In February, Chicago-based Redwood Logistics announced its acquisition of Strive Logistics, a freight brokerage with offices in Chicago and Austin, Texas, placing the combined entity in the top 15 North American freight brokerages with a combined $1 billion of freight under management.
Commenting on the deal, Redwood CEO Mark Yeager pointed out that Strive’s LoadRunner, an intelligent platform that uses advanced analytics to drive broker productivity, perfectly complements the customer-facing technology that Redwood had developed.
We wanted to learn more about LoadRunner, so we spoke to Michael Johnson, Redwood’s new executive vice president of strategy. Before the acquisition, Johnson was most recently Strive’s vice president of strategy; Johnson spent 12 years at Strive, having started on the brokerage floor in the fall of 2007.
Johnson said that Ben Greene, a veteran of American Backhaulers and C.H. Robinson who founded Strive in 2003, realized early on the advantage that data and automation could bring to a brokerage competing in an industry that was largely dependent on Excel spreadsheets and telephone calls.
“Two years into learning the business, Ben was expressing to me his vision of creating a technology platform that would allow the company to scale faster and differentiate ourselves in the marketplace,” Johnson said. Johnson’s engineering background gave him the technical skills to sketch out the blueprint of what the platform would look like.
After two years of development, the technology was ready to go live.
“We ended up calling it LoadRunner. Our primary goal was to emulate the way high-frequency trading platforms perform in financial markets, specifically how they use data to drive automation and decision-making within their organizations,” Johnson explained.
In its seven years of operations, LoadRunner has been enhanced by more than one hundred new releases. These refinements were driven by feedback from users, customers, carrier partners, and the company’s dictum that “complacency is not an option.” Johnson said that when LoadRunner was launched, fully 90% of the capacity it matched freight to was sourced from public loadboards; one year later, that number was down to 30%.
“As recently as the end of last year,” Johnson said, “less than 10% of our total freight is moved by carriers we’ve booked from public load boards. LoadRunner has allowed us to change how we’re managing our own carrier networks, and our matching algorithms allow the freight we have coming in to match up to our own liquidity, in our own private marketplace.”
We had questions about those matching algorithms—what are the algos looking for? What is the engine optimizing for? In other words, what are the attributes of a load and a carrier that cause LoadRunner to match them?
LoadRunner’s carrier selection algorithms make probabilistic bets on which carriers can offer customers the best value and are most likely to accept the load. LoadRunner’s algorithms are dynamic in that as new information enters the system, the outcomes and suggested carriers change in real time.
“The reason that’s important,” Johnson said, “is that just in our private marketplace alone, there are hundreds of thousands of available trucks we have visibility into. Especially on high volume lanes, like Dallas to Houston, we might have more than 60 carriers who would haul that lane, so what we need to do for our operators to help make decisions is weave in the order that those carriers should be contacted. We’re asking ourselves, how do we take data and provide recommendation engines to our team as to which carriers should be called and in which order, which dramatically increases the velocity of freight booking.”
Apart from the technology itself, both LoadRunner and RedwoodConnect, Redwood’s proprietary integration middleware, will benefit from the increased scale achieved by combining the companies’ data, customers, and carrier networks. Load matching is a mathematical problem governed by Metcalfe’s Law, which states that network effects are proportional to the square of the number of connected users in the system. Greater scale gives brokerages an exponential, not a linear advantage over their smaller competitors.
Another way to think of the network effects derived from increased scale is liquidity in a marketplace: It is now easier for Redwood to match a load, and to do so at a higher productivity. Shippers’ costs go down and carriers are also afforded better rates. Scale makes it easier to service valued customers’ freight with the highest quality carriers and help trusted carrier partners optimize the utilization of their assets.
“We’re coming together from two very complementary positions in the market,” Johnson concluded. “Strive and Redwood are thought leaders when it comes to technology. Redwood has the best customer-facing technology, and Strive has spent the last ten years building the internal horsepower. The technology is at the forefront of the industry and it makes us more effective in every way. It’s the combination of these tools and our people that creates the real magic for our customers.”