Connecting the Dots From Sourcing to Payments: Why Energy Needs a New Breed of Source-to-Pay Solution

By Joshua Trott, Chief Revenue Officer

In the growing source-to-pay space, more companies are delivering value by streamlining all the activities related to the purchasing of goods and services, from initial sourcing through final payment. The first-ever Gartner Magic Quadrant for source-to-pay was released this year — and even a cursory read shows that the best-known brands in this space are generalists. 

If you work in energy, it will be instantly clear that what works for IBM or Microsoft isn’t optimal for the Exxons and the BPs of the world, and certainly not for smaller operators and regional players. From the moment an energy company needs to find a new vendor for a project, the road to completed work and paid invoices is filled with obstacles:

• Systems that require manual inputs — and aren’t designed to talk to each other  
• A complex constellation of tools that vary by operator
• Strained relationships between the field and centralized teams, making collaboration difficult
• No single source of truth for the purchasing process, which results in ballooning costs, wasted time, operational bloat and inefficiency, and a lack of access to high-quality data

The promise of source-to-pay, or S2P, for the energy industry is a streamlined workflow that captures each step in the process — from sourcing new suppliers to making payments for goods and services — while supporting the industry- and user-specific needs that make untangling and unifying this process so challenging.

We’ve talked about how the complex, capital-intensive, and often high-risk nature of work in the energy sector magnifies the critical need for a unified S2P process.

Read on for a closer look at S2P and the energy industry. We’ll cover the singular challenges facing energy companies today, what source-to-pay technology is, why it will be a game-changer for energy operators and suppliers, the features required to unlock the promise of S2P in energy, and how to effectively implement S2P within an energy organization.

Why the Energy Industry’s Unique Challenges Require a Source-to-Pay Solution

At first glance, the way energy companies and their suppliers engage on projects looks fairly straightforward. Any time goods or services are needed for a project, operators must:   

1. Find the vendor. 
2. Evaluate them against competitors. 
3. Engage and onboard them. 
4. Establish the scope of work. 
5. Verify that work.
6. Pay for the work.
7. Repeat.

In reality, the process by which operators and suppliers work together is broken, with an abundance of headaches on both sides. Yet the scale and complexity of work in the energy industry is so massive that everyone involved must be in sync to deliver safely and efficiently. 

Inside the Energy Industry’s Fractured Source-to-Pay Process

For today’s energy companies, every S2P journey — which begins the moment a new vendor is needed for a project and ends with completed work and paid invoices — requires an astounding number of tools. Most Oil & Gas companies use eight or more separate tools to manage the suppliers they rely on to operate. This is a big issue for the industry that is literally powering the world:  

• All of these tools do a different job, which means processes and systems remain fragmented. 
• Software still requires input, so teams are managing tools instead of handling other business needs. Plus, manual updates are required for each tool for each process of the vendor management lifecycle.
• Each operator has its own unique set of tooling, and each tool is managed by different teams and customized to meet their individual requirements. 
• This results in a patchwork profusion of tools that adds more complexity than value, and creates massive data and reporting issues.

In addition to the too-many-tools problem, there is no single source of truth for each step in the S2P process. No singular record captures and aligns the inputs along the journey from sourcing to payment, which results in:

Ballooning Costs

• The rising costs of parts, services, and materials are impacting the bottom line of energy companies. In a benchmark study commissioned by Workrise and conducted by Newton X, only 19% of supply chain leaders say the majority of their projects were delivered on budget in 2023. For an industry that plans to spend more than $1 trillion in 2024 in the US alone, these overruns are significant.
  

Wasted Time

• Time lost to manufacturing and shipping delays, human error, inefficient processes, and other logistical roadblocks create myriad operational challenges and extra costs.
• Add to those the personnel costs related to onboarding, contract negotiations, chasing down invoice disputes, manually maintaining compliance — the list goes on — and the spend only increases.
  

Lack of Data

• More than 60% of supply chain and operations leaders don’t know if they’re paying a good price for the products and services they use on their projects, and only 20% of decision makers have the data they need to make decisions. Access to high-quality data is a must for energy operators working to meet the demands of multiple stakeholders in a challenging geopolitical environment.
  

Operational Bloat and Inefficiency

• When errors arise, teams must dig through emails, manually enter data, pass information from one tool to the next, call to check the approval status of a new vendor, and so on. This takes attention away from the work that matters while adding delays and costs.
  
