Why Oil & Gas Needs a Source-to-Pay Solution

Introduction

Oil & Gas has a reputation for being a handshake industry. In many ways, it is — and for good reason. In an industry where the scale and complexity of the work is massive, the stakes are high, and the risks associated with getting something wrong are very real, it’s only natural to choose to work with people you trust.

Unfortunately, handshakes don’t scale. 

The reality facing today’s energy companies is that the world demands ever more energy while pressure from shareholders continues to increase. Opportunities to improve the bottom line are increasingly rare.

Enter the source-to-pay (S2P) process, the journey that begins the moment a company needs to find and evaluate vendors and ends with payment for completed work. This process has, over decades of Band-Aid fixes and point solutions designed to tackle individual chunks of a much larger process, devolved into a taped-together process that is slow, laborious, prone to human error, and wildly opaque. So much so that most operators can't get visibility into their spend on a drilling project … until after the well is drilled.

For Oil & Gas operators, from independents to supermajors, S2P represents one of the last remaining opportunities to meaningfully improve how they operate — to increase efficiency, deliver cost savings, and better manage risk and compliance.

The State of Source-to-Pay Today

In a nod to the importance of the S2P process, the first-ever Gartner Magic Quadrant for source-to-pay was released earlier this year. It identifies well-known brands as leaders in the space, but these companies’ solutions aren’t built for the highly specific set of problems that Oil & Gas operators face day in and day out.

From the moment an Oil & Gas 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 unique 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

Source-to-pay for the Oil & Gas industry is a specific, and comprehensive, workflow that spans everything from sourcing qualified new suppliers — equipped to service the needs of operators in the field — to making payments for goods and services. And all of this while capturing critical industry-specific supplier requirements such as tribal licenses and compliance metrics, or validating service delivery in remote locations, at key steps along the way. This is different from the offerings of the leading S2P generalists. 

Given the complex and capital-intensive nature of Oil & Gas projects, an efficient S2P process is mission-critical for ensuring operational efficiency, cost control, and regulatory compliance. More simply, improving S2P efficiency is about ensuring greater returns from every dollar spent.

As we drill down into why this is so crucial for Oil & Gas, let’s take a closer look at what source-to-pay really means, what a successful S2P solution for the industry looks like, and how to effectively implement S2P within an energy organization.

What is Source-to-Pay?

Generally speaking, source-to-pay is the process of finding, negotiating with, hiring, managing, and paying suppliers for their products and/or services. From start to finish, this 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 

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

The Unique Challenges of the Oil & Gas Industry 

The steps mentioned above may seem well-defined for a 1:1 relationship between an operator and a single supplier. But hundreds of suppliers are needed for every single well in operation — and in the US alone, hundreds of thousands of wells are active at a given time. It’s easy to see how this becomes a massive headache when it isn’t properly managed.

Here are a few common stumbling blocks we’ve seen during our years helping Oil & Gas teams solve their supply chain challenges: 

No Single Source of Truth on the Road From Bidding to Payments 

Think about how your organization functions. The chain of events described above — from securing bids and awarding the work to verifying and paying for it — is handled by different people, on different teams, who are often siloed from one another and using a myriad of tools. This often includes email, Excel, SAP, OpenInvoice, and even additional proprietary tools.

This jumble of systems makes the process impossible to audit, which means when the invoice hits and the Accounts Payable team has a question (i.e. “Is this the right price for X service?” or “Is this in the vendor’s scope of work with us?”), multiple people have to drop what they are doing to manually connect the dots.

It’s no wonder supply chain leaders report disputes for over 60% of invoices coming across their desk. A single system capturing every step in the process from bid to payments allows for a clean audit trail, improved invoicing accuracy, and better relationships with suppliers.

Delays Caused by Outdated Technology 

In Oil & Gas, there are too many examples of antiquated processes to count (hello, Excel spreadsheets and faxes). Here are two areas that clearly illustrate this pain point.

Bidding

Most operators require competitive bids, but very few have solutions to compare bids without manual compilation. This means superintendents and engineers in the field might receive bids from three suppliers via email, then have to manually create spreadsheets to pull each data point from each bid, and finally compare the options themselves before selecting the best one.

Is that really what these valuable employees should be doing — for hundreds of different vendors — on a single well?

Beyond the cost (that is an expensive head collating spreadsheets), this data is also siloed and inaccessible, rather than being put to work for the company as a whole. For example, once captured it can be leveraged to build the work order, or inform how the company sees pricing for a given service in the region.

Field Tickets

Whether you use paper tickets or a basic field ticketing solution, the challenges are similar. Field personnel are required to jump through hoops on the job site to keep a record of work completed, and that data is siloed from the other systems and tools that support the S2P process.

The result? 

Field ticket creation requires manual input that saps valuable time and resources, and creates continual opportunity for error. What should be straightforward — a job done, for an agreed-upon price, in an agreed-upon time frame — is anything but.

Once work is verified, invoicing is conducted manually in a separate system, creating yet more opportunities for error.

Finally, invoicing and payments, which could be entirely automated from the point of on-site approval in the field, are so tedious that many operators don’t actually manage their invoices, below a certain threshold.

