Adopting AI in Supply Chain and Operations: A Practical Guide for Australian Organisations That Want Results, Not Science Projects

There's a powerful narrative running through Australian boardrooms right now, and it goes something like this: global supply chains are broken, China is too risky, tariffs are making imports expensive, the government is offering incentives, and we should be making more things here — or at least closer to here. It's a narrative with genuine merit. But it's also a narrative that glosses over the economics, underestimates the complexity, and risks leading organisations into decisions they'll regret.

The reshoring conversation in Australia has intensified significantly since 2020. The pandemic exposed just how dependent the country had become on extended global supply chains — for PPE, for pharmaceuticals, for basic manufactured goods. Then came the geopolitical tensions with China, the Red Sea shipping disruptions, and the tariff shocks of 2025. Each new disruption reinforced the same message: distance is risk, and dependence on a single source is dangerous.

The Australian government has responded with policy settings that explicitly encourage domestic manufacturing. The Future Made in Australia Act, introduced in the 2024 federal budget, allocates approximately $22.7 billion over ten years to support clean energy and advanced manufacturing — including production tax credits for critical minerals processing and renewable hydrogen. The National Reconstruction Fund provides $15 billion in financing for projects that diversify and transform Australian industry, though it has faced criticism for slow deployment. A $5 billion Net Zero Fund, announced in September 2025 and delivered through the NRF, targets industrial decarbonisation.

Meanwhile, the Ai Group's 2025 Trade and Supply Chain Survey shows that 44% of Australian manufacturers intend to increase supply chain investment in 2026, with digital technologies and AI a focus. HKTDC's sourcing analysis confirms that many Australian businesses are adopting a China-plus-one strategy, diversifying their supplier base to reduce single-source reliance, with some considering reshoring operations and investing in local suppliers.

All of this creates momentum. And momentum, without rigorous analysis, is where expensive mistakes get made.

The unit cost trap

The most common mistake in reshoring analysis is comparing the wrong numbers. Specifically, comparing the unit manufacturing cost of a product made in Australia (or Vietnam, or Indonesia) against the unit cost from China — and concluding that the gap is too large to justify a move.

This comparison is misleading in both directions.

It understates the true cost of offshore sourcing by ignoring the hidden costs that accumulate across an extended supply chain: international freight and insurance, customs duties and tariff exposure, inventory carrying costs driven by long lead times, quality inspection and rework costs, travel and communication costs for supplier management, intellectual property risk, compliance management across jurisdictions, and the opportunity cost of slow responsiveness to market changes.

The Reshoring Initiative in the United States has documented this consistently. Their research shows that making sourcing decisions based solely on unit price typically results in a 20-30% understatement of true offshoring costs. When organisations conduct a proper total cost of ownership analysis — accounting for freight, duty, inventory, quality, risk and overhead — roughly 25% of what is currently sourced offshore would be more profitably reshored, even without tariff protection.

But the unit cost comparison can also overstate the case for reshoring by ignoring the genuine cost disadvantages of domestic production. Australian manufacturing labour costs are among the highest in the world. Energy costs have been rising. The domestic supplier base for many components and materials is thin or non-existent. Regulatory compliance costs are significant. Scale economies that exist in Chinese or Southeast Asian manufacturing clusters are difficult to replicate in a market of 26 million people. The Productivity Commission has cautioned that supporting industries without long-term competitive advantage can lead to ongoing costs — a warning that deserves attention in the current policy environment.

The honest answer, for most Australian businesses, sits somewhere in the uncomfortable middle: reshoring makes sense for some products, in some categories, under some conditions — and not for others. Getting that assessment right requires analytical rigour, not enthusiasm.

What total cost of ownership actually means in the Australian context

A proper TCO analysis for an Australian business considering reshoring or nearshoring should account for at least the following cost categories, each of which plays out differently depending on the product, the source market, and the supply chain configuration.

