First, a history lesson.

Back in the beginning, in 1885, Railroad Barons were building the nation during the Gilded Age, writing the first handbook on purchasing, and managing their logistics and vertically integrated supply chains in house.

But as technology advanced, so did the need for mass production and specialization, and production of components that could be easily, and more economically, produced by a third party started to be done by the third party so the firm could focus on more specialized production in house. But then the Panic of 1893 set in, the Guilded Age began to come to an end, and the Progressive era began.

The Progressive Era, which focused on social and political reforms, also saw continued technological progress as well which occurred as the railroad era gave way to the automotive era (symbolized by the Ford Model T in 1908), the introduction of the first production line, and the need for improved logistics (enabled by Autocar Truck, one of the first motor truck companies) as supply chains slowly lengthened and became more complicated.

These functions were still managed in-house as part of a single function, buying from American companies, even if the materials were coming from halfway around the world (as the American company would buy from the American importer), and everything worked well (unless unions got in the way — but that’s not the subject of this post). Then we saw the New Era, which lasted a little over a decade until the Great Depression happened, which was bad, but it led to the New Deal, which saw more political reforms, and then we got World War II, which, when it ended, led to the post-war economy which ushered in the American Dream for the Consumer and the rise of the management consultancy (and marketing agency) for the Business — where the former had just began two decades earlier.

During this era, we saw the rise of McKinsey that revolutionized corporate structures through the institution of professional management, performance-based pay, and strategic planning. This led to the introduction of downsizing (unnecessary middle management) in the 1960s, the 7S framework in the 1970s (that focussed on aligning strategy, structure, systems, shared values, skills, style, and staff) that introduced the importance of systems, and then the 1980s brought outsourcing of talent and offshoring of unspecialized supply.

This led to the split of logistics from supply chain to manage the transportation from global countries, and the split of Procurement from Supply Chain as that was a back-office function that could be outsourced, and the great divergence began. Once costs started soaring, we saw the introduction of the first dedicated Procurement software in the 1990s, the proliferation of platforms and the rise of Procurement in the 2000s, and the rest, as they say, is history.

Procurement became a completely standalone process, and purchasing became completely separate from supply chain and logistics. During the age of globalization where conflict was low, free trade flowed, and stagflation ruled, everything worked well. But then we got COVID, tariff/trade wars, global instability and increased conflicts, critical strait closures, and supply chains breaking on a daily basis. Decisions made by Procurement months, or years, ago in isolation don’t hold up any more. Neither do processes that assumed sourcing events could take months. Neither do risk mitigation plans that assumed you could just switch to the other supplier in the region (who you gave a volume minority contract to) when the region has been cut off.

The days of Procurement succeeding stand-alone are gone. It must operate in a supply-chain-aware, logistics-aware, and geopolitical aware context. But, for the most part, except for supplier selection in the seven-step-sourcing process of your choice, it doesn’t do any of this. So how do we fix the disconnect?