  

Energy-Specific Needs That Generalist Source-to-Pay Offerings Don’t Support

Beyond the structural challenges and their impact, there are also realities of doing business in energy that the S2P generalists just don’t support. Things like:

• Compliance monitoring and alerts. These are critical to every energy company’s ability to operate, with entire teams dedicated to managing compliance across all supplier relationships. Energy leaders will be hard pressed to find the granularity they need from Magic Quadrant leaders.
  
• Safety monitoring. Safety is foundational to the operation of energy companies, as risk of injury — or worse — is a fact of life when delivering energy projects. Capturing and monitoring niche safety records and government ratings isn’t something generalists can support.
  
• Specialized vendor networks and sourcing. Energy projects require materials (i.e. sand, water, chemicals), specialized parts, highly technical equipment, and skilled labor to deliver in the field. Good luck searching SAP for a new sand vendor, Coupa for land surveyors, or Ivalua for solar panel racks. It’s either not on offer, or requires manual sourcing support, which isn’t practical for just-in-time needs.

And that’s only a subset of the total gaps we see when we look at this group. It’s clear the energy industry needs its own S2P solution. Before we get into how this works, let’s take a step back and look at what exactly source-to-pay is and why it’s such an important offering for any industry.

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What is Source-to-Pay?

Source-to-pay refers to the process of finding, negotiating with, hiring, managing, and paying suppliers for their products and/or services. From start to finish, the process involves:

Sourcing the Vendor

• Supplier identification and evaluation:
  • Find potential suppliers and evaluate them based on criteria such as quality, cost, reliability, location, and compliance with regulations
  • Identify and select the suppliers you wish to invite to bid on upcoming projects

Procuring the Vendor

• Bid management:
  • Run RFQs, RFPs, and other bid requests to formally compare suppliers side-by-side, and identify the supplier offering the best value for a given project
  • Circulate RFQ results internally for awareness and approval, when required
• Onboarding:
  • Once a new supplier’s bid is accepted, the onboarding process begins.
  • Collect the supporting documentation — from certificates of insurance and safety records to diversity status and tribal licenses — that are required to meet business requirements
  • Build a work order to codify the scope of work the vendor is able to deliver, and the agreed-upon pricing for those services
• Requisition management:
  • Internal departments create and submit purchase requisitions for approval based on identified needs.
• Job ticket or purchase order (PO) creation:
  • Convert approved requisitions into job tickets or purchase orders (depending on the nomenclature of the organization) and send them to suppliers.
  • This formalizes the requested products / services, quantities, and delivery schedules for a job ticket or purchase order

Order Receipt and Verification

• Receive and verify the delivery of goods and services in the field, in accordance with the work order 
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Invoice Processing and Payment

• Invoice receipt and matching:
  • Receive invoices from suppliers and match them with the terms of the work order to ensure accuracy
• Invoice approvals:
  • Review and approve invoices for payment
  • This often involves multiple levels of approval based on the invoice amount and organizational policies.
• Payment execution:
  • Process payments to suppliers based on agreed payment terms
  • This can include various payment methods including electronic funds transfer (EFT), checks, and digital payments.

Optimization and Ongoing Management

• Review and evaluate key metrics and performance data from across the S2P lifecycle (supplier uptime, supplier churn, spend by category, and more)
• Proactively manage service coverage and costs, optimize delivery, and track compliance
• Identify opportunities to improve over time

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"Vendor onboarding in energy is slow and time intensive for everyone involved. Energy-specific solutions can reduce onboarding-associated costs by as much as 35% and accelerate the process by 6x."

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Source-to-Pay for Energy: How It Works

A S2P solution that meets the unique needs of the energy industry should include a specific set of core capabilities in order to deliver measurable value:

Vendor Discovery

Sophisticated vendor sourcing is about ensuring energy companies always have the suppliers they need, when they need them.

• Vendor search: The ability to search for vendors within an established network of energy service providers, and to filter based on service category, operational footprint, safety ratings, years in service, and more, so that you can properly evaluate options without making a single phone call.
• Specialized sourcing: There will be times when the right vendor for the job isn’t available via search. Support from expert teams that know the industry, and can source niche vendors for remote jobs, is essential for maintaining smooth operations.

Vendor Onboarding

Vendor onboarding in energy is slow and time intensive for everyone involved. Energy-specific solutions can reduce onboarding-associated costs by as much as 35% and accelerate the process by 6x.

