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Financing for Trucking Industry Supply Chain

Supply chains have a vital role in the success of trucking companies. Lacking the ability to deliver goods in a cost-effective manner, opportunities for increased sales narrow. Because of this importance, many businesses entrust their transportation services to trucking logistics specialists. Generally, this gives them access to resources and industry experiences that help to lower costs.

Creating value through quick and reliably delivery services is likely to occur when distribution strategies align with logistics. For nearly 40 percent of all companies, unprofitable measures are apparent through different components – products, orders, transactions or accounts. Of that number, 20 to 30 percent report profit and subsidized losses at any given time.

Although a common reaction to unprofitable stages is to eliminate the cause, no company wants to fire customers. Rather, the goal is to identify essential elements and, wherever possible, turn around the unprofitable elements. In some situations, integrating systems and processes can help to strengthen the weak areas.

Keeping the Focus on Solutions

During the last economic downturn, some companies decided to strip layers of cost from supply chain operations. Making these cuts were not easy; for many, stripping away operational functions in the supply chain were not the most obvious target for a leaner operation. Moving forward, the focus should return to making improvements in performance. This could mean focusing on risks and relationships but in the long run will help to make companies stronger financially.

Focusing on solutions could transform both trucking supply chain and the entire company. More than ever, carriers are working closely with clients to create value in services. Coordination between suppliers, business partners, warehouses and fleet managers positions every player to anticipate problems and take corrective actions.

Many solutions to supply chain issues involve end-to-end management, which typically works best for carriers that specialize in load-to-deliver. Handling merchandise through the entire system can eliminate making unnecessary transfers.

With load-to-deliver strategies, trucking companies can become more flexible with customizing shipping schedules. Deliveries are based on demand rather than routes by delivering products based on projected sales. Quantities will vary and changes in inventory is easier just in time for the holidays or in between seasons.

By keeping the focus on solutions, trucking companies can increase customer satisfaction and receive additional contracts. This could present a challenge for companies that do not have the proper tools. In the past, looking inward for problem-solving solutions did not give those responsible for supply chain visibility on sales. Their process was to guess based on past performances and order stock accordingly.

Balance Customer Demand with a Strong Supply Chain

Stronger customer ties are essential to managing an effective supply chain operation. Generally, trucking companies need to satisfy customer demand without weakening the supply chain. The best approach is to find out what customers need and standardize relationship processes to have an efficient supply chain.

Essentially, this will require cooperation between sales and marketing and supply chain management. Customers are mapped to the appropriate level of relationship handling without feeling neglected. Similar to having a tiered system that groups customers in a hierarchy from the best to those with growth potential.

On one end of the spectrum, a high integrated system could focus on building close relationships with the best customer. These are not always the largest in terms of company size. On the other end of the spectrum, relationship-building occurs with growth potential customers who might bring a lower, but consistent, volume of business. Otherwise, a company could easily devote 40 percent of costs to filling one-off requests from the least profitable customers.

Traditionally, the goal for moving customers from one level to the next was set by the sales department. A low-volume supplier with a high potential customer needed to find ways to get more business. While sales identifies customers with potential, supply chain management determines which ones will become true partners. This should be done before dedicating resources that could serve other customers better. For high potential customers, this may require getting acquainted with the customer's operations team.

Of course, this is opposite of conventional approaches where some companies relied solely on its operations team once a deal was closed. Using the new approach, companies are stretched to find out whether the customer's operations team is truly a partner. They are the ones that can help with increasing sales.

Benefits of adopting this new approach to having a supply chain relationship is to smooth the order cycle, improve forecasts and increase profits for all. Details are ironed out during the process but resources are focused on productive partnerships.

The Global Perspective

The concept of connecting customer relationships with supply chain operations cross over to supplier relationships. Being open to closer relationships with key suppliers becomes a joint effort to improve costs. Service and profitability also win. From a global perspective, risks are also lowered.

When businesses look at instability in locations such as the Middle East, it shows how stable governments can come under attack. Generally, supply chains extend thousands of miles reaching into emerging economies. Government stability becomes an automatic concern when low-cost sourcing countries can change business dynamics if instability occurs.

Other risks that can affect the supply chain on global grounds include natural disasters that sometimes turn into an economic disaster. Consider the long-term effects of the 2011 earthquake and tsunami in Japan. Citizens endured the full brunt of the natural disaster but other countries – including America – also felt the economic effects. While the country endured loss of life and destruction of property, supply chains and some economic activity were impacted, particularly within the automobile industry.

Current Market for Financing and Leasing Equipment

Global operations and operations closer to home rely on a financial market that is amenable to funding growth. In general, the trucking industry is experiencing openness form some sources to financing and leasing commercial equipment. Borrowing rates remain relatively low so there are more opportunities to invest in supply chain operations.

Nevertheless, economic uncertainty remains and with higher prices on new trucks, more carriers are looking at used equipment, short-term leases and rental options. New technology and maintenance costs are making lease options a favorable financial choice.

Factors That Influence Finance Partner Selection

Financing a business is challenging, regardless of the industry. For trucking companies, the challenge is greater when there are hiccups somewhere in the supply chain. Buying new or used equipment can lead to significant losses if customers are not satisfied and have little business expansion opportunities.

That is why trucking companies should not simply look for financing options when needed. Rather, they should focus on building a partnership with a reputable financing company. The benefits outweigh completing a business transaction.

A partnership rests on a foundation that the lender understands the trucking industry and factors that can influence financial needs. Not only does the company receive the best rate or terms, but the partnership remains even during a downturn in the economic cycle.

Consistent lenders are there when funding is needed most. They understand the value in trucking companies and can find hidden collateral that makes it easier to approve loan requests. Additionally, they offer financial solutions that fit the needs of trucking supply chain operations. Options such as revolving lines of credit and borrowing against receivables are on the table.

Difference Made with Accounts Receivable Factoring

Today, supply chain management for the trucking industry has more to do with finding low-cost sources. Having a well-positioned and well-managed supply chain extends to every area within the operation. Cost controls, efficiencies, operational excellence and optimization remain important factors in a successful trucking industry supply chain. At the same time, managing risks and building relationships will separate the mediocre from the big winners.

Having a financial partner that offers accounts receivable factoring as an alternative funding solution can give trucking companies an advantage. A financial partnership means that trucking companies are poised for success in supply chain operations.