Supply Chain Finance

Logistics Industry facing a working capital crunch

With low consumer spend, Logistics companies are facing severe payment delays from cash-strapped customers as well as higher costs due to increase in diesel prices, shortage of workers and drivers, and sanitization costs. Facing this double whammy, companies are trying to raise rates for the customers.

Due to slower consumption in the market, customers’ payment patterns are changing with prolonged payment cycles. These circumstances are creating a lot of hardship for logistics companies to pay drivers/owners of trucks on time. Drivers need money immediately after loading the truck to meet en route expenses such as diesel, toll, food, shelter, etc. Without this advance/upfront payment, they cannot drive the truck to the delivery point. Many logistics companies are facing issues to make these payments on time, resulting in productivity loss through trucks halting, driver struggles, etc.

Chennai based owner cum trucker Arumugam’s truck loaded in Bhiwandi to return to his home town Chennai after waiting for two days for a return load. He is eagerly waiting to drive back to Chennai, but logistics company which provided load has not paid an advance on time and he has to wait in a dreadful covid19 environment. Logistics companies are also helpless as they are not receiving payment on time from customers to pay for Arumugam. This kind of situation is very common in the Transportation business, but the problem is increasing due to covid19. The overall impact of this situation is resulting in productivity loss such as prolonged halting of the truck, delayed delivery of goods and revenue loss for the trucker. It is estimated trucker loss almost 20 to 30% of income which is impacting his bottom line.

To overcome work capital crunch, LOBB has joined hands with a FinTech startup Rezofin to provide exclusive end-to-end “Lorry Hire Financing Solution” to help logistics companies pay advance to their drivers/truck owners as soon as loading is done with minimum documentation. LOBB platform seamlessly integrates with Rezofin, who in turn is integrated with multiple lending partners, offering structured working capital solutions.