SPEAKER_01
0:37
The analogy that we love using that is it is the water for our plant. Like there's a lot of other pains, like insecurity, driver shortage, and others. But if the plant doesn't grow with water, then the other problems are secondary. And that is what we have so many incredible stories of carriers that have grown their business 7x, 20x, 11x. And that is what keeps us excited and motivated to continue gone.
SPEAKER_00
1:06
The freight rate is the only part of the cost of moving, is not the only part of cost moving cargo across Mexico. Payment timing can determine which whether carriers accept the load, who funds fuel and tolls while an invoice waits, and who takes the hit when the paperwork or service is disputed. As part of CargoRex's Mexico cross-border trade guide, I am joined by Jaime Tabachnik. He is the co-founder and CEO of Salvento. Jaime has experienced the payment problem from both sides. First, it's a logistics operator and now building financial infrastructure for Mexican freight. We're going to be following the money behind how the freight moves through the country and how it implicates the cross-border delivery. So let's go ahead and dive right in, Jaime. First of all, welcome to the show. Second of all, can you give us sort of that high-level overview of what happens after a load is delivered? Who's responsible for the paperwork? Who's responsible for the checks and balances? Give us that high-level overview.
SPEAKER_01
2:05
Thank you for having me here. First of all, uh really excited for this conversation. And yeah, let's uh dive in. So uh I think a very important difference from how the US operates in Mexico is that in Mexico we don't have a standard. I think that EDI is uh a widely used standard in the US, but in Mexico we don't have a standard. So each shipper literally defines how a load is going to be selled. That is a shipper's decision. And you can imagine the different combinations and the amount of different processes that exist across the industry. So it is the entire responsibility of the carrier to comply with this shipper's rules for them to be able to collect for that loan. And I've seen very extreme processes and rules, like literally shippers demanding a picture, like literal pictures of all the product that they deliver. And if there's a picture missing, then the process is not complete. I do think that there are some perverse incentives in making these processes more complex to delay payments, and because that benefits the shipper. But in the end, the carrier and the SE or small carrier is the one that suffers most because of this complexity. But let me just share how the usual process works, like the most common process works, and in most operations in Mexico, paper is still required, a physical evidence. So let's imagine I'm a carrier and my shipper calls me and asks me to go pick up a load uh at a warehouse and to deliver it in another city. And let's say that that other city is 20 hours away, right? So I go, I pick up the load, and sometimes I need a physical evidence of the load that I picked up. Then I go to the destination and I unload the truck, and at that moment, I as a carrier need to be very careful that I collect everything that my shipper requires for me to be able to collect this service in the future. Sometimes I need uh pink paper with a signature, I need a rubber stamp, I need a document that is the warehouse confirmation that the products are in the WMS. So I need to deliver the product. Sometimes the carriers need to wait a couple of hours for them to receive this warehouse confirmation that it's inside the WMS, and then the carrier needs to drive back to wherever the shipper's uh hub or a headquarter is to give this physical document to them to be able to collect. And one thing that makes it even more complex is that very often these shippers only receive these documents once or twice a week. So if you deliver this on a Tuesday and they only receive these documents on a Wednesday, maybe you're not backing time on a Wednesday and you need to wait a full week to give this physical paperwork. And then when they receive this physical paperwork, it's a black box of how they re-revise and how they sell all this documentation. And sometimes they take two to three weeks to tell you, okay, it's good. We're gonna schedule this payment for you, or guess what? You're missing a signature, you're missing a stamp, and you and at this field starts. So this is like a high-level view of how a process can look. There are some companies that are investing in making these processes more efficient, digitized, and uh less painful, but uh still a long way to go.
SPEAKER_00
6:17
And so uh you were talking about the, you know, one of the more common things in the US is is ELD with that standardization. And so with with on the Mexico side of things, without that standardization, and I was listening to another conversation you had where it could take uh you were estimating it could take up to 10 days to receive all of that paperwork just to make sure it's in proper order. And then that's after the load is delivered, and then from that 10 days, then it could take up to 30 days for the carrier to even get paid. Is that still I know that interview was uh a couple of years ago, but is that still the standard today?
