From supplier management to cost reduction to risk mitigation, procurement departments face a variety of challenges - with contracts taking the lead. While contracts are still handled in timeworn ways, a lot can be done with an efficient contract lifecycle management solution.
Host Guru Venkatesan is joined by Robert Waalder, Founder & Owner of Sourcing Champions, a boutique strategy consulting firm focused on global sourcing and procurement. They discuss how efficient contracting can be beneficial for solving various procurement and business challenges and why it is wise for procurement teams to adopt the right solution and use them as a competitive advantage.
Here’s how it goes:
Guru: Hi, I am Guru Venkatesan and I would like to welcome you all to this episode of Clause & Effect, a podcast series presented by SimpliContract. Joining us today is Robert Walder, the senior executive leader in procurement in operations, with over 25 years of cross-functional industry experience across Europe. Robert is based in Amsterdam and is the founder of Sourcing Champions, a boutique strategy and consulting firm that focus on global sourcing and procurement consulting and advisory.
Robert has done multiple roles in his career as the Chief of Procurement, Vice President of Procurement, managing over €2.5 million of procurement category, has served as the Chief Operating Officer and managed PNL of about €100 million. And in his corporate life, he spent about 18+ years at Phillips corporate headquarters where he created and built very large, high-performing procurement teams across countries. Robert, glad you could join us on this podcast. Can't wait to dive deep and discuss the world of contracting and procurement.
Robert: Yes, Guru, I'm also very happy to be here on this process with you, especially now that Sourcing Champions and SimpliContracts are working so closely together.
Guru: To start interestingly, we come from completely opposite ends of our specialization, right? All through my 20-25 years of corporate, I've been in sales. Any sales guy you ask, the nightmare would be dealing with procurement. Dealing with contracts and procurement.
Robert: Yes, I recognize that. But at the end of the day, Guru, we need to make a deal. Sales and procurement have to come and make a deal and finally get the context done. But before you do that very often takes quite a number of rounds before we find a common ground so to say.
Guru: So, if I have to share some of my anecdotes on the paid side, where I've always been dealing with procurement. There are multiple things that organizations could find as a challenge for not having a contract lifecycle management product in place. It could be something like lacking agility in sales contracting. How fast you close a deal with the customer and how fast you contract it? It could be something like tracking some of the contractual commitments -what we committed to the customer, how are we measuring all that? Some of the other areas like ability to get contractual information or so called contractual data. Like sort of key milestones. What we have out of those losses that we have agreed and of course, the last but not the least and supercritical is how compliant are we never contracts.
All through my career I've seen this and a lot of emphasis across large corporations I work across. How do you see some of these in the procurement world?
Robert: Yeah. If you look at the procurement teams that I've had the privilege of working with, and we see that now that for eleven years, Sourcing Champions is actively advising companies to strengthen their procurement and contract management. First of all, the creation of the contract is something that is still a lot on the back burner. So negotiation takes place very often. Negotiations are done on a Friday afternoon still where there are big negotiations to be done. So preparation is very key. And if you do it well, you take the contractual topics already with you in the negotiation process from the beginning. But that doesn't happen very often.
That means that when you come to the end of the negotiation, there's still quite a long contracting phase to make sure that all the clauses, and all the elements are really well structured. I think here is where procurement can really win time if done already at the start of a tender process, at the start of an RFP process, to have the contractual elements as part of the journey and working together with the legal teams and with our sales counterparts, - it will speed up things tremendously and also increase the quality. That, for one thing.
Then once contracts are in place, this is very often an area where then procurement is no longer involved. You very often see the roles of contract managers, for example, in IT or in larger construction projects, etc. Whereas in the vision of Sourcing Champions, in my vision over the years also, that is an important procurement role. It's to manage your suppliers, it's to manage your contracts and to be very clear, what has been agreed, what are the key obligations and all the elements that are inside of could be 100 million, a billion or multi-billion contracts that we are talking about. To do that well, to make this seamless integration, once you have agreed on the contracts, then you still understand very well what obligations your FP has started. But all of those things are still in the paper century, partly. A little bit with Word, a little bit with Excel all over the place. This is where integrated contract management solutions, easy to use, which is important, can be of a big help.
Guru: Absolutely! I think that you bring in a great point. Both of us see, CLM has to be or it's going to be the next wave of ERP. Like there's no company without an ERP. Both of us, as organization, fundamentally believe CML is going to be the next ERP that enterprises need to embrace or adapt. If you look at the customer maturity model, we define it as the bottom of a pyramid. The bottom of the pyramid on your CLM maturity is how do you get your baseline of contracting, which is we have one single repository where you are able to store and retrieve contracts. That's the baseline of starting your CLM journey.
