Vertical focus – Transportation sector bursts with SCF opportunities David Gustin - July 9, 2014 2:02 AM | Categories: Payables Finance | Tags: CASS, Syncada, Trax, US Bank The transportation industry has always been considered very messy when it comes to AP processing. There are numerous vendors providing freight audit and payment processing services, but only recently have some of these vendors looked to add early payment capabilities. It’s not surprising; the sector has attractive characteristics: It’s a big sector According to the annual State of Logistics report published by the Councile of Supply Chain Management, the U.S. logistics market is estimated at $1.39 trillion for 2013, up $31 billion from 2012. The report states that the three main category of costs are inventory carrying costs, including the costs of warehousing (33.9% of the total logistics spend in 2013), transportation costs (61.5%), and finally administrative costs, only 4.6% percent of total and mostly related to logistics IT spend. Within transportation, trucking-related costs comprise 77.2% of total transport costs, and these are mainly smaller organizations...which leads to point two... Logistic services are mainly bought by investment grade buyers (P&G, Walmart, Best Buy, etc.) dealing with small companies – truckers, movers, warehouse companies, etc. This is attractive buyer risk to the investor market. Because it is messy, there are opportunities for data, algorithms and underwriting models. For example, when it comes to reconcilement, invoices, etc. a logistic invoice is 7x more likely to OVERBILL than UNDERBILL. With the right data and analytics, these invoices can be analyzed for risk of collection. Banks don’t like to touch the sector. Why? Logistics has one of the highest percentages of invoices that are never paid. Banks like dealing with clean, high quality invoices. There are several vendors that provide AP related services around this sector and have built up pretty sizable invoice flows: U.S Bank – Their Powertrack platform, founded in 1997, was merged with Visa’s commercial payment and network management to form Syncada. As reported here last year, Visa divested of this joint venture and now the platform is back in U.S. Banks commercial card business. The solution is a cloud-based, collaborative solution buyers can use to accelerate payment to suppliers and gain efficiencies by automating the accounts payable process. They have processed over $20 billion in transactions annually. Trax - you can think of Trax as a combination of Dun & Bradstreet, Visa and a freight audit company in one that targets specific logistics invoices. Trax describes themselves as the only company that fixes bad logistics data by taking the garbage in and putting safe information out to take the pain and risk out of settlement Other sample providers in the freight payment services market include CASS, CT Logistics, nVision Global Technology Solutions, CTSI, TTC/Technical Traffic Consultants Corp., Tranzact Systems, and Data2Logistics. Given the size of the market, it is interesting to see how these firms progress with early payment solutions to help their customers. P.s. I would like to invite you to receive our Trade Financing Matters Weekly Digest by signing up here Related Articles Why did Visa exit Syncada? OpenText Buys Cloud B2B Integrator GXS: Great For IT Departments,… JPMorgan Chase to Shut Down Xign Visa Exits Syncada Relationship Discuss this: Cancel reply Your email address will not be published. Required fields are marked *Comment Name * Email * Website Notify me of new posts by email.