Critical turning point for resilience using automation

Australia and New Zealand’s supply chains are reaching a critical turning point, as persistent labour shortages collide with weak productivity growth and rising global volatility, forcing businesses to rethink how competitiveness and growth is achieved inside their operations.

According to Dematic Australia and New Zealand, the pressure is no longer cyclical but sustained — reshaping how businesses think about productivity and competitiveness.

That shift is occurring against a weak national productivity backdrop. Data from the Australian Bureau of Statistics, analysed by the Productivity Commission, shows while labour costs have increased 3–3.5%, labour productivity grew just 0.8% over the year to September 2025, remaining well below the long-term average and reinforcing ongoing concerns about Australia’s productivity slowdown.¹ The Reserve Bank has repeatedly warned that subdued productivity is a key drag on economic growth and inflation control.²

At the same time, industrial and logistics markets remain tight, with national vacancy rates sitting around 3% in the second half of 2025 — a level that continues to reflect constrained warehousing and distribution capacity.³

In major metropolitan markets, warehouse space close to customers is also becoming increasingly scarce and expensive, placing further pressure on operators to extract more throughput from existing footprints. For warehouse and distribution operators, these macroeconomic pressures are no longer theoretical — they are operational realities playing out daily on the floor.

“Labour constraints in logistics are no longer temporary disruptions,” said Michael Jerogin, CEO of Dematic APAC. “They are structural realities. If organisations are still relying on workforce expansion alone to increase output, they are exposed. The question is not whether automation is relevant, but whether you can consistently meet customer expectations without it.”

While some of Australia’s largest retailers and industrial operators have progressed along their automation journey, investment is broadening across the market as labour and service pressures intensify. Companies including Woolworths, WesTrac, Sigma Healthcare, AS Colour and PepsiCo continue investing in automation across Australia and New Zealand to maximise customer service levels, build operational resilience and agility, and meet increasing labour challenges — highlighting that this shift extends well beyond large global e-commerce players and is occurring across sectors locally.

The pressure is not simply about cost. It is about service. Rising consumer expectations around delivery speed, order accuracy and reliability mean there is little tolerance for bottlenecks or inconsistency. When facilities are under-resourced or overly dependent on manual processes, the impact quickly surfaces in missed dispatch windows, picking errors, reduced on-shelf availability and increased safety incidents. In highly competitive sectors such as retail, FMCG and e-commerce, those issues translate directly into lost market share.

“The real lever for competitiveness now sits inside operations,” Jerogin said. “How efficiently goods move through a facility, how resilient processes are to disruption, and how safely teams can operate under pressure will determine who grows and who stalls. Protecting service levels has become the strategic priority.”

At the same time, global trade uncertainty and shifting tariff conditions are reinforcing the need for agile, locally resilient operations. Businesses can no longer assume that external conditions will remain stable, nor can they rely on steady labour availability to absorb peaks in demand. Internal efficiency gains are becoming the primary mechanism for protecting continuity.

“Automation today is less about replacing people and more about amplifying the workforce you have,” Jerogin said. “When labour is constrained, technology allows organisations to increase throughput, improve accuracy, reduce operational risk and drive competitiveness without scaling headcount at the same rate as volume.”

Successful automation, whether it begins with voice-recognition and augmented vision systems for operators, islands of robotics or complete ‘lights-out’ fully-automated warehouses, is not simply about installing robotics. Designing a ‘right-fit’ solution comes from a deep understanding of operations, business strategy, growth ambitions and constraints. Steel and robotics perform tasks — but it is the software, system architecture and the people behind planning, integration and ongoing service and support of the solution that determine whether an operation achieves its key objectives of increasing productivity, improving service levels, or making operations more agile and resilient.

Historically, investment in automation was often framed as a long-term cost-reduction exercise. That narrative is shifting. Boards and supply chain leaders are increasingly viewing automation as a resilience strategy — one that mitigates reliance on hard-to-fill roles, reduces exposure to disruption and strengthens safety outcomes for frontline teams. Together, these all translate into better customer service levels and improved competitiveness.

“With productivity stagnating nationally, the businesses that secure internal efficiency advantages now are better placed to compete and remain profitable,” Jerogin said. “Automation has moved from future consideration to present necessity.”

_{1. https://assets.pc.gov.au/2025-12/Quarterly%20productivity%20bulletin%20%E2%80%93%20December%202025.pdf?VersionId=tyk3WlAF.PCyaJ6v.u_9pUGGUOLZnWGF}

_{2. https://www.rba.gov.au/publications/smp/2025/aug/in-depth-drivers-and-implications-of-lower-productivity-growth.html}

_{3. https://www.cbre.com.au/press-releases/australia-s-national-industrial-logistics-vacancy-rate-lifts-to-3-2}