An average 70% of purchasing software is not used properly

Robert Waalder founded Sourcing Champions in 2014 after parting ways with Philips. Since then, his consultancy has been making strides in the field of procurement transformation and strategy, with a significant focus on digitalization. Waalder discusses his firm’s work in this area and highlights crucial considerations for companies venturing into the digitalization of their procurement processes.

Owner and founder of procurement consultancy Sourcing Champions, Robert Waalder, spent 18 years at Philips, where he departed in 2014 as Vice Head of Procurement. “I had various involvements with procurement there, and I learned a lot,” says Waalder. Afterward, Waalder founded Sourcing Champions, offering services to companies like Siemens, Credit Suisse, and the automotive industry. “Sourcing Champions operates from Amsterdam and has a consultant in New York. We support procurement departments globally,” says Waalder.

Sourcing Champions focuses on transformation strategy, procurement strategy, category management, and sourcing programs, offering assistance in tenders, and advising on risk management and sustainable procurement. Digitalization is a significant part of their advisory. “Sourcing Champions collaborates with digital partners across Europe. Initially, we focus on so-called best-of-breed solutions—standalone tools. An example is Cirtuo’s software, which concentrates on category strategies and management with the aid of templates. Another example is Valuedesk’s tool, which targets sourcing,” explains Waalder. Additionally, there are best-of-suite solutions. “These are digital procurement platforms like the source-to-pay platform of our new partner Ivalua, where many solutions are integrated as modules. This is also aligned with ERP and SAP systems. Such a platform is sufficient for 80% of your procurement tasks. For the remaining 20%, you still need best-of-breed.”

He elaborates on why digitalization is crucial. “It means working faster and more effectively. Moreover, you have easier access to the required knowledge. Procurement professionals can focus more on procurement strategy, decision-making, collaboration with suppliers, and risk management. They are no longer driven by the daily grind. Digitalization brings savings and competitive advantages. Therefore, it’s more than worthwhile to invest in the use of digital procurement tools.”

Increasing Procurement Software

An increasing number of procurement software options are entering the market, potentially overwhelming procurement departments. “At the annual technology event DPW Amsterdam in 2023, for instance, 120 different procurement tools were showcased. We evaluate this software and know what works well. We have deeper relationships and close collaborations with several software providers.”

Sourcing Advice: Sourcing Champions advises companies on selecting software that suits them, supports them in the selection process, and assists with the implementation and effective use of the tools. According to Waalder, the latter is the significant issue in the digitalization of procurement. “On average, 70% of procurement software is not used properly. The software is not faulty, but companies pay too little attention to implementation. There is insufficient priority for training and coaching users. Often, there is also a lack of a clear vision of why you are using the software. Procurement professionals then don’t know how to see digital tools in the overall procurement process. Management lacks governance for usage. There is insufficient support, and as a result, the application of the software does not thrive. It should be about capability: well-trained employees with the right skills.”

According to Waalder, companies should clearly explain the need for digital work and ensure a willingness to use software to prevent resistance. Change management should, therefore, receive sufficient attention. “Principles include a clear vision and a good process description. Additionally, you need to establish a management body for, among other things, aligning the digitization of procurement with other departments.”

Sourcing Champions supports procurement professionals until they can use the software proficiently. “We first demonstrate how it works. Then we let people do it themselves under supervision. After that, they start working with less guidance until they can use it completely independently. We are experienced procurement professionals who also possess training and coaching skills. This combination is our strength. We also use the tools ourselves, so we know how they work.”

Procurement Excellence

Waalder believes that medium and large organizations should have procurement excellence—a team or an individual who understands the software well, knows how to integrate it into the digital landscape, and understands what a good data structure is. Additionally, Sourcing Champions can examine new needs for a company to determine whether the current software provides sufficient capabilities or if a best-of-breed or best-of-suite solution is needed. He emphasizes the importance of ongoing experimentation with tools. “Procurement professionals can see what works and what doesn’t. Organizations should give employees the space for this and encourage them.”

Furthermore, Waalder stresses the need for a budget for software, implementation, training, coaching, and usage. “Moreover, it is crucial to make the added value of digital procurement tools visible on the shop floor. If you can show on your dashboard which suppliers exist globally, which of them pose a high risk, and which countries pose a high risk, then a CEO gets excited. This can be done, for example, with the software from our partner Sphera.”

He notes that digitalization does not stop within the internal organization. “At Ivalua, for instance, suppliers have their own portal, allowing them to work in the system and handle contracts and invoices. This way, you have one system for sharing information. It is even possible for suppliers and procurement departments to work together on improvement plans in the system. The next step is integrating risk management for level-2 suppliers.”

Digitalization from Plan-to-Strategy

Waalder distinguishes three phases in the procurement process, which currently differ significantly in terms of digitalization. “The first is plan-to-strategy, formulating the procurement strategy. This phase is only 10-20% digitalized on average. The second phase is source-to-contract, doing inquiries and setting up tenders and contracts. Steps are still needed in this phase, which is 30% digitalized on average. Procure-to-pay is the third phase, the operational phase. Then you talk about purchase requests, purchase orders, invoicing, and payments. Many organizations (70%) are advanced in the digitalization of this phase.”

According to Waalder, procurement still focuses too little on making the plan-to-strategy part digital. “It is the most important part for companies to digitalize, with the analysis of your spend, procurement strategies, risks, and sustainability. Cross-functional strategy is essential here. It involves listing the requirements from the various functions of your company. This can be taken into account in your procurement strategies, category strategies, and logistics. You then come up with an action plan that states what is important for costs, sustainability, and risk management. Criteria and goals should be clear in your entire digital system. It involves the steps from conception to action plan to execution. Connected to this, you need a performance system to see how well you have done. Digitalization makes it much easier to create reports for this.”

Waalder observes that the procurement process is becoming increasingly complex. “Consider, for example, the risk management of level-1 and level-2 suppliers. Regarding sustainability, procurement can reduce Scope-3 emissions by 70 to 80% by imposing requirements on suppliers. These requirements must be included in your entire procurement process. Therefore, procurement becomes a broader field. This means that it also needs more digital support. Additionally, a deepening occurs with the help of AI and machine learning. Due to their self-learning ability, systems work better over time.”

Implementation Pitfalls

To avoid poor implementation of procurement software, Waalder warns against several pitfalls. “A first pitfall is the absence of a shared vision of procurement, the process landscape, procurement objectives, and the implementation of digital tools. Procurement professionals then do not understand the purpose of the tools and do not use them. A second pitfall is that the organization has not made the implementation of procurement software a significant priority. This is necessary to clarify the importance of proper usage for everyone in the organization. Lack of ambition is often seen with a lack of discipline to use tools effectively. Another pitfall is that an organization underestimates what is needed to implement and integrate digital tools into the organization.”

As a fourth pitfall, Waalder sees that employees do not experiment enough with software. “There may be insufficient governance with a management that delegates too much to procurement professionals. You need management that inspires, coaches, sets a good example, and also uses the tools themselves.” A final pitfall, according to him, is that organizations invest too little in the skills of their staff.”

User Adoption and Implementation

Sourcing Champions aims for 100% user adoption of the software. “Therefore, we measure how many people use tools during an improvement trajectory, how many tenders are successful, to what extent contract management leads to contracts, and what results AI produces. We continue to measure and are only satisfied when 90 to 100% of employees use the software.”

Waalder strongly advises procurement departments to give sufficient attention to the implementation of procurement software. “Organizations buy software and often provide only a small amount of training. It is essential to spend a lot of time on change management, developing a vision on usage, training, and coaching. This enables procurement professionals to better handle digital tools, benefiting the entire organization.”