The imperative to transform is clear for Australia’s logistics sector, but the willingness to invest remains constrained.
As 2026 approaches, cost pressures are mounting, customer expectations are rising, and the old playbook no longer applies.
So, what does practical transformation look like when capital is tight, and uncertainty persists?
Supply Chain Insights spoke with industry leaders to find out.
Australia’s supply chains have absorbed repeated shocks throughout 2025. Trade tensions between major partners have complicated sourcing decisions and freight planning, with tariff changes forcing companies to reassess inventory positioning and distribution strategies. Flooding and extreme weather have exposed the fragility of networks built around single distribution hubs, driving a shift toward more distributed, resilient supply chain models.
The Corporate Emissions Reporting Standards have also added fresh compliance challenges, forcing businesses to track Scope 3 emissions across increasingly complex global supply chains. Labour shortages persist, particularly in transport, driving up wages and squeezing service reliability. Rising logistics, fuel, and operational costs against a backdrop of sluggish economic growth have left profit margins razor-thin.
The Australian Government’s National Freight and Supply Chain Strategy 2025 has outlined ambitious priorities for productivity, resilience, and decarbonisation, but what will this look like in 2026? Supply Chain Insights spoke with experts from TMX Transform, Manhattan Associates and Dematic to find out more.
The Cost-Customer Conundrum
The increased tension between cost management and customer experience will continue to dominate in 2026.
Our recent survey of over 500 supply chain leaders highlighted more than a third feel cost is the biggest challenge they face. Even more so are seeing businesses stuck between cost and customer, with customer experience being key and ranked second for leaders in this same survey.
The TMX Transform State of the Supply Chain 2025 report reveals a disconnect. Despite end-to-end visibility’s critical role in reducing costs and delivering superior customer service, only one in ten businesses are prioritising it as a source of competitive advantage. “Businesses are challenging today’s supply chain leaders to find a way to ‘transform, but not invest’ due to the focus on cost,” Charlotte says.
For Raghav Sibal, Vice President, APAC at Manhattan Associates, the challenges lie in persistent structural issues. “Rising labour costs and labour shortages are going to continue into next year,” he says. “Geopolitical uncertainty is going to persist. There’s also the challenge of finding the right balance of technology, namely using AI without it becoming disruptive, which there is a lot of hype around at the moment.”
Dematic’s Marketing Director for Asia Pacific, Philip Makowski, agrees and adds that recent surveys in Southeast Asia and ANZ consistently identify labour as the toughest challenge, followed by rising costs, data visibility, and customer service levels. “Companies continue to find it challenging to find and retain workers in warehouses,” he says. “With customers increasingly expecting next day if not same day deliveries with 100% order accuracy, and the labour constraints, companies will continue to invest in automation in 2026.”
The infrastructure constraints are equally pressing. Land costs and availability, particularly in Sydney, are forcing difficult choices. “A number of businesses have made the call to invest in Melbourne,” Philip reveals. However, building costs remain high. “Some companies are experiencing waiting periods of up to 18 months to plug into the electricity network at new sites, because data centres – which are closer to city centres – are soaking up the available power capacity,” he explains.
The Automation Imperative
The economic troubles of the past few years appear to be easing, with interest rates beginning to fall and retail sales showing year-on-year improvement. “We are seeing improvement, definitely in terms of people making the decision to invest across the board despite cost being a primary concern,” says Philip. “Investment activity has picked up this year and keeps building. I don’t see it slowing down anytime soon.”
Part of this uptick in investment is due to the democratisation of automation. Its accessibility is no longer limited to large enterprises with deep pockets.
“With the latest technologies, we can enable smaller companies to gain the benefits of automation,” Philip explains. The technology has evolved to the point where even start-ups are making automation part of their initial business strategy rather than a future aspiration. “Instead of seeing it as a future investment, new businesses are building automation into their foundations from day one,” Philip says.
While automation is increasing, Philip emphasises the importance of granular operational data. “We are finding companies say, ‘We’ve implemented an ERP or a WMS, but it’s not giving us what we need. We need a lot more granularity of information around what’s happening at the operator level, device level, subsystem level, so we can get a good handle on where the bottlenecks are.’”
The automation discussion in 2026 extends beyond physical robotics into intelligent, autonomous systems. A good example of this is Manhattan Associates’ recent launch of AI agents that can make autonomous supply chain decisions.
“When you think about a warehouse supervisor who can get to the same outcome, they would need to spend at least 30 to 45 minutes and go through maybe a dozen or so screens,” Raghav explains. “This can be done in seconds using AI agents.”
