The oil and gas industry has had a difficult past few days amid supply chain disruptions stemming from the ransomware attack on the Colonial Pipeline.
While the event has raised awareness as to the importance of corporate cybersecurity measures, it has also revealed the delicate nature of the supply chain of such a massive, yet complex, industry: one point of failure has widespread ramifications.
Procure-to-pay workflows in industries like oil and gas as well as waste management can be immensely complicated. Industry giants like BP are managing massive volumes of invoices to both send out and pay, but as Engage Mobilize CEO Rob Ratchinsky told PYMNTS, that’s far from the only area of friction that can stifle B2B payments in the industrials arena.
Sectors like oil and gas face some unique hurdles in streamlining the procure-to-pay process, but such challenging pain points also present an opportunity for some of the most innovative technologies, like blockchain, to step in and ramp up efficiency.
Middle Of Nowhere
Industrial workflows involve a high volume of documents that, like many industries, have historically involved a lot of paper and manual workloads.
Yet what makes procure-to-pay processes for firms in markets like the oil and gas sector especially challenging is that the work and purchase orders being generated often involve difficult-to-price services that occur in remote locations, with little opportunity for oversight.
“You’re out in the middle of nowhere,” said Ratchinsky. “You’re dropping supplies, you’re doing things nobody can watch and remit.”
By the time an invoice is submitted to the accounts payable (AP) department, finance leaders can be weeks or even months removed from when the actual service occurred. Oil and gas is an industry heavily reliant on a “cyclical workforce,” added Ratchinsky, meaning the cycle of professionals coming in and out creates an even greater challenge to gaining visibility into operations, matching what was ordered or purchased to what was actually provided, and how much was paid.
“They’re dealing with millions of records and millions of work orders per year,” he noted. “It’s hard to validate what took place in a timely manner.”
Blockchain Steps In
One of the biggest pain points surrounding the procure-to-pay processes in this industry involves data. Such sectors not only require management and integration of data from work and purchase orders, invoices and payments, but must also take into consideration a high volume of tertiary data points.
Ratchinsky offered an example of facilitating the payment for a commodity transfer between an oil and gas hauler and a client like BP. Key information including validation of that pickup from a third-party trucking company, as well as information from Internet of Things (IoT) devices including shipment location, timing, volume and temperature, are all essential to ensuring that billing and payments are done correctly.
Historically, the sector has relied on paper and snail-mail to move that information into the right hands. But as digitization progresses, the opportunity to embrace technology like blockchain can help to consolidate and streamline collection and management of that information.
“These multinational corporations need to get a handle on the way they aggregate their data,” said Ratchinsky.
As blockchain proliferates in such industrial spaces, there will be other use cases for the technology. B2B payments are another major opportunity, particularly considering the cross-border nature of industries like oil and gas. While today, blockchain has not yet reached the scale required to facilitate transactions, Ratchinsky acknowledged that such a future may not be too far off.
In the meantime, Engage Mobilize might consider exploring collaborations with payment technology providers to complete the procure-to-pay cycle, which it built out earlier this month through the launch of ENGAGE E2E and enhanced eInvoicing capabilities. But in the coming years, said Ratchinsky, blockchain-powered functionality will find a space to optimize both data flows and payments.
“Overall, it does not exist at large scale commercial efforts today,” he noted, “but I can see it entering the ecosystem in the next five to 10 years.”
May 17, 2021 at 01:00PM