The AirPlus Global

The role of procurement: Past, present, and future

Written by AirPlus International UK | Apr 8, 2024

Imagine a time where goods were acquired through handwritten letters and handshakes.

A far cry from modern times, where the click of a few buttons will do the trick.

But history will tell you, as long as there have been businesses, there has been the need to procure goods and services.

However, over the years, procurement has evolved in a big way, growing in importance and scope – and now seen as a crucial cog in the overall success of a business.

Join us in this blog post as we look back over the evolution of procurement.


Setting the procurement foundations

Where did procurement begin?

Wikipedia will tell you that its roots began in the military,[1]  and that supply chains were developed by the army as far back as the Romans.

But in the early 1800s, a sequence of major events happened to propel the procurement process forward, laying the foundations for the modern procurement landscape of today.

  • The Industrial Revolution

    The dawn of the Industrial Revolution marked a significant shift in procurement.

    The rise of factories, machinery, and mass production created a strong need for the organised and efficient procurement of raw materials in larger quantities.


  • The first procurement teams

    The early 19th century witnessed a rapid expansion of railway networks. This meant a large amount of resources such as rails, locomotives, and carriages were needed.

    Managing the supply of these resources was critical to the success and growth of railway companies, and as a result saw the first procurement teams being born.

  • Globalisation

    The advancements in transport brought about a game changer for businesses: cross-border trade.

    The move from local to global procurement was made. Procurement teams began to see the world as their marketplace, allowing for greater scale, diversity in supply, and cost reductions – transforming procurement into a more dynamic, interconnected process.

 

The modern procurement landscape 

The 1970s is when procurement started to really take shape. 

Economic challenges were presenting themselves, along with a rapidly growing global marketplace.

Strategic procurement was now in demand – with a sharp focus on long-term value and efficiency. 

Key concepts such as supplier relationship management (SRM) and total cost of ownership (TCO) were introduced. These methods were put into practice to build stronger, more collaborative relationships with suppliers and provide a more holistic understanding of costs. 

It became clear that cost-saving was not the only benefit procurement could bring to the table.

Procurement could provide true value to the overall success of a business.

 

21st-century procurement 

Looking at modern procurement in the 21st century, there have been some significant, major shifts:

  • The rise of technology

    Technology has evolved in line with the business landscape.

    Digital e-procurement systems – now a standard – came into play, enabling businesses to streamline processes. 

Thanks to globalisation and the internet, a new, diverse, global supply chain was at work. Which made strategic sourcing more important than ever.

Then of course, we saw the emergence of data analytics, which began to give procurement teams in-depth insight into spending patterns and supplier relationships. This transparency of data meant enhanced efficiency, optimised opportunities, and smarter decision-making.

 

  • Facing global challenges

    As the role of procurement grows more prominent, so does the need to mitigate risk. 

In the context of the pandemic, geopolitical landscapes, remote working, rising inflation, not to mention climate change – risk management is proving to be an ongoing challenge.

But tools such as advanced analytics, spend visibility tools, and supply chain monitoring software are empowering procurement teams. So they can respond proactively and swiftly in this fast-changing environment. 

And for global challenges such as climate change, procurement is also playing its part in ESG (Environmental, Social and Governance)[2] through sustainable and ethical sourcing. 

 

Procurement, payment systems, and virtual cards


Procurement is more complex than ever before, so it’s understandable that needs are changing.

Procurement teams now want faster payments, reduced fraud capabilities, and more control over spend.

The rise of virtual cards in procurement

Virtual cards bring a whole new level of security and control.

Procurement teams can now set specific limits, vendor restrictions, and expiration dates, which allow them to tailor payments to their precise procurement needs.

Rich data access provided by virtual cards means better supplier decision-making, negotiations, and carbon footprint tracking.

And in a future where integration and data-driven decision-making are paramount, access to that rich data is now a minimum requirement.

Businesses are turning to modern payment providers to make sure that their payment systems are meeting their needs.

So yes, procurement has overcome many challenges.

But it will continue to evolve and new solutions will evolve alongside it.

Staying ahead of the game is crucial to streamlining processes and procurement success. 

Want to streamline your procurement processes with a modern payment solution – download our latest guide “Mastering virtual card integration: A step by step guide for treasury, finance, and procurement teams"

 

[1] https://en.wikipedia.org/wiki/Procurement 

[2] https://comms.airplus.com/en/blog/esg-finance-and-sustainability