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.
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.
 |
| Gardner |
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?
The AI advantage
 |
| Tokarz |
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?
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.
We
use the RPA and bot technology to take the entire organization to the next level. We're always striving to get to 90 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.
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.
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
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?
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 and push all of that information out seamlessly across all the participants.
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.
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 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.
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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