E-commerce is continuing to surge, and as a result, the freight demand is experiencing a sharp rise. Retailers online are becoming a huge piece of where people are buying from, which leads to the freight business getting a huge spike that has to be kept up with in order ot meet this demand. Factoring need, as a result, as seeing an increase in demand as well. There’s a huge need for factoring companies to keep up with the demand for freight to ensure that these companies are getting paid on time for the amount of work that they are doing. 

How is E-commerce Driving Freight Demand Up?

E-commerce has become one of the main shopping areas for people, and it’s been increasing heavily over the last decade. In fact, according to Digital Commerce 360, it has increased by over 800% in the last decade. With this rise, we’ve seen a change in how people shop and in what frequency with which they shop. Most of the orders that are placed can be smaller, which means that more frequent, but smaller orders are being purchased. On top of this, fulfillment is direct-to-consumer, which means that these packages aren’t necessarily being shipped to a large warehouse and then sold ot the customer, but they are being shipped directly to the consumer. 

Challenges Associated with Increased Freight Demand

There are challenges, just like with anything else, that come with the increased freight demand and the increase in e-commerce shopping. One of the biggest problems that’s been experienced is the timeliness of these deliveries. Some companies are offering 2-day shipping, while others have express shipping, and people are taking advantage of this. That means that freight driver must expedite their work and push these packages out at an increased speed, faster than they normally do. This increase in demand and increase in need for more trucks can put pressure on them to keep up with demands, and without factoring, these freight companies are having to wait for their payment for days or months after the work is completed. 

 

Financial Pressure on Freight Companies 

 

As we previously stated, there is a lot of pressure on freight companies to do the work they do without getting paid as quickly as they desire. This has caused a number of issues within freight companies as they try to balance the increase in demand while also being able to keep up with their own financials and getting paid in a timely manner. Here’s a more in-depth look into the issues faced financially by freight companies: 

 

Longer Payment Terms 

 

There are typically longer payment terms from brokers or shippers. The standard pay could be anywhere from 30 to 60 days, or even later than that. Many freight companies don’t want to or even can’t wait that long for payment from a job that’s already been completed. For smaller owner-operators or carriers, this poses a huge issue for them as they don’t have that ongoing cash flow that they need to pay themselves and keep their business up and running efficiently. 

 

Rising Operational Costs

 

The costs of operating a freight business are rising, especially with the demand for their services due to increased e-commerce growth. Freight businesses already have a lot of operational costs just to keep their business flowing, but with increased demand, there are a lot of extra costs that can come with expediting shipping and increased labor due to the demand, and also fuel associated with it. 

 

Need for Immediate Working Capital 

 

One huge issue that freight workers have to deal with is the fact that the working capital they receive is not immediate. As said before, this payment can take even over 60 days in some cases, which is not ideal for many freight companies. With the need for immediate capital, that’s where factoring companies come in. Especially with an increased demand for e-commerce, there is also an increased demand for freight companies. Having that immediate capital that can be received by factoring companies can push freighters to do more work and take on more jobs, knowing that they are getting paid at a decent time because of factoring. 

 

How Does Freight Factoring Help?

 

Freight factoring is an important part of freight businesses to avoid having to wait for capital for their jobs. Freight factoring is when freighters use a factoring company to take care of their invoices, allowing them to get paid immediately once the job is done. They are a third-party company that ensures that the invoice is paid without having to wait, like they normally would. 

 

How Do They Help Growing E-commerce Demand?

 

Freight factoring helps freighters to meet delivery needs by giving them funds immediately. This allows them to take on more jobs that keep the process moving smoothly, without having to take breaks due to waiting for payment. This also helps smaller freight businesses to keep up with demand and continue getting work, due to them getting their funds in a decent amount of time. This also helps them to be able to scale their business, get more work, and work more efficiently, even as a freight company. 

The Future of E-commerce Growth

E-commerce demand is going to continue to grow as many businesses adopt this way of retailing and as more people start to move towards online shopping. With the growth seen in the last decade, we can expect that growth to continue over the next decade, or longer. Freight companies are going to play a huge role in this demand and the increase in e-commerce shopping by people. Freight factoring companies like TBS are becoming a huge asset to these freight companies to help them scale and keep up with this demand, while getting them paid instantly. If you are a part of a freight company or if you are a freight company looking to scale your business, get paid faster, and keep up with the demand of e-commerce, then freight factoring might be right for you. We offer a variety of benefits at TBS that can help you get your invoices paid, get your team paid, and be able to scale your business even if you are an owner-operator or a small freight company.