Manufacturing cost differential. The starting point, but only the starting point. Australian manufacturing wages are significantly higher than alternatives in Southeast Asia. But productivity differences, automation potential, and quality costs can narrow the gap substantially. For highly automated production where labour content is low, the wage differential matters less. For labour-intensive production, it matters enormously.

Logistics and freight. Australia is an island continent. Everything that arrives from offshore comes by sea or air, through a relatively small number of ports and airports. Freight costs from China to Australia have been volatile — spiking during the pandemic, normalising, then spiking again during Red Sea disruptions. But the baseline cost of shipping from Southeast Asia is actually lower than many assume for standard containerised goods. The logistics cost advantage of domestic production is real but often overstated for shelf-stable, non-perishable products. It's most significant for bulky, low-value items where freight is a large percentage of landed cost, and for products requiring temperature control or other special handling.

Inventory carrying costs. This is where the economics get interesting, and where many organisations undercount the cost of offshore sourcing. When your supply chain involves 4-6 month lead times from Asia (common for many Australian importers), you need to carry substantially more inventory than if you were sourcing domestically or from a nearby region. At current capital costs — the Reserve Bank cash rate has been elevated, and weighted average cost of capital for most Australian businesses sits between 8-12% — carrying excess inventory is expensive. A business with $50 million in inventory is spending $4-6 million per year just on the cost of capital tied up in stock. If domestic or nearshore sourcing could reduce that inventory by 30% through shorter lead times and more frequent ordering, that's $1.5-1.8 million in annual savings to offset against any unit cost premium.

Tariff and trade policy exposure. The tariff landscape has been volatile. Australian exporters paid approximately A$1.4 billion in additional duties following US tariff impositions, and the full effects of trade policy changes are still flowing through. The February 2026 US Supreme Court ruling that the use of IEEPA for tariffs was unlawful, and the subsequent replacement with 15% Section 122 tariffs, illustrates the unpredictability. For Australian importers, tariff exposure works differently — but the principle is the same: trade policy can change the economics of your supply chain overnight, and concentrated sourcing from a single geography amplifies that risk.

Quality and compliance costs. Managing quality across distance is expensive. Inspection regimes, factory audits, sample testing, rework and returns all cost more when your supplier is thousands of kilometres away. For products subject to TGA regulation, food safety requirements, or other Australian compliance standards, the cost of ensuring offshore suppliers meet requirements — and demonstrating that compliance to regulators — adds meaningfully to the total cost. Modern slavery reporting requirements add another layer of due diligence cost for extended supply chains.

Responsiveness and speed to market. This is harder to quantify but often strategically decisive. When your supply chain has 4-6 month lead times, you're making production decisions based on forecasts that are inherently uncertain. When demand shifts — a product takes off unexpectedly, a competitor launches, a promotion overperforms — you can't respond quickly. You either miss the opportunity or you've overcommitted to stock you can't sell. Domestic or nearshore sourcing with shorter lead times allows smaller, more frequent orders, better matching of supply to actual demand, and faster response to market changes. For businesses in categories with short product lifecycles, seasonal patterns, or promotional intensity, this responsiveness has real financial value.

Risk and resilience. The cost of supply chain disruption is notoriously difficult to quantify in advance but very real when it happens. The Ai Group found that 81% of Australian businesses that experienced supply chain disruptions reported increased costs, and 44% said disruptions constrained their growth. A diversified supply base — which might include some domestic or nearshore sourcing — reduces concentration risk. The question is whether the premium for that diversification is worth paying as a form of insurance, and the answer depends on how much disruption would actually cost your business.

The geography that matters: why "reshoring" for Australia is really "nearshoring to Southeast Asia"

When American companies talk about reshoring, they often mean bringing production back to the United States — a market of 330 million people with deep manufacturing capability, an extensive domestic supplier base, and massive government incentives. When Australian companies talk about reshoring, the reality is more nuanced.

