When it comes to finding an easy way to secure capacity and lock in rates, Anshu Prasad looks to the future.
As co-founder and CEO of Leaf Logistics, Prasad aims to give shippers, carriers and brokers confidence in buying and selling freight contracts as well as protection against market fluctuations. He explained the benefits of Leaf Forward contracts with FreightWaves CEO Craig Fuller on the FreightWavesTV show, “Fuller Speed Ahead.”
Leaf Logistics, formerly the Logistics Exchange, is a New York City-based early-stage startup in freight contracting. Its Leaf Forward contracts offer buyers and sellers the ability to secure future rates, capacity and service on its digital platform.
But what is a forward contract?
Forward contracts are private agreements between two parties to buy or sell an asset at a specific time at a given price.
“It is about the physical provision of transportation capacity at a future date at a set rate,” Prasad said.
Seasonality can be troublesome for supply chains as changes in demand can impact the level of capacity in the market. When anticipating market fluctuations, it’s not uncommon for shippers and carriers to back out of a contract, often leaving both parties frustrated and freight unmoved.
According to Leaf, its forward contracts are standardized, enforceable and tradeable agreements for future transportation use. Both parties are bound to abide by its trading rules and are free to trade their contracts on its digital platform.
Although flexible and easily tradeable, a Leaf Logistics contract is a binding commitment. If a shipper or carrier fails to perform, it is still responsible for paying the cost of the load.
Prasad said this contract model combines flexibility with guaranteed capacity. Contract periods are determined between the buyer and seller and can last days, weeks or months.
“We built a basis for digital contracting, whether you wanted to do if for four weeks or 52 weeks, and said what if there was a way to take each of those future loads and make it tradeable?” Prasad explained. “What if you could standardize a way that some of the aspects that make this a one-to-one contract [the way] a pop-up fleet or a dedicated fleet is, and say I could abstract some of the complexity away and take it off your books if the summer is going to have a weak shoulder period?”
Leaf’s online contracting platform provides access to forward-focused market indicators that predict capacity movements and future rates. According to Leaf, its analytics engine also tracks both historical shipment data and Leaf’s future market insights to automatically suggest best-fit contracting opportunities for users.
As a founder of a newly created freight exchange, Prasad said he is focused on building trust with individual customers. He noted that an impediment to his industry has been establishing a standard basis for trading.
“We were absolutely fixated on making sure that the first few trades that people entered into were safe,” Prasad said.
Innovating a freight-trading platform isn’t easy. Working against the status quo is the biggest challenge facing the company currently and for the next couple of years, Prasad said.
“We have a ton of respect for how hard this job is. Finding loads in the market that actually work for the business you’re trying to build as a provider or finding capacity that actually fits like a puzzle piece in your portfolio is hard. It’s been hard for 25 years,” he said.