Only 27% of respondents reported that 80% or more of their projects were delivered on budget, and 94% of leaders reported invoice rejections due to errors. In addition, on average, energy companies in the US employ an average of 124 FTEs who spend 80% or more of their time managing suppliers.
In a world where such a large share of the hard costs associated with project delivery is informed by vendor costs, and where the process from sourcing to payments is so broken that 124 or more FTEs spend the vast majority of their time managing it, something clearly needs to change.
Leaders Lack Access to Quality Data
Data plays a crucial role in a company’s ability to deliver projects on time and on budget, and of course in any leader’s ability to manage against the KPIs for which they are accountable. Unfortunately, due to the fragmented and highly manual process by which most energy companies manage the S2P lifecycle, data challenges abound. The study revealed that:
- Nearly half of Supply Chain leaders (49%) don’t have the data they need to compare and contrast vendors outside of their AVL.
- Almost 40% of leaders lack the real-time spend data and reporting that is essential to proactive spend and project management. In Oil & Gas, an industry where it takes seven to 10 days to drill a well yet averages 45 days to process a single invoice, this should not be a big surprise.
- Nearly a third of energy leaders say they lack reliable data on their most critical KPIs.
When you consider that most energy companies use eight or more separate tools to manage the S2P lifecycle, and so much data entry is manual, these data challenges are understandable.
For an industry projected to spend $1B in the US alone this year, these challenges beg some important questions:
- Is this — leaders without real-time spend data, leaders lacking the data they need to search for vendors outside their AVL, leaders missing reliable data on their most important KPIs — good enough?
- How much of every dollar of capex is wasted instead of being put to use for the greater good of the company?
The Costs of Just "Getting By” Are Substantial
We’ve touched on service costs. But what about the costs —both hard and soft — an organization incurs to manage the purchasing process?
Workrise recently commissioned a study to surface data on the true costs of managing suppliers from the moment of onboarding through to compliance management and payments. It found that this process is incredibly high-cost and labor-intensive for Oil & Gas companies.
The study found that for an average supplier, onboarding saps 47 hours of FTE time, and compliance management alone requires an average of 70 hours per year. When you consider that the average respondent reported 1,057 active field vendors managed annually, 52 new vendors onboarded, and 175,620 invoices processed in a calendar year, it’s easy to see why 310 FTEs are pulled into this equation to varying degrees, and the average energy company spends $8.11M and 125,005 man hours annually simply keeping the source-to-pay process afloat.