Australia's manufacturing sector accounts for roughly 5.7% of GDP. The domestic supplier base for many manufactured components is thin. ABS data shows the sector employed approximately 902,000 people at June 2024, and while Industry Value Added grew modestly to $134.8 billion, EBITDA actually declined by $3.6 billion — highlighting the profitability pressures that make cost competitiveness a genuine challenge.

For most Australian businesses, the practical supply chain reconfiguration opportunity is not "bring everything back to Australia" — it's a combination of strategic decisions about what to make domestically, what to source from nearby alternative markets in the Asia-Pacific region, and what to continue sourcing from established offshore suppliers with better risk management.

The alternative markets have different profiles, and understanding those differences matters.

Vietnam has become the most common first alternative to China for Australian importers. It offers competitive labour costs, a growing industrial base, government support for export manufacturing, and improving infrastructure. It's also a member of both CPTPP and RCEP, providing preferential trade access. But capacity constraints are real — particularly for complex products — and quality consistency can be variable. Shipping times to Australia are somewhat shorter than from China, but not dramatically so for most trade lanes.

Indonesia is closer to Australia than any other major manufacturing economy, which creates genuine freight cost and lead time advantages. It has a large domestic market, competitive labour costs, and government interest in developing export manufacturing capability. But the manufacturing base is concentrated in certain categories, the regulatory environment requires careful navigation, and infrastructure outside Java can be challenging. The proximity advantage is most significant for bulky, low-value goods where freight cost is decisive.

India offers enormous scale and a strong engineering base, particularly for pharmaceuticals, chemicals, and IT-enabled services. But inland logistics infrastructure remains challenging, bureaucratic complexity is real, and quality consistency across suppliers varies widely. It's typically a stronger option for businesses with the resources to invest in supplier development and ongoing relationship management.

Domestic Australian manufacturing makes the strongest case in specific circumstances: where quality control and IP protection are paramount (defence, medical devices, specialised industrial products); where speed to market is a competitive differentiator; where the product is bulky and low-value relative to freight cost; where government procurement requirements mandate or incentivise local content; or where automation can offset labour cost disadvantage. The National Reconstruction Fund and Future Made in Australia incentives can shift the economics for certain product categories — particularly in clean energy, critical minerals processing, battery manufacturing, and medical technology.

The right answer for most Australian businesses is a deliberate portfolio approach: different products and components sourced from different locations based on a rigorous assessment of total cost, risk, responsiveness, and strategic importance. Not a wholesale shift in any one direction, but a conscious diversification of the supply base.

The five mistakes organisations make

Having set out the analytical framework, it's worth naming the specific mistakes we see most often when Australian organisations approach reshoring or supply chain reconfiguration.

Mistake one: comparing unit costs instead of total cost of ownership. We've covered this, but it bears repeating because it's so common. The unit price from the factory gate is the starting point of the analysis, not the answer. Organisations that make sourcing decisions on unit cost alone consistently underestimate the true cost of offshore supply by 20-30% — and overestimate the premium for domestic or nearshore alternatives by a corresponding margin.

Mistake two: underestimating the transition cost and timeline. Qualifying a new supplier — whether domestic, nearshore, or in an alternative offshore market — takes time. For simple products, six months might be sufficient. For complex manufactured goods, medical devices, food products, or anything with regulatory requirements, twelve to eighteen months is more realistic. And that's just qualification — building genuine dual-source capability, where the alternative supplier can reliably deliver at volume and quality, takes longer still.

During the transition, you're typically carrying cost in both the old and new supply chains: dual tooling, parallel testing, additional inventory buffers, project management overhead, travel costs. These transition costs are routinely underestimated and can be significant — enough to eliminate the projected savings from the switch for the first two to three years. Organisations that don't budget for the transition realistically either abandon the project partway through or deliver it over budget and behind schedule.