SPEAKER_01
6:53
Absolutely. And there are actually some initiatives and entrepreneurships that are tackling this issue in very creative ways. And I would give a shout out to uh Recurso Copiale, who uh is a company that maybe you've heard of. They are one of the OGs in the logistics industry in Mexico, started building a database of drivers, but now they are a freight disability platform and they have a service that is very interesting and creates so much value. And actually, some ventu is integrated to the service, and what they do is they have physical uh people in the distribution centers of the largest retailers in the country. So Costco, Walmart, Samsung, uh, Soriana, and all these largest retail companies. And they have people literally with mobile scanners that scan documents with high quality, and they act as an objective third party that validates that a delivery was successful. And percentage around 80 or 90 percent of deliveries are clean deliveries that don't have damaged or missing products from the purchase orders, etc. And what they do is they certify this clean delivery and they share this clean delivery with the manufacturer and the retailer, so the manufacturer can start the collections process of that purchase order. And what we're doing is we're integrating directly with the process. So not only the collection of the manufacturer starts at that moment, but we can trigger the payment to the carrier and offer them quick pay with our solutions. So this is an example of creative solutions that are being implemented in place, just so this 10 days of conciliation inside this black box of the bureaucracy of shippers don't damage and affect the carrier schedule.
SPEAKER_00
9:51
And now for the audience, it for the audience's sake, uh there, I believe the number is like 92% of all trucking companies have seven trucks or fewer in the states. Are you finding that same ratio in Mexico for a lot of maybe you know smaller carriers where they need access to this cash flow a lot sooner than some of the bigger guys?
SPEAKER_01
10:14
The official numbers, like it's a very similar distribution and fragmentation. The official numbers in Mexico is 80% of carriers have less than five trucks, and 95% have less than 30. Those are the two official uh data points, because the the government divides in segments carrier size of microcompanies less than five, which are 80%, and then small companies less than 30, which are 95.
SPEAKER_00
10:46
And so having access to that cash flow is is sounds like it's pivotal.
SPEAKER_01
10:50
It's pivotal because also the the Mexican financial system doesn't have the muscle to underwrite this industry and also the distribution to get to these companies that are all across the country. So, yeah, it's both the underwriting complexity and the distribution. So if these carriers don't have this option and they literally get are paid 40 days uh after they already invested in that load, it literally kills them. I think this is a very interesting data point in comparison to like comparing Mexico and the US that portrays how this cash flow inefficiencies affect small carriers. The average age of a truck in Mexico is 20 years old compared to the US, which is six or seven. And this is taking all trucks into consideration. But if you take the 5% large companies out of the equation and you see the average age of trucks of the 95% of the companies who have less than 30 trucks, the age goes up to over 25 years. And this is because the small companies have not been able to grow their businesses because of how much working capital they need to operate, and that comes from these inefficiencies on and these negative cash cycles that they carry with.
SPEAKER_00
12:14
And so, where does Salvento come into play during, you know, uh obviously there's lots of you know inefficiencies probably everywhere, not just uh in Mexico, but US as well. And so, where does Salvento come into play to offer some relief to these carriers?
SPEAKER_01
12:28
Yeah, we are obsessed with solving these working capital and cash flow pains that they have, and we interact with the different actors in the ecosystem to do it. So our flagship product is quick payment, and what we do is we collaborate with shippers and brokers to integrate to their payment processes, automate the painful part of the the payment process, and offer quick pay to carriers. So we're integrating our software layer to TMS so we can understand how the conciliation of each load is happening, and then offer uh carriers immediate payment through our banking rails. One uh thing that excites us a lot where we're innovating is we're starting to offer uh our underwriting capabilities are getting better, and we are starting to be able to underwrite the risk of offering quickly to carriers the moment they deliver a load, and we don't need to wait for the conciliation process to happen. So we have the muscle and the capability to understand what is the risk of that load being paid, and we can take that risk and we price that into our product. So that is the the first way we do it, and the second way we do it is we are also underwriting uh direct-to-carrier revolving credit product that is smaller credit and designed specifically for uh carriers so they can also access and have liquidity when they have a situation where a customer is delaying paying them, or they just have uh kind of cash flow uh unbalance at AD2 address.
