Demand Planning and Advanced Planning Systems: How to Run an RFx Process That Doesn't End in Regret

There's a pattern we see repeatedly in Australian organisations attempting to transform their supply chains. It starts with a compelling case for change — costs are too high, service levels are inconsistent, inventory is bloated, planning is reactive rather than proactive. Leadership agrees something needs to change. A project is initiated. And almost immediately, the conversation turns to technology.

Which planning system should we implement? Should we move to a cloud ERP? What AI tools are available? Who are the leading vendors? Can we see a demo?

This is understandable. Technology is tangible. It can be evaluated, costed, and procured. It has a vendor behind it who will show up with a team and a project plan. It feels like progress. And in a world where 82% of supply chain organisations report increasing their IT spending, the expectation that technology will solve the problem is reinforced at every conference, in every analyst report, and by every vendor pitch.

But here's the uncomfortable truth that the data keeps confirming: the technology is rarely why supply chain transformations fail. McKinsey estimates that more than 70% of digital transformations fail to deliver their expected results. Gartner puts ERP implementation failure rates above 75%. BCG's study of over 850 companies found that only 35% of digital transformations meet their value targets globally. These aren't technology failures — they're failures of everything that surrounds the technology. Process redesign. Organisational change. Executive alignment. Capability building. Governance. The human side of transformation.

This article is about that human side — and why the organisations that get it right consistently outperform those that don't, regardless of which technology they choose.

The technology illusion

The technology market for supply chain management has never been more capable. Advanced planning systems can run probabilistic demand forecasts across thousands of SKUs. Digital twins can simulate network configurations before committing capital. AI-powered analytics can identify patterns in procurement data that humans would miss. Real-time visibility platforms can track shipments across global supply chains. The tools exist.

And yet, McKinsey's 2025 survey of 100 global supply chain leaders confirms that the majority of companies understand their supply chain risks only up to tier one — and that this visibility has actually deteriorated since 2022 as pandemic urgency faded. PwC's 2025 Digital Trends in Operations Survey found that 82% of operations leaders face challenges balancing short-term needs with long-term strategic change. Ninety percent expect supplier and material costs to increase significantly. The technology is deployed, but the outcomes lag.

The reason is what we might call the technology illusion: the belief that implementing a new system will, by itself, change how the organisation operates. It won't. A new planning system layered over a broken S&OP process will produce better-formatted reports about the same bad decisions. A new ERP implemented without redesigning the underlying business processes will, as one observer put it, simply automate chaos faster. A visibility platform that nobody trusts or acts on is an expensive dashboard.

We see this in Australia regularly. An organisation invests $5-15 million in a new ERP or planning platform. The implementation partner delivers the system on time and on budget. The project is declared a success. Six months later, planners are running the same spreadsheets alongside the new system because they don't trust the outputs. Procurement is processing purchase orders through the new platform but hasn't changed any of its sourcing processes. Warehouse operations have reverted to manual workarounds because the system configuration doesn't match how the warehouse actually operates. The technology was successfully implemented. The transformation never happened.

The organisations that succeed treat technology as an enabler of transformation, not the transformation itself. They invest as much — often more — in the process redesign, organisational change, and capability building that allow the technology to deliver its potential. The ones that fail treat the technology implementation as the project, and then wonder why nothing actually changed.

The five things that actually determine whether a transformation succeeds

1. Process redesign before system design

The single most cited cause of ERP and supply chain technology implementation failure is poor business process mapping. Organisations jump into implementations without thoroughly understanding or redesigning their current processes. The technology then gets configured to replicate existing workflows — including all their inefficiencies, workarounds, and dysfunction.

Lidl's experience is a cautionary example at scale: the German retailer spent an estimated €500 million over seven years on a SAP implementation before abandoning the project entirely and reverting to its legacy system. The failure was attributed not to the software but to an inability to reconcile the company's operating processes with the system's design philosophy.

In our experience at Trace, the organisations that succeed in supply chain transformation invest significant effort — often three to six months — in process design before making technology decisions. This means mapping current-state processes end to end, identifying where value is created and where waste accumulates, defining the target-state operating model, and only then determining what technology is needed to enable it. The technology selection follows the process design, not the other way around.

This is particularly important for planning transformations. The difference between a functional S&OP process and a dysfunctional one isn't the planning software — it's whether demand and supply planners collaborate effectively, whether commercial teams contribute meaningful demand signals, whether the executive S&OP meeting makes real decisions or just reviews slides, and whether the planning outputs actually drive operational execution. These are process and behavioural challenges, not technology challenges. The best APS in the world cannot compensate for a planning process where commercial and operations teams don't trust each other's numbers.

2. Executive alignment and sustained sponsorship

Insufficient executive sponsorship kills more supply chain transformations than technical issues. This isn't just about a CEO signing off on a business case. It's about sustained, visible leadership commitment through the difficult middle phase of transformation — when the old ways no longer work, the new ways aren't yet embedded, and the organisation is tempted to revert.

Supply chain transformation is inherently cross-functional. It touches procurement, manufacturing, logistics, commercial, finance, and IT. Each of these functions has its own priorities, its own metrics, and its own definition of success. Without executive alignment on what the transformation is trying to achieve — and a willingness to resolve the trade-offs that inevitably emerge — the project fractures along functional lines.

PwC's survey found that 82% of operations and supply chain leaders face challenges balancing short-term needs with long-term strategic changes. This tension plays out in transformation programmes constantly: the supply chain director wants to transform planning processes, but the sales director won't release commercial staff for the S&OP redesign because they have quarterly targets to hit. The CFO approved the business case but now wants to cut the change management budget because Q3 results are soft. The IT department insists on a different technology platform than the one the supply chain team evaluated.

The organisations that navigate this successfully have a senior executive — ideally at C-suite level — who owns the transformation outcome (not just the project), who has the authority to resolve cross-functional conflicts, and who maintains visible engagement throughout the multi-year programme. In our experience, transformations without this level of sponsorship have a near-zero success rate, regardless of how good the technology or the implementation partner is.

3. Change management as a core workstream, not an afterthought

Deloitte has identified change management as the single biggest failure point for ERP and supply chain transformation projects, citing the critical people-related challenges that leaders face at every stage. Research suggests that 70% of all software implementations fail due to poor user adoption. Forty-five percent of employees say new software is introduced without adequate training, and 63% will stop using new technology if they don't see its relevance or receive help.

Yet in most supply chain transformation budgets, change management is a fraction of the investment — if it's budgeted explicitly at all. The technology licence, the implementation partner fees, and the data migration dominate the cost structure. Training is compressed into a few sessions near go-live. Communication is limited to project updates in the company newsletter. The organisational redesign that should accompany the new ways of working is deferred because it's "too disruptive."

Effective change management in supply chain transformation involves several elements. Stakeholder analysis and engagement from the outset — understanding who will be affected, what their concerns are, and how to bring them on the journey. Role and process redesign — defining explicitly how each role changes under the new operating model, and ensuring people understand and accept their new responsibilities. Capability building — not just system training (how to use the tool) but process training (how to work differently) and analytical training (how to interpret and act on the new information available). Communication that goes beyond project updates to address the "what's in it for me" question that every affected employee is asking. And sustained reinforcement after go-live — because the hardest phase of any transformation is the three to six months after implementation, when old habits reassert themselves and the system hasn't yet proven its value.

At Trace, we've seen organisations that invest 15-20% of total transformation spend on change management consistently outperform those that invest less than 5%. The delta isn't marginal — it's often the difference between a transformation that delivers its business case and one that becomes an expensive technology deployment with no measurable impact.

This is especially true in supply chain, where the people affected by the transformation are often the most operationally critical. Warehouse managers, demand planners, procurement specialists, logistics coordinators — these are the people who keep the supply chain running day to day. If they don't understand, accept, and adopt the new ways of working, no technology investment will deliver its promised returns. And unlike office-based knowledge workers who might adapt to a new CRM, supply chain professionals operate under real-time pressure where a clunky workaround today means a missed shipment tomorrow. The stakes of poor adoption are immediate and visible.

4. Data foundations that actually support decision-making

There's a common assumption that implementing a new system will fix data problems. It won't. If your master data is inconsistent, your demand history is unreliable, your inventory records are inaccurate, and your cost data doesn't reflect reality, a new system will simply process bad data faster and present it more attractively.

Panorama Consulting found that 23% of ERP projects exceed budgets, with half requiring additional technology that nobody planned for and 40% discovering organisational issues that should have been obvious from the start. Much of this unplanned effort relates to data: the migration, cleansing, and harmonisation work that nobody fully scoped because it's unglamorous and hard to estimate.