Mistake three: treating reshoring as an all-or-nothing decision. Some products should be reshored or nearshored. Others shouldn't. Treating the entire product portfolio the same way — either moving everything or moving nothing — misses the opportunity for a smarter, more nuanced approach. The most effective supply chain strategies segment the portfolio: critical components, high-risk categories, and products where responsiveness matters most get prioritised for diversification; commodity inputs where cost is the primary driver and supply risk is manageable stay with established low-cost sources.

Mistake four: ignoring the procurement capability required. Managing a diversified supply base across multiple countries is harder than managing concentrated sourcing from a single market. It requires more sophisticated procurement capability — in supplier identification and qualification, contract management, quality assurance, logistics coordination, trade compliance, and supplier relationship management. Many Australian organisations have procurement teams that are already stretched managing their existing supplier base. Adding new suppliers in new markets, with different languages, different regulatory frameworks, different quality systems and different commercial practices, requires capability investment that needs to happen concurrently with the sourcing transition.

Mistake five: making the decision reactively rather than strategically. The worst time to diversify your supply base is during a crisis — when you're scrambling for alternatives, your negotiating position is weak, and you don't have time for proper due diligence. The best time is before you need to, when you can assess alternatives methodically, qualify suppliers properly, negotiate from a position of strength, and build optionality into your supply chain before it's urgently needed.

The organisations that are best positioned right now began their diversification programs in 2022 or 2023, giving alternative suppliers time to qualify, build capacity, and prove their reliability before disruption hit. Organisations starting now are already behind — but starting late is better than not starting at all, because the forces driving supply chain reconfiguration (geopolitical tension, tariff volatility, Scope 3 reporting requirements, regulatory complexity) are structural, not cyclical. They're not going away.

What the policy environment means for Australian supply chain decisions

The Australian government's industrial policy settings are the most interventionist in a generation, and they create real incentives that can shift the economics for specific categories.

The Future Made in Australia Act commits approximately $22.7 billion over ten years. This includes production tax credits for critical minerals processing and renewable hydrogen, substantial funding through ARENA for clean energy technology manufacturing (batteries, electrolysers, solar components), and a $5 billion Net Zero Fund targeting industrial decarbonisation. The NRF's recent investments — including $75 million in Alpha HPA's alumina facility in Gladstone and $20 million in Diraq's quantum technology — signal the types of projects being supported.

For businesses operating in the targeted sectors — critical minerals, clean energy, battery manufacturing, medical technology, defence — these incentives can genuinely change the reshoring calculus. A production tax credit that covers a material portion of the cost disadvantage versus offshore production can make domestic manufacturing viable where it otherwise wouldn't be.

But there are important caveats. The incentives are concentrated in specific sectors. If your business makes consumer electronics, textiles, general industrial components, or other products outside the priority areas, the government support is limited. The NRF has faced criticism for slow deployment — stakeholders have noted that much of the funding remains unutilised. And the Productivity Commission has warned about the risks of supporting industries that don't have long-term competitive advantage, cautioning that the era of getting the most competitively priced goods on the global market is coming to a close, with consumers and businesses paying more as supply chains duplicate and fragment.

For supply chain leaders, the policy environment is a factor in the analysis, not the answer. Government incentives can shift the economics at the margin, and they should be factored into any TCO assessment. But they don't eliminate the underlying cost disadvantage of Australian manufacturing for most product categories, and they introduce their own risks — policy settings change with governments, sunset clauses expire, and eligibility criteria evolve. A reshoring decision that only works with a government subsidy is a decision that carries political risk alongside the commercial risk.

The Scope 3 connection

One dimension that's increasingly relevant but rarely integrated into reshoring analysis is the interaction with Scope 3 emissions reporting. Under AASB S2, large Australian organisations will be required to report Scope 3 emissions from their second reporting year — which for the first tranche (revenue exceeding $500 million) means mid-2026.

This changes the reshoring conversation in a subtle but important way. Transport emissions are a significant component of Scope 3 for most importers. Sourcing from Southeast Asian alternatives — particularly Indonesia, which is closer to Australia than China — reduces transport emissions compared to longer trade lanes. Domestic sourcing eliminates international transport emissions almost entirely.

