The U.S. logistics industry is a key component of the nation’s economy, but has faced cash flow challenges as the Great Freight Recession stretched on. Fortunately, the end of one of the worst freight markets in history is finally approaching. As demand for over-the-road (OTR) trucking services is predicted to outpace capacity, carriers could get some long-awaited relief from tapping into their financial reserves. Read on to learn how the solution lies in leveraging modern financial tools and discover the ways Raistone can alleviate working capital pressures for trucking companies.
The upcoming rebalance of supply and demand in OTR trucking
Many providers in the logistics sector have been forced to deplete their cash reserves from a once bustling market during Covid-19. Unfortunately, the sharp increase in demand seen through 2020 and 2021 has fallen off, and overcapacity in the market has led to lower rates.
As we look forward, one metric to consider is the tender rejection rate, the percentage of shipment request that carriers decline to accept. This metric is a key indicator of supply and demand dynamics in the freight market. Typically, rejection rates below 5% suggest a soft market and rates above 6-7% indicate a tighter market where spot market rates and volumes increase.
In early 2024, the Outbound Tender Rejection Index (OTRI) was relatively low, around 3%. However, the OTRI did reach 5% by mid-year due to various market disruptions, such as port strikes and natural disasters. The OTRI has remained above 5% more recently, marking the longest stretch above this level in over two years. This indicates a strengthening market with increased demand relative to available capacity.
Notably, the trucking industry is facing a shortage of qualified drivers. In recent years, the ATA estimated a deficit of approximately 80,000 drivers. With tender rejection rates and the number of truck drivers who could lose their CDLs rising, some predict that carrier revenge could be imminent.
According to the U.S. Census Bureau, e-commerce sales represented about 15% of total retail sales in 2022, a number that continues to grow rapidly. As e-commerce continues to expand, so will the need for efficient and reliable freight services, particularly in the OTR trucking space. The American Trucking Associations (ATA) predicts that freight volumes will increase by 36% by 2031, with trucks expected to handle over 70% of all domestic freight tonnage. Carriers will have an edge when it comes to selecting their shipments, meaning there’s opportunity to negotiate better rates and take on more (and bigger) jobs. This supports truckers to have low-cost factoring options and suggests that brokers must implement efficient, economical payment acceleration options for their partners in order to stay competitive.
Challenges and strengths of asset- and non-asset-based logistics providers
Transportation and logistics providers typically fall into two categories: asset-based and non-asset-based. Both play vital roles in meeting the demand for OTR trucking, but they operate under different models.
Asset-based logistics providers
Asset-based logistics providers own and manage physical assets such as trucks, warehouses, and other equipment, giving them direct control over their operations. These providers typically offer a wide range of logistics services — such as transportation, warehousing, and distribution — and generally contract either directly with the shipper or through a third-party logistics (3PL) provider.
While asset-based providers offer the advantage of more direct oversight, they also face significant challenges, such as high capital investments in fleet management, ongoing maintenance costs, and regulatory compliance. Keeping up with strict requirements related to safety, emissions, and driver working hours demands resources and constant monitoring. For these companies, lengthy payment cycles — especially with large clients — often delay incoming cash and add to financial strain. Asset-based carriers compete with other asset-based companies as well as flexible non-asset-based providers that can often offer competitive pricing through their networks.
Non-asset-based logistics providers
Comparatively, non-asset-based providers, including freight brokers and 3PL companies, do not own trucks or warehouses but rather coordinate logistics through a network of carriers. Providers focus on optimizing routes, negotiating with carriers, and ensuring that goods move efficiently.
While these providers offer flexibility and scalability, they face significant challenges, particularly around cash flow.
Non-asset-based providers often experience delayed payments, high operational costs, and intense competition. Managing these financial pressures can be especially difficult when clients extend payment terms or default on payments. Additionally, market conditions, such as fuel prices and demand, fluctuate and impact cashflow unpredictably. To stay competitive, non-asset-based providers are often encouraged to invest in advanced technology and systems; however, these systems previously required significant upfront costs, straining cash flow. Fortunately, Raistone provides simple, customizable solutions that are easily implemented, or may already be available in the systems you’re using.
Working capital challenges in the trucking industry
For both asset-based and non-asset-based logistics providers, one of the most persistent challenges is cash flow management.
