Walmart tests autonomous delivery vans for 'middle mile'

Dive Brief:

Autonomous vehicles (AVs) operating in the "middle mile" between Walmart warehouses and store-adjacent package pickup kiosks could cut logistics costs in half for these e-commerce orders, Walmart U.S. CEO Greg Foran told reporters, according to Bloomberg. Foran reportedly called self-driving vehicles a "no brainer."
The retailer is using Ford vans to test self-driving technology from Gatik AI, a startup that came out of stealth mode two weeks ago, TechCrunch reported. The vehicles are ready to drive up to 200 miles per day in urban environments, Gatik AI CEO Gautam Narang told TechCrunch.
A Walmart spokesperson told Supply Chain Dive the U.S. is years away from allowing AVs on highways and the retailer's private fleet remains critical to its supply chain.

Dive Insight:

As e-commerce grows its share of Walmart's total sales, lower profit margins on such orders are a growing concern. Online sales at Walmart were up 40% year-over-year at the end of 2018 and on an earnings call in February, Walmart CEO Doug McMillon said building out the fulfillment network has driven sales, but not necessarily profitability. Gross margins were down 21 basis points in 2018.

The partnership with Gatik is a sign the retailer is looking outside, as well as inside, the warehouse for cost savings to change these dynamics.

"Milk runs," or routes often repeated, are a common thread between most AV trials on the road, because they require little decision-making on the part of a driver. Frequent repetition means the return on investment is easily calculated and not as likely to vary, compared with last-mile deliveries.

Efforts to automate frequent routes with autonomous road vehicles are underway in Sweden where Volvo's autonomous truck will ferry goods from a DFDS warehouse to the Port of Gothenburg. USPS tested TuSimple's driverless truck between Phoenix and Dallas last month.

These early live tests of AVs demonstrate what Foran explained is an ideal application for the technology in its current stage. Gatik AI is specifically targeting middle mile runs for its technology, focusing on vehicles smaller than Class 8 trucks and larger than sidewalk delivery bots.

Walmart isn't keeping its autonomous experimentation completely away from the consumer. A trial with driverless vans for groceries will go live in Surprise, Arizona, later this year with tech provider Udelv.