Australian manufacturers are no strangers to disruption. They have proven their resilience and agility through many market cycles, and broad industry confidence about the next 12 months suggests this time is no different.  

According to the latest Manufacturing Insights Report, 72% of manufacturers nationwide are targeting higher production volumes in the next year. That’s supporting expected revenue and profit growth for around three in four.

However, there is also widespread recognition of the challenges ahead, with many lingering from recent years. Chief among them is rising operating costs, with most forecasting further increases. Supply chain issues and their impact on cash flow and capacity are also widely reported.

CommBank head of manufacturing, Maria Christina, said, “The industry’s responses are already well underway. Not only are manufacturers directly addressing each challenge but are directing investment to ensure their operations are more efficient, productive, and sustainable.”

Examining these responses and tactics can be instructive for business leaders keen to navigate their organisations through uncertainty and reveals why manufacturers remain optimistic.

Overcoming persistent supply chain issues

Beyond rising operating costs, manufacturers are still feeling the impact of supply chain disruption. In fact, 92% of decision-makers say supply chain issues are either restricting capacity or holding back growth.

In turn, supply chain issues are adversely affecting cash flows for 86% of manufacturers. This is exacerbating capacity constraints and prompting decisive action to improve liquidity.

As a result, the top tactics being employed include:

  • Tackling supply chain issues: The most common strategies are to adopt technology to monitor the supply chain more effectively and increase materials and inventory on site. That’s followed by increasing and onshoring operations and suppliers. 
  • Easing cash flow constraints: Manufacturers are most likely to be increasing prices and pushing out supplier payment terms. Most are extending or increasing financing facilities, including asset and trade finance. 

Seeking technology-driven efficiencies

Manufacturers' top-rated priority for the year ahead is investing in new technology. Given higher production targets, this reaffirms the connection between technology and enhanced operational performance in manufacturers’ minds.

In another step up this year, 87% of manufacturers signalled their intention to lift technology budgets. Those that can streamline operations, drive scale, improve collaboration, and enhance the customer experience are all earmarked for investment.

Over the next two years, spending on emerging technologies will also rise, firmly embedding innovative digital solutions across the sector. The fastest-growing areas include next-generation ERP systems, the use of autonomous vehicles and machines, and artificial intelligence.

The adoption of many emerging technology and data-driven applications is already widespread, with efficiency again the top driver. However, as this investment continues, commensurate cyber security processes and safeguards will be needed, with the research showing relatively few have protocols in place.

“The most common activity manufacturers are undertaking is implementing rigorous access and password policies, but that’s only the case for 36%,” Maria said.

“Just under one in three have a cyber-security policy that is regularly updated, which is essential when bad actors are constantly finding new ways to exploit vulnerabilities.”

Positive impact, better business outcomes 

With sustainable manufacturing a long-term feature of the industry, it’s no surprise that 88% now see it as an important part of their business strategy. 

The top initiatives that manufacturers intend to introduce include: 

  • Sustainable supply chain: implementing sustainable procurement processes among supply chain partners.
  • Circular economy: circular practices such as operational waste reduction, recycling, and reuse in the production cycle.
  • Natural resources management: Lowering energy usage and reducing or recycling water.

A large majority recognise that sustainable practices can help improve their competitive position and ability to meet stakeholder expectations, and around half believe their financial position can benefit. That’s supporting activity across the environmental, social and governance spectrum, with manufacturers indicating there’s more to follow. 

To explore the latest Manufacturing Insights Report and the strategies and tactics topping decision-makers’ agendas, visit the CommBank Foresight special report.

Click here to discover more insights from our Report

To learn more from leading industry experts about what’s important to business and the economy, head to CommBank Foresight™ – insights for future-facing businesses.

Things you should know

  • This report has been published for general information purposes only. As this information has been prepared without considering your objectives, financial situation or needs, you should, before acting on this information, consider its appropriateness to your circumstances, if necessary, seek professional advice. The Bank believes that the information in the report is correct and any opinions, conclusions or recommendations are reasonably held or made, based on the information available at the time of its compilation, but no representation or warranty, either expressed or implied, is made or provided as to accuracy, reliability or completeness of any statement made in the report. Any projections and forecasts are based on a number of assumptions and estimates and are subject to contingencies and uncertainties. Different assumptions and estimates could result in materially different results. The report refers to data sourced from an online survey of 300 manufacturers. The survey was conducted by ACA Research on behalf of the Commonwealth Bank. All analysis and views of future market conditions are solely those of the Commonwealth Bank. The Commonwealth Bank does not accept any liability for loss or damage arising out of the use of all or any part of the Report. Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945.