For asset-based providers, payment delays can cause significant financial strain, as they rely on the timely receipt of payments to cover fuel costs, truck maintenance, insurance premiums and payroll. Non-asset-based providers, while not directly responsible for maintaining fleets, still have high operating costs tied to technology, labor, and logistics operations, all of which are difficult to manage when payments are delayed. The trucking industry is generally cyclical, with demand fluctuating based on seasonal shifts, market conditions, and even unexpected supply chain disruptions. These fluctuations make it difficult for companies to maintain consistent cash flow, creating the potential for financial instability, missed growth opportunities, and increased stress on operations.
Alleviate cash flow issues with advanced payment on invoices
For trucking companies struggling with cash flow management, Accounts Receivable Finance (ARF) can be a game-changer. ARF offers competitive rates and fast payment, amongst other benefits.
Freight companies often face late payments from clients, especially during economic uncertainty. The average days sales outstanding (DSO) in the trucking industry is approximately 41 days, with average terms between 30 and 60 days.
ARF allows trucking providers to access working capital without waiting for customers to pay their invoices. Having the ability to advance payment when you need to — such as if payment terms begin to stretch or delays arise — can reduce financial strain and help maintain smooth operations.
With improved liquidity, freight companies can also invest back in their operations, such as hiring more staff and upgrading equipment or technology. As demand fluctuates, having a reliable financing solution allows freight companies to scale their operations up or down without jeopardizing financial stability. This adaptability is vital in an industry marked by rapid changes.
Improve supply chain health and client relationships
ARF can provide immediate relief to trucking companies by improving liquidity and easing cash flow pressures, and it’s just one component of a larger ecosystem. For freight brokers, 3PL providers, and other logistics stakeholders, ensuring smooth and efficient operations across the supply chain requires an all-encompassing approach. This is where Supply Chain Finance (SCF) is essential.
By integrating SCF solutions, freight brokers and 3PL providers can enhance their cash flow management and strengthen relationships with their carriers and clients. SCF offers an opportunity to streamline payment processes, optimize working capital, and offer more flexible financing terms to partners, which improves overall supply chain health.
As we exit the Great Freight Recession, freight brokers and 3PL providers will have to identify themselves as ideal partners for truckers to work with. Given the predicted carrier revenge, these stakeholders cannot risk lost business and rejected tenders.
When all parties in the supply chain — from shippers, to carriers, to 3PL providers — experience greater financial stability, the entire ecosystem becomes more resilient and responsive to market shifts. SCF programs help create a more collaborative environment, reducing friction caused by payment delays and creating a shared sense of financial security. This improved cooperation fosters trust, optimizes efficiency, and allows all parties to focus on meeting market demands on time.
How Raistone helped a major 3PL provider gain a competitive advantage
To address the challenges faced in the industry, Raistone offers embedded finance solutions tailored specifically for the logistics and trucking space. By partnering with Raistone, providers can integrate flexible, scalable financing options directly into their existing operations, gaining easier access to working capital when it’s needed most.
For example, one of Raistone’s clients, a large 3PL provider, leveraged an embedded finance solution to create a more streamlined, reliable, and mutually beneficial relationship with their trucking partners.
Raistone assisted with an SCF program that allowed our client to offer early payment directly to their network of partners, enabling immediate payments on outstanding invoices. This reduced the financial strain caused by delayed payments and identified our client as a preferred partner. As a result of the embedded finance solution provided by Raistone, the 3PL provider improved cash flow, increased operational efficiency, and built stronger relationships with their carriers.
Working Capital Management in a Volatile Environment
In an industry where cash flow is critical, the right financial solution can determine whether a company thrives in a volatile environment. Raistone’s tailored solutions offer logistics providers financial flexibility, allowing them to focus on what matters most — transporting and delivering goods across the nation and keeping the economy running.
By partnering with Raistone for a working capital solution, businesses can take a proactive approach to overcome these obstacles. If you’d like to connect with one of Raistone’s financial experts, please fill out this form or call 888-626-6593.
About the Author
Pete Kienlen, Sales Director at Raistone, leads efforts to develop tailored working capital solutions for clients. With over 15 years of experience in sales and finance, including more than a decade at American Express, Pete specializes in helping businesses optimize cash flow, particularly in the logistics industry. Pete values Raistone’s agile environment, which enables quick, customized solutions, and is passionate about supporting small- and medium-sized businesses.
