If trucking companies could get paid within minutes of making a delivery, it would ease the financial strain that so many smaller companies face on a daily basis as some shippers delay payments for weeks or even months. Factoring is one way they address this, allowing the carrier to “sell” the invoice to a third-party company that deducts a fee for the service.
dexFreight, a blockchain-based logistics platform for brokers, carriers and other stakeholders, has just completed a pilot project that turned freight invoices into collateral to allow the carrier to be paid within minutes of making the delivery.
In the pilot, a third-party logistics (3PL) provider agreed to pay on 45-day terms for the invoice, but the carrier opted to finance the invoices using dexFreight ‘dexFi’ feature. Once the carrier pressed the dexFi button on the dexFreight platform, it took less than a minute for it to receive the funds at less than a 1% borrowing rate with little or no paperwork involved, dexFreight said.
The pilot was conducted with cooperation from Centrifuge and the Maker Foundation and used decentralized finance (DeFi), an emerging use case in the public blockchain. The pilot was run on top of dexFreight’s logistics platform with several participating freight brokers and trucking companies.
“We can now reduce friction, extend instant credit lines, and offer highly competitive rates to trucking companies on the dexFreight platform,” said Jim Handoush, dexFreight’s president and CEO. “This is a major step in the transformation of the logistics industry, and we could not have realized such a milestone without our partners Centrifuge and the Maker Foundation.”
According to the company, the pilot proved that smart contracts and tokenized invoices can be used to create a faster and inexpensive alternative to traditional factoring.
Centrifuge is an open network protocol for the financial supply chain. Maker is a decentralized organization dedicated to bringing financial stability and transparency to the world economy.
Did you know?
According to the Cass Freight Index Report, shipments declined 3.4% in September, the 10th straight month of year-over-year declines. On a month-over-month comparison, the index improved 0.8% to its best reading since May.
“The rebalancing trend is still valid for 2020, but we think Q4 spot rates will actually fall from Q3 this year, counter to the seasonal pattern, due to the supply/demand imbalance detailed in the Freight Forecast report.”
– ACT Research, in its Freight Forecast report
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A successful pilot program between dexFreight, Maker Foundation and Centrifuge has shown that, using blockchain, freight invoices can be paid within minutes rather than weeks or months. This is one of dozens of pilot programs that are ongoing in the world of blockchain and showing that while the hype may have outpaced the reality, blockchain remains a viable technology for the supply chain and it’s future is closer than many think.
Hammer down everyone!