Transcript of a discussion on how leading enterprises are digitizing procurement and automating spend management to reduce inefficiencies, cut manual tasks, and streamline the entire source-to-pay process.

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How Enterprises Like McKesson
Digitize Procurement and Automate
Spend Management to Slash Waste
Transcript of a discussion on how leading enterprises are digitizing procurement and automating
spend management to reduce inefficiencies, cut manual tasks, and streamline the entire source-
to-pay process.
Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.
Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and
you’re listening to BriefingsDirect. Our next intelligent enterprise innovations discussion
explores new ways that leading enterprises like McKesson Corp. are digitizing
procurement and automating spend management.
We'll now examine how new intelligence technologies and automation methods help
global companies reduce inefficiencies, cut manual tasks, and streamline the entire
source-to-pay process.
To learn more about the role and impact of automation in
business-to-business (B2B) finance, I’m pleased
welcome Michael Tokarz, Senior Director of Source to
Pay Processes and Systems at McKesson, based in
Alpharetta, Georgia.
Tokarz: Thank you.
Gardner: There’s never been a better time to bring
efficiency and intelligence to end-to-end, source-to-pay
processes. What is it about the latest technologies and
processes that provides a step-change improvement?
Tokarz: Our internal customers are asking us to move faster and engage deeper in our
supplier conversations. By procuring intelligently, we are able to shift where resources
are allocated so that we can better support our internal costumers.
Gardner: Is there a sense of urgency here? If you don't do this, and others do, is there a
competitive disadvantage?
Tokarz: There's a strategic advantage to first-movers. It allows you to set the standard
within an industry and provide greater feedback and value to your internal customers.
Gardner: There are some major trends driving this. As far as new automation and the
use of artificial intelligence (AI), why are they so important?
Tokarz

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The AI advantage
Tokarz: AI is important for a couple of reasons. Number one, we want to process
transactions as cost-effectively as we possibly can. Leveraging a “bot” to do that, versus
a human, is strategically advantageous to us. It allows us to write protocols that process
automatically without any human touch, which, in turn is extremely valuable to the
organization.
AI also allows workers to change their value-quotient within the organization. You can go
from someone doing manual processes to working at a much higher level for the
organization. They now work on things that are change-driven and that bring much more
value, which is really important to the organization.
Gardner: What do you mean by bots? Is that the same as robotic process automation
(RPA), or they overlapping? What’s the relationship?
Tokarz: I consider them the same technology, RPA and bots. It’s essentially a computer
algorithm that’s written to help process transactions that meet a certain set of
circumstances.
Gardner: E-sourcing technology is also a big trend and an enabler these days. Why is it
important to you, particularly across your supplier base?
Tokarz: E-sourcing helps us drive conversations
internally in the organization. It forces the
businesses to pause. Everyone's always in a
hurry, and when they're in a hurry they want to
get something published for the organization and
out on the street. Having the e-sourcing tool
forces people to think about what they really need
from the marketplace and to structure it in a
format so that they can actually go faster.
E-Sourcing, while you have to do a little bit of
work on the front end, you enable the speed of
the transaction on the back end because you
have everything aligned from all of the suppliers
in one central place, so that you can easily
compare and make solid business decisions.
Gardner: Another important thing for large organizations like McKesson is the ability to
extend and scale globally. Rather than region-by-region there is standardization. Why is
that important?
Having the e-sourcing tool
forces people to think about
what they really need from the
marketplace and to structure it
in a format so that they can
actually go faster. While you
have to do a little bit of work on
the front end, you enable the
speed of the transaction on the
back end because you have
everything aligned … in one
central place.

