Logistics startup Baton, which aims to feed last-mile freight through a series of relay yards strategically placed outside major cities, has completed a study that its co-founder said was aimed at convincing midsized companies of the value of its service.
Co-founder Andrew Berberick told FreightWaves in an email that the result of the study is not being viewed as a “proof of concept.” Baton is past that point, he said, adding that the company already is moving freight for five of the top 10 carriers. He singled out Werner (NASDAQ: WERN) as an example in that top 10 group and also cited several other midsized fleets, specifically Bison and KAL Freight, as examples of customers.
The latest test was conducted with a top 3 carrier, Berberick said, declining to identify the specific company.
Baton conducted a similar test last year with CRST, but Berberick said there were key differences between that and the latest “experiment,” the word used by Baton in its white paper reviewing the results.
In the CRST test, savings from using the Baton yards were estimated by using in/out times. In the latest test, Berberick said actual driver logs were used, leading to greater specificity in measurements of savings. (He added that CRST was not the carrier in the latest experiment.)
“The point of this test was to demonstrate using actual carrier driver log data the economic/quantitative value of a relay model in terms of actual increased revenue,” he said in the email about the latest experiment.
The methodology and findings are in a white paper published by Baton. The experiment involved moving freight on just one lane, Phoenix to Los Angeles, round trip. A control group conducted business as usual, with freight originating both in Phoenix and LA headed to the other city. The trucks operated by the control group went directly to the end customers.
A second group utilized the resources of Baton’s relay yard in Commerce, California, allowing the drivers between Phoenix and LA to make a quick turn. Although there was no relay yard used in Phoenix, the experiment involved comparisons to the control group going from the LA warehouse to Phoenix and the test group going from the warehouse to the relay yard and then on to Arizona.
In LA, the final miles coming out of or into the warehouses were handled by a local driver with more flexibility in making deliveries. And all freight transfers in the LA area were drop and hook, whether it was at the relay yard or for the control group dropping off at one warehouse and picking up at another.
“We’re enabling the [test drivers] to stage loads, saving the eight-plus hours that they would have incurred waiting for an appointment, waiting in detention, etc.,” Berberick said.
The white paper laid out the “thesis” behind the experiment, which was that local relays can help avoid three profit-killing conditions found in the final mile: peak traffic, peak warehouse congestion and “the inherent lost time due to appointment constraints, arriving early or waiting for your next appointment.”
“Using local relays for live loads will have dramatically higher ROI,” Baton said in the white paper.
The number of loads between the control group and the Baton relay was 123 for each. The test ran for 60 days with an average of two loads per day.
The drop-and-hook charge was $140. Berberick said that fee included the cost of the local driver.
Baton believes the savings it found in the experiment more than offset the costs of the last mile. “The point of the experiment was to show that test drivers returned so much faster that their incremental mileage/revenue more than paid for a last-mile shuttle driver,” he said.
Baton, in its white paper, took on criticisms of the hybrid local relay model. One criticism is that the local relay part of the trip adds costs to “an already margin-constrained trucking operation.” The second is that wasted time in the current setup doesn’t disappear, it just gets pushed down on the final-mile transit that is at the heart of the Baton model.
But Baton said its experiment generated results that in some instances improved efficiency by as much as eight hours of “productive driving time.” The summary of the test results said that “with this freed-up time, the long-haul drivers who relayed loads to Baton drove enough incremental profits (increased miles per week) to cover the costs of the relay in the most strict use case,” which Baton defined as drop and hook.
Among the key numbers in Baton’s findings:
- The Baton trucks that delivered only to the Commerce yard returned to Phoenix 16.2 hours faster than the control group that went all the way to the end user.
- The last mile from the relay yard to the consumer took two hours on average.
- Using a calculation that assumed an average speed of 50 mph and a cost of $1.25 per mile, and deducting drop-and-hook costs, Baton calculated that the theoretical ROI improvement per load was $366. That figure is after the $140 drop-and-hook fee.
- Assuming greater miles over the course of a week, the incremental profit per week per truck was estimated at $751.
In the white paper, Baton conceded there are features that impacted the potential gains in ROI. Drivers who got more time because they dropped their loads at the Baton local relay site didn’t always use that extra time to drive more; many “clocked out.” The data does not include weekend coverage, the absence of which negatively impacts the ROI, since drivers presumably would face less traffic and congestion over the weekends.
Baton executives were encouraged enough by the findings that Berberick said they plan on using them in the company’s marketing efforts, particularly targeting smaller companies. “Now that many of the largest carriers partner with Baton, the goal of this was to show to more skeptical medium-sized fleets a quantitative picture for the potential increased profitability the model enables,” he said.
Baton has needed to trim its sales somewhat due to the pandemic. Earlier this year, when the company secured $10.5 million in series A funding, it said that its expansion plans included Chicago, Dallas and Atlanta. “The pandemic and drastically increased costs in the LA market delayed our launch timeline,” Berberick said. He added that the company hopes to add one of those three cities in the second quarter of 2022.