It seems as if world wars have caused less disruption to domestic freight and trucking than this endless pandemic, but the entire sector is decades past due for a systems overhaul, anyway.
Like so many industries blindsided by the global health crisis, the highway freight business saw manifold inefficiencies exposed by COVID chaos, none more so than around payments. Truckers are the wheels that roll to ports and depots to bring goods to stores and warehouses, but they’re stuck at the bottom of the payments system and need some leverage.
Melissa Forman, senior vice president and chief strategy officer at TriumphPay, told PYMNTS’ Karen Webster that problems with paying truckers began with deregulation in the 1980s.
“It allowed a ton of small carriers to enter the market, and they didn’t have access to the cash flow that they needed,” Forman said. “On the other hand, shippers themselves didn’t have the internal logistics support to manage their own capacity and bring those smaller carriers together.”
Enter two significant intermediaries: freight brokers and factoring companies.
With factors providing cash to carriers and brokers consolidating capacity, matching trucking companies to loads and handling the paperwork, Forman said.
“These two intermediaries grew so much so that when you look at the size of the market, we believe at TriumphPay that there is $420 billion annually in freight spend, of which about $170 billion is handled by freight brokers,” she continued.
Getting a piece of that spend means fixing fragmentation in the sector that is being worsened by legacy technology that lags the connected economy — of which trucking is an integral part.
“With the fragmentation [in transportation freight], all of that is facilitated through manual intervention,” Forman said. “It’s phone calls, it’s emails, it’s looking up information on multiple disparate websites trying to consolidate that, and it makes it extremely difficult and inefficient.”
Solving for fragmentation and plodding payments is what TriumphPay has set its sights on.
See also: Transfix, TriumphPay Team To Bolster Freight Payment Visibility
Payment Terms Blow a Tire
Creating connectivity between the industry’s disparate systems is the objective at TriumphPay, acquiring audit and verification solution firm HubTran to bridge brokers, factors and carriers. That’s a good thing, as payment terms for freight truckers are far from ideal.
“Everybody in the chain is trying to push out their payment terms, not bring them in,” she said. “We are seeing shippers with more and more leverage going out to 120 plus [days]. It’s not out of the norm anymore to see a standard payment term of 90 to 120 days.
“When you think about a carrier getting paid in a traditional 30 to 60 days, if they’re working with a freight broker, that broker is waiting to get paid from their shipper. All of these entities, especially the higher up you get in the supply chain, the more purchasing power … they have, or leverage they have, over vendors that they’re able to push these payment terms out.”
She added, “Does it make sense for carriers to get paid as soon as the load is delivered? Absolutely. But as long as entities [like] shippers, etc. are going to push out payment terms, people like the brokers, the factors, are going to have to step in and provide that supply chain finance to fill that gap to execute those payments quickly.”
As the payments arm of Triumph Bancorp, the TriumphPay platform integrates with the stakeholders’ transportation management systems (TMS) and coordinates preload, load and delivery data, facilitating faster payments.
“We can also show them through the delivery process with our integrations into the TMS, was it delivered?” Forman said. “We can get feedback from the broker as well. Are there any claims or any exceptions to that load that they need to be concerned about? We can now present this information and show the appropriate parties what they need to know to make very important business decisions to help expedite the process and also mitigate risk.”
Related: Clearing The Paper Backlog That Keeps Truckers From Timely B2B Payments
The One Thing is Faster Payments
Conceding that there’s a long road ahead until freight trucking invoicing and payment is brought up to connected economy code, Forman sees room for real-time payments and more.
Looking for the one thing that needs to change now, she told Webster, “The biggest shift has to happen [in] real-time payments. I mean, same-day [automated clearinghouse] is a thing now. That’s something that’s really exciting and simple to do. More and more companies should be able to do that. Real-time payments, getting those rails up and accessible to all the banks is another step.”
With the truck manufacturing supply chain taking a big hit over the past two years, Forman doesn’t see tight capacity problems clearing up anytime soon.
As more operators begin to see the possibilities of using platforms, she said they reaction these days is, “‘I’m going to go start my own trucking company. I’m going bring it in house so that I can control my capacity.’ That is some of the conversation that we’re starting to hear where it’s shifting from outsourcing to bringing it back in direct. It’s that supply and demand balance.”
That prediction suggests more fragmentation, but platform efficiencies can solve for that.
“There’s going to be much more of that in the industry and transportation in the next couple years,” Forman told Webster.“ TriumphPay will play a big part in that. We will see carriers able to demand faster payment, better payment options, send money where they want it, when they want it.”
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