• Onboarding management: Streamline the process of document collection, contract negotiation, and work order creation in one end-to-end workflow.
• Work approvals and status: By centralizing this process in a single digital workflow, S2P solutions offer visibility into the status of a vendor who is onboarding, and clarify for everyone in the organization when that vendor is approved to work.

Safety and Compliance

With all relevant information centralized and digitized, buyers can expect energy S2P solutions with capabilities that include:

• Compliance dashboards: Clear visibility of the compliance status of your entire supplier base, across multiple axes and KPIs
• Compliance thresholds and tracking: The ability to set your compliance thresholds and to trigger alerts when vendors fall outside them, as well as to proactively notify vendors when a critical document is about to expire

Payments and Invoicing

Invoice disputes are a time-consuming fact of life for energy companies — so much so that entire teams are often dedicated to resolving them. But thanks to the auditability made possible by an energy S2P solution’s accuracy and automation, this is no longer the case.

• Invoice validation: Validate invoices against a predetermined scope of work with supporting documentation, such as work order details and price sheets, without having to log into separate systems or dig through emails to locate the appropriate documentation
• Payment automation: With defined pricing and work verification at the delivery phase, management of individual payments can either be handled by the S2P provider’s services group or automated entirely.

Data and Insights

In the Workrise-Newton X benchmark study, only 20% of industry leaders said they felt they had the data they needed to make decisions. By bringing the source-to-pay process onto a single digital chain, S2P solutions provide:

• Powerful dashboards: Spend reporting, compliance data, service coverage by category and geography, diversity data, and more, all in one central location — with endless options to filter the information in ways that will enable better insights and smarter decisions.   
• 24/7 access: No longer do decision-makers have to wait a week or two (or more) to get the report they asked for. Energy-specific S2P solutions ensure the data is always there – anytime and anywhere – and always up to date.

Managed Services

In energy, the costs are too high and the risks are too great to put everything in the hands of software. The best energy S2P solutions bring human hands in strategically to deliver increased value. Some examples of areas where expert teams are expanding what is possible:

• Managed onboarding: Some solutions offer the ability to let go of the hassle of onboarding entirely. This service allows operators to select a vendor and watch as their S2P provider completes the onboarding process.
• Pricing negotiation: Energy-specific S2P solutions often have pricing data customers don’t, and will handle pricing negotiation to get the best possible price for the customer.
• Compliance management: Hounding suppliers for documents that have expired can get old fast. Proactively reaching out to suppliers before documents expire, and replacing them on the platform, is another service available to companies looking to optimize their operations.

Best Practices for Implementing Source-to-Pay in Energy

Due to the deep-rooted challenges that make it harder and harder for everyone in energy to work together to deliver projects in the field, the energy industry needs a solution that:

• Connects the entire S2P process, capturing each step along the way in a continuous digital record
• Allows a vendor to log in once, update a compliance document once, and automatically roll that out to all clients
• Enables field personnel to log and verify work in seconds, no matter where they are 
• Automates accurate invoicing and payments, based on pre-approved pricing and scope
• Equips centralized teams to track milestone progress and spend across all projects, down to the job, in real time
• Empowers leaders to make decisions based on reliable real-time data

The S2P lifecycle touches teams across the business. Solutions of this scope are non-trivial, and often require buy-in from one or more VP- or C-Level executives, to ensure they are adopted by the necessary teams and deliver maximum impact for the business. To that end, a team of stakeholders is usually involved in finding and selecting partners.

The implementation process can take anywhere from three to six months, depending on the scale of the organization, the level of adoption required, and the teams involved. 

Make no mistake. This is transformative work that takes time. But for those who are willing to stay the course, the rewards are both measurable and substantial.

Workrise: Rising to the S2P Challenge for Energy

In its unique position as both the leading supplier of labor services and a provider of strategic vendor and supply chain management for energy companies, Workrise has deep firsthand experience with the friction, bloat, and headaches suffered by both operators and suppliers. 

That’s why we created Workrise Vendor Management, an end-to-end solution — not just another tool — for today’s energy industry.

Ready to transform the way you manage your source-to-pay lifecycle? Book a free consultation to see how our unique blend of software and services — the first S2P solution purpose-built for energy — makes it easier, faster, and safer to get projects done. 

To book a demo today, click here.

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