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Tokarz: First and foremost, getting to one technology across the board allows us to
have a global standard. And what does a global standard mean? It doesn't mean that
we're going to do the same things the same way in every country. But it gives us a
common platform to build our processes on.
It gives us a way to unify our organization so that we can have more informed
conversations within the organization. It becomes really important when you begin
managing global relationships with large suppliers.
Gardner: Tell us about McKesson and your role within vendor operations and
management.
Tokarz: McKesson is a global provider of healthcare solutions -- from pharmaceuticals
to medical supplies to services. We’re mainly in the United States, Canada, and Europe.
I’m responsible for indirect sourcing here in the United States, but I also oversee the
global implementations of solutions in Ireland, Europe, and Canada in the near future.
Currently in the United States, we process about $1.6 billion in direct transactions. That’s
more than 60,000 transactions on our SAP Ariba system. We also leverage other vendor
management solutions to help us process our services transactions.
Gardner: A lot of people like you are interested in becoming touchless – of leveraging
automation, streamlining processes, and using data to apply analytics and create
virtuous adoption cycles. How might others benefit from your example of using bots and
why that works well for you?
Bots increase business
Tokarz: The first thing we did was leverage
SAP Ariba Guided Buying. We also then
reformatted our internal website to put Guided
Buying forefront for all of our end users. We
actually tag it for novice users because Guided
Buying works similar to a tablet interface. It gives
you smart icons that you can tap to begin and
make decisions for your organization. It now
drives purchasing behavior.
The next thing we did is push as much buying through catalogs and indirect spend that
we possibly could. We've implemented enough catalogs in the United States that we
now have 80 percent of our transactions fully automated through catalogs. It provides
people really nice visual cues and point-and-click accessibility. Some of my end users
tell me they can find what they need within three minutes, and then they can go about
their day, which is really powerful. Instead of focusing on buying or purchasing, it allows
them to do their jobs, their specialty, which brings more value to the organization.
SAP Ariba Guided Buying
works similar to a tablet
interface. It gives you smart
icons that you can tap to
begin and make decisions
for your organization.

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The last thing we've done is taken it to the next level. We use the RPA and bot
technology to take the entire organization to the next level. We’re always striving to get
to 90 percent touchless transactions. If we are at 80 percent, that means an additional
50 percent reduction in the touch transactions that we’re currently processing, which is
very significant.
That has allowed me to refocus some of my efforts with my business process
outsourcing (BPO) providers where they’re not having to touch the transactions. I can
have them instead focus on acquisitions, integrations, and doing different work that
might have been at a cost increase. This all saves me money from an operations
standpoint.
Gardner: And we all know how important user experience is -- and also adoption.
Sometimes you can bring a horse to water and they don’t necessarily drink.
So it seems to me that there is a double-benefit here. If you have a good interface like
Guided Buying, using that as a front end, that can improve user satisfaction and
therefore adoption. But by also using bots and automation, you are taking away the rote,
manual processes and thereby making life more exciting. Tell us about any cultural and
human capital management benefits.
Smarts, speed, and singular focus
Tokarz: It allows my procurement team to focus differently. Before they were focused
on the transactions in the queue and how fast to get them processed, all to keep the
internal customers happy. Now I have a bot that processes that three times a day, it
looks at the queue, and so we don’t have to worry about those any more. The team is
only watching the bot to make sure it isn’t kicking out any errors.
From an acquisition integration standpoint, when I need to add suppliers to the network I
don’t have to go for a change request to my management team and request more
money. I can operate within the original budget with my BPO providers. If there's another
300 suppliers that I need added to the network, for example, I can process them more
effectively and efficiently.
Gardner: What have been some challenges with establishing the e-sourcing
technology? What have you had to overcome to make e-sourcing more prevalent and to
get as digital as possible?
Tokarz: Anytime I begin working on a
project, I focus not only on the
technology component, but also the
process, organization, and policy
components. I try to focus on all of them.
Focus not only on the technology
component, but also the process,
organization, and policy components.

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So first, we hired someone to manage the e-sourcing via an e-sourcing administrator
role. It becomes really important. We have a single point of contact. Everyone knows
where to go within the organization to make things happen as people learn the
technology, and what the technology is actually capable of. Instead of having to train 50
people, I have one expert that can help guide them through the process.
From a policy standpoint, we've also taken the policies and dictated that. People are
supposed to be leveraging the technology. We all know that not all policies are adhered
to, but it sets the right framework for discussion internally. We can now go to a category
manager and access the right technology to do the jobs better, faster, cheaper.
As a result, you have a more intriguing job versus doing administrative work, which
ultimately leads to more value to the organization. They're acting more as a business
consultant to our internal customers to drive value -- not just about price but on how to
create value using innovations, new technology, and new solutions in the marketplace.
To me, it’s not just about the technology -- it’s
about developing the ecosystem of the
organization.
Gardner: Is there anything about Guided Buying and the added intelligence that helps
with e-sourcing – of getting the right information to the right person in the right format at
the right time?
Seamless satisfaction for employee and customer
Tokarz: The beautiful thing about Guided Buying is it’s seamless. People don't know
how the application works and that they are using SAP Ariba. It’s interesting. They see
Guided Buying and they don't realize it's basically a looking glass into the architecture
that is SAP Ariba behind the scenes.
That helps with transparency for them to understand what they are buying and get to it
as quickly as possible. It allows them to process a transaction via a really nice, simple
checkout screen. Everyone knows what it costs, and it just routes seamlessly across the
organization.
Gardner: So what do you get when you do e-sourcing right? Are there any metrics or
impacts that you can point to such as savings, efficiencies, employee satisfaction?
Tokarz: The biggest impact is employee satisfaction. Instead of having a category
manager working in Microsoft Outlook, sending e-mails to 30 different suppliers on a
particular event, they have a simple dashboard where they can combine all of the
answers, or questions, and develop all of the answers and push all of that information
out seamlessly across all the participants. Instead of working administratively, they’re
working strategically with internal customers. They are asking the hard questions about
how to solve business problems at hand and creating value for the organization.
It’s not just about the technology
– it’s about developing the
ecosystem of the organization.

