Warehouse automation shifts from cost saver to necessity

Dematic says Australian and New Zealand companies are rethinking warehouse automation as labour shortages and weak productivity push investment decisions beyond simple cost and output calculations.

Supply chain speed, resilience and agility are becoming decisive in winning market share, as operators face persistent staffing constraints and tighter warehouse capacity in key metropolitan markets. More local firms are expanding automation programmes across retail, industrial and consumer goods supply chains.

Dematic works with Woolworths, Westrac, Sigma Healthcare, AS Colour and PepsiCo across Australia and New Zealand. It says the current wave of projects extends beyond the earlier focus on large eCommerce operators, with investment now more closely tied to service performance and continuity.

Productivity backdrop

National productivity trends are adding pressure. Productivity Commission analysis of Australian Bureau of Statistics data found labour costs rose 3% to 3.5% while labour productivity increased 0.8% in the year to September 2025. The Reserve Bank of Australia has also cited weak productivity as a drag on growth and inflation control.

Industrial property constraints have compounded the challenge for distribution networks. National industrial and logistics vacancy rates were about 3.2% in the second half of 2025, indicating limited spare capacity. Space closer to customers is harder to secure and more expensive in major cities, increasing the value of higher throughput from existing facilities.

As a result, warehouse performance has become a board-level issue for many operators. Businesses that depend on adding headcount to lift output face higher risk when labour markets tighten further or demand spikes without enough staff available for shifts.

"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."

Service pressure

In retail, FMCG and eCommerce, service metrics now leave less room for variation. Delivery speed, order accuracy and reliability have moved closer to the core of brand performance and customer retention, as consumers increasingly compare sellers across channels.

Dematic argues that operational shortfalls surface quickly in heavily manual facilities or those with limited staffing flexibility. Missed dispatch windows can disrupt transport schedules. Picking errors can increase returns and complaints. Lower on-shelf availability can hurt in-store sales. Safety incidents can also rise when teams work under pressure in constrained environments.

"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."

Automation options

Warehouse automation projects in the region start at different points. Some operators begin with voice-recognition tools and augmented vision systems to improve picking. Others deploy smaller, contained robotics in parts of a facility. A smaller number pursue fully automated warehouses with minimal human intervention.

Dematic says outcomes depend on more than physical equipment. Software, system architecture, planning and integration, and ongoing service and support can all shape performance and reliability once a site is live. It also describes solution design as a process that must align with operational constraints and growth plans.

Global trade uncertainty has added complexity for supply chains that rely on imported goods or components. Shifting tariff settings and volatile shipping conditions can change lead times and inventory strategies, increasing the focus on local resilience and the ability to adjust processes when external conditions shift.

Against that backdrop, Dematic positions automation as a way to stabilise operations when labour availability and demand fluctuate. It says technology can lift throughput and accuracy while reducing operational risk, without requiring headcount to rise in step with volume.

"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."

Dematic says corporate decision-making is shifting, too. Where automation was often assessed as a long-term cost-reduction measure, it is now more often considered in terms of service protection, safety outcomes and reduced exposure to hard-to-fill roles.

"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."