At the same time, the emissions profile of manufacturing itself varies enormously by country. Manufacturing in a country with a coal-heavy energy grid may generate higher production emissions than manufacturing in Australia (which has a growing renewable energy share) or in a country with a cleaner energy mix. A proper Scope 3 analysis needs to consider both transport and production emissions — not just proximity.

The practical implication is that Scope 3 reporting requirements are adding another variable to the total cost of ownership calculation. Organisations subject to mandatory reporting will need visibility into the emissions profile of their supply chain, and sourcing decisions will increasingly need to account for emissions alongside cost, quality, risk and responsiveness. This doesn't automatically favour reshoring — but it does favour supply chain transparency, supplier engagement, and the kind of rigorous analysis that most organisations haven't yet invested in.

What a good reshoring assessment looks like

If your organisation is considering supply chain reconfiguration — whether that's reshoring to Australia, nearshoring to Southeast Asia, or diversifying away from concentrated offshore sourcing — the assessment should follow a structured approach.

Start with supply chain mapping. Before you can assess alternatives, you need to understand your current supply chain in detail. Where are your tier-one suppliers located? What about tier-two and tier-three? Where are the concentration risks — multiple products or components sourced from a single supplier, a single region, or a single trade lane? What percentage of your spend goes through your top ten suppliers? How many critical items are single-sourced? Many organisations can't answer these questions without significant data gathering across fragmented procurement systems and business units.

Segment your portfolio. Not every product or component needs the same supply chain strategy. Segment based on a combination of supply risk (concentration, geopolitical exposure, lead time vulnerability, supplier financial health), strategic importance (revenue impact, customer impact, substitutability), and value characteristics (unit cost, freight sensitivity, shelf life, quality criticality). High-risk, high-importance categories are the priority for diversification. Low-risk commodity inputs with well-functioning competitive supply markets are not.

Conduct total cost of ownership analysis for priority categories. For the categories you've identified as priorities, model the true total cost across alternative sourcing scenarios — current state, nearshore alternative, domestic alternative, diversified portfolio. Include all the cost categories discussed earlier: manufacturing cost, logistics, inventory carrying costs, tariff exposure, quality and compliance, responsiveness value, and risk premium. Be honest about the transition costs and timeline.

Assess alternative markets and suppliers. For each priority category, identify potential alternative suppliers in target markets. Assess them against capability, capacity, quality, financial stability, ESG compliance, and willingness to invest in the relationship. This is where deep procurement expertise matters — identifying and qualifying suppliers in unfamiliar markets requires knowledge of those markets, established networks, and structured evaluation frameworks.

Develop a phased transition plan. Don't try to move everything at once. Prioritise based on the combination of risk urgency, financial impact, and readiness (both your readiness and the alternative supplier's readiness). Plan for dual sourcing periods where you're running both old and new supply chains in parallel. Budget for the transition costs realistically. Set clear milestones and decision gates.

Integrate with broader supply chain strategy. Reshoring and nearshoring decisions don't sit in isolation. They connect to your network design (where are your distribution centres relative to where you're now sourcing?), your planning processes (shorter lead times from nearshore sourcing change inventory parameters and planning horizons), your warehousing and distribution configuration, your Scope 3 reporting obligations, and your resilience strategy. The best outcomes come from treating supply chain reconfiguration as an integrated strategic exercise, not a standalone procurement project.

The honest conclusion

Reshoring and nearshoring are real, strategically important options for Australian businesses. The forces driving supply chain reconfiguration — geopolitical volatility, tariff uncertainty, regulatory complexity, Scope 3 requirements, and the painful lessons of recent disruptions — are structural and enduring.

But the decision to reconfigure your supply chain should be based on rigorous analysis, not narrative momentum. The economics are more complex than most commentary suggests. The transition is harder, slower, and more expensive than most business cases assume. The right answer is almost always nuanced — a portfolio approach that puts different products and components in different places based on a clear-eyed assessment of total cost, risk, responsiveness, and strategic importance.