SPEAKER_00
14:27
And so, if I'm understanding correctly, a lot of the carriers that are operating, majority of them are operating with five trucks or fewer, they have uh you know cash flow issues, they're not able to grow, buy new equipment because of those cash flow issues, and then that's where Solvento comes into play to fix some of these inefficiencies with just you know paperwork collection that sounds easy to rectify. But when you have multiple people playing across multiple parts of the logistics process, I imagine that that could get complicated. The finger pointing, you know, can it can start? And then I and the additional complexity is if you start moving, or maybe there's not additional complexity. I'm not sure you could help answer this. Um, but when it the freight starts moving across the border, does that change uh you know how you operate or how some of these carriers can operate?
SPEAKER_01
15:15
Yes. Um I think that the main change between cross-border and intra-Mexico is that actually makes this issue even bigger is the length of the service and the distance and the average ticket. So if you work in a city and you are a last mile carrier to give an example, you can probably invest in fuel and everything you need to uh to perform the the loads and to deliver the loads that you are hired to and get back to your customer, give them all the paperwork, and be paying fast. But if you're doing cross-border deliveries, one you need more working capital to invest, a lot of uh more fuel. You need probably money to pay for overnight stays, like at truck stops, you need food for your driver, you need to pay for all the tolls, you need more maintenance on your trucks, and then it takes longer for you to come back and find a loan to come back and then deliver the documents to your shipper for you to get paid. So it just requires more working capital. And as you require more working capital, the the liquidity pains are greater, and you need more to grow your business. And that is what injecting liquidity to an industry, it literally we are the analogy that we love using that is it is the water for a plant. Like there's a lot of other pains, like insecurity, driver shortage, and others. But if the plant doesn't grow with water, then the other problems are secondary. And that is what we have so many incredible stories of carriers that have grown their business 7x, 20x, 11x, and that is what keeps us and uh excited and motivated to continue going.
SPEAKER_00
17:24
And so if I'm a carrier and I know that I have some cash flow issues and I know I need to solve this problem in order to start growing, what are the first steps look like to even working with a company like yours?
SPEAKER_01
17:39
I think it's fairly easy. I think the the asset that we've been working more on developing is that trust that and that brand that carriers have with Solvento, because this is an industry that historically has been mistreated, and so naturally they don't trust financial institutions. They they're so the first step like all our solutions are digitized, you just need to do a two-minute application, and we have most of our underwriting and analysis is automated, and we have cases where the same day of an application, we have dispersed the load to carrier, so it's fairly easy. Uh, I think we are starting to see an organic flywheel where as of now we have over 3,000 carriers already getting paid through our platform. And so these carriers uh are taking us to their other customers that don't have sold and those who could take over and implement them to ask for them to implement the solution because our solution is cheaper if we have it integrated to a broker or a shipper than the alternative of working directly with a carrier because it's risk-based. So we're starting to see that flywheel and that uh that pull from the market of carriers taking us to their other costs.
SPEAKER_00
19:08
Is is there a solution or is it the same product for that you're offering to carriers? Is it the same one that you're offering to shippers and to brokers as well?
SPEAKER_01
19:16
In the end, it's revolving credit on the same, it's the same product, which is liquidity and money. The difference is price and how it operates. When we integrate our solution to a shipper or broker, we're integrated to their systems and the payment flows from the shipper or broker go through us. So in the end, the payment risk is better because we're usually integrated to a larger company that has a different risk rating than small carries. So that way, when we integrate to a shipper or broker, we can distribute our product to hundreds of carriers by integrating to a single broker or shipper.