In supply chain transformation specifically, the data challenge has several dimensions. Master data harmonisation — ensuring consistent product hierarchies, supplier records, customer classifications, and location data across business units. Demand data quality — ensuring the demand history that will feed new planning algorithms actually reflects true demand rather than constrained shipments, one-off promotions, or data entry errors. Inventory accuracy — ensuring the system's view of inventory matches physical reality, which for many organisations means investing in cycle counting, warehouse management processes, and potentially warehouse technology before a planning system can be effective. Cost data integrity — ensuring that the cost models driving procurement, make-or-buy, and network design decisions reflect actual costs rather than averaged or allocated figures that obscure the true economics.

This data work isn't optional, and it can't be deferred until after the technology is implemented. It needs to run in parallel with — or ideally ahead of — the system implementation. Organisations that treat data readiness as a prerequisite rather than an afterthought dramatically reduce implementation risk and accelerate time to value.

In practice, this means appointing data owners for each critical data domain well before the implementation begins, establishing data governance processes that will persist after the project, investing in the often tedious work of data cleansing and standardisation, and testing the new system with real data — not sanitised test data — before go-live. The organisations that do this well often find that the data remediation effort alone delivers value, because clean, consistent data improves decision-making even in existing systems.

5. Organisational design that reflects the new operating model

Supply chain transformation changes how work gets done, which means it changes what skills are needed, how roles are defined, and how the organisation is structured. Yet many transformations leave the organisational design unchanged — implementing new technology and processes within the same reporting structures, role definitions, and capability profiles that existed before.

This creates a predictable set of problems. New planning processes require analytical skills that existing planners don't have — but there's no plan to recruit, develop, or supplement that capability. Cross-functional processes like IBP require regular collaboration between demand planners, supply planners, commercial managers, and finance — but the organisation still operates in functional silos with no shared forums or decision-making processes. The new operating model requires someone to own end-to-end supply chain performance — but accountability remains fragmented across procurement, manufacturing, logistics, and customer service.

McKinsey's research on successful enterprise platform transformations highlights that the organisations that deliver sustained value combine technology implementation with cross-functional working groups, capability building, and a continuous improvement culture. The technology is the platform, but the organisational design is what determines whether the platform generates value.

In Australia, this challenge is compounded by the structural talent shortage in supply chain and operations. With 90% of supply chain leaders globally reporting their companies lack the necessary talent and skills to achieve digitisation goals, the gap between what the new operating model requires and what the existing workforce can deliver is often substantial. Closing that gap requires a deliberate capability strategy — combining recruitment, development, process simplification, and strategic use of external expertise — that runs alongside the technology implementation rather than being addressed after it.

The failure patterns we see most often

Having worked across dozens of supply chain transformation programmes in Australian organisations, we see several recurring patterns that lead to disappointing outcomes.

The vendor-led transformation. The organisation selects a technology vendor or implementation partner and then allows the vendor's methodology to define the transformation scope, timeline, and approach. Because the vendor's incentive is to implement the software (and bill consulting hours), the non-technology workstreams — process redesign, organisational change, capability building — are under-scoped or treated as secondary. The system goes live on schedule, but the business outcomes don't materialise because the surrounding transformation was never adequately addressed.

The IT-owned transformation. Supply chain transformation is positioned as an IT project with a technology-focused project manager and governance structure. Business stakeholders are consulted but don't own the outcomes. Decisions default to what's easiest to implement technically rather than what delivers the most business value. The result is a technically sound system that doesn't match how the business needs to operate — leading to workarounds, shadow systems, and frustrated users.

The big-bang approach. The organisation attempts to transform everything simultaneously — new ERP, new planning system, new warehouse management system, new procurement platform, new organisational structure — in a single programme. The complexity overwhelms the organisation's capacity to absorb change. Testing is compressed because the timeline is aggressive. Training is superficial because there's too much to cover. Go-live is chaotic, and the organisation spends the next 12-18 months stabilising rather than realising benefits. Research consistently shows that incremental approaches have significantly lower failure rates than these large-scale overhauls.

The underfunded change programme. The business case includes $10 million for technology and implementation but $200,000 for change management — essentially a communications plan and a few training sessions. The system is technically functional but user adoption is poor, process compliance is low, and the organisation gradually reverts to old ways of working. Twelve months after go-live, an internal review finds that the transformation hasn't delivered its expected benefits, and the finger-pointing begins.

The transformation without a target operating model. The organisation implements new technology without first defining the target operating model — including governance, decision rights, process ownership, performance metrics, and organisational structure. The technology gets layered onto the existing operating model, which wasn't designed for it. The mismatch creates friction, workarounds, and frustration, and the promised benefits of integration and visibility are never realised because the organisational design doesn't support them.

Each of these patterns is avoidable. But avoiding them requires recognising that supply chain transformation is fundamentally an organisational change programme that happens to involve technology — not a technology project that happens to affect the organisation.

What good looks like in practice

The organisations we've seen succeed in supply chain transformation — whether they're implementing a new planning system, redesigning their network, restructuring their procurement function, or building end-to-end visibility — share several characteristics that transcend the specific technology or initiative.

They start with the business problem, not the technology solution. The transformation is driven by a clear articulation of what needs to change in business outcomes — service levels, cost performance, working capital, resilience, agility — and the technology is selected and configured to deliver those outcomes. When McKinsey documented a successful enterprise platform transformation that identified over 40 operational initiatives worth approximately $250 million, the key difference from the company's previous failed attempt was that the successful effort focused on achieving combined business and IT benefits rather than treating it as a technology project.

They invest in process design before system design. Target-state processes are defined, tested, and agreed before the technology is configured. This means the technology is built to support the way the organisation wants to work, not the way it works today.

They budget realistically for change. The total cost of transformation includes not just the technology and implementation but the process redesign, data remediation, organisational restructuring, capability building, and sustained change management that determine whether the investment delivers returns. The best organisations we work with allocate 30-40% of total programme spend to these non-technology elements.

They sequence deliberately. Rather than attempting a big-bang transformation across the entire supply chain, they identify the highest-value, lowest-risk starting points, build capability and confidence, and expand from there. This mirrors the broader finding that incremental approaches show significantly lower failure rates than large-scale overhauls, because they reduce complexity and allow the organisation to learn as it goes.

They measure what matters. Success metrics are defined at the outset in business terms — not in project management terms like "on time" and "on budget" but in operational terms like forecast accuracy improvement, inventory days reduction, service level uplift, or cost per unit shipped. These metrics are tracked from before the transformation through to steady state, creating accountability for actual business impact rather than just system delivery.

And they sustain the effort after go-live. The three to six months after a system goes live is the most critical period — and the period most likely to be under-resourced because the project team has moved on and the organisation assumes the transformation is "done." In reality, this is when new processes need to be reinforced, when users need the most support, when workarounds need to be identified and eliminated, and when the benefits start to materialise (or don't). Organisations that maintain dedicated transformation support through this period consistently outperform those that don't. Successful companies also conduct formal post-implementation reviews — not to assign blame, but to capture what worked, identify what didn't, and feed those lessons into the next phase of the transformation or the next initiative. Without this discipline, the same mistakes are repeated across the organisation, and institutional learning from expensive transformation experience is lost.

What this means for Australian supply chains

Australian organisations face specific dynamics that make the non-technology dimensions of transformation even more critical.

Geographic dispersion means that supply chain processes must work across multiple time zones, climates, and operating environments — from dense urban distribution networks in Melbourne and Sydney to remote operations in Western Australia and the Northern Territory. Technology that works in a single-site pilot may not scale without significant process adaptation.

The concentrated supplier market means that procurement and supply chain transformations must work within the reality of limited supplier optionality. Transformations designed for markets with deep supplier bases need to be adapted for categories where there may be two or three viable suppliers nationally.

The talent challenge means that transformation programmes can't assume access to the specialist skills they need — whether in planning, analytics, technology, or change management. Capability building and knowledge transfer must be embedded in the programme design, not treated as something that happens organically.

And the scale of most Australian organisations — smaller than US or European peers in most sectors — means that transformations need to deliver value faster and with lower total investment. This argues for pragmatic, phased approaches rather than multi-year, enterprise-wide programmes that defer benefits while accumulating cost.

The good news is that this same scale can be an advantage. Smaller organisations can move faster, with shorter decision-making chains and less organisational inertia. Cross-functional alignment is easier to achieve when the supply chain director and the commercial director sit in the same office. Process redesign can be tested and refined quickly when there are dozens of users rather than thousands. The key is to design the transformation approach for the Australian operating context rather than importing a methodology designed for Fortune 500 scale.

This also means being realistic about the role of emerging technologies like AI and generative AI. While these tools offer genuine potential — particularly in demand sensing, spend analytics, and exception management — the foundational work of process design, data quality, and organisational alignment must come first. Organisations that rush into AI before their core processes and data are sound will repeat the same failure patterns that have plagued ERP implementations for decades, just with newer technology.

