Tag Archives: trucking

Truck freight matching as factoring

Some large unicorn startups are targeting freight matching for truckers as a great way to guarantee better utilization of trucks for smaller independent truckers, and offer the additional benefit of helping sustainability. Empty return trips are definitely a source of unnecessary air pollution.

Two big ones are Convoy in the US, and Zeus Labs in the UK. The concept is Uber-like and simple: match freight that has to move with trucks looking for a load. It’s easily handled with software. So far, so good.

Now these large, well-capitalized firms are using their financial power to offer factoring to their trucker clients. In effect, the truckers are selling their freight invoices to the large firms for ready cash of something like 80% of the value. The claim in the article is ‘up to 85%”. It’s up to the factors then to collect the full value of the invoice, possibly as much as 90 days later. This is due to the ‘slow pay’ practices of many shippers.

This factoring or loaning of money could be useful for a trucker, in order to get paid right after delivering the load. The question is whether the price is right. The factor can make a lot of money due to the reduced payment for the invoices. It clearly is a good business for the factor.

But as in small business everywhere, it’s not always the best policy to sell your invoices for early money. The discount may be too high to offer a decent profit on the trip. Truckers might be trapped by the idea of quick money into reducing their profits from each load by too much to sustain them. It’s a classic small business risk, that has to be examined closely.

I’m not sure truckers are all prepared to make this evaluation. But the offer of early payment can be attractive.

By Charlie Bartlett, Technology Editor 25/04/2022

Frenzy of investment as truck freight matching oils the wheels – The Loadstar

Trucking demand near recession levels: Bank of America

We’ve seen a catastrophic drop in demand for trucking freight. It’s natural given the very high prices for truck hauls recently. Now tender rejection, a measure of how often trucking firms reject contracted loads to go after higher-paying spot market loads, has dropped to around 9% from well over 20%.

Does this mean that the inventory buildup also is about over? We hear conflicting things from the maritime front. There are still ships waiting to unload, even though Shanghai has reduced its shipping considerably. Many firms have gone to private shipping rather than using the liner alliances. But the containers still seem to be coming.

It’s a good question what portion of the trucking drop is to be attributed simply to the high prices, and what part to the actual reduction of demand.

I think it may be the high prices. They may be inducing shippers and buyers to hold off to keep logistics costs down. Buying larger orders less often is a good way to reduce total inventory cost, even if you leave out quantity discounting. So firms can plan to buy later. It may pay off with reduced trucking need and lower truck haul prices.

So is there a driver shortage? We may be training a bunch of new drivers just as the demand for them is cratering. How is that good for those people?

Rachel Premac kMonday, April 25, 2022

Trucking demand near recession levels: Bank of America – FreightWaves

Two less-obvious reasons why trucking capacity has remained so tight

C. H. Robinson is a well-established third-party logistics company, with close ties to academic communities of logistics experts, as well as broad contacts in the field. Their 2020 Annual Report shows revenues over $16 billion, and a $2.4 billion profit. Their main businesses are North American surface transportation and global forwarding. They are the largest less-than-truckload 3PL in the US.

Clearly they have expertise in trucking, and a need to know what’s going on in the area. In this article they asked Jason Miller, a Logistics professor at Michigan State University, to talk about why trucking capacity is so tight.

He offers two reasons.

First, the pandemic surge was very disruptive to trucking, more than we think. It’s not just the COVID impact itself, and the loss of time, and it’s not just the ‘driver shortage’. it’s the fact that drivers started changing jobs to find positions safer and more conducive to a lifestyle they find more comfortable. Retention of drivers became a big problem. My research too indicates that turnover at trucking firms reached as high as 90% over the last two years. That adds recruiting, hiring, and training costs, and makes it hard to keep to schedules and load commitments. It’s part of ‘The Great Resignation’, and it hit trucking harder than most other sectors.

Second, one of the choices drivers made was to leave employment at trucking firms, and become owner-operators. The figures Dr Miller shows on this are remarkable.

Source: CH Robinson Blog

Many of these new owner-operator firms were local freight rather than long-haul, showing that drivers wanted to be home more often than a long-haul schedule allows. Acting as an owner-operator also allows drivers to choose which loads they will accept; they can reject loads that carry onerous schedules or working conditions or excessive paperwork. As employees they had no say about which job they would take.

We know that trucking as an owner-operator is an easy-entry business. All you need to do is have a tractor and the appropriate filings with the government. Load boards provide a constant source of business you can bid on. And over time you can build a repeat-business clientele of shippers you want to work with.

You can also easily switch markets. Now that West Coast freight rates have shot up, we find that owner-operators have left the East and Midwest and flocked there to feast on the elevated drayage and haulage rates in the West. That creates shortages in other areas.

Miller has some advice for C.H. Robinson clients, which you can read. I wanted to highlight the article for its insightful look at aspects of truck driver supply we don’t often think about.

Trucking never fails to be interesting to examine!

Two less-obvious reasons why trucking capacity has remained so tight | C.H. Robinson blog

Two less-obvious reasons why trucking capacity has remained so tight | C.H. Robinson blog