By Joshua Trott, Chief Revenue Officer
The Supply Chain Data Gap
Last month we published a benchmark study by Newton X, commissioned by Workrise to gather not just one client’s point of view but a representative sample from decision-makers across the industry. In a sector where companies look inward at their own historicals to make decisions (and those historicals vary widely in reliability, as I’ll explain below), we wanted to establish a benchmark for Oil & Gas.
This collective experience and knowledge of leaders representing all facets of the industry, from supermajors to regional suppliers, has painted an exceptionally nuanced, at times startling, picture of an Oil & Gas supply chain at a tipping point. I’d like to tighten the aperture on one of the study’s more astonishing findings, which centers around data. The three central themes:
- Access to data: “Do we have the data we need?”
- Quality of data: “Is our data accurate?”
- Solutions: “How can we improve the data we have?”
For any business leader, all of these are crucial questions, and the first two are first-order priorities. But in the Oil & Gas supply chain, only 20% of respondents across all departments said they feel confident they have the data they need to make decisions in their daily work.
And that’s just the tip of the iceberg. As you read more about some of the study’s most fascinating findings, hold this thought: We share all of this in the spirit of progress — not to point fingers or complain about the status quo. We believe this challenge is eminently solvable. The first step to solving a problem is acknowledging that the problem exists.
Access to Data: We Can’t Change What We Can’t See
Perhaps a more meaningful way to think about access to data is “visibility.” At any given moment, can you see how your teams are performing? Do you know if you’re on budget? Do you know which levers will improve a given outcome?
Take key performance indicators (KPIs). Whether you think of KPIs as a window into production, or just as the things you or your organization uses to gauge whether you’re on track or not, it goes without saying that KPIs are a critical part of how leaders manage teams and deliver against their goals. But in Oil & Gas, just 40% of decision makers across supply chain, operations, logistics, and finance said they have access to reliable data on the KPIs for which they are held accountable.
In an industry where billions change hands every quarter, it’s shocking to hear that only 40% of leaders feel they are able to track the impact of their investments against their goals.
Another shock is how little visibility leaders have into market pricing data. A whopping 49% of decision-makers surveyed reported they lack the ability to get regional pricing data to benchmark bids from new vendors against the going rates in the area. So almost half of these leaders are purchasing at a disadvantage. Of course this sometimes can be combated with competitive bidding, but when the stakes are this high we know that competitive bids are a luxury some situations just don’t allow for.
A final example of just how little crucial information today’s Oil & Gas leaders are actually able to see: out-of-network supplier data. As with regional pricing data, the lack of a true market for energy services has other impacts. Nearly half, or 48%, of respondents listed “data to compare and contrast vendors outside of their AVL” as data they need but don’t currently have.
There may be a handful of vendors that can provide the same service you get from your current approved vendor list — at a lower cost. But you’d never know that if you can’t see who’s out there and evaluate them side by side. With 61% of industry leaders surveyed saying the rising cost of goods and services is keeping them up at night, it will be telling to see how much AVL expansion is explored as a means to combat this trend.
TL;DR: Improving access to data is a clear pain point and a critical piece to solve as Oil & Gas companies look to improve their cost basis and operate more efficiently in a challenging environment.
Data Quality: What We Can See is Murky at Best
“If you imagine that 95% of the spend is manually coded, whether or not that data is reliable is questionable. We use it as maybe a good ballpark, but it's hard to even assess the quality of it.”
— Senior Category Manager, Supply Chain; Top 10 US-based Oil & Gas producer
You might see that quote from the study and ask: Why is the quality of supply chain-related data available to Oil & Gas companies so unreliable? And why, in a newly released study of the energy sector’s data landscape conducted by Cognite, did only 3% of respondents say they completely trusted their critical decision-making data, leaving 97% with some level of mistrust in their data?
To start to answer those questions, let’s look at project input costs. Survey respondents rated input costs for projects (services, materials, labor, equipment, etc.) as the No. 1 most valuable data point they need but do not have.
As we’ve discussed in prior pieces on steps to strengthen the supply chain, it takes 15 days to drill a well, and often 30 to 60 days to get the final reports to know if it was on budget or not. Consider the heavily layered, multistep processes required for all work on energy projects, and the mostly manual approvals required at each step along the way. Given the likelihood for error across the hundreds of vendors that participate in drilling and operating a single well, the quality of this data is mediocre at best.
That might help explain why nearly half of the supply chain leaders surveyed said they dispute invoices 40 to 50% of the time. And why “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,” according to a Supply Chain Service Center Manager at one Oil & Gas supermajor.
The sheer volume of manual input makes something as simple as cost visibility a challenging nut to crack.
Legacy assets are another hurdle many companies face. “One of the biggest challenges is the lack of perfect data from legacy assets,” says a Business Opportunity Manager at an Oil & Gas supermajor. “Most of our legacy systems were built without data analytics in mind. For example, in the Gulf of Mexico we have 10 facilities built in the last 30 years, and not everything is up to date.”
Consider that the average lifespan of a well is 20 to 30 years. And that 20 years is a millennium in tech (20 years ago we hadn’t yet laid hands on the first iPhone). It’s easy to see how challenging it is to maintain quality operational data with wells that are even halfway through their production lifespan.
TL;DR: Oil & Gas companies may have data, but it’s often of questionable quality. Large operational footprints, aging infrastructure, and a large volume of manual inputs (necessitated by a disconnected patchwork of tech solutions) are all contributing factors.
Solving the Data Gap: The Solutions Oil & Gas Leaders Are Exploring
If it’s clear that Oil & Gas leaders see gaps both in data access and data quality, the question then becomes: What are they doing about it?
According to the study, nearly half of all Oil & Gas leaders surveyed aim to have a Single Source of Truth (SSoT) to connect data, workflows, and teams. And nearly a third of respondents (30% of them Ops leaders and 37% Supply Chain leaders) report their organization already has, or is currently in the process of implementing, a SSoT to connect data, workflows, and teams.
In a promising sign that companies recognize the need for better data and are taking steps to implement solutions, 31% of industry leaders surveyed said they are “very likely” to look into implementing Enterprise Resource Planning (ERP) over the next 12 months, while 29% intend to look into vendor management over the same period. The 3rd top box score after vendor management and ERP was project management, reflecting another way to centralize KPIs and improve visibility of outcomes.
TL;DR: Vendor Management and ERP systems often offer a centralization of key data points to more efficiently drive results, suggesting that a sizable chunk of industry decision-makers surveyed are currently searching for point solutions to offer better quality, easier-to-access data.
Change Starts from Within
While these points around data access, quality, and solutions represent only a fraction of the study’s illuminating results, my hope is that by holding a mirror up to the industry and finding common ground on shared hurdles, we can start to inspire meaningful change.
What I see here is not just a set of challenges operators face around data quality and access, but also an incredible opportunity waiting for those who invest meaningfully in their supply chain and operational data.
External pressures will come and go. Oil prices will rise and fall. But those who choose to improve how they operate will not only weather the troughs more efficiently, they’ll be positioned to improve profitability regardless of volatile forces like market changes, weather, and politics.
It’s always better to control your destiny than to be at the mercy of the macro picture.
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 shepherd the company’s rise to become the No. 1 Oil & Gas labor provider in the country, and played a critical role in guiding its evolution into an end-to-end supply chain solution provider. A lifelong soccer player and fan, he lives in Austin, Texas.
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