How Inefficiencies are Plaguing the Energy Sector’s S2P
A study by source-to-pay solution Workrise, looking at the energy industry's source-to-pay (S2P) space, has revealed the high costs and hidden inefficiencies of the process that energy companies use to source, procure, manage and pay vendors for projects.
The findings show that many industry leaders are unaware of just how inefficient — and costly — the traditional source-to-pay process in energy has become.
Workrise, an S2P solution for the energy industry, commissioned NewtonX, one of the world's leading B2B market research companies, to formulate and field the impartial benchmark study, setting out to hear firsthand from oil and gas leaders about the pressures they face and to surface data about the dynamics that impact the S2P process to understand how the industry works today.
Source-to-pay: One of the last actionable opportunities
The study obtained answers from 120 decision-makers at energy companies and their suppliers across the US and Canada, from service companies like Seadrill and Worley to industry behemoths like BP, Enbridge, Chevron, Shell and TotalEnergies. Participants' roles ranged from managers with regional scope to VP and C-Level executives.
“The study confirms what we have seen firsthand from working with energy operators and suppliers,” says Adam Hirschfeld, Senior Vice President at Workrise.
“Many energy companies don’t fully understand the true cost of the S2P process to their organisation.
"Source-to-pay is one of the last actionable opportunities for energy companies and their suppliers to streamline field operations, and meaningfully improve their cost basis.”
The study's key findings
Efficiency issues:
Only 30% of leaders say their company is "highly efficient" at managing the S2P process across all the teams it touches.
Just 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.
On average, US energy companies employ 124 FTEs who spend 80% or more of their time managing suppliers (for large-cap operators the average is 190 FTEs).
Lack of access to quality data:
Nearly half of Supply Chain leaders (49%) say they don't have the data they need to compare and contrast vendors outside of their approved vendor list (AVL).
Almost 40% of leaders lack the real-time spend data and reporting that is essential to proactive spend and project management.
Nearly one-third of respondents say they don't have reliable data on their most critical KPIs.
Mounting cost pressures:
When asked about supply chain-related cost savings, respondents report being asked to find an astonishing 40% to 60% reduction in cost across categories, on average.
Yet over a third of suppliers (37%) reported operating above capacity, up from 25% this time last year — an almost 50% gain. And 56% of operations leaders from service companies reported full capacity billing.
S2P: touches every department
S2P is an emerging category — Gartner's first Magic Quadrant for Source-to-Pay Suites was released earlier this year — and none of the leaders in the space specialise in the needs of the energy industry.
"The source-to-pay lifecycle touches every department at every energy company in the world. It costs companies millions annually in wages, technology and tooling - and millions more in opportunity costs that are harder to measure," adds Jacob Gritte, General Manager, Source-to-Pay Solutions at Workrise.
"The complex, capital-intensive and often high-risk nature of work in the energy sector magnifies the critical need for a unified S2P process."
Highly manual and prone to errors
The majority of energy operators currently use either eight, or even more, separate tools to manage their S2P process – making the process highly manual and prone to errors.
The costs from this are significant, with energy companies, on average, having 310 full-time employees (FTEs) working on source-to-pay activities and spending over US$8.1m– while 150,000 man-hours annually simply keep the process afloat.
Dealing with invoices alone, including disputes, costs operators an average of US$4.52m annually, according to findings from Workrise's October 2024 Cost Savings study.
The benchmark study comes following the launch of Workrise Vendor Management, an end-to-end solution whose capabilities span the entire S2P journey: vendor discovery, onboarding, safety and compliance, payments and invoicing, as well as data and insights, with a sixth capability in managed vendor services supporting each step in the purchasing lifecycle.
Make sure you check out the latest edition of Procurement Magazine and also sign up to our global conference series - Procurement & Supply Chain 2025.
Procurement Magazine is a BizClik brand.
