Australian 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. Dematic APAC CEO, Michael Jerogin, offers insights on automation integration for local businesses to maximise efficiency.
Source: Dematic
As costs rise, political uncertainty hangs over the US, Middle East, and Europe, and the skilled workforce continues to shrink, research from the Australian Food & Grocery Council (AFGC) has shown manufacturers are looking for logical solutions closer to home – increasingly working to onshore manufacturing and investing in automation.
According to Dematic Australia and New Zealand, the region’s largest supplier of warehouse automation solutions, the pressure on manufacturers is no longer cyclical but sustained, reshaping how businesses think about productivity and competitiveness.
That shift is also occurring against a weak national productivity backdrop, with the Reserve Bank repeatedly warning that subdued productivity is a key drag on economic growth and inflation control.
In major metropolitan markets, warehouse space and cold storage 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 shortages in logistics are no longer temporary disruptions, they are structural realities. Across Australia and New Zealand, we’re seeing persistent labour constraints on top of weak productivity growth and rising global volatility,” said Jerogin.
“ABS data shows labour costs rising 3-3.5 per cent, while labour productivity grew just 0.8 per cent over the year to September 2025 – well below the long‑term average. At the same time, warehouse vacancy rates remain extremely tight at around 3.2 per cent nationally.
“When organisations rely on workforce expansion alone to increase output, they expose themselves to risk. The question is no longer whether automation is relevant, but whether you can consistently meet customer expectations without it,” he said.
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.
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,” said Jerogin.
“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.”
Global trade uncertainty and shifting tariff conditions are also 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.
Balancing the workforce
As automation adoption accelerates, the challenge of finding skilled employees to install, run, and maintain the technology remains. Jerogin told Food & Drink Business that companies are balancing the skilled‑labour gap in two ways.
“First, they’re investing in upskilling which enables existing employees to transition into higher‑value roles that involve managing and optimising automated systems,” he said.
“Second, they’re partnering more closely with technology providers like Dematic for ongoing support, remote monitoring, and lifecycle services. This hybrid model reduces pressure on internal teams and ensures systems run reliably even in a tight labour market. A blended approach is becoming essential to maintaining productivity and service levels.”
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.
“Automation today is less about replacing people and more about maximising the productivity of the workforce you already have. When labour is constrained, technology allows organisations to increase throughput, improve accuracy, reduce operational risk, and maintain service levels without scaling headcount,” said Jerogin.
“Automating logistics operations allows food and beverage companies to move employees from lower yield applications to higher yielding ones. Specifically, cold stores is an area where companies facing labour constraints want to move labour out of low yield manual applications such as palletising and into higher yield applications like dispatch or production operations.
“Automation enhances safety, creates more skilled roles, and protects service levels. When teams are involved early and provided with training to work more efficiently with the technology they are empowered,” he said.
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.
“SMEs face real constraints including limited capital, smaller facilities, and the need for fast ROI. The key is designing a solution that is the right fit for the business,” said Jerogin.
“At Dematic, we start by deeply understanding an SME’s operations, growth ambitions, and constraints. Automation isn’t just robotics – it’s the software, system architecture, and ongoing support that determine whether an operation becomes more productive, agile, and resilient.
“We often recommend modular or scalable systems that can expand over time, supported by phased implementation to reduce upfront capital requirements. The goal is to strengthen competitiveness and service levels without burdening the business.”
Investment policy
The AFGC recently highlighted long‑term underinvestment in innovation and R&D across the food and grocery sector, suggesting strong policy will be essential to secure long-term growth and competitiveness. The federal government also released its review of Australia’s research and development system last week, which offers several recommendations for policy designed to reverse a decade-long decline in business R&D investment.
“Australia’s productivity slowdown is well‑documented, and underinvestment in innovation has made it harder for manufacturers to compete globally,” said Jerogin.
“Policy settings that encourage investment such as accelerated depreciation, expanded R&D incentives, and targeted support for automation can help reverse this trend. For example, Singapore Government incentives for companies to invest in robotics and automation saw a marked increase in companies implementing supply chain automation to drive productivity and local and regional competitiveness.
Investment in automation has often been framed as a long-term cost-reduction exercise, but that narrative is shifting.
“Policy alone isn’t enough. Boards and supply chain leaders increasingly recognise supply chain automation as a resilience strategy which also increases agility to respond to market changes. It mitigates reliance on hard‑to‑fill roles, reduces exposure to disruption, and strengthens safety and service levels,” said Jerogin.
“With productivity stagnating nationally, the businesses that secure internal efficiency advantages now will be best placed to grow and remain competitive. Automation has moved from future consideration to present necessity.
“The right balance is a partnership: government creating an environment that rewards innovation, and industry making strategic, forward‑looking investment decisions,” he said.