Unnecessary Waste Due to Long-term Contracts

In Oil & Gas, rigs run 24/7 and the cost of downtime is enormous. Parts, materials, equipment, you name it — operators must have the things they need when they need them. For decades, long-term contracts have been a way to ensure a dependable supply of goods and services.

But the industry’s reliance on these contracts has negative follow-on effects:

• Vendors are forced to pad their pricing to support it over a period of years without going underwater on a given deal.
• Operators don’t pay market prices for the things they buy — so yes, they can predict the cost of goods and services, but who can say if they are paying the right price for a given service at a given time?
• Operators also relinquish pricing leverage to a smaller set of vendors; they have less leverage to negotiate renewals, in part because they don’t have the flexibility to find a better option.

In the US alone, $150B will be spent with O&G suppliers in the field in 2024. 

In an industry where waste is baked into the equation on both sides, how much of every one of those dollars spent is wasted? And what could be possible if more of every dollar could be meaningfully put to work?

How a Source-to-Pay Solution Built for Oil & Gas Tackles These Challenges

What the Oil & Gas Industry needs isn’t another generalist S2P solution. The complexity is too great, and the risks are too high.

An end-to-end S2P solution gives teams a unified platform and single source of truth for each step of the process, and the ability to manage that lifecycle continuously, with each and every one of their suppliers, over time.

But the lifecycle piece (continuous work order, safety, and compliance management) underscores an essential truth of this space, which is that technology on its own isn’t enough. Another tool – without expert teams to do the heavy lifting – is just more work.

What the industry needs is a solution that marries powerful technology with knowledgeable teams to support everything from specialized sourcing and onboarding to contract negotiation and compliance management, and even those dreaded invoice disputes.

With a solution like this, everything changes.

A Single Source of Truth from Sourcing to Payment

An end-to-end S2P solution provides a single, auditable record of the journey from sourcing to payments. With a single source of truth in place, transparency becomes possible at last, unlocking valuable benefits:

• Supers in the field can check their phone and see an up-to-date vendor list in real time. They know exactly who’s approved to work and can call them out immediately.
• When an engineer reviews surveying bids, they invite the vendors they want to participate and review the bids side-by-side, all in a single platform.
• When the AP team wants to know if the invoice price matches the agreed-upon pricing in the work order, they have it instantly.
• Leaders from operations to supply chain to finance can log in and review spend dashboards on-demand, with granular filtering and manipulation options. (No more manual reports and one-week — or longer — wait times for the data needed to make a decision.
• If the HSE team needs to review vendor compliance across the entire vendor list, they can do it from a real-time dashboard.
• Category managers can review service coverage, and proactively add depth in strategic areas, to ensure the field always has what it needß to keep operations running smoothly.

Automation, Powered by Structured Data 

By capturing structured data at each step in the S2P process, source-to-pay technology is also able to automate workflows which have historically taken place in multiple, often siloed tools, and required manual handoff to complete. What does that look like in practice? 

• Mapping data from work order to field ticket and invoice verification enables the process to flow unencumbered, radically reduces the opportunity for human error to create disruption, and makes payment automation possible.
• HSE teams can set their TRIR and EMR thresholds, and be notified when a vendor falls out of band.
• Vendors are able to maintain their documentation in one central location for all of their clients; no more 1:1 compliance management for each and every client account.

Streamlined Vendor Management

With well over a hundred vendors on any given project, it’s easy to see how managing these relationships can get out of hand. Source-to-pay solutions designed for for Oil & Gas bring order to the chaos by providing: 

• a single source of truth for all supplier relationships
• the automation that unlocks the support of expert teams who know the industry backwards and forwards

With an end-to-end solution in place, operators can watch the rewards proliferate as the old way of doing things is replaced by a system that empowers them to:

• Source the vendors they need, when they need them
• Onboard vendors in days, not weeks, with the heavy lifting done by outsourced teams
• Be notified automatically when vendors respond to bids, replace documentation, and submit invoices for approval
• Maintain clear visibility of spend across all vendor relationships
• Scale up and down resources as needed, rather than being bound to long-term contracts
• Gain access to market pricing when they don’t have the historicals to be confident in their own assessment

Source-to-Pay for Oil & Gas: How It Works

To handle the process from sourcing to payments, and remove all the areas of friction in between, the industry needs a truly end-to-end S2P solution built for the unique needs of Oil & Gas. This solution should include an Oil & Gas-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.

Workrise: Rising to the Source to Pay Challenge

If you’ve gotten this far, it should be clear that the patchwork of tools that enable the S2P process in energy are part of the problem, and that the generalists in the Magic Quadrant for source-to-pay don’t focus on supporting the specific needs of Oil & Gas companies.

This industry needs a purpose-built solution that:

• Connects the entire source-to-pay process, capturing each step along the way in a continuous digital ledger record
• Allows a vendor to log in once, update a compliance document, and automatically roll that out to all clients
• Enables field personnel to log and verify work with a couple of taps
• 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

Workrise, with its unique position as both the leading supplier of labor services and a provider of strategic vendor and supply chain management for energy companies, 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 connected source-to-pay 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 makes it easier, faster, and safer to get Oil & Gas projects done. 

Book a demo today.

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