Byon 30 October 2020
The US Energy Information Administration (EIA)1 projects worldwide energy consumption to rise 50 percent by 2050, with renewable sources on track to become the most used energy source during this same time.
How we consume energy is also going to change drastically. To meet these evolving needs, energy companies are reshaping their strategies and creating bold plans. For example, they’re investing in technology to create more agile processes and offer new value to customers to help everyone achieve sustainability commitments.
Can technological innovation in procurement help meet increasing demand?
Yes. In fact, technological innovation in procurement is transforming the industry. This year, three Amazon Business customers—also Fortune 500 energy companies—have shared their stories with us. Their experiences reveal trends across the energy sector—demonstrating how digital automation and analytics are replacing manual processes, optimizing supply chains, and helping them drive better outcomes for the bottom line.
Optimizing business processes to deliver in an evolving landscape
Procurement organizations at big energy companies are operating on a global scale, often serving thousands of internal users across the world. When you consider the complexity of these procurement organizations and the breadth of needs across offices and remote locations—including upstream and downstream production—procurement leaders in the energy sector are increasingly leaning towards technology solutions to replace manual, time-consuming processes that not only enhance the user experience, but also reduce costs and inventory and establish scalable models.
ExxonMobil is an example of an organization with an immense global procurement operation. To give you an idea of their scale, here are some quick figures. ExxonMobil...
For energy companies at this scale, the move to digital is no longer a question of if, but when—and how quickly—they can automate.
Like many Amazon Business enterprise customers, ExxonMobil started its e-commerce journey sourcing office supplies, and later expanded to industrial materials, maintenance, repair and operations (MRO). Recently they’ve turned to us to help them deliver on the needs of a remote workforce. They’re also increasingly using e-commerce to find and source from suppliers with diversity certifications such as Turtle & Hughes, a leading women-owned electrical and industrial supply distributor, spending more than $2.2 billion on diverse suppliers and small businesses within the US, an increase of 15 percent since 2017.
Nassim Kefi, now a Global IT Procurement Manager at ExxonMobil, who spearheaded many of the changes above remarked: “At our scale, every percentage point counts. When you save thousands of dollars on each transaction, considering the sheer size of our procurement organization and our purchasing activities, it adds up fast. And that’s why we’re aggressively rolling out e-commerce solutions such as Amazon Business in North America, Europe, and beyond, because of this buying channel’s superior value proposition.”
E-commerce agility + a vast network of global suppliers = powerful procurement
E-commerce has not only helped Kefi and his team at ExxonMobil accelerate technology-driven procurement, but it has also enabled them to get ahead of supply chain disruptions by choosing a source with hundreds of thousands of suppliers vs. relying on contracts and set price lists with those who may or may not be able to navigate unforeseen challenges. Mariano Matzkin, Global MRO Procurement Manager at ExxonMobil, noted: “One thing that’s been made clear for procurement leaders during this time is how prepared they are to navigate through unforeseen circumstances, and how the processes we’ve established in advance help or hinder us during difficult times.”
Using supply chain automation to drive sustainability goals
As global energy demands continue to rise, the energy industry is putting a greater emphasis on renewable energy sources, with carbon reduction and net-zero carbon commitments becoming more common. Companies that were once entirely focused on oil & gas generation are now committing themselves to efforts to diversify—which makes good business sense when you consider energy sources such as solar, wind, and hydroelectric power are on track to be the fastest-growing energy source between 2018 and 2050, surpassing petroleum and other liquid fuels, according to the EIA.
In February 2020, bp embarked on a bold initiative: ‘Reimagining Energy’ to reshape its business. By 2030, the company plans to pivot into an integrated energy company, delivering on a progressive future with the end goal of achieving net zero carbon by 2050—just as worldwide consumption doubles.
There’s a three-part strategy to turn this ambition into a reality:
Since the start of 2015, bp has focused on reducing inefficient purchasing, resulting in a 40 percent reduction in existing inventory. bp is also using a combination of e-commerce and machine learning capabilities with the help of Amazon Business and AWS to align delivery of eligible supply orders—using a feature called Amazon Day—with freighting schedules in the Gulf of Mexico. This feature allows businesses like bp to set a specific day to automatically consolidate eligible order delivery on a weekly basis. This has led to a reduction in freighting that not only saves time and effort, but reduces fuel consumption and contributes to its carbon reduction goals. Over time, bp is collecting data on shipments, and plans to completely automate ordering, shipping, and freighting of supplies with little manual effort.
