American society mythologizes great inventors and celebrates the “stroke of genius”. But profound ideas are usually the result of incremental and often painstaking progress on hard technical problems. Entrepreneurs must rapidly prototype, test their products against the market to determine if they’re addressing real challenges, and develop profitable business models, all at the same time. We designed the 8VC Entrepreneur-in-Residence program with this reality in mind.
Our EIR program gives talented new founders the time, space, and intellectual environment to develop revolutionary new businesses. Today we’re proud to announce that 8VC Entrepreneurs-in-Residence Andrew Berberick and Nate Robert are launching Baton: a logistics software company which will transform last-mile delivery, saving our trucking industry billions of hours, dollars, and gallons of fuel annually.
Andrew and Nate are working alongside 8VC advisors such as Alan Gershenhorn, Andy Clarke, Chris Sultimier, and Shaleen Devgun, who are some of the foremost logistics experts on the planet. We recruited these accomplished individuals because the trucking industry is a classic example of an industry ripe for Smart Enterprise technology. Trucking accounts for over $700B of GDP annually, and over 70% of the nation’s freight is moved by truck at some point before it is delivered. The problem is that the entire logistics industry is run on archaic 15+ year old software, almost no data is captured, and none of the software systems can communicate with each other — in fact 67% of shippers still rely on paper records.
Trucking is a strikingly competitive industry — the barrier to entry is just a couple of drivers, a vehicle, and a contract to ship freight. But logistics companies have been slow to modernize their software systems. As in healthcare, the costs of integrating logistics data are steep. Different shippers have different Warehouse Management Systems (WMS), carriers all use different Transportation Management Systems (TMS), and communication protocols are as fragmented as the logistics market itself.
Over the past 5–10 years, a series of companies have started to surface GPS data from trucks and even parcels using electronic logging devices and other sensors. A layer of IoT devices emitting valuable location data has enabled an app ecosystem of digital brokers, data aggregators, and other software companies to spring into existence. Some of 8VC’s portfolio companies, including Platform Science, Project44, and Trackonomy, are principal players in this recent round of technological advancement. But the trucking industry is still in the early phases of the smart enterprise wave, and there are dozens of billion dollar companies to be built harnessing new data to allow carriers, brokers, and shipper/receivers to deliver freight more efficiently.
Take, for example, the final mile of delivery, which is by far the most expensive for carriers and the most painful for truck drivers. Imagine you’re a truck driver driving from NYC to LA. You cruise at around 55 mph across the country, aside from occasional traffic. But when you hit LA county around 4pm, you’re immediately stuck in standstill traffic. You crawl your way to a warehouse in inner city LA for two hours, and then enter a queue to unload. But now you’re stuck in “detention” waiting for other drivers to unload their trailers ahead of yours, and you sit in your cab for several hours until you dock at the warehouse. Finally, after 5–6 hours of waiting, you’re free to leave and pick up another shipment.
This story is unfortunately the reality for millions of truck drivers, in trip after trip across the country. We’ve all seen 18-wheelers sitting in traffic. But what you may not know is that trucks also wait an average of three hours whenever they load or unload their trailers at warehouses (“detention”). Last year, trucks wasted $3 billion worth of fuel idling in detention, not to mention the opportunity cost of billions of hours of time. It’s no wonder that truck drivers consistently describe detention as the most miserable part of their jobs.
There are two fundamental problems with this process. The first is that you entered the city of LA at rush hour and suffered through multiple hours of grinding heat and gridlocked traffic. The second is that you were stuck in “detention” at the warehouse for several more hours because you had no way to predict that a dozen other trucks would be there at the same time as you.
The Baton team has come up with an elegant solution to each of these problems. Baton is building a network of “drop zones” on the outskirts of urban areas where long-haul truckers can drop off their trailers, pick up new trailers, and get back on the highway without ever having to deal with rush hour traffic in major cities. Local fleets of last-mile delivery vehicles will then pick up trailers from Baton drop zones and will have the flexibility to deliver them to urban customers at off-peak hours, such as early morning or midday.
In addition, Baton is developing software that uses dynamic convex optimization to manage the delivery times of incoming and outgoing loads based on the delivery patterns of local fleets, behavior of other carriers in the region, wait times at warehouses, and more. We predict that a sophisticated coordination system can cut detention times by over 50%, saving billions of dollars a year and allowing truck drivers to earn more income doing what they’re best at.
At scale, we expect that tackling the rush-hour delivery and detention problems in the American logistics industry will save 50–100 billion dollars annually and drastically improve the experiences of truck drivers and American consumers.
We can only dream about the second order effects, but we’ll list one. Long-haul trucks get less than half the possible highway fuel efficiency because they are designed to be “jack of all trades” machines which can handle both highway and city driving. Aggressive aerodynamics and low engine gearing would hugely improve highway fuel economy, but these improvements are impractical in cities with tight turns and stop-and-go traffic. Conversely, electric vehicles could reduce emissions and save billions in urban areas, but are less economical on highways. Baton’s drop zone concept will allow long-haul fleets and local delivery fleets to specialize and adapt to their environments. This will allow carriers to become massively more fuel efficient, saving tens of billions of dollars a year in fuel costs alone.
In addition, we believe that Baton’s core innovation will empower early adoption of autonomous vehicles and comfortably embrace a future in which autonomous vehicles become the norm. Full-scale, “Level 5” autonomy is more than a decade away, and many believe that the first autonomous trucks will only be functional on the highway. Baton provides the real estate infrastructure to enable highway-only autonomous trucks or convoys to interchange loads with human drivers for the final mile of delivery. And when we do achieve Level 5 autonomy, we’ll still need staging zones for autonomous trucks in order to avoid the bottleneck of urban warehouses with their own internal inventory lag.
We’ve been thrilled to see the Baton team attract top advisors including Alan Gershenhorn, the former Chief Commercial Officer from UPS, and Craig Fuller, the CEO of Freightwaves. Prologis, the largest industrial real estate owner in the world, is also an investor and a partner. Trucking is the backbone of the national economy, and we believe that the Baton team is attacking one of the most massive problems in our society. It has been our privilege to collaborate with Andrew and Nate and we’re excited to help them transform the face of American logistics in the coming years.