[CF-DROP] MIP6 Application: ConsolFreight DROP: Tokenized Freight Shipping Invoices

If you look at the chart from your link - DAT Reefer Load-to-Truck Ratios
You can see that the L/T ratio hasn’t dipped below 2 at all until 2020
Not only is 2020 the first year that this happened , but it dipped well below 1.
That being said, the DAT Analytics are not the most reliable when it comes to a situation like Covid.
Reason being, brokerage will have less freight to cover so initially , you will have a surplus of employees all competing to book the same load.
So instead of a small team of 3,4 people trying to cover their freight, a larger group in company is given a chance to find the lowest prices so the number of postings can go up.
Working from home, they will post one load 8,9 times with different extensions. Doesn’t mean there is 9 loads.

I based my ratios on actually looking at how many companies are posting their trucks and how many real loads are posted by brokers within a 150 miles - 200 mile radius.

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Maybe I’m not fully understanding but i think you might be looking at this too logically.
I did mention this is a very unregulated industry :slight_smile:

I’ll give you a few examples very broad examples all bunched into one mess that is logistics :

Facility makes product X in IOWA.
Wal-mart wants to buy it. They put in orders.
Lets say some of these orders need to go to Buffalo, NY

They don’t have enough of their own trucks so they call JB Hunt. (They are a mega carrier have thousands of trucks and trailers AND… a brokerage as well ) They pay JB Hunt for X amount of shipments within a certain timeframe. Jb Hunt takes the contract.
They send some trucks but fail to position enough of them or they just don’t want to ( not profitable at the moment )
They are getting $2500 per shipment so they contact XPO and offer them 30 shipments for $2000 a piece.
XPO covers what they can with XPO trucks … and then what they can’t goes on the spot market.
( All of this is called Double brokering freight. Some customers allow it, most don’t. )
Now…
Dispatcher from company ABC Trucking is looking at DAT Loadboard , sees this load IA- NY and makes a call. He books the load with Broker from XPO Logistics. They only pay ABC trucking $1800

Carrier picks it up… he thinks its just not enough to take it all the way out there.
So he takes the container trailer off , and pays $800 to ship it to Buffalo via RAIL.

He’s left with $1000 that uses to pay $150 to the driver who picked up and brought to the railyard … and another 150 to the driver waiting in Buffalo to pick it up from the railyard and take it to the Wal-Mart.

None of this is legal.

So just try to wrap your head around that, this is all of course once the product is already here, if its not produced here, you cannot even imagine the shenanigans when you add AIR & SEA.

As far as the invoicing goes…
Trucking company submits paperwork to factoring company only because they want to get paid faster.
They dont want to wait for those 30, 45 days to pass. They want the money NOW so they can pay for fuel, tolls , drivers etc…
If the broker (at the time) has a good credit rating, factoring company pays the carrier.
If that broker goes out of business next month… the factoring company will turn around and take that money back from the carrier by witholding pay from other invoices in what they call a " Reserve "
This is usually how it works.

Although it might look much simpler on the surface where you have a seller and a buyer, the flow of goods, services and money is a lot more complicated.
Sometimes the shipper is simply a storage facility. They get paid just to store the product and collect loading/unloading fees. This was one of the issues we were having in the midst of the pandemic, stores were not ordering as much product , the cold storages were getting overloaded with product.
We would pick up loads and find out on the day of delivery that they cannot give us an appointment for 5 days.

At any rate… i can’t imagine even a 1% fluctuation in price not having massive implications for all parties involved.
If crypto was involved without any built in stability that Fiat has and you had contracts that were losing value overnight by 2,3 or up to 10% you would just see massive cancellations all over the place.
It would potentially lead to even more shenanigans than already exists IMO because its never so cut & dry.

Sorry for another big rant.

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@Peter_Jones thank you for all your comments, I can tell you are very vested in the US trucking industry, but logistics goes farther away that the US and uses other transportation methods such as Air and Ocean.