The organisations getting this right are treating it as a multi-year strategic program, not a reactive response to the latest disruption. They're investing in the analytical capability to make good decisions, the procurement capability to execute them, and the supply chain design thinking to integrate sourcing decisions with network, planning, and distribution strategy.

How Trace can help

At Trace, we work with Australian organisations across FMCG and manufacturing, retail and consumer, resources and energy, health and human services, and government and defence on exactly these decisions. Our work spans supply chain risk assessment and exposure mapping, total cost of ownership analysis across alternative sourcing scenarios, market analysis and alternative supplier identification, procurement strategy that integrates diversification with cost and service objectives, supplier qualification and evaluation frameworks, transition planning and project management, and network design that reflects the new sourcing configuration.

We're independent — we don't have commercial relationships with suppliers, logistics providers, or technology vendors that would influence our recommendations. Our advice is based entirely on what's right for your organisation.

We've written previously about how tariff disruption is affecting Australian businesses and about the broader challenges shaping Australian supply chains in 2026. If you're considering supply chain reconfiguration and want a rigorous, independent assessment of what makes sense for your business, get in touch.

Trace Consultants is an Australian supply chain and procurement consulting firm. We help organisations make better supply chain decisions — grounded in data, informed by deep operational experience, and independent of any vendor or supplier interest. Visit our insights page for more on the challenges shaping Australian supply chains.

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How has studying math prepared me for consulting?

I remember telling my sister last year I was going to try my hand in consulting.

“But how are you going to help businesses?” she replied incredulously, “Don’t you need like… business knowledge?”.  

Coming into consulting, without a business or economics background, I too was worried I would be at a disadvantage. I had just spent three years studying mathematical definitions and theorems, working with ‘imaginary numbers’ and building differential models to investigate biological issues, such as the spread of COVID-19. To me, this was a whole different world to that of excel sheets, operating models and client presentations. However, the past few months in my first role in the consulting world has made me realise how my degree has prepared me for consulting in so many unexpected ways; ways that studying technical business knowledge could have never. And so I’ve come to realise, actually, among the swarm of applicants with commerce backgrounds that typically reach for consulting roles, that perhaps my different background has given me an edge over the field, instead.

Maths shaped the way I think. It taught me how to confidently bring order to complexity: to take problems that initially feel overwhelming and break them down into structured, manageable components. Many problems had no obvious starting point and allowed for multiple pathways to a solution, each requiring fast judgement on which tools or approaches were most relevant. Rather than relying on precedent, I learned to reason from first principles. Through tackling lengthy, abstract problems, I was trained to work methodically, even without a clear end goal or complete information. I learnt to rely on a clear structure and disciplined logical thinking to recognise patterns and progress step by step towards a solution. That process ingrained disciplined problem solving and abstract thinking skills; the core to what consulting is.  

Maths taught me resilience and independence in the face of ambiguity and limited resources. As my classes grew more complex, practice problems became scarce as many concepts were too difficult to replicate, and a single question could require over five pages of working to solve fully. Hence, to consolidate my understanding, I often sifted through old forums and lengthy online workbooks, to be able to digest complex abstract theory. When exams arrived, we were sometimes given only a single practice paper, and often without answers, and so I found myself frequently reaching out to professors, tutors, and classmates to compare thinking processes and to clarify concepts. As a result, this process built initiative and independence, shaping the way I approach and complete work. It prepared me well for consulting, where projects often come with limited direction or guidance and involve navigating ambiguity, identifying what information is necessary and relying on your own research and judgment to progress effectively.