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Gardner: Let's dig deeper into the need for extensibility for globalization. To me this
includes seeking a balance between the best of centralized and the best of distributed.
You can take advantage of regional particulars, but also leverage and exploit the
repeatability and standard methods of centralization.
What have you been doing in procurement using SAP Ariba that helps get to that
balance?
Global insights grow success
Tokarz: We’re in the process of rolling out SAP Ariba globally. We have different
regions, and they all have different requirements. What we've learned is that our EMEA
region wants to do some things differently than we were doing them. It forces us to
answer the question, “Why were we doing things the way we were doing them, and
should we be changing? Are their insights valuable?”
We learned that their insights are valuable, whether it be the partners that they are
working with, from an integration standpoint, or the people on the ground. They have
valuable insights. We’re beginning to work with our Canadian colleagues as well, and
they've done a tremendous amount of work around change management. We want to
capitalize on that, and we want to leverage it. We want to learn so that we can be better
here in the United States at how we implement our systems.
Gardner: Let’s look to the future. What would you like to see improved, not only in terms
of the technology but the way the procurement is going? Do you see more AI, ML, and
bots progressing in terms of their contribution to your success?
Tokarz: The bots’ technology is really interesting, and I think it's going to change pretty
dramatically the way we work. It’s going to take a lot of the manual work that we do in
processing transactions and it's going to alleviate that.
And it’s not just about the transactions.
You can leverage the bot technology or
RPA technology to do manual work and
then just have people do the audit.
You're eliminating three to five hours’
worth of work so that the workers can go
focus their time on higher value-add.
For my organization, I’d like us to extend the utilization of the solutions that we currently
own. I think we can do a better job of rolling out the technology broadly across the
organization and leverage key features to make our business more powerful.
Gardner: We have been hearing quite a bit from SAP Ariba and SAP at-large about
integrating more business applications and data sets to find process efficiencies across
You can leverage the bot technology
or RPA technology to do manual work
and then just have people do the
audit. You’re eliminating three to five
hours’ worth of work so [they] can go
focus their time on higher value-add.

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different types of spend and getting a better view of total spend. Does that fit into your
future vision?
Tokarz: Yes, it does. Data is really important. It's a huge initiative at McKesson. We
have teams that are specifically focused on data and integrating the data so that we can
have meaningful information to make more broad decisions. They can be made not by,
“Hey, I think I have the right knowledge.” Instead insights are based on the concrete
details that guide you to making smart business decisions.
Gardner: I’m afraid we’ll have to leave it there. You have been listening to a sponsored
BriefingsDirect discussion on new ways that companies gain improved visibility,
analytics, and predictive responses across their supply-chain activities.
And we have learned how new tools and methods are coming together to help
organizations be more intelligent by using such new technology as bots to improve not
only the outcome from procurement activities -- but the satisfaction of those doing the
procurement.
So a big thank you to our guest, Michael Tokarz, Senior Director of Source to Pay
Processes and Systems at McKesson in Alpharetta, Georgia. Thank you so much,
Michael.
Tokarz: Thank you.
Gardner: And a big thank you to our audience for joining this BriefingsDirect intelligent
enterprise innovation discussion. I’m Dana Gardner, Principal Analyst at Interarbor
Solutions, your host throughout the series of SAP Ariba-sponsored BriefingsDirect
interviews. Thanks again for listening -- and do come back next time.
Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Ariba.
Transcript of a discussion on how leading enterprises are digitizing procurement and automating
spend management to reduce inefficiencies, cut manual tasks, and streamline the entire source-
to-pay process. Copyright Interarbor Solutions, LLC, 2005-2019. All rights reserved.
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