Supply chain snarls and a shortage of qualified drivers have driven the freight industry toward a digital overhaul.
But not all areas of the logistics and freight industry have embraced modernization.
Bharath Krishnamoorthy, CEO and co-founder at Axle, told PYMNTS’ Karen Webster that freight financing has lagged. Credit and payments for shippers have been mired, for decades, in paper-based processes, done by pen, with clipboards and even by fax.
“Some of our competitors will have clients fax them documents whenever they want to get financing — which is outrageous,” he said. Those freight and logistics firms are working with truck drivers who spend all day on the road — encountering nary a fax machine.
That means it can take weeks or even months to get paid. For the brokers, the negative ripple effect is that cash flow management is no easy process, and visibility is lacking. Many of those smaller brokers and carriers, he said, even amid the explosion in demand, have struggled to be paid long after the deliveries have been made. And where cash-flow cycles are elongated, growth is truncated.
In a twist on the age-old practice, Krishnamoorthy said, invoice factoring can be greatly improved by the use of online platforms, Axle’s among them. And that, in turn, can improve supply chain dynamics.
Freight Primed for Digital Shift
The shift toward back-office automation and digital payments is an inexorable one, he said, as Uber Freight and any number of digital-first brokerages are helping shake up the logistics — improving the visibility of the actual transportation of goods.
“There are a lot of great things happening with route optimization and efficiency,” he said, “including consolidating deliveries to make them more efficient.”
Payments and financing remain natural follow-ons to embrace technology in the bid to improve process and scale. Axle and its competitors have captured only about 1% of the digital freight market, which means the entire landscape remains fragmented.
“I think people like the feeling of getting a paper check for the work they’ve done, and depositing it — there’s a dopamine rush,” he told Webster.
To that end, Axle has sought to meet the paper check halfway, so to speak, building out its integrations to automate the process of mailing out checks while remaining committed to the longer-term goal of full automation — creating and sending invoices, reconciling payments and leveling the playing field between startup brokerages and their larger brethren.
The model allows Axle to provide financing to clients that have not traditionally been deemed creditworthy.
“Maybe they’ve only been in business for six months — or maybe they have had some rough months because of COVID. We can still support them and help them get back on their feet so they can scale their business.”
The Axle Wallet
Earlier this month, Axle unveiled its new carrier payments solution. Axle Wallet allows freight brokerages and shippers to pay their carriers with their own capital through Axle’s payments network.
In terms of the mechanics, Axle Wallet allows brokers and shippers to transfer funds to one account and disperse payments to the right carrier at the right time.
The introduction of the Axle wallet, he said, allows the firm to service a segment of the market that does not need financing — in a bid to help Axle move “upstream” to help those firms that still need some assistance with consolidating payments and with workflow automation.
In 2022 and beyond, Axle’s focus will be on building out more integration partnerships with digital load boards and other freight companies that wish to offer payments and financing support to their clients.
As the pandemic lingers, “we’ve seen a bifurcation in our customer segment.” Some carriers are having trouble operating amid the supply chain snarls, marked by driver shortages.
Then there’s a huge segment that is thriving in the current environments. If they can establish great carrier relationships and secure the carrier loads, they can also to command higher prices for what they do — capturing higher margins in the offing.
The Axle Wallet, he said, “enables more firms in that first group become part of that latter group by building carrier relationships and their credit scores, too.”