The agents operate across multiple operational dimensions. “We’ve got agents that can identify what’s happening across an operation, whether it’s during a day shift, in an eCommerce fulfilment run, or in a specific area of the warehouse that’s falling behind,” Raghav says. “It will look for where you need to move people from or where you may be ahead to move people to an area where you may be behind. It then picks the right people with the right qualifications and skills and moves them. All of this is happening autonomously, without any intervention.”
Building Resilience for an Uncertain Future
Charlotte Jordan of TMX Transform emphasises that supply chain resilience hinges on strategic network design and operational flexibility.
She warns that network fragility persists, with single points of failure, such as reliance on one port, corridor, or mega-warehouse, leaving businesses vulnerable to floods, fires, cyberattacks, and industrial action.
To mitigate these risks, Charlotte advocates for a “multi-path to market” approach: at least two viable routes or modes for every major lane, supported by pre-approved alternatives and rehearsed switch criteria.
She also recommends a modular node strategy, favouring smaller, near-demand cross-docks and selective storage over mega-sites. This accelerates recovery and spreads risk.
Inventory strategies have flipped as a result of supply chain disruptions, according to Dematic’s Philip Makowski. “Companies were shifting from just-in-case back to just-in-time as the business environment was regaining stability post-COVID,” he says. “However, many companies are pivoting back to just-in-case as we see more disruptions with tariffs and all the follow-on impacts, and the competitive net impact as large retailers continue to force inventory back down the chain to suppliers.”
For Raghav Sibal from Manhattan Associates, the fundamentals matter most. “Companies need to look back and see that their foundation and fundamentals are strong,” he says. “In the short term, it’s more about efficiency, knowing where your inventory is and how you’re maximising inventory returns. In the long term, it’s how you increase more flexibility through adding automation, how do you leverage AI and data strategies and move strategically to create differentiation.
Digital twins are emerging as an essential tool for resilience planning. Simulate port closures, weather and labour shocks.
“Pre-bake standard operating procedures and customer communication plans.” TMX Transform uses simulation to quantify cost, service, and emissions trade-offs before committing capital.
Looking ahead to next year, U.S. tariff policies could continue to impact Australian supply chains, but perhaps not as much as some expect, and could even present opportunity. “Some economists are stating Australia may be one of the few countries seeing a net positive impact as our competitors get hit with high tariffs,” says Philip. “For example, red meat may be beneficiaries, with Brazil facing 50% tariffs into the USA. Our meat industry should be able to take full advantage of that.”
Australia’s meat industry has positioned itself to capitalise through automation investment. “Dematic has implemented over 25 meat production automated storage and distribution systems around ANZ that enable red meat companies to ship products internationally up to one day faster,” Philip notes. “The international competitors haven’t really invested to the same extent. We are really a global leader in that regard.”
Strategic Priorities for 2026
What should supply chain leaders do differently in 2026? The answer depends on their starting point and economic outlook.
“For companies still wrestling with fragmented technology stacks, the priority is integration. “Fundamentally we need more unification across the end-to-end supply chain,” Manhattan Associates’ Raghav advises. “Create a data foundation that you can layer on with more AI and predictive analytics.”
For those ready to invest in automation, TMX Transform’s Charlotte recommends starting with proven industry playbooks.
Deploy industry playbooks – beverage, grocery, healthcare, industrials – to capture quick wins around routing of products, slotting rules, and service policies.
Philip adds that even brownfield sites offer significant opportunities, with voice and vision systems delivering 20–40% productivity gains with payback under 18 months.
On sustainability, the experts all recommend pragmatism. Philip highlights infrastructure limitations, noting that “Electricity supply has challenges at new sites in Australia.” Charlotte echoes this view, stressing that progress must occur at a realistic and practical pace, aligned with infrastructure support.
The human factor remains critical as automation accelerates. “There needs to be a good combination of driving efficiency using AI, but also not losing the human empathy,” Raghav warns.
As AI-driven chatbots and autonomous agents become more prevalent, companies must consider where efficiency improvements tip into customer experience degradation.
Charlotte offers scenario-based guidance. If economic conditions improve, she advises pulling forward fleet renewal and automation in high-repeat flows. If they stagnate, prioritise network consolidation and commercial resets. If they worsen, activate resilience plays – dual ports and carriers, pop-up capacity – without compromising Chain of Responsibility obligations.
As Charlotte puts it, the key is to link every investment to measurable outcomes – like delivery in full, on time, dwell time, empty kilometres, emissions per drop – not tech inputs. In 2026, CFOs will demand proof that transformation delivers tangible returns, not just technological upgrades.
This article was originally published in Supply Chain Insight on November 11, 2025.