How Trace can help

At Trace, we help Australian organisations design and deliver supply chain transformations that actually work — by focusing on the business outcomes, process redesign, organisational change, and capability building that determine whether a technology investment pays off.

Our approach begins with understanding the business problem, not the technology landscape. We work with clients to define what good looks like in operational terms, design the target-state processes and operating model, identify the technology requirements that follow from that design, and then support the implementation with the change management, capability building, and governance that sustains the transformation.

We work across planning and operations, procurement, warehousing and distribution, strategy and network design, organisational design, and project and change management. We serve clients across FMCG and manufacturing, retail, government, health, and resources.

We're independent — we don't sell software, we don't take commissions from technology vendors, and we don't have implementation partnerships that bias our recommendations. When we advise on technology, our only interest is what will deliver the best outcome for your organisation.

If you're planning a supply chain transformation — or recovering from one that didn't deliver — get in touch. The technology is the easy part. Let us help you get the hard part right.

Trace Consultants is an Australian supply chain and procurement consulting firm. We help organisations transform their supply chains by getting the fundamentals right — process design, organisational change, capability building, and governance — so that technology investments deliver real business impact. Visit our insights page for more on the challenges shaping Australian supply chains.

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Let's get the uncomfortable truth out of the way first.

The supply chain AI market is growing rapidly. Investment is accelerating. According to a Deloitte survey, 85% of leaders increased their AI investment over the past year. The Australian Industry Group reports that 27% of industrial businesses rank AI-powered solutions as a top investment priority for 2026. Platforms like o9 Solutions, Kinaxis, Blue Yonder and SAP IBP are competing aggressively for enterprise adoption. The technology itself — for demand forecasting, inventory optimisation, logistics routing, supplier risk, warehouse automation — is genuinely capable.

And yet, the results are overwhelmingly disappointing.

An MIT study published in mid-2025 found that 95% of enterprise generative AI pilots delivered zero measurable return on investment. Forbes reports that upwards of 85% of AI initiatives don't make it into production, and of those that do, a significant portion fail to deliver the expected value. McKinsey's 2025 State of AI survey found that while 88% of organisations use AI in at least one function, only about a third have managed to scale it beyond experiments or pilots — and only 39% report any improvement to EBIT at all, with most of those seeing less than 5% impact.

For supply chain specifically, the picture is equally stark. McKinsey research found that only 16% of companies have successfully scaled AI in supply chain operations, despite 68% claiming to use it. PwC's 2025 Digital Trends in Operations Survey reported that 92% of operations and supply chain leaders cite at least one reason why their technology investments haven't fully delivered expected results, with integration complexity (47%) and data issues (44%) the most common culprits.

These numbers should give every Australian supply chain leader pause — not because AI doesn't work, but because something between the investment decision and the operational outcome is consistently going wrong. Understanding what that something is, and how to avoid it, is worth more than any vendor demonstration or conference keynote.

The gap isn't technology. It's everything around the technology.

The most important thing to understand about supply chain AI failure is that the technology itself is almost never the problem. The algorithms work. Machine learning can genuinely improve forecast accuracy. Optimisation engines can identify inventory savings that humans miss. Predictive models can flag supplier risks earlier than manual monitoring. Computer vision can improve quality control. Natural language processing can accelerate document review and contract analysis.

The failures happen in the space between the technology's capabilities and the organisation's ability to use them. As one analysis put it, the high failure rate observed today reflects implementation challenges, not inherent limitations of AI. Companies that mistake these struggles for permanent constraints risk missing the window to build a competitive advantage.

This is a critical distinction. When an AI project fails, the instinct is often to blame the tool — the vendor oversold it, the model wasn't accurate enough, the platform was too complex. Sometimes those things are true. But far more often, the project failed because the organisation wasn't ready for it — and nobody assessed that readiness honestly before committing budget.

Let's look at the specific patterns.

Pattern one: starting with the technology instead of the problem

This is the most common and most expensive mistake. An organisation sees a compelling vendor demonstration, reads about what a competitor is doing, or faces board pressure to "do something with AI." So they select a platform, launch a pilot, and then try to find a problem for it to solve.

It happens more than you'd think. Gartner found that 37% of leaders in low-maturity AI organisations identified "finding the right use case" as one of their top three implementation barriers. That statistic should be alarming — it means more than a third of organisations are investing in AI without being clear about what they're trying to achieve.

In supply chain, the technology-first approach typically looks like this: a team selects an AI-powered demand planning tool, runs it alongside their existing forecast for a few months, gets results that look promising in a controlled test environment, and then struggles to integrate those results into their actual planning process. The forecast might be better in theory, but if the planning process doesn't change, if planners don't trust the output, if the data feeding the model isn't maintained to the standard the model requires, the theoretical improvement never translates into operational results.

The organisations that succeed with AI start from the other end. They identify the operational decisions that matter most and are currently made poorly — where is the most value being lost? — and then ask whether AI can improve those decisions. Sometimes the answer is yes. Sometimes the answer is that better data, cleaner processes, or more disciplined governance would improve the decision without any AI at all. Either way, the improvement is grounded in a real operational problem rather than a technology aspiration.

Pattern two: the data foundation isn't there

If there is one theme that dominates every credible analysis of AI failure in supply chains, it's data. Not as an abstract concept, but as a practical, operational blocker.

PwC's survey identified data issues as the second most common reason technology investments fail to deliver (44% of respondents). BCG research found that 61% of supply chain leaders cite poor data quality and system integration as the top barriers to successful AI implementation. Gartner's research confirmed that data availability and quality remain among the top challenges regardless of AI maturity — identified by 34% of leaders in low-maturity and 29% in high-maturity organisations.

In Australian supply chains, the data challenge has several dimensions that are worth spelling out because they're often underestimated.

Fragmented systems. Most organisations of any scale run multiple systems across their supply chain — an ERP (sometimes more than one, particularly after acquisitions), a WMS, a TMS, procurement systems, demand planning tools, spreadsheets that bridge the gaps, and manual processes that bridge the gaps between the spreadsheets. Each system holds part of the picture. AI models need the full picture. Getting data out of these systems, aligning it, cleaning it and maintaining it at the quality the model requires is not a small task. It's a foundational infrastructure project — and most organisations underinvest in it dramatically relative to what they spend on the AI tool itself.

Master data quality. Inaccurate lead times, incorrect unit conversions, outdated supplier records, inconsistent product hierarchies, duplicated customer records — these are mundane, unglamorous problems. But they directly determine whether an AI model produces useful output or garbage. When a demand forecasting model is trained on historical data where product hierarchies changed mid-period, where promotions weren't flagged consistently, where returns were recorded inconsistently, or where intercompany transfers contaminated demand signals — the forecast will be wrong in ways that are hard to diagnose and expensive to fix.

Historical data gaps. Machine learning models learn from patterns in historical data. If you've only been tracking a particular metric for twelve months, or if your data from two years ago is unreliable because it predates a system migration, or if a pandemic scrambled your demand patterns so thoroughly that three years of history are essentially unusable — the model has less to work with than you think. This is particularly relevant for Australian businesses with seasonal demand patterns that differ from Northern Hemisphere norms, or those with relatively short data histories in newer product categories.

Integration costs. The ASCLA highlighted that data quality across fragmented systems remains a persistent challenge for logistics operations, noting that when AI tries to optimise across disconnected sources, decisions can be dangerously flawed. ABI Research's 2025 supply chain survey recommended that organisations expect integration and change costs to exceed computational spend by a factor of 1.2 to 2.5 times. That's not the AI platform licence — that's the unglamorous plumbing work required to make the platform actually function.

The practical implication is straightforward but frequently ignored: the data foundation work needs to happen before the AI investment, or at minimum concurrently with a realistic assessment of how long it will take. Organisations that treat data quality as a problem to be solved during implementation rather than a prerequisite for implementation consistently overshoot timelines and budgets.

Pattern three: bolting AI onto broken processes

This one is subtle and therefore dangerous. An organisation has a demand planning process that doesn't work particularly well — forecasts are inaccurate, planners override the statistical baseline without discipline, the S&OP process is more presentation than decision-making, and inventory parameters haven't been reviewed in two years. They invest in an AI-powered planning platform expecting it to fix the problem.

It doesn't. The AI tool generates a better statistical baseline, but the same planners override it with the same undisciplined adjustments. The improved forecast feeds into the same S&OP process that doesn't connect demand to supply to finance. The inventory parameters are still wrong, so the system optimises around incorrect targets. The result: an expensive new platform producing results that aren't materially better than what came before.

