From American Backhaulers to Sheer Logistics with Eddie Leshin and Brian Winshall

This week’s podcast features guests Eddie Leshin and Brian Winshall. Eddie is the former VP of Operations at American Backhaulers and former COO at Coyote Logistics. He is now a Partner at Woodlawn Partners and a Board Member at Sheer Logistics. Brian is the former Executive VP of AFN and GlobalTranz and now acts as an Advisor at Isometric Technologies (ISO) and is the CRO at Sheer Logistics. In our interview,  the two discuss how Y2K shifted the world of brokerage, the significance of managed transportation, and the intricate dynamics of private equity in acquisitions.

Robust Backgrounds

Eddie started his career at BT Trucking before moving to American Backhaulers as employee #44 where he quickly moved up the ranks and helped oversee the growth of the company.

• Helped American Backhaulers soar from $30 million to $300 million.
• Led CH Robinson’s Chicago Central from $300 million to $1 billion.
• Became the COO of Coyote, pushing it from $150 million to $1.8 billion.
• Acquired logistics businesses and set sights on non-asset-based strategic operations, leading to the acquisition of Sheer in 2022.

Brian’s first encounter with logistics started in high school, where he worked at a warehouse. He went on to study supply chain at Michigan State and eventually joined American Backhaulers as employee #80.

• Saw the growth of American Backhaulers from $80 million to a whopping $14 billion after its merger with C.H. Robinson.
• Joined AFN in 2015, a strategic logistics company, and spearheaded its success.
• Took on advisory roles and then recognized the potential in Sheer, joining its executive team.

American Backhaulers and the “Bronze Age of Brokerage”

In the wake of the 1980s deregulation, Paul Loeb founded American Backhaulers with a visionary approach. Recognizing the underutilized carrier capacity, particularly with trucks returning empty after sand deliveries, Loeb aimed to maximize efficiency in this uncharted terrain. By 1990, Eddie Leshin and later Brian Winshall stepped into what Eddie termed the "Bronze Age" of brokerage.

Their journey marked a transition, where the term "broker" moved from a taboo to a vital industry asset, predominantly fueled by technology.

Importance of Y2K

Eddie honed in on the impact the Y2K fear had on the broker business. He calls it the “catalyst” behind data and information taking the front row in the 3PL world and beyond.

Connectivity: The World Wide Web and cloud tech became much more important in ensuring the success of the business.

Innovation: It helped drive new ideas, with American Backhaulers creating its proprietary TMS that caught the attention of players like C.H. Robinson who acquired the company in 2000.

The Appeal of  Managed Transportation

Brian and Eddie went on to discuss the significance of Managed transportation and why these guys say it's the future of logistics.

What is it?:

• Tech Control Tower: Central hub of all shipment activity.
• Decision-Making Power: Executes transportation choices for customers but doesn't control strategy.
• Separate from Brokerage: Could work without any brokerage ties.
• Value-based: Offers efficiency, optimization, and detailed reporting.

The Spark:

• 90's Origins: Eddie and Brian, with their tech know-how from Backhaulers, noticed a need.
• Realization: When Walmart called out service issues, the solution was data-driven communication and better systems. This evolved into managed transportation.
• Why it Matters: It's not just about moving freight. Managed transportation integrates technology and strategy for efficient, customer-centric solutions. They tell us to think of it as the next level in the logistics game.

Sheer Logistics and Value of 4PLs

As Eddie and Brian envision it, managed transportation represents a future of logistics that seamlessly fuses technology with strategy. The advantages are manifold: swift implementation, reduced costs, and the ability to easily navigate complex systems. Instead of companies shouldering the daunting task of implementing and maintaining these systems in-house, they can outsource to specialists like Sheer. This not only optimizes costs but ensures staying ahead of market trends.

When it comes to investing, 4PLs (managed transportation businesses) often hold higher valuations than traditional 3PLs for several reasons:

1. Technology Enablement: 4PLs are often more tech-driven, offering advanced solutions like a TMS.
   
2. Solution Value: 4PLs provide non-commoditized, value-driven solutions tailored to clients, ensuring sticky and long-term relationships.
   
3. Cost Efficiency: Data indicates that businesses using managed transportation services see reductions in costs. According to Arc, shippers engaged in managed transportation arrangements saw reduced costs by over 12% compared to those not using such arrangements.
   
4. Customer Stickiness: 4PLs tend to have deeper integrations with their clients, leading to reduced churn and more prolonged engagement.
   
5. Business Intelligence: Beyond immediate cost savings, 4PLs provide a gold mine of data and analytics. This business intelligence allows companies to swiftly pinpoint inefficiencies like increased minimum order quantities or higher costs per unit. Quick data access and actionable insights can lead to savings of between 5% and 10%.

Brian says that while there are multiple factors to consider, generally managed transportation can get anywhere from two to four greater valuations than what a brokerage would.

Private Equity and Company Acquisitions

Eddie discusses his role as a partner at Woodlawn and his approach to investing in logistics companies by prioritizing genuine value, sustainable growth, and robust due diligence in acquisitions.

• Private Equity Role: Best when it empowers management, providing support over control.
• Growth Strategy: Prioritize value to clients and employee welfare for sustainable results.
• Due Diligence Essentials: Examine financials, contracts, and customer satisfaction.
• Red Flags: Overreliance on one customer, unclear value proposition, and weak market differentiation.
• Voice of the Customer: Feedback should align with a company's value offering.
• M&A Caution: Ensure acquisitions reflect genuine value, not just inflated market highs.

Private equity offers a strategic lens, driving innovation and growth in the evolving logistics industry through informed investments.

Tune in for the full conversation on 4PLs, managed transportation, and investing insights from Eddie and Brian on FreightCaviar's Spotify channel.