Almost nine in 10 construction firms said they expect costs to increase over the next 12 months © Ezra Bailey via Getty Images
Almost nine in 10 construction firms said they expect costs to increase over the next 12 months © Ezra Bailey via Getty Images

Australian firms switch to domestic suppliers to beat disruption

16 September 2022

Rising costs and continuing supply chain disruptions were the major challenges for Australian businesses in June and July, according to a survey.

Commonwealth Bank surveyed 800 key decision-makers and found 40% were planning to extend the life of current equipment and assets to overcome supply chain delays. 

A quarter (23%) were purchasing more from Australian suppliers rather than overseas vendors in response to the challenges, while 21% were sourcing cheaper products and brands than they would normally have considered.

Almost a fifth (17%) said they were bringing forward orders to ensure delays do not affect business operations, 15% said they were purchasing second-hand rather than new products, while 11% used different channels to source equipment.

However, 20% of businesses were unable to use any of the above approaches to mitigate supply chain difficulties and said they had no choice but to wait for deliveries no matter how much they were delayed.

Overall, despite concerns, business sentiment across Australia among respondents was positive – especially among businesses with revenue over A$100m and those in the retail, hospitality, health and education sectors. SMEs were least positive overall.

Rising costs affected the construction industry more than any other. Almost nine in 10 (86%) construction sector respondents said they expected operating costs to increase over the next 12 months.

Construction sector respondents also led the way in planning to introduce more efficient systems and processes to mitigate rising costs.

A third (33%) of respondents said they were concerned about rising overheads while 22% expressed worries about transport and distribution costs. Escalating supplier costs were named as a problem by 21%.

Even as many businesses named supply chain issues as a problem, the proportion of respondents experiencing disruption fell from 45% last October to 37% in this year’s survey.

“This slight improvement showed that businesses have changed their sourcing processes to overcome availability and delay problems,” said Commonwealth Bank.

Almost three-quarters (72%) of businesses with revenue of more than A$100m reported supply chain disruptions, against 71% of firms with revenue between A$10m and A$100m.

Western Australia was the geographical reason region most affected by supply chain issues.

But only 20% of businesses said supply chain delays would be a key challenge to achieving their business objectives this year.

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