Forget the ‘Final Mile’, Digitization Brings Efficiencies to Supply Chain’s ‘First Mile’

Supply chain has certainly been in the forefront lately. One part of that chain is what Factor calls the “first mile” — the processes that move something from theoretical design to physical product. This includes sourcing, scheduling, following up on order status, enforcing order terms and sending payments.

“What we’ve seen, my co-founder and I, from personal experience in the industry is there’s some of these very fundamental processes in supply chain that are extremely and sort of shockingly manual and tedious,” Factor CEO and Co-Founder Doug Shultz told PYMNTS.

Factor, a payments and order management platform for the global supply chain, announced Dec. 12 that it had raised $6 million in seed funding to modernize that first mile infrastructure.

Enabling Customers to Focus on What Matters

The investors see an opportunity to apply FinTech innovations to legacy B2B workflows, Shultz said.

Factor’s solution is easily scalable and customizable, and it integrates into existing enterprise resource planning (ERP) software, he said.

“The interoperability of today’s technology that we’re able to access makes that much easier to deploy throughout a network of suppliers and their suppliers as well,” Shultz said.

Most of the company’s current customers deal with complex goods that contain dozens or hundreds of components, such as robotics, medical devices, aerospace and industrial equipment. All those moving pieces take a long time to manage. Shultz said the supply chain managers on one team Factor worked with were spending as much as 40% of their time emailing suppliers to check in on the status of an order, for example.

“This is sort of where we usually start with customers, and we like to hear all their anecdotes because they’re like, ‘I wish that I could have more than 60% of my day actually be focused on the stuff that matters, instead of this tedious stuff,’” Shultz said.

Uncovering Possible Bottlenecks

Recent port slowdowns and semiconductor shortages have put manufacturers on high alert, worried about potential bottlenecks elsewhere in their supply chains. Schultz said Factor can help reveal these vulnerabilities because it captures data from companies further upstream.

Giving an example of how Factor’s customers might use that data, Shultz said, “Having access to that means, ‘Hey, we just uncovered a major risk because we and this other massive company are procuring from this one supplier who doesn’t have enough capacity if we both have an extra-large order in any given month.’”

As companies try to solve those problems, they increase complexity on the financial services side. For example, if they begin to dual source, they’ll have double the number of suppliers and double the number of orders.

That’s difficult to cope with if the company’s current processes are already inefficient and the source of truth is generated by calling or emailing suppliers to check on orders. The Factor system, on the other hand, uses artificial intelligence (AI) to ingest data from suppliers and keep that up to date.

“We actually see the evolution of this, starting with this core visibility layer, if you will, that source of truth, bringing on a whole host of new financing providers, risk services providers, and actually integrating them into the order process at the very low level,” Shultz said. “So, we can get much better outcomes, much more cost-effective financing, much more specific providers of the specific thing we need.”