the fullest scope of his stated and implied powers. In some of the smaller organizations it is possible for these standards to be reached, still leaving time and energy for other activities" (Schell 1935).

Schell goes on to say: "Do you not believe it would be desirable to have closer coordination between the various departments contributing to the inflow of materials? If a coordinating executive is not appointed, how can this objective be reached?

The closest possible coordination between the activities of related departments is always desirable. And such coordination should be equally high throughout the entire sequence of operations from the purchase of raw materials to the delivery of finished goods to the customer. To isolate, for especial coordination, that forepart of the sequence relation to procurement is to assume a divided unity, which does not exist in the process of manufacture.

It is the prime responsibility of the general manager to coordinate this entire sequence. With adequate facilities in the form of budgetary control, manufacturing schedules and the like, together with the cooperation of his subordinate executives in charge of major functions, satisfactory coordination is possible under this general executive" (Schell 1935).

In commenting on a 1938 N.A.P.A. survey on the responsibilities of purchasing departments, H.T. Lewis said: "The results of this survey indicate that the scope of the purchasing department's activity, the breadth of its responsibility, and its control of functions other than the actual placing of orders vary tremendously among different organizations, whether industrial, institutional, or public utility. It is also apparent, however, that there are certain duties which the purchasing department more or less commonly controls" (Lewis 1940, p. 23).

The same study lists the responsibilities quite commonly assigned to the purchasing department:

(a) "Stores and storeskeeping.

(b) Inventory control.

(c) Receiving.

(d) Inspection.

(e) Traffic.

(f) Research and engineering.

(g) Salvage disposal.

(h) Reclamation.

(i) Miscellaneous minor functions sometimes allocated to the purchasing department. These minor functions include such responsibilities as management of the office, representation on the budget committee, purchase of all kinds of insurance, control of the customs entry of imported materials, and so on. Most of these miscellaneous duties have no particular relationship to the purchasing function, and their assignment to the purchasing department is invariably due to some individual circumstance.

In view of the wide diversity of responsibilities thus outlined, it is not possible to formulate any unifying principle on the basis of which we may determine what may properly be considered the scope of the purchasing function" (Lewis 1939, p. 24).

Coming out of the Depression and Legislative Developments

The 1936-37 period saw the return of a "sellers market" and a recovery from the depths of the Depression and purchasers were concerned about federal regulations hampering their attempts to obtain good value.

Two, notable ones were, the Robinson-Patman Act (1936) dealing with price discrimination prohibitions and the Clayton Act and the Miller-Tradings Amendment (1937) to the Sherman and Federal Trade Commission Act which led to the "fair-trade" laws.

A third was described by H.T. Lewis as follows: "On September 28, 1936, the so-called Walsh-Healey Public Contracts Act went into effect--an act designed to enforce certain labor standards by providing roughly, that companies awarded federal contracts in excess of $10,000 confirm to prescribed minimum requirements with reference to hours, wages, working conditions and child labor.

Superficially, it might appear that this law was enacted in the interests of increasing the efficiency of governmental procurement. In reality, however, this was probably not the real objective. More likely, the purpose was not to secure better materials at a fairer price but rather to aid in establishing a program of social welfare. This fact raises a more interesting issue. In private industry, is there any reason, for instance, why a concern whose management adheres to racial prejudices should not use its purchasing power to persuade or force its suppliers to act in accordance with its ideas? Or again, could not a manufacturer who held extreme Pacifist ideas insist that his suppliers sign a pledge never to engage in manufacture of any form of war equipment? In short, how far is a purchaser, governmental or private, justified in utilizing his purchasing power to attain certain social objectives only indirectly related to the conduct of his business? In the first half of 1931, for instance, Mr. Henry Ford refused to follow the general practice of lowering wages as a means of reducing costs, and what is more important from the standpoint of our present discussion, he undertook to prevent his suppliers from doing so. It was the general impression at the time that Mr. Ford threatened to make his purchases only from firms that agreed to maintain certain wage standards and refused to place orders with companies that sought to cut costs through wage reduction. His interest, it is true, was not wholly humanitarian, as he held that the degree of quality required on Ford work could not be produced by second- or third-rate workmen" (Lewis 1940, pp. 9-10).