SPEAKER_00
19:55
And then what happens if, you know, God forbid something bad happens along the process? You know, maybe the the uh payments are denied, you know, what happens? Who does, I guess, the responsibility fall on? I would imagine it falls on the carrier in order to resolve some of those paperwork issues, but what does that, I guess, process kind of look like uh, you know, if something doesn't go as planned?
SPEAKER_01
20:17
Yeah, I think it's the carrier's responsibility and pressure to resolve that and to dispute that. So Vendo usually comes in, and with our technology, we are reducing the amount of the disputes by uh a big uh big amount. And that's also a moment when a carrier needs a working capital injection and liquidity injection, because sometimes it takes a few months to solve a dispute like that. To give uh an example and a little bit more color, sometimes if there is a theft of uh a load, and then what a shipper usually does, that I think it's a little bit abusive, but they stop paying all the accounts bill that they have for that specific carrier until they understand what happened, until insurance is cleared, until the carrier demonstrates that they were not involved in the crime. That stops the payment flow to the carrier. And they have other customers, they have other obligations, and that's where Solvento can also help with a direct credit line. But usually Solvento offers quick pay when we integrate to a shipper or a broker, we only offer the quick pay option when the load is validated by the shipper or broker that it has been delivered.
SPEAKER_00
21:48
And so I I know we got time for you know a couple more questions here. Is there anything important that you feel that we should mention uh for carriers looking or shippers and brokers looking to get started with moving freight, you know, to and from the United States and Mexico that they should know that we haven't already talked about?
SPEAKER_01
22:06
I just think that it's important to understand that moving freight is a working capital and cash flow game. When you run out of cash, that's when you decrease your service level, you start declining loads from your customers, you lose trust from your customers. So running freight business with low amounts of working capital is super risky. And we've seen very clearly and with data that the companies that thrive and grow are the ones that invest in having that working capital availability and build good relationships and end up growing their loads and uh with the best shippers or brokers out there. So, my suggestion is to build a relationship with a financial solution that is focused and understands logistics like Soldento early on. So you and when when you need it, and when that big shipper comes and asks for a dedicated contract, you have that credit history and access to the working capital that is going to enable you that growth. Because without that water, you will remain small for generations. Like we've seen many companies that have been through three generations and have not grown. And they have the same amount of trucks, same amount of customers, because they don't have and they haven't built that track record and credit history that enables them to inject working capital to their business.
SPEAKER_00
23:37
Yeah, I think that that's a perfect place to leave it. You know, great advice all around. Uh Jaime, where can I send folks that want to get in contact with you, want to learn more about Solvento and your solutions? Where can I send them?
SPEAKER_01
23:49
Send them. Well, we have our old uh social media. Our website is uh solvento.com, and uh everyone can I happily send a direct email to me to Jaime J A I M E at Solvento.com. Happy to have a chat and uh be creative and create today.
SPEAKER_00
24:07
Absolutely. And I will put all of that in the show notes just to make it easy for folks. But but this was really an enlightening conversation. I, you know, especially from a cash flow perspective, you would think that you know most businesses know that, but maybe they they're in a situation where they're just if it ain't broke, don't fix it. You know, we're just gonna keep doing things the same old way that we've always been doing them, but now you know you have access to to new tools and new financing mechanisms uh to help grow your business to places where you didn't think that it that you could take it. So, Jaime, again, thank you so much for for coming on and talking about it.
SPEAKER_01
24:39
No, thank you very much. I really enjoyed it and hope to review some.
SPEAKER_00
24:43
Absolutely. Thank you so much for tuning into this special edition from CargoRecs. This is one of many series that we have planned. So if you have a chance to check out more of our content, please do hit the subscribe button. It helps a lot with growing the channel. And then also if you want to support more content like this, head on over to Cargorex.io and consider becoming a premium or plus member. Offers a lot of benefits, all listed over on the website. Just hit the pricing tab over on the website and you can get signed up and even possibly be featured in one of these interviews just like this. Thank you so much.
