Australia’s manufacturing sector remains firmly on a growth trajectory despite a range of persistent and emerging challenges. After transitioning from the disruption of the pandemic to booming demand and then economic uncertainty, manufacturers are again delivering a masterclass in navigating change.  

Agility and resilience were central themes of the latest CommBank Manufacturing roundtable in Queensland, held in partnership with BDO. The event brought together diverse leaders from across the state, who confirmed that the outlook is bright but didn’t shy away from the growth hurdles they face.

This was echoed by Bernadette Zerba, Deputy Director-General, Regional Economic Development, who said, “while no sector of the economy has been immune to the impacts of COVID-19, including the impacts of restricted labour movement in Australia and abroad, Queensland’s manufacturing industry has proved incredibly resilient and adaptable in the face of these challenges.”

“The fact that this industry continues to grow is proof of this. Compared to five years ago, manufacturing employment has increased by 10,400 people. Queensland manufacturing is remarkably diverse which is an integral part of our strength as a manufacturing state.”

The recent experiences of manufacturers, and their adaptability, were best illustrated by two businesses that attended the CommBank and BDO roundtable. The first creates office furniture and faced significant disruption during the pandemic, only to restart in a new world of hybrid work and uncertain demand. The second was a caravan manufacturer that saw demand explode during the pandemic and then normalise.

Both manufacturers navigated their unique challenges and are now turning their minds to what lies ahead. More broadly, Queensland manufacturers are responding to rising supply chain costs, unlocking operational and workforce capacity to meet demand, and meeting stakeholder and community expectations around sustainability.

Tim Kelly, Director of the Manufacturing Excellence Forum (MEF), a body designed to facilitate the growth of Sunshine Coast’s manufacturing ecosystem, says there is a confluence of three factors that are reshaping the strategic outlook for manufacturers.

“First, amid global supply chain and geopolitical issues, having a sovereign manufacturing capability is more important than ever, supporting sustained demand for onshore suppliers,” Tim says.

“Yet persistent talent, land and affordable housing shortages are coming together to drive significant changes. To manage demand, manufacturers can’t throw people or space at the problem, and they can’t bring more people in from offshore as there’s nowhere to house them.”

“This is refocusing efforts towards maximum productivity with the minimum number of people and square metres. These are net positive changes that will strengthen the industry in future.”

“Manufacturers in Queensland and nationwide are being compelled to have long-term talent and growth strategies and harness digital solutions to remain competitive. It continues the move away from the long and complex supply chains with a just-in-time philosophy in favour of shorter, local supply chains and increased levels of vertical integration.”

Keeping pace with the economic cycle

Many leaders at the roundtable said that the mooted slowdown in consumer demand is yet to arrive but that signs of that possibility are appearing. One food and beverage producer confirmed that spending on goods remains robust to date.

Instead, focus was on the bottom line, given the potential for rising costs to outstrip higher revenue and demand. One attendee voiced concerns about the impact of increasing energy and fuel costs, inflationary conditions, and wage growth on its cost base.

According to attendees, the foundations for growth are now arguably stronger for Queensland manufacturers. The lessons learned during the pandemic meant many attendees discussed the ongoing benefits of diversifying their supply chains. It was also noted that international freight and shipping costs may have peaked.

Managing elevated demand and access to the talent that supports capacity also remains a persistent challenge, yet initiatives to grow and diversify the industry’s talent base are bearing fruit.

It was here that the connection between resilience and sustainability became clearer. In the example of talent shortages, BDO Sustainability Partner, Brett Spicer, commented that applying diversity and inclusion targets to these human resources challenges can help. That’s because having an inclusive workforce, free of discrimination, can aid productivity.

Balancing inputs and impact

There are multiple ways that environmental, social and governance (ESG) initiatives naturally benefit manufacturers’ resilience, according to BDO. Brett said manufacturers must think about their businesses from a reputational and resourcing standpoint and understand the risks.

“The way I think about ESG is providing frameworks and standards to guide investment decisions that balance prosperity with impact. Each material component of ESG must be considered, and long-term enterprise value can be gained by going on the journey,” Brett said.

Brett explained that manufacturers could reframe their objectives in practical ways to deliver the best outcomes. For example, viewing natural capital as an input into manufacturers’ businesses and driving greater efficiency ensures a more positive commercial and environmental impact

“There are inputs into your operations like clean air, clean water, and energy. For energy, the question worth asking is how best to hedge price volatility and implement demand management when operating a facility. Through investments in energy efficiency and lower emissions fuel sources, costs and carbon can go down - if done well,” Brett said.

“Then you have waste management, and you will be at odds with community expectations without a clear strategy. The other factor is the disclosure of ESG-related financial risk, and new, mandatory standards are coming down the line very quickly.”

Managing new ESG obligations

Brett drew the audience’s attention to the consultation paper recently released by the Australian Government’s Treasury outlining proposed climate-related financial disclosure. While the administrative burden of reporting obligations was acknowledged, Brett reiterated that it is far outweighed by the broader benefits of stringent scenario and risk planning, stakeholder engagement and compliance.

“Rather than seeing it as additional work, it’s worth remembering that the big companies and government are already voluntarily reporting on their impact. If you are, or want to remain, part of their supply chain, adhering to the latest standards might make the difference between securing or losing that work.”

“There are also technology solutions that can assist in monitoring and reporting ESG risks. For example, for modern slavery compliance, platforms exist that track the chain of custody of landed goods.”

As confirmed in the upcoming CommBank Manufacturing Insights Report, stakeholder engagement is a key driver of ESG initiatives in manufacturing. As Brett points out, balancing business outcomes and impact is a core expectation.

However, any conversation about achieving ESG outcomes must bring all parties together. Collaboration between manufacturers, regulators and consumers is vital to ensuring that sustainability is supported across the supply chain, and that outcomes are maximised for each party at every step.

Diversity and inclusion supporting a thriving workforce

A key pillar of sustainable manufacturing is social initiatives, and particularly those designed to promote diversity and wellbeing in the workforce. In light of recent skills shortages, this has become even more important in cultivating new labour pools.

Encouragingly, the upcoming CommBank report shows that most manufacturers have diversity targets. At the top of those efforts are initiatives designed to drive more gender balance across the industry.

As Bernadette Zerba said, “the times are definitely changing. As the world embraces advances in technology, we stand to benefit from workplaces that can remove barriers to participating in the labour force, increase diversity and improve productivity and innovation”.

“Queensland’s manufacturers are looking to diversify how they recruit employees, trainees and apprentices, and the Women in Manufacturing Strategy will be a key enabler for this change,” Bernadette says. 

“With the current workforce and skills shortage, Queensland will need an extra 280,000 workers over the next four-years.”

“With opportunities on the horizon such as the 2032 Brisbane Olympics and Paralympics and the roll out of Queensland’s $62 billion Queensland Energy and Jobs Plan, there is a genuine opportunity for women to enter manufacturing, particularly as women represent nearly 50 per cent of the overall labour force in Queensland.”

“Diversifying the workforce is not just good business sense, it is necessary,” Bernadette concluded.