KPMG identified this explicitly in their analysis of AI in supply chains: true scalability requires clean data, standardised processes, and disciplined governance. The technology layer sits on top of a process layer, which sits on top of a data layer. If any layer is broken, the layers above it can't function properly.

This is where the process design and transformation work becomes essential — not as a separate initiative from AI adoption, but as an integral part of it. The organisations that get value from AI in demand planning, for example, typically redesign their planning process concurrently: clarifying who owns the forecast, establishing governance for overrides, connecting the demand plan to supply and financial plans, and defining how the AI output is used in decision-making. The technology and the process change together.

Pattern four: the pilot trap

The data on this is unambiguous. Organisations are launching AI pilots at scale, but very few of those pilots reach production.

McKinsey's 2025 survey found that the majority of organisations are still in experimenting or piloting stages. BCG reported that 90% of vertical, function-specific AI use cases remain stuck in pilot mode. The MIT study's finding that 95% of enterprise AI pilots deliver zero measurable return isn't about pilot failure in the technical sense — many pilots "work" — it's about the gap between a successful pilot and a scaled deployment that delivers measurable business value.

The pilot trap works like this. An organisation identifies a use case, selects a vendor or builds something internally, runs a proof of concept in a controlled environment, and demonstrates that the model can produce better results than the current approach. The pilot is declared a success. Then the project stalls.

It stalls because the pilot environment was curated — clean data, engaged users, limited scope. Production is messy — inconsistent data quality, users who weren't involved in the pilot, integration with live systems, edge cases the pilot didn't encounter, organisational resistance from people whose workflows are being changed. The gap between pilot and production is not a small step — it's often a larger, more expensive, and more complex undertaking than the pilot itself.

The SupplyChainBrain analysis noted this directly: buying AI tools from specialised vendors succeeds about 67% of the time, compared to about one-third for internal builds. But even for vendor solutions, success depends on choosing the right product, configuring it for the business, and adopting it strategically — starting narrow and scaling from there rather than building something generic.

For Australian organisations, this has a practical implication. Don't conflate a successful pilot with a successful implementation. Budget and plan for the pilot-to-production journey explicitly, including data integration, process redesign, change management, user training, and ongoing model maintenance. If the business case only works at production scale, ensure there's a realistic plan and budget to get from pilot to production — or don't start the pilot.

Pattern five: underinvesting in people and change

Gartner predicts that by 2028, 60% of supply chain digital adoption efforts will fail to deliver promised value due to insufficient investment in learning and development. Their survey of 579 supply chain practitioners found that 58% identified rapid tech advancement as a major future challenge, while 40% believed hyperautomation was evolving skills requirements faster than they could adapt.

This is not a soft problem. It's the difference between success and failure.

When an AI tool changes how a planner does their job — from manually building a forecast in a spreadsheet to reviewing, adjusting and approving an AI-generated forecast — that's not a small change. It requires the planner to develop new skills: understanding what the model is doing well enough to know when to trust it and when to override it, interpreting confidence intervals and scenario outputs, managing by exception rather than rebuilding from scratch. If the planner doesn't develop those skills, they'll either ignore the AI output (making the investment worthless) or accept it blindly (introducing new risks).

The same applies across warehouse operations, procurement, logistics planning and supplier management. AI changes the nature of work in each of these functions. People need new skills, new workflows, and enough confidence in the technology to use it effectively. That requires deliberate investment in training, ongoing support, and an organisational culture that embraces experimentation and learning.

McKinsey's research confirmed that high-performing AI organisations are nearly three times more likely than others to fundamentally redesign their workflows. They don't just add AI to existing processes — they rethink how work is done. And high performers are more likely to have defined processes to determine how and when model outputs need human validation. The human-in-the-loop design is intentional, not an afterthought.

In the Australian context, where supply chain talent is already constrained — the ASCLA reports ongoing shortages of skilled drivers, warehouse staff and logistics professionals — the workforce dimension of AI adoption deserves even more attention. Organisations aren't just competing for AI-literate talent; they're asking existing teams with full workloads to adopt new ways of working while maintaining operational performance. That requires investment in capability building and organisational design that goes well beyond a vendor training session.

Pattern six: no clear success metrics

A surprisingly common contributor to AI "failure" is that nobody defined what success looks like before the project started.

Gartner's research found that mature AI organisations were more likely to define performance metrics early in the ideation phase of every use case. PwC identified unclear objectives and weak business rationale as one of the least-selected reasons for technology investment failure — which they interpret not as evidence that objectives are clear, but as a blind spot. Organisations don't realise their objectives are unclear until the project is underway and nobody can agree on whether it's working.

In supply chain, this plays out in several ways. A demand forecasting project might improve forecast accuracy at a national level but not at the SKU-location level where inventory decisions are actually made. An inventory optimisation project might reduce total stockholding but increase stockouts on critical lines. A logistics optimisation project might reduce total transport cost but create service problems for premium customers. Whether any of these outcomes counts as "success" depends entirely on what was defined upfront.

The most effective approach is brutally specific. Before committing to an AI project, define the operational metric you're trying to improve, the baseline you're measuring from, the target improvement, and the timeframe. If you can't do that — if the best you can say is "we want to use AI to improve our supply chain" — you're not ready to invest. You need a diagnostic first.

Pattern seven: trying to do too much at once

The final pattern is ambition that exceeds organisational capacity. An organisation commits to an enterprise-wide AI transformation — new demand planning, new inventory optimisation, new logistics routing, new supplier risk monitoring, all at once. The scope is overwhelming, the change burden on the organisation is unsustainable, and the project collapses under its own weight.

The evidence strongly favours a focused, sequential approach. The SupplyChainBrain analysis recommended starting with a single AI application and then adding more over time, building a solid foundation before expanding capabilities. Infios' leadership team noted that most AI initiatives fail because companies chase tools rather than solving specific problems. Supply chain AI trends research from Dataiku emphasised that organisations should start narrow, prove value, then scale — not attempt broad transformation from day one.

For Australian supply chain teams, the sequencing question is particularly important. Resources are constrained. Operational demands are relentless. Tariff disruption, Scope 3 reporting deadlines, and cost pressures are all consuming management bandwidth simultaneously. Trying to run a multi-workstream AI transformation on top of these priorities is a recipe for failure.

A phased approach works better. Start with one use case where the business case is clear, the data is relatively clean, and the process is well understood. Deliver measurable results. Build internal confidence and capability. Use the lessons from the first deployment to inform the second. This is slower than the ambition suggests, but it's how value actually gets captured.

What the organisations that succeed are doing differently

The patterns above describe how AI projects fail. The inverse — what successful organisations do — is equally instructive, and the evidence is remarkably consistent.

They start with operational problems, not technology. The organisations capturing value from AI identified specific decisions that were being made poorly, quantified the cost of those poor decisions, and then evaluated whether AI could improve them. The technology selection followed the problem definition, not the other way around.

They invest heavily in data foundations. Not as a separate initiative, but as an integral part of AI deployment. They clean master data, build integration pipelines, establish data governance, and create processes to maintain data quality over time. They treat this work as ongoing investment, not a one-time project.

They redesign processes concurrently. McKinsey's high performers are three times more likely to fundamentally redesign workflows. They don't bolt AI onto broken processes. They redesign the process to take advantage of AI capabilities — establishing new roles, new governance, new decision rights, and new ways of working.

They invest in their people. Training, change management, capability building, and ongoing support. They recognise that AI changes the nature of supply chain work and invest in helping their teams make that transition. They deploy human-in-the-loop controls deliberately, building trust in the technology over time.

They define success metrics upfront. Specific, measurable, operationally grounded. They know what they're trying to achieve before they start, and they measure progress against those targets relentlessly.

They start narrow and scale deliberately. One use case, well-executed, delivering measurable results. Then a second, informed by lessons from the first. This isn't lack of ambition — it's recognition that sustainable AI value comes from building organisational capability alongside technical capability.

They have senior leadership commitment. McKinsey found that high performers tend to have senior leaders who demonstrate strong ownership and commitment to AI initiatives. AI adoption is not delegated to IT or an innovation team — it's owned by the supply chain leadership as an operational priority.

What this means for Australian supply chain leaders

The Australian supply chain landscape creates both specific challenges and specific opportunities for AI adoption.

The challenges are real. Fragmented systems from years of organic growth and acquisition. Data quality issues that predate the AI conversation by a decade. Talent constraints that make it hard to build internal AI capability. Operational complexity driven by Australia's geography — vast distances, concentrated coastal populations, long inbound lead times, and relatively small domestic markets compared to the infrastructure required to serve them. Regulatory complexity, from Scope 3 reporting to modern slavery to product safety, consuming management attention that might otherwise go to technology transformation.