Today, I'm sure in the procurement world, they say the best place where we find the contracts is in our table draw or at max in a document management system. The next step that we see as a logical maturity, the next stage is about how do you automate your contract authoring process? Today, it happens in an email. Nothing beyond an email where they do a contract company. Is there a way companies can embrace a simple workflow solution that could help them to collaborate with multiple stakeholders, collaborate externally with their vendors, and help vendor contracting make it smooth and make it a very agile process?
That's how the maturity goes. As you go towards the top of the pyramid is about once the contracts are done, how do you measure your vendor's performance? Vendors delivering what they committed. It goes back to what you said, the contract management. That's the most critical element of vendor customer relationship or the quality of the engagement, so to speak. Right. I think that's a great point. You brought up.
Robert: We just finished a very large negotiation on the software package in IT. We had to do the negotiation with one of the large software vendors. What you could see with the company that we were supporting, first of all, is we needed to find back what were the old contracts. So that was already a challenge. Then there were contract proposals coming from the vendor, and there were also multiple subcontracts - which was unclear how they were connected with each other. This started a significant process of communication internally in the company between the legal representatives and procurement about how the clauses should be. This was all done on word and email, etc. Then was the communication with the software vendor about all these clauses. This took us like one and a half months of different versions, different clauses, very difficult to track. And this is, what procurement team they come across still every day.
Guru: Absolutely. I can't agree more on the point that you brought up. It's a very interesting personal anecdotal example you brought up. Another case I wanted to talk about, which we recently engaged with the largest public sector customer. This particular customer at this point has probably a 13 -14 year old long contract with the vendor that runs probably a few hundred million currencies worth it. The vendor has promised multiple things. Contractually there are multiple obligations that's been agreed between this public sector customer who's using public money to help citizens to lead a better life. But unfortunately, the people, both sides, the customer and vendor have changed multiple times in the last six years of the contract. Nobody has the full view of what's coming up, what's missed out, what is overdue, who is accountable and who is responsible. Every time there is a change, the change management takes about six months. That's the kind of complexity the contractual relationship has. But unfortunately, there is no way you can solve this by just putting people behind this.
The whole knowledge is a tribal knowledge with people. People change. Somebody comes in for them to understand the contractual obligations, what's sue - takes another three to four months. So within these four months, there are a few hundred obligations that both sides have missed out. So the whole contract management is running manual with Excel sheets, I think those days are probably numbered. Unless, we feel that there is a solid tailwind of many organizations trying to bring in technology. Especially I would say, there's a lot of technical debt the legal process has got to cover up with. Unlike any other functions like retail, marketing or finance, in procurement, the predominant focus has been more on the procurement solutions around the upstream downstream procurement with not too much emphasis around the contracting side, which I feel is something very important.
Robert: Yeah. I think maybe one of the elements that came out of the pandemic is of course, that risk management is something that was always somewhat on the agenda of CPOs. But through the pandemic, of course, we have seen that the supply chain risk has become higher and higher.
That's also where procurement teams need to go back and look at their contracts, their supply contracts because of lack of supplies. What are commitments that do exist between the supplier and the company? And all these risks need to be managed much more digitally. The pandemic has really taught us that it's important for procurement to step up in risk management. In all our risk scenarios and the contracts risk is an important one on that risk map.
In response to your question, I think if there's one thing or has been on the mind of the CPOs of the last one and a half years has been, how can I manage all these risks? What are the risks that I actually don't know yet? If contracts have expired and I didn't know? But I still need the products for my vendors because otherwise I cannot produce until specific obligations are there where suppliers might not meet our elements.
This whole risk management notion is for CPOs top of mind, and that also triggers them to look across the whole source strategy to contract space at making sure that all the systems are more robust. But the one thing that puts procurement teams often not to engage in too many tools quickly. They have been working with tools in the past that were very complex to use. There were ERP systems of the past that took quite a long time to get to learn. Whereas we need simple tools that they can use every day like it's part of their teams, it's part of their work, but in a digital environment that makes them help.
When we look at advising into solutions for companies, we very strongly look at the user acceptance - the ease of use.
Guru: It's a very interesting point. Most of these business users look for a very simple solution because they go to use this day in, day out, and they want to be a lot more intuitive and user driven. Interestingly, now that you said, CLM plays a very strategic impact on the procurement side - one question, if I may ask, do you see any industry wise differences or any industry adopting faster because of the complexities, because of the pandemic compared to any other industry? Do you see any patterns or any thoughts around that, Robert?
