Inside the Energy Industry's Trillion Dollar Problem

By Joshua Trott, Chief Revenue Officer at Workrise  

The relationship between energy companies and their suppliers is… complex. Each needs the other, and together they are responsible for delivering on the mission-critical projects that power our world.

On the surface, the way energy companies and their suppliers engage 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.

This simplicity, however, masks a much deeper problem. The process by which they engage — the way they work together day-in, day-out — is broken, with plenty of headaches on both sides. The scale and complexity of the work are massive, so the players involved must be in sync to deliver with efficiency. But what we see is a dance floor full of partners who constantly find themselves out of step.   

We’ve lived and breathed this problem space for a decade.

There are dozens of solutions that solve problems within the seven steps we outlined above. The problem we see is that most only address small slices of this complex pie, often creating more work than value for the teams that manage them. 

We know this from our years acting both as a “supplier” in the labor services space and the provider of strategic vendor and supply chain management for in-house operations and supply chain teams. 

We work with over 300 operators in the US alone. We’ve managed regional expansions and M&A integrations for operators ranging from independents to supermajors. We’ve experienced the pain points of vendor management firsthand, and from many angles. 

This is what we’ve found.

A Broken Process

From the moment an energy company needs to find a new vendor for a project, the road to completed work and paid invoices is littered with obstacles.

Systems aren’t designed to talk to each other.
In the fractured energy ecosystem, each step is held together by human hands and brittle integrations.

Each operator has their own unique constellation of tools.
Each tool is managed by different teams, and customized to meet their individual requirements. The result is a myriad of tools that create more complexity than value.

Collaboration between the field and centralized teams is strained, at best.
Their goals can be at odds, and the pressures are very real. Whether the relationship is strained or worse, broken, depends on who you talk to.

There is no single source of truth for each step in the source-to-pay process.
No singular record captures and aligns the inputs along the way. And this has massive follow-on effects:

• Ballooning costs. Energy companies are getting squeezed by the rising costs of parts, services, and materials — from electrical components to transportation to labor and beyond. According to senior industry leaders who took part in a benchmark study on the energy supply chain commissioned last year 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 United States alone, that’s a lot of money being left on the table. 

• Wasted time. If time is money, energy projects are a case study in the perils of waste. In many cases, ballooning costs are caused by time lost to manufacturing and shipping delays, human error, inefficient processes (paper tickets, anyone?), and other logistical roadblocks. Every hour spent waiting to get something done translates to extra costs. And if operations  are stopped because you couldn’t get a vendor out in time, that’s time you’ll never get back.

• Lack of data. Energy operations are plagued by a lack of access to high-quality 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, according to the benchmark study. Only 20% of decision-makers across all departments said they feel confident they have the data they need to make decisions in their daily work.

• Operational bloat and inefficiency. On the road from sourcing and evaluating new vendors to paying for completed work, every moment spent digging through email for a current vendor list, manually entering data, passing information from one system to the next, calling to check the approval status of a new vendor, sending back an invoice because it had the wrong AFE code, is a lost opportunity. For too long, the industry has thrown people at these problems, because there hasn’t been a better answer. Can you imagine what all those people would do if they could focus on the work that really matters?

In a Space Littered with Tools, Solutions are Needed

Most Oil & Gas companies today use anywhere from five to eight separate tools to manage the suppliers they rely on to operate. All these different tools do a job — contracts, vendor management, invoicing, and so on —  and many of them do that job pretty well. 

But software still requires inputs. That often means human hands, who have to put down what they were doing to manage the tool instead of focusing on what matters. Humans will be in the loop for the foreseeable future, and that’s a good thing. But smart automation in the hands of the right humans is the way forward for the energy industry.  

Solutions absorb a bigger portion of the work that teams are struggling to complete. Sure, it’s helpful to see the steps a vendor has to move through to complete onboarding, and to know where they are in the process. But with a tool, someone still has to do all the work to move from one step to the next. Imagine a process where operations and supply chain teams could add the vendors they need with the click of a button, and watch as they move through the onboarding process — without moving a muscle.