But there are opportunities too. Australian labour costs are among the highest in the world, which means AI tools that improve productivity have a shorter payback period than in lower-cost markets. The country's geographic isolation creates structural supply chain complexity — long lead times, concentrated shipping lanes, vulnerability to disruption — that AI-powered planning and risk management tools are well-suited to address. And the relatively concentrated nature of many Australian industries means that organisations that get AI right can establish meaningful competitive advantages quickly.

The practical question for most Australian supply chain leaders is not whether to invest in AI — it's how to invest in a way that actually delivers results rather than adding to the 85% failure rate.

Based on everything we've seen — in the research, in client engagements, in the pattern of successes and failures across the market — here's what we'd recommend.

Start with a diagnostic. Before committing to any AI investment, understand where your supply chain is actually losing value. Map your end-to-end supply chain costs, processes and capabilities. Identify the decisions that matter most and are currently made most poorly. Quantify the opportunity. This creates the fact base for prioritising AI investments — and it often reveals that the highest-value improvements don't require AI at all. Better data, cleaner processes, more disciplined governance, and stronger procurement practices can deliver substantial value without any algorithms.

Assess your readiness honestly. Data quality, system integration, process maturity, workforce capability — evaluate these honestly, not aspirationally. If your master data is unreliable, your first investment should be in fixing it. If your planning process doesn't work, redesign the process before layering AI on top of it. If your team doesn't have the skills to work with AI tools, invest in capability building before you invest in the tools.

Choose one use case to start. Not the most ambitious one — the one with the clearest business case, the best data foundation, and the most receptive team. In most Australian supply chains, demand forecasting or inventory optimisation are strong starting points because the data typically exists (even if it needs cleaning), the business case is quantifiable (working capital, service levels, waste reduction), and the technology is relatively mature.

Plan for the full journey. Budget and plan not just for the pilot, but for the pilot-to-production transition, the integration work, the process redesign, the change management, and the ongoing model maintenance. If the total cost of that journey exceeds what the organisation can support, reduce the scope rather than reducing the investment in the things that determine success.

Get independent advice on technology selection. The supply chain technology market is crowded, vendor claims are aggressive, and the difference between a platform that's right for your organisation and one that isn't can be the difference between success and a multi-year, multi-million-dollar disappointment. Independent advisory — from a firm that doesn't sell software and doesn't have vendor partnerships that create conflicts — is worth the investment. Trace is independent of all technology vendors, which means our recommendations are based entirely on what's right for your organisation.

Connect AI to your broader supply chain strategy. AI isn't a standalone initiative. It connects to your network design, your procurement strategy, your planning processes, your warehousing and distribution operations, your resilience planning, and your workforce strategy. The organisations that get the most value from AI are those that integrate it into a coherent supply chain improvement program rather than treating it as a separate technology project.

The role of advisory in AI adoption

There's an irony in the supply chain AI market that's worth naming. The same organisations that are underinvesting in data foundations, process design and change management — the things that determine whether AI projects succeed — are overinvesting in technology licences and vendor engagements. They're spending millions on platforms and relatively little on the advisory work that determines whether those platforms deliver value.

This isn't an argument for hiring consultants instead of buying technology. It's an argument for getting the sequence right. A well-run diagnostic, a clear readiness assessment, a disciplined use case prioritisation, a structured technology selection process, a thoughtful process redesign, and a proper change management program — these are the things that determine whether an AI investment succeeds or fails.

At Trace, this is exactly the work we do. We're a specialist supply chain and procurement consulting firm — it's all we do, which gives us the operational depth that generalist firms and technology vendors can't match. We're independent of all technology vendors, which means we can assess platforms, evaluate vendors and make recommendations based entirely on what's right for your organisation. And we understand how AI fits into the broader supply chain context — because we work across strategy and network design, procurement, planning and operations, warehousing and distribution, organisational design, technology advisory, and resilience.

We've written previously about how to adopt AI practically in your supply chain and about the seven things that need to be right before the technology matters. This article adds the failure patterns — because understanding what goes wrong is often more instructive than understanding what to aim for.

The bottom line

The supply chain AI market is not going away. The technology is getting better. The use cases are getting clearer. The competitive pressure to adopt is intensifying. Gartner predicts that 70% of large organisations will adopt AI-based supply chain forecasting by 2030. BCG reports that agentic AI systems already account for 17% of total AI value and are projected to reach 29% by 2028.

But the gap between AI investment and AI results is a real and present problem. Four in five organisations are seeing no tangible bottom-line impact from their AI initiatives. Ninety-five percent of pilots deliver zero measurable return. The organisations that are capturing value are doing fundamentally different things — not buying better technology, but building better foundations, redesigning processes, investing in people, and approaching AI with the same operational discipline they apply to every other aspect of supply chain management.

The window for getting this right is narrowing. Organisations that build the foundations now — clean data, sound processes, capable people, clear strategies — will be positioned to capture genuine value from AI as the technology continues to mature. Organisations that keep launching pilots without addressing the foundations will keep getting the same disappointing results, while falling further behind competitors who've figured out that AI success is an operational challenge, not a technology one.

If you're an Australian supply chain or operations leader thinking about your AI strategy — or wondering why your current AI investments aren't delivering the results you expected — we'd welcome the conversation. Get in touch and let's talk about what's really going on and what to do about it.

Trace Consultants is an Australian supply chain and procurement consulting firm working across FMCG and manufacturing, retail and consumer, resources and energy, health and human services, and government and defence. We help organisations navigate the intersection of supply chain strategy, technology adoption and operational improvement — with the independence and depth that comes from doing nothing else. Visit our insights page for more articles on the challenges shaping Australian supply chains.

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There's a widening gap in Australian supply chains right now, and it's not the one you'd expect. It's not between organisations that have AI and those that don't. It's between organisations that have deployed AI and are getting genuine operational value from it, and organisations that have deployed AI and are quietly wondering why the results don't match the business case.

The Australian Government's National AI Centre tracks AI adoption across the economy, and its Q1 2025 data tells an instructive story. When asked whether AI had helped with supply chain and supplier management, only 14% of surveyed businesses said "definitely." Another 46% said "possibly" — the kind of answer you give when something is technically in place but the results aren't clear enough to point to. The remaining 40% said "unlikely." Meanwhile, industry data from the Supply Chain and Logistics Association of Australia suggests nearly 40% of supply chain leaders report measurable improvements from AI implementation — which means 60% haven't captured those benefits yet.

These numbers don't reflect a technology failure. The AI tools available today — for demand forecasting, inventory optimisation, logistics routing, predictive maintenance, warehouse automation and supply risk management — are genuinely capable. The algorithms work. The platforms are maturing. The cloud infrastructure to run them is accessible and affordable.

What these numbers reflect is an execution failure. Organisations are adopting AI without adequate preparation in the areas that actually determine whether it works: understanding their own readiness, selecting the right use cases, redesigning processes to consume AI outputs, choosing the right technology for their context, running pilots that test the full operating model, building the data foundations that AI depends on, and developing the human capability to work alongside AI tools effectively.

These seven disciplines aren't optional extras that you bolt on after the technology is deployed. They're the work that determines whether your AI investment delivers a 15% improvement in forecast accuracy and a $30 million reduction in inventory — or becomes a line item that finance questions at every budget review.

This article covers all seven, in the order they need to happen, with practical guidance for Australian supply chain and operations leaders who want to get this right.

1. Supply Chain AI Readiness Assessment

Every AI journey should start with an honest answer to a question most organisations skip: are we actually ready for this?

Readiness isn't about whether you can buy an AI tool. Of course you can — the market is flooded with options. Readiness is about whether your organisation has the foundations in place to deploy AI in a way that produces reliable outputs, integrates into operational decision-making, and sustains value over time.

A genuine AI readiness assessment evaluates five dimensions.

Data maturity. AI is only as good as the data it learns from and operates on. For demand forecasting, that means clean, granular historical transaction data at the right level of detail — typically SKU-location-week — with promotional activity, pricing changes, new product introductions and other demand-shaping events accurately captured. For inventory optimisation, it means reliable lead time data, supplier performance history and demand variability metrics. For logistics optimisation, it means accurate delivery windows, vehicle constraints, cost structures and geographic data.

Most Australian organisations have this data somewhere in their systems. The question is whether it's accessible, consistent, integrated and trustworthy. Data quality issues, system fragmentation, inconsistent master data and manual workarounds are the norm. A readiness assessment quantifies where you actually stand — not where you think you stand — against the data requirements of specific AI use cases.

Process maturity. AI tools produce recommendations, forecasts, optimisation outputs and alerts. Those outputs only create value if there's a business process that consumes them. If your S&OP process is dysfunctional, a better demand forecast won't fix it. If your warehouse has no standard operating procedures for pick path management, an AI-optimised slotting recommendation won't translate to throughput improvement. If your procurement team doesn't have a structured approach to supplier risk management, an AI early warning system will generate alerts that nobody acts on.

