It's not by chance that the term "logistical nightmare" has entered the corporate lexicon — it can be a massively challenging area of business. Logistics demands multitasking, communication and coordination across an array of parties — and across geographies — and that means the movement of money in fleet and logistics can be just as complex.
Technology means businesses can yield the power of Big Data, telematics and other innovations to ease the burden of logistics friction; electronic payments tools have followed suit. But these solutions by no means render logistics "easy," especially for small businesses with limited resources to get all of their logistics ducks in a row.
Transport Pro is a logistics company that wants to ease the struggle of logistics for SMEs. Last year, the company rolled out a fleet management solutions designed for the smaller company, enabling firms to manage the transport of their goods, along with the money that moves along, too.
More recently, though, Transport Pro announced its SME software for logistics brokers, the companies that help businesses transport goods and services via third-party transporters.
"The role of a broker is to broker loads; this means that the broker needs to find a carrier to cover a load for their customer or shipper," explained Transport Pro Head of Marketing Kelly Frederick to PYMNTS.
For instance, if a company's fleet can only manage to transport 75 out of 150 loads of a product, that firm needs to find another logistics provider to transport the remaining 75 loads. A broker will find that provider for them.
Adding another party into the already complex (and crowded) logistics process also makes the payments process more complex.
According to Frederick, brokers pay carriers for transported loads; once the load is delivered, the broker invoices its client. But these transactions aren't always this straightforward.
Transport Pro's new solution for brokers enables these companies to receive an early payment discount, for example. "If the broker pays the carrier immediately, 5 percent will be deducted from the carrier's pay," Frederick explained, adding that, for example, brokers using the Carrier Quick Pay feature can set their own quick pay options to determine when a carrier gets paid and how much of a discount the broker will receive.
Just as is the case when businesses pay their suppliers more quickly for an early payment discount, early payment for carriers provides a way for brokers to strengthen cash flow, said Frederick.
Plus, she said, "having this option allows brokers to pay carriers more quickly, keeping the carrier happy and more likely to cover a load for them in the future."
Of course, early payments aren't always feasible, especially in lower-margin industries, like logistics brokerage. This is where factoring comes in. According to Frederick, factoring is a popular way to help brokers secure an early payment discount and to have the cash-on-hand to actually pay carriers early.
"It is particularly difficult for smaller companies to handle all necessary expenses," explained Frederick, "so by factoring, they can be sure that they are keeping cash flow, as well as fulfilling customers' needs."
In addition to handling faster payments to carriers, factoring, argued Frederick, allows brokers to ensure their clients' shipments are fulfilled in a timely manner. This, too, leads to happier business partners.
"Being able to meet these needs helps the probability of customer loyalty," said Frederick, "which, in turn, results in a growing business."
With so many parties involved, the movement of money in the logistics sector can be tricky. Frederick noted that payments — from broker to carrier, at least — are typically made via ACH or paper check. So, while speed is a critical component of payments in the logistics and transport space, the industry could be in a position to adopt more efficient (re: faster) payment technologies.
Still, there is no denying that the logistics space has shone bright when it comes to adopting innovative technologies. While electronic payments may not yet be commonplace, Frederick explained that the industry is flooded with digital solutions.
Transport Pro, she said, sees "the demand for faster, electronic practices," like logistics software, integration with cloud-based accounting platforms, electronic barcode scanning, digital documentation, digital billing and invoicing and the like.
All of this means more efficient communication between all of the parties involved in the transport of goods from Point A to Point B.
"This eliminates the need to constantly make phone calls or construct emails," said Frederick. "Not to mention, electronic practices such as these save exorbitant amounts of money, ultimately increasing ROI."