Speeding up cash flow is as important today as it was 20 years ago. Richard Piontek and eCapital are using today’s tools to get the job done.
By Mark B. Solomon
Much has changed, and continues to change, in the transportation world. But one immutable rule remains: Service providers want to be paid as soon as possible. There’s another somewhat immutable rule, however: Getting paid quickly is easier said than done. Shippers have little incentive to pony up fast, even though it is good relationship practice to do so, especially in a period of tight capacity when it would seem short-sighted for a shipper to keep its carriers hanging waiting for payment.
It’s Richard G. Piontek’s job to smooth out the rough spots in the payment chain. As chairman of Carlsbad, Calif.-based factoring, or financial services, firm eCapital LLC, Piontek helps smaller truckers and last-mile service providers—a burgeoning segment given the growth of B2C (business-to-consumer) commerce—maintain their cash flows by getting reimbursed fast. Piontek joined eCapital in December 2016 after a multidecade stint that included the presidency of Redwood Supply Chain Solutions, a division of Redwood Logistics Inc., and leadership roles at Crowley Maritime Corp., freight forwarder and customs broker Livingston International, transport and logistics giant Schneider, and DHL’s Express and Global Forwarding units.
Piontek spoke recently to Mark B. Solomon, DC Velocity’s executive editor-news, about eCapital’s role in the ecosystem, how it developed a niche focusing on smaller players, and the role that blockchain technology could play in facilitating the payment process.
Q: Can you describe how eCapital got started and what services you perform?
A: In 1993, our two founders met for the first time in Los Angeles. Both were originally from South Africa. Shortly after meeting, the two launched a factoring business from a spare room with not much more than a desk and a thermal-paper fax machine. They began building a partnership that has allowed us to develop an enduring business helping small companies grow and thrive by gaining access to capital. Over time, the transportation segment became the primary industry they served, and that has evolved to what is now eCapital. Over the last 25 years, we have purchased billions of dollars of invoices and helped several thousand owner/operators and small fleets succeed by providing access to capital and predictable cash flow.
We provide invoice financing, or “factoring,” services to new entrants and small fleet capacity providers that are vital to the health of the U.S. truckload transportation capacity base. We manage carrier payables for brokerage-based 3PLs (third-party logistics service providers), accelerate payments to a growing list of last-mile delivery providers, and increasingly, act as a technology and services platform that powers the transportation settlement process for TMS (transportation management software) providers, visibility applications, and the new generation of digital freight matching innovators.
Q: There are a number of factoring firms that serve the transportation industry. What is different about eCapital?
A: We have a clear vision and are highly focused on the business that we’re in. For us, this means we are reinventing transportation financial services by accelerating access to capital and streamlining the flow of information and funds to enable shippers, carriers, and logistics service providers to adapt, grow, and thrive in the digital age. Second, we are a business with deep knowledge and experience within the markets we serve.
Q: To what degree have last-mile providers, which have gained prominence with the expansion of B2C commerce, been underserved in the development of factoring solutions?
A: To say the segment is “underserved” might be a bit of a stretch. I think I’d qualify that by saying that it’s somewhat underserved. I also think it’s fair to say that on the surface, when compared with other traditional long-haul segments, last mile may not appear to have embraced invoice financing (factoring) to the same degree—but the demand is there. Some providers strictly operate intra-state and are part of larger regional carriers that hold the service contracts with shippers—they have the capacity to settle quickly. But many do not, so we help those carriers grow.
Q: Do those providers have unique factoring needs relative to the truckload carriers that have been factoring companies’ traditional customers?
A: Yes. There are unique operational processes, technologies, and business rules that come into play and dictate how we efficiently process and manage last-mile transactions. Aside from that, the goal is the same: We enable owner/operators and small fleets to grow and thrive by providing predictable cash flow.
Q: What role do you see blockchain playing in the area of the industry that your company specializes in?
A: Finance and carrier settlements will be among the first, if not the first, widespread deployments for blockchain in transportation. I think blockchain will play a major role in reducing fraud, establishing security and visibility, and streamlining the entire settlement process. We are members of the Blockchain in Transport Alliance (BiTA) and look forward to working collaboratively with our peers to clear the way for progress.
Q: Are folks vesting too much in blockchain than the reality of its evolution calls for?
A: That depends on one’s perspective. If you like all the information in one complete and neat package before deciding where to invest, I suppose that’s one way to operate. I believe that advancements like blockchain tend to get deployed by industry leaders in about half the time that you expect. Said another way, if you think that blockchain has potential but that it won’t be realized in three years, just know that the winners will usually act, implement, and change the game in half that time or probably less.
Q: Have we seen a lengthening in shippers’ “days payment outstanding” (DPO) in recent years? Can you quantify it?
A: We have seen a trend of extended payment terms among commercial shippers, especially large companies. Given today’s capacity crunch, it’s counterintuitive as to why anyone would consider lengthening payment cycles as an effective strategy because it has obvious operational consequences. Asking carriers to finance a shipper with extended payment terms just doesn’t work well today—shippers will pay for it in rates and capacity.
I have seen survey results from the National Association of Credit Management indicating that some shippers are pushing carriers to accept payment in 90 days and beyond, as compared with the average of about 37 days. Reconcile that with our brokers telling us that paying carriers quickly helps build more durable capacity relationships. On the truckload side, taking 30-day carrier payment cycles down to 24 hours makes a difference to brokers who must compete for capacity.
In any case, DPO trends should be understood by mode, as ocean freight, truckload, and parcel have different payment patterns.
Q: Have digital tools streamlined the process?
A: Yes, and they will continue to evolve and proliferate for the benefit of all supply chain participants. From automated freight payment systems and carrier payment acceleration platforms that inject capital into the transaction to broader supply chain and trade finance applications, digital tools are helping to streamline the cash-to-cash (C2C) cycle throughout the financial supply chain.