Process maturity assessment looks at the planning and operations processes that would need to consume AI outputs: demand planning, supply planning, inventory management, S&OP, logistics planning, warehouse management, procurement execution. For each, it evaluates whether the process is defined, followed, measured and governed — because these are the prerequisites for AI integration.

Technology landscape. What systems are currently in place? What's the ERP platform? Is there a warehouse management system? A transport management system? An existing planning tool? What are the integration points and constraints? What's the cloud posture? These questions determine what's technically feasible, what integration work is required, and whether AI tools can plug into the existing architecture or need a parallel infrastructure.

Organisational capability. Do your planners, analysts and operations managers have the skills to work with AI tools? Not to build models — that's a different skill set — but to interpret AI outputs, manage exceptions, configure parameters, and know when to trust the model versus override it. The readiness assessment should evaluate current capability levels across the roles that will interact with AI, identify gaps, and flag the training and development investment required.

Governance and culture. Does the organisation have a framework for managing AI responsibly? This includes data governance (who owns data quality, who authorises data use), model governance (who monitors performance, who recalibrates, who decides when a model should be retired), decision governance (who is accountable when AI-informed decisions go wrong), and cultural readiness (is the organisation open to changing established ways of working based on AI-generated insights, or will there be resistance?).

The Australian Government's 2025 Guidance for AI Adoption sets out six essential practices for responsible AI governance, reflecting a maturing regulatory environment that organisations need to align with. The readiness assessment should evaluate current governance maturity against these expectations.

What the output looks like. A well-executed readiness assessment produces a clear picture of where the organisation stands across all five dimensions, with specific gaps identified and prioritised. It should include a heat map of readiness by AI use case — showing which applications are ready to pursue now, which need foundation work first, and which should be deferred until earlier initiatives have matured. This becomes the basis for a sequenced AI roadmap that's grounded in reality rather than aspiration.

The organisations that skip this step — that jump straight to technology selection or pilot execution — almost always find themselves circling back to readiness issues 6-12 months later, having spent budget and credibility on initiatives that underperformed because the foundations weren't in place.

2. AI Use Case Identification and Business Case Development

With a clear readiness picture in hand, the next step is identifying which AI applications to pursue and building the business cases to justify the investment.

This sounds straightforward. It rarely is. The challenge isn't a shortage of potential use cases — it's an overabundance. Every AI vendor, every conference presentation, every industry report suggests dozens of ways AI could be applied across the supply chain. The risk is either trying to do too many things at once (spreading resources thin and delivering nothing well) or picking the wrong things to start with (choosing technically interesting applications that don't address the organisation's most material operational problems).

Starting with the operational problem, not the technology. The most reliable approach to use case identification starts with a simple question: which operational decisions are currently made most poorly, and which have the largest financial impact?

In supply chain and operations, the decisions that typically offer the highest leverage for AI-assisted improvement include demand forecasting (where machine learning can materially improve accuracy for products with complex demand patterns driven by promotions, seasonality, weather or external signals), inventory optimisation (where AI-driven parameter setting can improve service levels while reducing working capital — particularly valuable in the current interest rate environment), logistics and route optimisation (where AI can reduce transport costs by 5-15% through better vehicle allocation and delivery sequencing — particularly impactful given Australian distances), supply risk and disruption management (where AI can monitor external data sources to provide early warning of disruptions), warehouse operations (from predictive slotting through to demand-driven labour scheduling), and predictive maintenance (where AI can reduce unplanned downtime by identifying equipment failure patterns).

Each of these is a broad category. The use case identification process should drill into the specific version of each that's relevant to the organisation: which product segments have the worst forecast accuracy? Which inventory positions are structurally wrong? Which logistics lanes have the most inefficiency? Where are the biggest maintenance cost drivers?

Quantifying the opportunity. For each candidate use case, the business case needs to quantify the current cost of the problem (excess inventory, lost sales from stockouts, transport cost premium, unplanned downtime cost), the realistic improvement AI can deliver (based on benchmarks, published research and the organisation's specific data characteristics — not vendor claims), the investment required (technology, implementation, data preparation, process redesign, training, ongoing support), and the payback period and return profile.

This is analytical work that requires deep understanding of supply chain economics — understanding total cost of ownership for inventory, the service-level-to-stock-level trade-off, the relationship between forecast accuracy and safety stock requirements, the cost structure of logistics operations. It's strategy work as much as technology work.

Prioritisation. With quantified business cases for multiple use cases, prioritisation should consider both financial attractiveness and readiness. The best starting point is a use case that has high financial impact and where the organisation's data, process and capability foundations are strong enough to support successful deployment. Starting with a lower-impact but higher-readiness use case can also make sense if it builds confidence and capability that enables more ambitious applications later.

The output should be a prioritised portfolio of 3-5 use cases with detailed business cases, clear sequencing, identified dependencies, and a realistic timeline. This becomes the investment case for the AI program — and the accountability framework against which results are measured.

3. AI-Enabled Planning and Operations Process Design

This is where most AI initiatives fall down, and it's the area that gets the least attention. Organisations invest heavily in selecting and implementing AI technology, then try to insert it into planning and operations processes that were designed for a pre-AI world. The result is predictable: the AI tool produces outputs that don't fit the existing workflow, planners don't know what to do with them, and the system either gets ignored or creates more work rather than less.

AI-enabled process design means redesigning the planning and operations processes — not just adding AI as an input — so that the entire workflow takes advantage of what AI makes possible.

What changes when AI enters the planning process. Consider demand planning as an example. In a traditional process, planners spend the majority of their time generating the statistical baseline forecast, then adjusting it based on market intelligence, promotional plans, sales team input and other qualitative factors. The S&OP cycle revolves around reviewing and reaching consensus on the forecast.

When AI handles the statistical forecasting — and does it better, faster and more granularly than manual methods — the planner's role fundamentally changes. They shift from forecast generation to forecast management: reviewing AI outputs, focusing attention on the exceptions and outliers where human judgement adds value, incorporating market intelligence that the model can't access, and making the cross-functional trade-off decisions that require business context.

This is a better use of skilled planners' time. But it requires a redesigned process that defines how AI forecasts are generated and reviewed, what exception thresholds trigger human intervention, how the planner's adjusted forecast feeds into the S&OP cycle, what governance ensures the AI model stays calibrated, and how forecast accuracy is measured and reported.

The same principle applies across other domains. AI-optimised inventory parameters need a process for planner review and override. AI-generated route plans need a process for driver exceptions and real-time adjustment. AI supply risk alerts need an escalation and response framework.

Designing the target operating model. For each AI use case, the process design work should define the end-to-end workflow (how does the AI-enabled process work, step by step, from data input through to operational decision?), the role of the planner or operator (what does the human do that the AI doesn't, and how do they interact with the system?), the exception management framework (what triggers human intervention, and what's the process for handling exceptions?), the governance rhythm (how often are AI outputs reviewed, who is accountable for model performance, what are the escalation paths?), and the performance measurement framework (how do we know the AI-enabled process is delivering better outcomes than the previous approach?).

This is organisational design work applied to AI-enabled operations. It requires understanding both the technical capabilities of the AI tool and the operational realities of the planning or operations environment — how planners actually work, what information they need, where they add value, and what frustrates them about current processes.

The S&OP connection. For organisations with a formal S&OP or integrated business planning process, AI-enabled planning has significant implications. AI can accelerate the demand planning phase, improve the quality of scenario modelling, provide more granular inventory trade-off analysis, and enable faster response to demand or supply changes between formal planning cycles. But these benefits only materialise if the S&OP process is redesigned to take advantage of them — if the meeting cadence, the information packs, the decision frameworks and the accountability structures all reflect the new AI-enabled capability.

Trace has written extensively about S&OP and planning process design — organisations looking at this intersection should also review our thinking on planning and operations process maturity and our guide to Advanced Planning Systems which covers how APS capabilities integrate with planning processes.

4. AI Technology Selection and Vendor Advisory

With clear use cases, quantified business cases and a target process design, the organisation is ready to evaluate technology options. Not before.

The sequence matters because technology selection should be driven by defined requirements — not the other way around. Too many organisations start with a technology shortlist and then try to find use cases that justify the purchase. This leads to solutions looking for problems, features that don't map to actual decision-making needs, and implementations that are technically impressive but operationally irrelevant.

The AI technology landscape for supply chain and operations. The options fall into four broad categories.

Embedded AI within existing platforms. Your ERP vendor's demand planning module may now include ML-based forecasting. Your WMS might offer AI-powered slotting optimisation. Your TMS may have added AI routing capabilities. These embedded capabilities are typically the easiest to deploy (no new integration required) but may be less sophisticated than specialist tools.

