Reinforcement Learning for Dynamic Bidding in Truckload Markets: an Application to Large-Scale Fleet Management with Advance Commitments

TL;DR

This paper introduces a reinforcement learning approach using a knowledge gradient policy with bootstrap aggregation to optimize dynamic pricing in truckload brokerage markets, improving fleet management and load commitments.

Contribution

It develops a novel high-dimensional contextual learning policy for pricing in freight markets, integrating fleet simulation and stochastic modeling for better decision-making.

Findings

Enhanced pricing strategies through reinforcement learning.

Improved fleet management with stochastic simulation.

Effective learning policy for complex market dynamics.

Abstract

Truckload brokerages, a $100 billion/year industry in the U.S., plays the critical role of matching shippers with carriers, often to move loads several days into the future. Brokerages not only have to find companies that will agree to move a load, the brokerage often has to find a price that both the shipper and carrier will agree to. The price not only varies by shipper and carrier, but also by the traffic lanes and other variables such as commodity type. Brokerages have to learn about shipper and carrier response functions by offering a price and observing whether each accepts the quote. We propose a knowledge gradient policy with bootstrap aggregation for high-dimensional contextual settings to guide price experimentation by maximizing the value of information. The learning policy is tested using a carefully calibrated fleet simulator that includes a stochastic lookahead policy that simulates fleet movements, as well as the stochastic modeling of driver assignments and the carrier's load commitment policies with advance booking.