Maths made me comfortable with rapid learning. Specifically as I specialised in applied mathematics, I was consistently exposed and expected to understand the application of new programming languages and software tools towards solving math problems. This meant many long nights spent in front of YouTube, trying to grasp their usages. Thus, the need for rapid self-learning for new skillsets and complex software set me up well for the nature of consulting. Here, likewise, I am constantly thrown into new projects, new clients, new tools, new objectives: all while making sense of brand-new industries. The learning curve has been steep and relentless. However, my degree normalised such pace and gave me the persistence and resilience to get through it, making my first few months as a consultant a rather thrilling and stimulating journey of continuous learning.

So, while on the surface, abstract math theory may seem removed from the world of consulting, but importantly, it has shaped the way I think and approach unfamiliar problems. It has trained me to work rigorously, learn quickly, manage ambiguity and apply discipline to complex systems. It has instilled fundamental pattern recognition and logical thinking processes that no technical business knowledge could.

Now, I can safely answer my sister’s question.  

Yes, business knowledge is pivotal. But consulting, by its nature, is built on how one approaches and solves problems: and that is where studying maths made all the difference.

At Trace, our work is shaped by the people doing it. In Conversation at Trace is a new series where we sit down with our consultants to unpack how they approach complex problems, apply their thinking across diverse environments, and reflect on what they’re seeing across the industry.

First up is David Carroll, a Management Consultant at Trace with more than eight years of experience across Federal Government, Defence, and private enterprise. David brings deep expertise in operating model design, governance, and end-to-end process reengineering, and is known for working closely with senior stakeholders to co-design solutions that are practical, context-aware, and built to last.

We sat down with David to talk about what he’s learned working across highly constrained environments, how to spot when an operating model is holding an organisation back, and what it really takes to turn strategy into execution.

You’ve worked across Federal Government, Defence, and private enterprise. How have those environments shaped the way you approach problem diagnosis and solution design?

DC: They’ve taught me the importance of understanding client context, especially when it comes to designing solutions. What works in one environment doesn’t necessarily work in another. For example in Government and Defence, changes to organisational charts are significantly harder than in private companies, as are opportunities to introduce new systems. In my experience, the degrees of freedom are far greater in private enterprise, with Defence being the most constrained due to security requirements and the mix of civilian and military personnel. However, Defence has a very hierarchical structure on the military side which at times can make it easier to gain buy-in and action when the senior officer is on our side.

When it comes to diagnosing problems, the tools and frameworks I’ve learned are applicable across all businesses, but they’re not enough on their own. Understanding the client is critical as while problems may appear similar, there is always something unique. There’s no substitute for interviews, workshops, and ideally sitting alongside teams to truly understand the problem and design solutions that fit their organisation.

Operating model design can sound abstract from the outside. How do you make it tangible for the teams who have to live with it day to day?

DC: The team on the ground wants to know how it will affect their day-to-day, so maintaining that focus is vital. Every layer of the operating model includes elements that are tactical for the team and strategic for the organisation. For instance, in organisation design the team on the ground are concerned on who their supervisor is and how many members are in their team. Meanwhile, management is more focussed on where that team sits, how that team impacts layers and spans of control. For the operational team, these considerations have no bearing on their day to day, as long as they aren’t broken and systems keep running smoothly.

For the team I have found the key is quickly identifying which documents/artifacts/systems are required and will be used either daily or as reference material. RACIs are a good example; they are rarely used daily but when a dispute arises they are excellent reference documents to determine responsibilities and help settle disputes. A process map and checklist on the wall is the opposite example, it is a quick reference that is used every day to make sure tasks are on track, and is vital for supporting new staff to get up to speed and be efficient.

Process optimisation is often framed as a cost exercise. What broader role does process design play in service quality, decision-making, and capability uplift?

DC: That's right, process optimisation is often seen as a way of freeing up time, and often with the aim of headcount reduction, but as you mention, the benefits can extend far beyond that. An optimised process can be a competitive advantage as the speed of activity increases, improving customer experience. An optimised process is also repeatable and reproducible meaning it can be done the same way and produce consistent outcome over and over again, hopefully providing a reliable, high quality and fast service that customers prefer.

