How manufacturers are defying supply chain issues

22 May 2023

Nearly three-quarters of Australian manufacturers are expecting increased profitability over the next 12 months, even as the vast majority see the continuing effects of supply chain disruption on their operations, a new survey has found.

The 2023 CommBank Manufacturing Insights Report found that 72% of manufacturers in Australia expect to increase production levels in the next year. A similar number are planning to increase capital spending.

And 70% of the 300 key influencers or decision-makers from Australia’s manufacturing industry surveyed said they had seen profit growth in the past 12 months. This compares to 52% of respondents who had anticipated seeing profits rise when surveyed last year.

Despite rising supply chain costs and inflation, three-quarters (74%) of respondents anticipated increased profits in the next 12 months.

However, 92% of those surveyed said lingering supply chain issues were holding back capacity or growth. Around 86% of manufacturers said it was impacting on cash flow.

The most common challenges for the manufacturers surveyed were inflationary pressures and rising costs, with overheads named by 30% of respondents and transport and distribution named by 28%.

Three quarters (75%) of respondents said they expected to see an increase in operating costs in the next year, with 86% saying that supply chains had adversely affected cash flow – identified as having significant impact by around 40%.

And 60% said they were taking supply chain-related actions. Measures being taken included intending to find alternative materials or suppliers (37%), negotiating better terms with suppliers (33%) and increasing prices (29%).

In response to supply chain issues constraining manufacturers’ ability to operate at full capacity or grow, 32% of respondents said they were implementing technology to more effectively monitor supply chains.

Top areas for investment include implementing process controls (32%), more cloud-based applications (28%), as well as supply chain and logistics and customer experience (27%).

Many manufacturers were also seeking to drive efficiencies through emerging technologies, with the fastest-growing areas of adoption in the next two years expected to be next-generation enterprise resource planning (ERP) systems (31%), autonomous systems and equipment (31%) and artificial intelligence (30%).

Most (88%) of respondents said sustainable manufacturing was an important part of their business strategy, while 36% described it as “essential”; 78% of those surveyed had set an emissions reduction target, up from 45% last year.

CommBank executive manager, consumer diversified industries, Jerry Macey, said: “We share the broad-based optimism of the manufacturing sector. Manufacturers aren’t ignoring challenges, but are ramping up their investment to become leaner, stronger and more productive. 

“Most are navigating rising costs, inflationary pressures and supply chain issues, which often combine to constrain cash flows. When viewed alongside talent shortages, this is driving innovation to achieve greater efficiencies and boost capacity to support an uplift in production.”

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