Business Cycles

Unfortunately, 1938-39 saw another business downturn causing purchasing agents to adjust purchasing strategies one more time. Purchasing interest in business cycles had already been high for decades and this latest change in the economic environment reinforced the wisdom of staying abreast of economic and market developments.

Handbook of Purchasing Policies and Procedures 

In 1939 N.A.P.A. published the first volume of the Handbook of Purchasing Policies and Procedures under the editorship of Donald G. Clark. This major undertaking involved 16 contributing editors and contributions from 560 members. The second volume, planned for 1940, actually appeared in 1943.

The next decade would see the largest war in the history of the world creating a whole set of new supply challenges.

CONCLUSION

This recounting of the development of purchasing's foundation over the period of about a century shows today's supply academics and practitioners owe much to their predecessors. And most American and Canadian predecessors were practitioners and key individuals who were able and willing to share their insights with their fellow practitioners, as well as the larger management community. Recognizing the cyclical nature of the economy and markets, they found themselves in conditions of shortages and surpluses, rising and falling prices, war and peace, and major social, political, technological and cultural developments.

They quickly identified the broader context of supply, popularly expressed today as the supply chain. They recognized the key notions of value versus price, of total cost of ownership, supplier relations, talent management, supply risks, corporate social responsibility, ethics and standardization. They realized that supply significantly impacted any organization's potential for success and found ways to gain recognition for their views.

The creation of N.A.P.A. in 1915 and this association's commitment to advancing the profession supported a strong collective effort of committed individuals to develop the body of purchasing knowledge and the profession itself. The realization that education would be a key component led to N.A.P.A.'s collaboration with academia. Originally, the early local N.A.P.A. associations had engaged in local professional development and training for purchasing practitioners. These efforts were complemented by purchasing courses at colleges and universities and N.A.P.A. strongly supported the first university level textbook by Prof. Howard T. Lewis at the Harvard Business School in 1933. These efforts came from the realization that professional recognition required academic recognition and vice versa.

The last impression that this article wishes to create is that this evolution was smooth sailing. Purchasing agents were publicly accused of being unethical, unfeeling and lacking knowledge and brains. The sales representative--purchasing interface was rife with accusations from both sides, particularly in tough economic times. These concerns gave rise to N.A.P.A.'s ethical codes in the 1920s. Purchasers themselves did not see eye to eye on many issues and N.A.P.A.'s very existence was in doubt in its first 20 years. During the Depression a number of local associations were trying to reduce the $15 national fee per member. This fee had been raised from $10 to $15 in 1929 to enable N.A.P.A. to fulfill its mandate in a better way than it had been able to in prior years. To put the $15 fee in context, please note that the meal rates at the coffee shop at the 1932 convention hotel were 25 cents for breakfast, 50 cents for lunch and 75 cents for dinner.

Despite the efforts of female purchasing agents they were denied N.A.P.A. membership in 1923. A cynical examination of the writings of our predecessors might come to the conclusion that these people were trying to blow up their own importance, increase the size of their pay cheques, or hanging on to avoid losing their jobs. We do not share that view. Clearly, most authors recognized that purchasing could be a major contributor to both organizational success and failure. It was this higher motive, our country is better off, the better we spend our money in both the public and private sectors, that seemed to inspire our predecessors to take on the dual challenge of finding better ways to purchase and convincing others of their cause.

One might conclude that it was a miracle that N.A.P.A. and purchasing itself survived this century. The ambitions and struggles of many dedicated purchasing managers and relatively few academics before 1940 laid a foundation that would stand the United States and Canada in good stead before the start of World War II and the period beyond. Today's supply practitioners and academics owe much to these predecessors. Hopefully, our understanding of supply management's evolution will not only assist today's practitioners and academics in placing current practices and theories in context but also in charting our future.

REFERENCES

"Purchasing Building Materials," The Manufacturer and Builder, (XI:February), 1870, p. 57.

Babbage, C. On The Economy of Machinery and Manufactures, 2nd ed., Charles Knight, London, UK, 1932, p. 202.

Diemer, H. "Functions and Organization of the Purchasing Department," The Engineering Magazine, (XVIII:March), 1900, pp. 833-836.

Ennis, W.D. "The Relation of Purchasing and Production," The Engineering Magazine, (XXIX:July), 1905, p. 539.

Farrell, P.V. Fifty Years of Purchasing, The Story of N.A.P.A., Shipman Medalists, National Association of Purchasing Agents, New York, 1954.