Best-of-breed AI point solutions. Standalone platforms focused on specific use cases — demand sensing, inventory optimisation, logistics route optimisation, predictive maintenance, supply risk monitoring. These typically offer deeper functionality for their specific domain but create integration requirements and add another vendor relationship to manage.

Advanced Planning Systems with native AI. The dedicated supply chain planning platforms — Kinaxis, Blue Yonder, o9 Solutions, SAP IBP, RELEX, Logility and others — increasingly embed AI and ML capabilities across their planning modules. For organisations considering a broader planning transformation, these platforms offer comprehensive capability but require significant implementation investment.

General-purpose AI and analytics platforms. Cloud ML platforms (AWS SageMaker, Google Cloud AI, Azure ML) and business intelligence tools with predictive capabilities can be configured for supply chain use cases. These offer maximum flexibility but require more internal technical capability to deploy and maintain.

How to evaluate. The evaluation approach should mirror the structured RFx process we recommend for any significant technology selection, but with specific adaptations for AI.

First, evaluate against defined use cases, not feature lists. The question isn't "does this platform support demand forecasting?" (they all do). It's "does this platform's forecasting capability handle our specific demand patterns — high promotional variability, long-tail SKUs, new product introductions with no history — better than alternatives?"

Second, insist on demonstrations with representative data. Canned demos tell you nothing about how the system will perform in your environment. Provide shortlisted vendors with a sample dataset that reflects your real data characteristics and ask them to demonstrate their system's outputs against defined scenarios.

Third, evaluate the implementation approach and partner ecosystem as heavily as the software. For AI tools specifically, the quality of model configuration, data engineering and calibration during implementation determines the majority of the outcome. A superior algorithm badly implemented will underperform an adequate algorithm well implemented.

Fourth, assess total cost of ownership, not just licensing. Implementation services, data engineering, integration development, training, change management and ongoing model monitoring and recalibration typically represent 60-70% of the total investment.

Fifth, evaluate local capability. For Australian organisations, the vendor's or partner's presence and experience in the ANZ market matters. Long inbound supply chains, Australian seasonal patterns, concentrated retail customers and specific regulatory requirements create a context that global vendors may not have deep experience with.

The procurement disciplines of structured evaluation, commercial benchmarking and negotiation are just as important for AI technology selection as for any other significant purchase — perhaps more so, given the complexity and the risk of vendor lock-in.

5. AI Pilot Design and Execution Support

Before committing to full-scale deployment, most organisations benefit from a structured pilot that tests whether the AI tool, configured for their data and integrated into their process, actually produces better operational outcomes than the current approach.

The key word is "structured." An AI pilot isn't a sandbox experiment where data scientists play with models to see what's possible. It's a controlled operational test with defined scope, clear success metrics, baseline measurement, and a rigorous evaluation framework that determines whether to scale, adjust, or stop.

Designing the pilot. A well-designed AI pilot defines several critical elements.

Scope. Which products, which locations, which planning horizon, which operational process? The scope should be large enough to be representative but small enough to be manageable. For a demand forecasting pilot, this might mean a specific product category across a defined set of locations over a 12-16 week period. For an inventory optimisation pilot, it might mean a subset of SKUs in a defined part of the distribution network.

Baseline. What does "current performance" look like, measured rigorously? If you're testing AI-driven demand forecasting, you need a clean baseline of current forecast accuracy by SKU, by location, by time horizon — measured consistently over a period long enough to account for normal variability. Without a solid baseline, you can't measure improvement.

Success metrics. What does "better" look like, quantified? A 10% improvement in forecast accuracy at SKU-week level? A 15% reduction in safety stock without service degradation? A 7% reduction in transport cost per delivery? The metrics should be defined before the pilot starts, agreed with stakeholders, and directly traceable to the business case.

Operating model for the pilot period. How will planners or operators interact with the AI tool during the pilot? Will they use AI outputs as their primary input (replacing the current approach) or run in parallel (comparing AI outputs against current methods)? Parallel running is safer but less realistic — planners who know they have a fallback behave differently than planners who are depending on the new tool. The pilot design should specify the operating model clearly.

Duration. The pilot needs to run long enough to test performance across different demand conditions — not just steady-state weeks but promotional periods, seasonal transitions, supply disruptions and other real-world variability. For most supply chain use cases, 12-16 weeks is a reasonable minimum.

Evaluation framework. How will the pilot be evaluated? Who reviews the results? What threshold of improvement justifies scaling? What happens if results are mixed — some metrics improve, others don't? The evaluation framework should be defined upfront, not designed retrospectively to fit the results.

Testing the full operating model. The most important — and most frequently missed — aspect of pilot design is testing the full operating model, not just the technology. This means evaluating whether planners are actually using the AI outputs in their decision-making, whether the process changes are working as designed, whether exceptions are being managed appropriately, and whether the results are genuinely better than the current approach across the full range of real-world conditions.

A pilot that demonstrates impressive algorithmic accuracy in a test environment but doesn't test whether planners trust and use the outputs is answering the wrong question. The question isn't "can this model forecast well?" It's "does this model, used by our planners, in our process, with our data, produce better operational decisions than what we do today?"

The scale decision. At the end of the pilot, the organisation faces a clear decision: scale, adjust, or stop. If the pilot demonstrates clear, measurable improvement against the defined success metrics — and the operating model is working — the case for scaling is strong. If results are mixed, the pilot data should inform what needs to change before scaling (data quality issues? process gaps? model configuration? planner training?). If results are poor despite good execution, that's also valuable information — it means this particular use case, with this particular tool, in this particular context, doesn't deliver the expected value.

Honest evaluation at this stage — rather than confirmation bias that justifies the investment already made — is what separates organisations that deploy AI effectively from those that scale failures.

6. Data Readiness and Foundation Work

If there's one section of this article that deserves to be read twice, it's this one. Data readiness is the single largest determinant of AI success in supply chain and operations, and it's the area where organisations most consistently underinvest.

Every AI model — whether it's forecasting demand, optimising inventory, routing deliveries or predicting equipment failures — depends on data. The quality, completeness, granularity and accessibility of that data determines the ceiling of what AI can achieve. No algorithm, however sophisticated, can overcome fundamentally poor data.

What "data ready" actually means. For supply chain AI applications, data readiness typically requires several things.

Clean historical transaction data. For demand forecasting, this means order or shipment history at the right level of granularity (SKU-location-day or week), with anomalies identified and addressed (one-off bulk orders, data entry errors, system migration artefacts), and sufficient history to train models effectively (typically 2-3 years minimum, more for seasonal products).

Accurate demand-shaping event data. Promotions, pricing changes, new product introductions, range deletions, competitor activity — the events that cause demand to deviate from underlying patterns. AI models can learn from these events, but only if they're captured accurately in the data. Most organisations have promotional calendars, but the linkage between promotions and transaction data is often incomplete or inaccurate.

Reliable master data. Product hierarchies, location hierarchies, supplier data, customer segmentation, lead times, minimum order quantities, shelf life constraints — the reference data that AI models use to structure their analysis. Master data quality is a pervasive challenge in Australian organisations, and it directly impacts AI model performance.

Integration and accessibility. Data often sits in multiple systems — ERP, WMS, TMS, point of sale, CRM, external data sources — and needs to be brought together in a form that AI tools can consume. This requires data integration pipelines, potentially a data warehouse or data lake, and APIs or connectors to the AI platform.

Timeliness. Some AI applications require near-real-time data (logistics optimisation, warehouse operations), while others work on daily or weekly data cycles (demand planning, inventory optimisation). The data infrastructure needs to support the refresh frequency that each use case requires.

The foundation work. Getting data ready is unglamorous, time-consuming work. It includes data profiling and quality assessment (understanding what you have, where the gaps are, and how severe the quality issues are), data cleansing and enrichment (fixing historical anomalies, filling gaps, enriching transaction data with event data), master data governance (establishing ownership, standards, processes and tools for maintaining data quality on an ongoing basis — because data quality degrades continuously without active management), integration development (building the pipelines that bring data together from multiple sources into a form AI tools can consume), and data architecture design (determining where data lives, how it flows, and what infrastructure supports it).

This work should begin early — ideally during the readiness assessment phase — and continue in parallel with use case development and technology selection. It's the longest-lead-time activity in most AI programs, and it's the one most commonly underestimated.

The ongoing challenge. Data readiness isn't a one-time project. It's a continuous discipline. Data quality degrades as products change, systems are updated, processes evolve and people make mistakes. AI models trained on historical data gradually lose accuracy as the underlying patterns shift. Master data requires ongoing maintenance as the business changes.