AI, robotic process automation, machine learning and other emerging technologies offer significant opportunities in process optimisation. Not only to improve efficiency and consistency, but also to free up time for, in my view, more interesting work as the technology handles the low value add repetitive tasks like digital filing or system transfers. This enables staff to do work that is more meaningful, requires them to use their brain, which ultimately supports job satisfaction.

You’ve partnered with senior stakeholders in high-stakes environments. What does genuine co-design look like in practice?

DC: Genuine co-design requires an open mind from both sides but in particular the consultants. It requires spending time with the stakeholders, using a whiteboard to throw up half developed ideas and debate over their merits. Basically bringing the stakeholder into the tent on the design process and treating them as a member of the team. But it won't work if the consultant isn’t open to not only hearing but also exploring and using the stakeholders ideas. Co-design where the stakeholder is at the white board but none of their ideas are included in the end solution, will just breed resentment and make implementation harder.

Consulting is a team sport and my most successful projects have included client stakeholders on the team to develop solutions as they are brought in and become champions for the idea in the organisation.

Many organisations struggle to turn strategy into execution. What helps bridge that gap?

DC: You have to make it real to those on the ground, not just the c-suite and executives. Ideally everyone in the organisation should be able to read the strategy and clearly see how their role contributes to it, understanding that without their involvement, it simply won’t land.

That needs to be backed by active management support. Not just oversight to drive change, but a genuine willingness to explain the why, listen to concerns, and take feedback back up the chain. When even the most junior team members feel heard and understand how they fit into the bigger picture, they’re far more likely to take ownership and help turn a well-designed model into successful execution.

Government and Defence contexts come with unique constraints. What do leaders in these environments most need from a consulting partner?

DC: They need a partner who understands their environment and what levers are available to them. Reducing headcount, while not impossible in the public service, is harder in Government and Defence for instance.

I think the biggest constraint for those that may not have worked in Government and Defence is the need to consider the public good and stewardship of tax payer funds. This extends to Government Business Organisations and Not For Profits too, where scandals over incentives and perks that are commonplace in the corporate world have resulted in disciplinary action on leaders and even their dismissal. However, this is why those engagements can be fun, as the playbook for corporate companies can’t just be applied, rather new options need to be developed and explored.

When organisations talk about operational excellence, what’s one misconception you see time and time again?

DC: I find people often jump straight to the technology lens, which while critical and certainly an enabler, is not where one should start. You can have the best tech in the world but without the right people, processes, procedures it will not provide operational excellence.

To me, step one is always ensuring you have the right governance in place, step two the right people with the right skills and the third is tech and data. Organisations can provide a lot of value from just getting the first two right. But when they jump straight to number three, the term white elephant starts to come into play, which is a very expensive way to determine you don't have the right governance or people to achieve operational excellence.

Looking ahead, what shifts do you see emerging in organisational design across public and private sectors?

DC: The obvious answer is AI and technology upending work. However, while many people have said we will see an almost elimination of junior team members as they are replaced by AI, I am not as convinced.

Your junior team members today are your leaders of tomorrow. There are many very successful companies where their c-suite started at entry level and have worked through the ranks (Nike, GM, Disney CEOs come to mind), and most of them are very successful CEOs as they understand the business at every level. Without understanding the basics, the how, and why something is as it is, it's a lot harder to make effective business-specific changes.

Now there will probably be less of them as there is less activity for them to do, but that just means initial hiring needs to step up, rather than casting a wide enough net to ensure you capture a couple of high performers. So I see the net becoming smaller, but given the nature of junior hires, companies still need to take on enough to account for not all of them being rock stars, or even wanting to stay in that career long term, to ensure that in 20-30 years time there is suitably qualified and experienced people to fill senior positions.

David’s perspective reinforces a core Trace belief: lasting change doesn’t come from templates, technology alone, or theory. It comes from understanding context, working side-by-side with teams, and designing operating models that are both defensible at the top and usable on the ground.