Forbes, R. Governmental Purchasing, D. Appleton & Co., New York, 1929.

Gushee, E.T. and L.F. Boffey. Scientific Purchasing, McGraw-Hill Book Company Inc, New York, 1928, p. 59, 99, 104.

Harriman, N.F. Principles of Scientific Purchasing, McGraw-Hill Book Company Inc, New York, 1928, p. 21.

Hysell, H. The Science of Purchasing, New York: D. Appleton and Company, 1922, p. 102.

Kirkman, M.M. The Handling of Railway Supplies--Their Purchase and Disposition, Chas N. Trivess, Chicago, 1887. Preface and p. 42.

Leenders, M.R., P.F. Johnson, A.E. Flynn and H.E. Fearon. Purchasing and Supply Management, with 50 Supply Management Cases, 13th ed., McGraw-Hill/Irwin, New York, 2006.

Lewis, H.T. Industrial Purchasing, Prentice-Hall, Inc, New York, 1933.

Lewis, H.T. Problems in Industrial Purchasing, McGraw-Hill, New York, 1934.

Lewis, H.T. Industrial Purchasing, Richard D. Irwin Inc, Chicago, 1940.

Materials and Supplies, Chicago: A.W. Shaw, 1915.

Mitchell, W.N. Purchasing, Ronald Press, New York, 1927.

Mitchell, W.N. Production Management, University of Chicago Press, Chicago, 1931.

N.A.P.A. Handbook of Purchasing Policies and Procedures, Vol. 1, National Association of Purchasing Agents, New York, 1939.

Pearce, H.C. "The Supply Department." Railway Age Gazette, New York, 1911, p. 108.

Rindsfoos, C.S. Purchasing, McGraw-Hill Book Co, New York, 1915, p. 69, 104.

Schell, E.H., The Scope of the Purchasing Function, National Association of Purchasing Agents, Pamphlet number 22, New York, 1935.

Taylor, F.W. The Principles of Scientific Management, Harper & Brothers, New York, 1915.

Thomas, A.G. Principles of Government Purchasing, D. Appleton & Co., New York, 1919.

Michiel R. Leenders (D.B.A., Harvard Business School) holds the Leenders Purchasing Management Association of Canada Chair and is professor emeritus and director of the Ivey Purchasing Manager's Index at the Richard Ivey School of Business. His supply management texts have been translated into 10 different languages and he is also considered a world expert on the case method. He has taught executive programs and case method workshops throughout the world. His various awards include the Financial Post Leaders in Management Education Award in 1997 and the Hans Ovelgonne Purchasing Research award in 2001. Dr. Leenders has founded six small companies and has been a director of the ING Bank of Canada since its inception. He holds a mining engineering degree from the University of Alberta and he earned an MBA from the University of Western Ontario.

Harold E. Fearon (Ph.D., Michigan State University) became the Institute for Supply Management[TM] Professor Emeritus at Arizona State University (ASU) after 28 years as an active faculty member. He started the Journal of Purchasing (now the Journal of Supply Chain Management) in 1965 and served as editor for 10 years, when he became Founding Editor Emeritus. In 1988, he established the Center for Advanced Purchasing Studies (CAPS) at ASU and was its director for 9 years, when he became Director Emeritus. At ASU, he was Chairman of the Management Department for 19 years, and then Founding Chairman of the Purchasing, Transportation, Operations Department (now the supply chain department). He is co-author with Professor Leenders of seven editions of Purchasing and Supply Management (McGraw-Hill/Irwin). He started Crown Capital Southwest, L.L.C., which manages Southwest Growth Fund, L.P., in 1966, and remains its managing director.

MICHIEL R. LEENDERS

The University of Western Ontario

HAROLD E. FEARON

Founding Editor Emeritus

*Like all invited papers and invited notes, the original version of this manuscript underwent a double-blind review process.

TABLE 1 Responsibilities of Purchasing Department for External
Activities

                                    RESPONSIBILITIES
                                   Full  Partial  None

In at least one external activity  100%   .        .
Checking of invoices                75   25%       .
Material and inventory control      55   13       32%
Incoming traffic control            39   25       36
Stores control                      49    3       48
Receiving and materials             43    4       53
Inspection and testing              27   17       56

(Schell 1935)