The tools that exist have stopped short of being a solution, because they require 1:1 effort for value gained.

No One is Solving for the Ecosystem as a Whole

It’s incredible what the industry has been able to accomplish in the face of these challenges. Every day operators, suppliers, and field personnel work together to keep the lights on, quite literally. They power our hospitals, schools, and grocery stores. They cool our homes, fuel our morning commute, or the flight to next week’s conference.

‍But these groups could work so much better, together. 

In the daily dance of energy production and delivery, so many areas of friction could be vastly improved, if not removed from the equation entirely. A few examples that illustrate this point:
   

1. Invoices are disputed 40-50% of the time amongst supply chain leaders. It should be no surprise then, that a supply chain manager at a US supermajor reported: “20-30% of our category managers’ time is spent not in managing spend, but in chasing down invoice problems and resolving them on behalf of suppliers.”
2. Nearly half of the industry’s leaders are purchasing at a disadvantage. In an industry where billions change hands every quarter, it’s shocking how little visibility leaders have into market pricing data. 49% of decision-makers surveyed in our benchmark study said they lack access to regional pricing data to evaluate bids from new vendors against the going rates in the area. Translation: Almost half of these leaders are purchasing at a disadvantage.
3. Multi-year pricing agreements. To combat pricing volatility and scarcity of everything from services to parts and materials, operators are negotiating for longer and longer-term pricing agreements. The result is that vendors are forced to bake more and more padding into their pricing, and operators are forced to pay what is often an inflated rate, regardless of the going rate for the things they are buying. 
4. Net 60 payments. They may help operators manage their cash flow, but extended payment terms can put a chokehold on suppliers trying to make ends meet while they wait to be paid for services rendered. For up-and-coming suppliers, the ability to float hundreds of thousands of dollars in capital for months before getting paid back could be the difference between staying in business or finding a new way to make a living. This reduces competition, consolidates pricing power amongst fewer providers, and reduces the buying leverage of operators in the market for their services.

The tools that exist today magnify this complexity. They solve for the needs of just one group, in one slice of the source-to-pay process, often with deep customization options. A vendor with 30 clients may have to submit invoices 30 different ways. A superintendent taking on a new hitch may have to get familiar with a handful of new tools before they can get to work. You get the drift.

These systemic challenges will not be solved by solving for one group, or one use case, in the larger ecosystem.

‍‍A New Kind of Solution is Needed

Nearly 50% more energy will need to be produced annually by 2050 to support global demand. But with immense challenges comes even greater opportunity. That’s why we believe everyone in the energy ecosystem must work better together to reach their full potential, and to meet the world’s growing needs. 

To make that change requires both a willingness to move beyond the status quo, and the innovation required to improve how the industry operates. 

At Workrise, we see the source-to-pay process as the link that binds this industry together, and the epicenter of where innovation is required. 

What the industry really needs is a solution that…

• Connects the entire source-to-pay process, capturing each step along the way in a continuous digital ledger record; but not just for the operator
• Allows a vendor to log in once, update a compliance document once, and automatically roll that out to all of their clients
• Enables field personnel to log and verify work with a couple of taps, before moving on to the next job at hand
• 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 data — much more than 20% of the time
• And more..

We believe there will always be a role for expert eyes and human hands in strategic moments throughout the source-to-pay lifecycle. The combined power of software and services is essential to delivering solutions that truly absorb the complexity that has plagued the industry for so long.

Only by solving for the ecosystem of energy — the entire dance floor, and not just a few couples — can the systemic challenges the industry has faced be solved once and for all. 

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Joshua Trott has spent his career serving the energy industry, including at Workrise where as Chief Revenue Officer (and previously as Head of Oil & Gas) he has helped to grow the company’s industry-leading labor business and shepherd its evolution into a leading supply chain solution for many of the biggest energy companies in the world. A lifelong soccer player and fan, he lives in Austin, Texas.

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