In reference to the IoT, is an industry that has evolved tremendously, specially in the last two years. Today we find devices that the battery last for several months at the time. But the use of IoTs shouldn’t affect the the repayment of an invoice as not every load is required to use IoTs.

You are absolutely right that COVID had shocked all industries as the world came to stop at a rate we have never seen before, where some industries have suffer immensely and others have grown as well. In both cases affecting supply chains and service providers.

As examples of growth, we seen the Air Cargo space surge over 300% in some cases, as all governments and private companies rushed to procure PPE from China, this also affected the trucking companies that had 4-5 hours of waiting time at airport terminals to pick up these loads, and I can also tell you that drives increased their waiting time rate in cases to 100% of the normal rate.

As China Air space got tighter, companies starting to procure PPE material in places like Mexico that moved incredible amounts of loads over the road to the US, and in those corridors the rates went up 15% to 25%.

During lock down many companies in the US received their PPP government bailouts to support 2.5 months of payroll, so even volumes where down for most companies so did their overheads, and now that the economy is opening again, volumes as increasing very rapidly as the demand to fulfill empty distribution centers is very high.

The port of Rotterdam, as an example, is moving almost the same volumes as pre COVID.

But the decrease of volume shouldn’t affect more than the volume of invoices factored, the decrease of volume will have impact in liquidity, probably promoting the use of factoring solutions to help companies coupe with the current demand for services as business re-opens.

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I just have to respond to one thing and im out
For good this time.

" I can also tell you that drives increased their waiting time rate in cases to 100% of the normal rate. "

I’m assuming you meant Drivers increased their waiting time rate.
Small problem with that…
At the airlines, the area inside the building where drivers check in on the computers and wait to be let in through the fence is generally very small.
Due to COVID, the social distancing rules, they no longer allow you to check in at until a loading dock (door) becomes available.

And the broker, customer wont pay you anything until you have checked in.
These past few weeks as the freight picks up and amazon trucks cause congestion at ORD , our drivers would sometimes have to wait 4,5 hours just to get a door. And then it would take another 4,5 hours to get them loaded.
In our case, detention rates haven’t increased.
If anything we’re keeping out mouths shut because people are being extremely competitive right now and we don’t want to cause noise and risk losing the freight because we’re charging them too much on the accessorials.

Second this statement. Short-term trade finance is generally very low risk provided the proper due diligence has been performed.

The ability to price risk appropriately is a key. That said, observed market rates for like risk consider the worst-case you laid out above and all other cases. Interestingly, observed market rates consider the timing of all possible events. Indexing these tokens to observable market indices might be a good way to start.

Cross posting here as we’re currently working with the domain teams on CF-DROP collateral onboarding. We’d like to encourage anyone who has questions or feedback on this application to join our next AMA session about Centrifuge/Tinlake. It’ll take place tomorrow, Oct 15th 7:30pm CET.

It will give an overview of how our tech stack works and will go into detail about Tinlake v3 features. Would be a great opportunity for us to receive direct questions from you. Link to the call is here: https://discourse.centrifuge.io/t/community-call-october-15th-revolving-pools-and-tinlake-v3/291

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ConsolFreight will be on next week’s Collateral Onboarding Call: [Agenda/Discussion] Collateral Onboarding Call #13 - Wednesday, October 28 17:00 UTC Wednesday, 28th 17:00 UTC Please check your local time as DST will happen this weekend.

Please make use of the call to ask any questions you have about ConsolFreight, trade finance and how their collateral would work with a Maker Vault. @EAV and @AleG will be happy to answer all of them.

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Please find below the link for yesterday’s Collateral Onbording Call recording: [Agenda/Discussion] Collateral Onboarding Call #13 - Wednesday, October 28 17:00 UTC.

Thanks to all participants from yesterday. We had a great time presenting Consolfreight’s business model and how we are using the Centrifuge Protocol to provide liquidity to the Logistics and International Trade industries. We appreciate all the questions raised during the session to better understand the type of collateral we are proposing. Also, we encourage the community to keep asking as we acknowledge that these assets are different to the ones currently used by Maker.
Cheers

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