Wharton’s John Paul MacDuffie speaks with Wharton Business Daily on SiriusXM about Walmart’s operating driverless delivery trucks.

In the race for retail customers, Walmart is closing in fast on the middle mile.

The company announced earlier this month that it is operating driverless delivery trucks from a distribution center to a Neighborhood Market store in Bentonville, Arkansas, where Walmart is headquartered. The deployment is a first because there are no other driverless deliveries along the so-called middle mile of the supply chain anywhere in the world.

The achievement brings Walmart closer to using autonomous vehicles (AVs) to traverse the challenging last mile of getting goods straight into the hands of customers. But Wharton management professor John Paul MacDuffie said technology still has some distance to go before it catches up to the aspirations of retailers chasing the speed and cost-efficiency that AVs can offer.

“That last mile, which we’ve heard a lot more over the years as the big challenge in mobility, in delivery, in business-to-consumer, is vastly more complex,” he said during an interview with Wharton Business Daily on SiriusXM. (Listen to the podcast above.) “These are the baby steps that get us there.”

MacDuffie, who is director of Wharton’s Program on Vehicle and Mobility Innovation, said Walmart and its logistics partner, Silicon Valley startup Gatik, deserve much credit for the pilot program. Automated trucks have been around for a few years, but they haven’t been operating in real-world conditions. Instead, they have been used on controlled, private routes.

“This is different,” he said. “These trucks are dealing with traffic lights, with turns, with pedestrians, with intersections, merging onto other roads.”

He said Gatik is building on its operational design domain, or ODD, by running the same route over and over again. In this case, it’s a 7-mile loop between the distribution center and store. The repetition enables engineers to “deeply train” the algorithms to understand and adapt to everything the trucks may encounter along that route.

“It doesn’t automatically mean that we’re going to see these things pop up everywhere because you’ve got to learn each ODD,” MacDuffie said. “But it’s still an achievement.”

Walmart and Gatik began the pilot program in 2019 and expanded it in 2020. After 18 months of successful operation, the partners received approval from the Arkansas State Highway Commission to remove the safety driver from the vehicle. An employee remains in the passenger seat of the truck, and a chase vehicle follows.

“Taking the driver out is the holy grail of this technology,” Gatik CEO Gautam Narang told CNBC. “Having the trust from the world’s largest retailer has been a massive boost for what we do and is a validation for our technology, our solution, and our progress.”

Currently, there are no federal regulations around autonomous vehicles. MacDuffie said it makes sense right now for individual states to set their own rules — like Arkansas has done with Walmart and Gatik — until a tipping point is reached with the technology and its ubiquity.

“At some point, it’s going to help the industry tremendously to move forward if there’s a standard set of requirements across the whole U.S.,” he said. “But that’s a ways away.”

“These trucks are dealing with traffic lights, with turns, with pedestrians, with intersections, merging onto other roads.” –John Paul MacDuffie

As the technology advances, drivers will grow more accustomed to the sight of AVs rolling along in the lane next to them. Having a spotless safety record will also help build consumer confidence in AVs. MacDuffie noted that Gatik has been accident-free so far, unlike Toyota. One of the automaker’s self-driving vehicles hit a visually impaired athlete in the Tokyo Paralympic Games village in August. The athlete wasn’t seriously injured, but Toyota suspended use of the vehicles and CEO Akio Toyoda apologized, saying the incident showed that AVs “are not yet realistic for normal roads.”

“That was certainly not the headline that Toyota wanted for new technology,” MacDuffie said. “Proceeding with real care about safety is very smart, and Gatik and Walmart seem to be doing that.”