Robert: I think that the pandemic and the risk actually have touched many companies, but for sure, the industrial companies where you needed to get supply from different regions and borders were blocked. Whole ships would not come out of Shanghai into Europe, for example. Especially in the industrial side, but in every side where you need the physical components to build something. So they're building the construction industry. So it's really brought across many sectors, I must say. That is where CPOs active in those industries would focus on, Guru.
Guru: That's a very interesting point. Given the pandemic and the borders being closed, manufacturing really had a downtime and hopefully things look back better for all of us.. So any thoughts about technology? Like I said this procurement and contracting has been long understood from a technology perspective. All of the investments, all of the innovation happened on the sales transformation or marketing transformation or finance transformation, lesser on the contracting and the so called procurement transformation. How do you think technology can be a differentiator or a big enabler in solving some of the inherent problems that large procurement teams have been faced?
Robert: I think for procurement teams, everything starts with data. If you have large corporations where data is in very multiple ERP systems across the different regions, for central category teams, this is still very difficult to manage. So if you are responsible for as I was in the past, for the whole outsourcing at the large multinational, you need to have the overview of what is spent across the globe. There with these multiple systems nowadays, there are really good tools that with artificial intelligence can pull out data at a really good both aggregated level but also at an item level so that you can manage the global spend in a much better way. It can only be done through these systems that work on artificial intelligence, new technology, easily connecting of different systems. I'm happy to see that. So that's where it starts with procurement. The same applies to building strategies and from strategies to contract. How can you on the one hand create more efficiency? So to do it faster because the challenge of procurement organization is also to do it with less people so that they are more efficient. But at the end of the day, the real procurement teams are there to be strategically stronger, to make stronger decisions, to make different decisions. For that, you need information. If you have a repository of contracts, how can you get decision making information out of that? That is what procurement teams need. It needs to be ready, available. It needs to be in their face. If they wake up in the morning and open their systems, their strategic information needs to come out and they need to work on it. It's really fantastic.
Guru: Like they say, data is the new currency. When I was in sales running large teams or in the sales, I used to hate my CRM. You go to sales day and say, here is the tool go start using, we never liked it. But, I really pity the procurement world because there are many tools you use - an upstream platform, you have a downstream procurement tool, there are some ERP, there are some vendor management tools. I'm sure there are many more tools beyond what I could comprehend. Bringing in another CLM and asking the buyer team or a procurement team to create contracts, something out of it. I'm not sure how anyone in the procurement team would look at it.
The second is if you have to look at any of this data from one system flowing into other system and probably getting you to correlate multiple data from multiple systems and help you to make an informed business decision, needs quite a bit of technology, so to speak. Any thought from your past experience you have about how these are being solved by some of the players that you work with?
Robert: Yeah, for CPOs, they need to make some choices. Somehow there is, first of all, this choice between: do I choose one integrated system that can do all - that has financials, that has purchase orders, that has contracts? Is there such a system? So yes, there are systems that can cover quite a lot.
On the other hand, you have what is called the best of breed solution. So the best possible contract system, or the best possible category strategy system, or the best possible tender and auction system, there are quite a few out there. What to choose? Which direction to go? My personal conviction is that there's so much depth and knowledge in these best of breed solutions out there that you would be stupid as procurement not to use that. As these systems now can talk quite easily with each other, so the integration can be easily done.You need to connect these systems where it's needed but really get all the best technology and the best processes out of there. As a CPO, that would be my choice instead of going for a really integrated everything, which is okay, but not the best. And, in procurement, we need the best. So that's my view on the world at this point in time.
Guru: Robert, thank you so much for the time and thank you so much for all the insights. I think your experience is invaluable
Robert: Indeed we look forward to our mission is to make sure that all procurement teams and also sales team become sourcing champions. We go on that journey. Thanks a lot for this podcast.
Guru: So listeners, that was Robert Waalder giving us deep insights into the world of procurement and how efficient contracting can be beneficial for solving various procurement and business challenges. CLM tools today hold immense depth of knowledge and it's only wise for procurement teams to adopt the right solution and use them as a competitive advantage.
Those were some solid anecdotes and Robert’s personal experience over the years. We have many such interesting conversations lined up with industry leaders in the upcoming episodes so stay tuned and catch us on the next episode of Clause & Effect. Subscribe to the podcast and visit us at SimpliContract.com for more information.