Springtime always brings an uptick in freight volumes, particularly in produce and for all types of outdoor retail goods. Capacity was already tight before this year’s surge, and many shippers are transferring more freight to brokerage companies as a result.
What appears to be a favorable business environment has created a fair share of challenges for small and mid-size companies because of their limited working capital. To compete for capacity in this market, many brokers are offering accelerated payment terms to carriers long before their shippers pay on invoices.
Besides experiencing problems with cash flow, freight brokers and logistics providers may lack the visibility and speed to market to lock down capacity. Healthy cash flow and cutting-edge technology are both essential to take advantage of growth opportunities during the ebb and flow of seasonal demand.
Here are four strategies to remove the constraints on cash and more effectively compete for capacity in today’s market.
- Non-traditional financing. Accounts receivable-based financing and factoring arrangements are typically short-term, lifeline strategies for brokers rather than a sustainable platform for growth. New financing programs are available that give brokers instant access to low-cost capital to fund freight transactions from within their native transportation management software (TMS). This new integrated feature creates a fast, convenient method for brokers to drive growth without the hassles of traditional lending.
- Automated payment. Carriers will commit capacity to brokers that pay on time, every time. One way to strengthen relationships with carriers is by using a payment platform that automatically releases funds for a freight transaction, according to the agreed-upon terms, once delivery is confirmed. This automated payment process can be initiated by the same platform that brokers use to finance their freight transactions. In addition, brokers can improve their margins as carriers are willing to soften their rates in exchange for fast, guaranteed payment.
- Instant visibility. Besides the advantages of having integrated financing, brokers can use the latest transportation management software (TMS) to gain instant visibility of market conditions and have the resources they need to act quickly on opportunities. TMS systems can identify and prioritize carriers for load offers by specific lanes to accelerate transactions, and where capacity is not already available, loads can be instantly posted to numerous load boards.
Some TMS systems also have internal load boards that are visible to a trusted user community. This instant visibility lets brokers see adjoining freight movements for the lanes they are trying to fill with capacity. Brokers can use this single-screen functionality to match their own freight with complimentary backhauls from other brokers, thus enabling them to secure capacity commitments from carriers.
In addition, some TMS platforms allow carriers to login to the website of a trusted broker to post their capacity as well as post their capacity to a wider network of brokers using the common TMS platform.
- Speed to market. Another important factor to consider is the speed at which cash management strategies and TMS technology can be implemented. When in the middle of a growth opportunity, brokers do not have 30 days to wait for installation of a new TMS or financing arrangement. With all of the advancements in the software-as-a-service business model, it is possible to implement software within a few days of starting a new contract and turn on the cash financing tool within minutes of credit approval.
In summary, using a TMS to expand visibility to the market coupled with an efficient and affordable capital solution will help ensure small and mid-size brokers are able to solidify relationships with carriers to build capacity and take on more business.
Jennifer Saunders is the Director, Architects for MercuryGate where she oversees the Vertical Delivery ensuring quality solutions are delivered for all customers. With over 16 years of transportation experience, she leads the Vertical Management and ensures quality product is delivered for MercuryBoost. Prior to joining MercuryGate, She has held many positions in Customer Implementations, Operations, Sales, Project Management, and Technology at several key players in the industry such as MIQ Logistics, UPS-SCS, and Menlo Worldwide.