Imagine the potential of nearly complete automation in the Gulf of Mexico supply chain. They could scale that kind of efficiency to other fuel production sites, requiring little to no manual effort.
As Justin Burnett, VP of Materials Management and Warehousing at bp puts it, “Our world and our industry are changing rapidly, and bp aims to be a very different kind of energy company to meet the evolving needs of our customers, and indeed, the world. Our new strategy will kick-start a decade of delivery towards our net zero ambition. We need to continue to push ourselves to evolve with progressive companies like Amazon, and allow them to support and push us on what is possible. Working together we can leverage great qualities from both companies to create a more efficient supply chain, and solve historically tough challenges.”
Getting supplies easier and faster to those in remote production areas
Oil and gas production generally happens in remote regions, including offshore, making the inbound movement of goods and services to rig sites a unique challenge. One example of this is the West Texas Permian Basin, a key production region for Chevron. Drill sites present logistical challenges—there’s limited infrastructure and roads, and in some cases no physical addresses. Supplies needed at these sites include specialized oil and gas materials that are managed by business partners on behalf of Chevron, as well as items not specific to oil and gas extraction that are important for the wellbeing of the crew living there for weeks at a time.
In these areas, Chevron managers, like Kevin Jackson, Logistics Execution Manager, Mid-Continent Business Unit at Chevron, keep things running smoothly. In the past, managers created shopping lists for monthly shipments for these teams. Building the lists, getting quotes, approving a quote, ordering, and accepting delivery of the items would take four to six weeks.
Chevron solved this problem by enabling individual employees on the rig sites to order what they need directly on Amazon Business, and have them shipped to a central warehouse for monthly distribution. To maintain established approval processes, Chevron uses the purchasing workflows feature on the Amazon Business store, which allows employees to order what they need, routed to the appropriate approver. The site automatically consolidates all orders into one P-Card for the region for master expense reporting, and consolidates eligible orders into a weekly delivery.
The intricate world of fuel retail, and how e-commerce supports it
Most fuel stations in the US are clearly associated with a major energy brand, like bp, ExxonMobil, or Chevron. But the story behind fuel station branding, and who consumers are buying from when they fill up at the pump, is more complex than you might think.
Major oil companies are moving away from owning the real estate—the fuel stations themselves—and have largely outsourced the operation of them. Out of the roughly 122,000 fuel stations in the US, less than one percent are actually owned and operated by a major energy company. Energy companies would rather dedicate their resources to supplying fuel through their distributors, focus on exploration and production, and increasingly, large-scale sustainability and net zero carbon goal initiatives.
Chances are, when you fill up, despite the branding or, “flag” in industry jargon, you’re actually buying fuel from a dealer, or a reseller of fuel, known in the industry as a “jobber.” The jobber buys fuel from the energy companies, owns the real estate (fuel stations and their convenience stores knows as c-stores), and often franchises some of the c-stores out as part of their business model and resell the fuel to consumers and businesses. Between fuel and c-store sales, fuel sites are big business. In 2019, c-store sales increased 4.4 percent year-over-year to $251.9 billion dollars.
The jobbers running these sites look for ways to optimize their supply chains, just like the energy companies.
Between ordering and resale, building an efficient and profitable business, and delivering on the needs of their customers, jobbers are adopting e-commerce solutions like Amazon Business to supply retail sites and c-stores. They can take advantage of numerous benefits, such as Business Prime, which allows them to order what they need (to keep these operations conveniently stocked) with FREE, two-day shipping, among other benefits. Whether its foodservice supplies, receipt paper, janitorial and sanitation, or shelf-stable goods for customers, the selection on Amazon Business continues to grow to meet the needs of these customers.
Equipping today’s leaders with the solutions of tomorrow
Technology is rapidly driving change across organizations of all sizes, and the move to digital-first is no longer a matter of if, but when. Amazon Business is proud to partner with the pioneering leaders in energy who value data-driven decision making, automation of manual processes, and who prioritize delivering on sustainability commitments. Together with these companies, we’re committed to building a sustainable future for our customers and the planet.
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