This is why data governance — the ongoing organisational capability to maintain data quality — matters as much as the initial data cleansing effort. Without it, the AI investment delivers diminishing returns over time as the data foundations erode.

For organisations across FMCG and manufacturing, retail and consumer, resources and energy and government and defence, data readiness challenges take different forms — but the fundamental principle is the same: invest in the data foundation before investing in the AI tool, and establish the governance to sustain it.

7. AI-Focused Capability Building and Training

The final discipline — and the one that determines whether AI delivers value in year one only or compounds value over time — is building the human capability to work effectively alongside AI tools.

This isn't about turning planners into data scientists. It's about developing a set of practical skills that enable supply chain and operations professionals to get the most from AI-enabled tools and processes.

What AI-literate supply chain professionals need to know. The capability requirements fall into several layers.

Interpreting AI outputs. Understanding what a demand forecast from an ML model represents — including its confidence intervals, its assumptions, and its known limitations. Understanding what an inventory optimisation recommendation means — why the model is suggesting a particular safety stock level, what inputs are driving it, and what would change if assumptions shifted. This isn't deep technical knowledge; it's practical literacy that allows professionals to use AI outputs intelligently rather than either blindly following them or reflexively ignoring them.

Managing exceptions. Knowing when and how to override AI recommendations. AI models work well for the majority of routine decisions but struggle with genuine exceptions — unprecedented events, data quality issues, business context the model can't see. Building the judgement to recognise these situations — and the confidence to intervene — is a critical skill that comes from training, practice and organisational support.

Configuring and monitoring. Understanding how to adjust parameters that the AI tool exposes — service level targets, demand segmentation rules, exception thresholds, scenario assumptions. Knowing how to monitor whether the model is performing as expected and recognising the signs of degradation (declining accuracy, increasing exceptions, outputs that don't align with business reality).

Asking better questions. Perhaps the most valuable capability shift is moving from "generating the answer" (which AI now handles) to "asking better questions." What scenarios should we test? What assumptions should we challenge? What trade-offs should we explore? What risks aren't reflected in the data? This is where experienced supply chain professionals add the most value in an AI-enabled world — and it's a capability that needs to be actively developed, not assumed.

How to build it. Capability building for AI-enabled operations typically involves several components.

Assessment. Understanding the current capability baseline across the roles that will interact with AI tools — planners, analysts, operations managers, supply chain leaders. What's the current level of data literacy? Analytical skill? Comfort with technology? Openness to changing established ways of working?

Training programs. Structured learning that covers the practical skills outlined above — tailored to specific roles and specific AI tools. This isn't generic "AI awareness" training; it's hands-on instruction using the actual systems and processes the team will work with. It should include real data, real scenarios and real decision-making practice.

Playbooks and reference material. Documentation that supports ongoing performance — standard operating procedures for AI-enabled processes, exception management guides, parameter configuration guides, troubleshooting resources. These should be living documents that evolve as the organisation's AI capability matures.

Coaching and support. Particularly in the early stages of AI adoption, planners and operators benefit from accessible support — someone who can help when the model produces an output they don't understand, when they're unsure whether to override a recommendation, or when they encounter a situation the training didn't cover.

Communities of practice. As AI adoption scales across the organisation, connecting practitioners — planners in different sites, analysts in different categories, operators in different facilities — creates a peer learning network that accelerates capability development and shares best practice.

The leadership dimension. Capability building isn't just about frontline users. Supply chain leaders need their own capability development — not in how to use AI tools, but in how to lead AI-enabled organisations. This includes understanding what AI can and can't do (to set realistic expectations), how to interpret AI-related performance metrics (to make informed governance decisions), how to allocate resources between AI investment and other priorities (to make sound trade-offs), and how to create a culture that embraces AI-enabled ways of working while maintaining appropriate scepticism and human oversight.

Strategic workforce planning for AI-enabled supply chains should address this leadership dimension alongside the frontline capability requirements — because leadership buy-in and capability is what sustains AI adoption beyond the initial implementation.

The partnership model: where to build and where to partner

One of the most important strategic decisions for organisations adopting AI in supply chain and operations is what to build internally versus what to source from external partners.

In our view, the answer is clear for most Australian organisations. The capabilities that should be built internally — because they're core to operational performance and need to be sustained over time — are AI literacy across the planning and operations team, process design and governance for AI-enabled operations, data governance and quality management, and performance monitoring and continuous improvement.

The capabilities that are typically better sourced from external partners — because they require specialist skills that aren't needed on a full-time basis — are AI model development and engineering (the deep technical work of building, training and deploying models), technology platform implementation and integration, advanced data engineering for initial setup and migration, and strategic advisory on AI roadmap, technology selection and organisational readiness.

This is where the distinction between AI engineering firms and supply chain advisory firms matters. AI engineering firms bring deep technical capability in building and deploying AI systems — custom model development, agentic AI frameworks, large language model integration, deployment infrastructure. They're the right partner for the model development, platform engineering and technical deployment work. Supply chain advisory firms bring the domain expertise to ensure AI is applied to the right problems, embedded in the right processes, and supported by the right organisational capability.

The most effective AI programs use both: domain experts who understand the operational context and define what needs to happen, partnered with technical experts who know how to make it happen. Neither alone is sufficient. An AI engineering firm without supply chain domain expertise will build technically impressive solutions that don't address the most valuable operational problems. A supply chain advisory firm without AI engineering capability can design the right solution but can't build the models. The partnership model brings both together.

For Australian organisations specifically, this model has a practical advantage. The local talent market for deep AI engineering skills is tight and expensive. Building a permanent internal team of ML engineers, data scientists and AI architects is feasible for the largest organisations but impractical for most. A partnership model lets organisations access world-class AI engineering capability on a project basis while building the internal domain expertise and operational capability that sustains value over time.

How Trace Consultants can help

At Trace Consultants, we sit firmly on the domain expertise side of this partnership model. We don't build AI models. We make sure the AI investments you make actually work in your operations.

Our role in AI adoption spans all seven of the disciplines covered in this article:

AI readiness assessment. We assess your data maturity, process maturity, technology landscape, organisational capability and governance readiness — producing a clear, honest picture of where you stand and what needs to happen before AI can deliver value. This is strategy work grounded in practical supply chain experience.

Use case identification and business case development. We identify the highest-value AI applications for your specific operation, quantify the opportunity with rigour, and build business cases that stand up to scrutiny. Our deep understanding of supply chain economics — from inventory optimisation to logistics cost structures to procurement spend analysis — ensures use cases are anchored in real operational value.

AI-enabled process design. We redesign planning and operations processes to take advantage of what AI makes possible — defining workflows, roles, exception management, governance and performance measurement for AI-enabled operations. This is organisational design work that bridges the gap between technology capability and operational reality.

Technology selection and vendor advisory. We help you navigate the AI technology landscape with an independent, informed perspective — evaluating embedded capabilities, best-of-breed tools and APS platforms against your specific requirements through structured procurement processes. Our technology advisory ensures you select the right tool for your context, not the most impressive demo.

Pilot design and execution support. We design structured AI pilots with clear scope, success metrics, baseline measurement and evaluation frameworks — ensuring you test the full operating model, not just the technology. Our project and change management capability ensures pilots run smoothly and produce the information needed for sound scaling decisions.

Data readiness and foundation work. We support the data quality, master data governance, integration planning and data architecture work that determines whether AI tools produce reliable outputs. This isn't glamorous work — but it's the work that protects your AI investment.

Capability building and training. We develop and deliver practical training programs that build AI literacy across supply chain and operations teams — from frontline planners to senior leaders. Our strategic workforce planning expertise ensures capability development is structured, role-specific and sustainable.

Our independence matters. We don't sell AI software. We don't build AI models. We don't have partnership arrangements with AI vendors that influence our recommendations. Our advice is based entirely on what will deliver the best operational outcome for your organisation — which technology, which use cases, which sequencing, which partnerships.

We work across FMCG and manufacturing, retail and consumer, resources and energy, health and human services, and government and defence — bringing cross-sector perspective on what works in practice, not just in theory.

Getting started

AI in supply chain and operations isn't a future state. It's happening now, in Australian organisations across every sector. But the organisations capturing value aren't the ones with the most ambitious AI strategies or the largest technology budgets. They're the ones that got the foundations right: honest readiness assessment, disciplined use case selection, thoughtful process design, structured technology evaluation, rigorous pilots, serious data work, and genuine investment in human capability.

Every one of those seven disciplines is within reach of any Australian organisation with the commitment to do them properly. The technology will follow — and when it does, it will land on foundations that actually support it.

If your organisation is ready to move beyond AI aspiration and start building the operational capability that makes AI work, we'd welcome the conversation.

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