Rising costs, inflation, and supply chain disruptions are increasingly gaining momentum, placing manufacturers all over the world under unprecedented pressure.
However, the industry is not new to seeing a plethora of global and local economic challenges as businesses constantly face various headwinds, such as broken supply chains and production shutdowns.
Research from the Commonwealth Bank of Australia suggests that the Australian manufacturing sector remains largely unfazed by the prospect of global market fluctuations, with 72 per cent of manufacturers looking forward to increasing production levels in the next 12 months.
Australian manufacturers are proving once again that navigating uncertainties and fluctuating demand cycles is written in their DNA as they gear up for an impending slowdown in global economic growth.
Investing in a better future
The CommBank Manufacturing Insights revealed that the majority of Australian manufacturers are confident in the short-term outlook for business conditions, likely buoyed by a stronger-than-expected financial performance in the past year.
Business leaders are ensuring the agility and resilience of their operations by directing investments to boost two factors: efficiency and sustainability.
To achieve this, manufacturers are doubling down on technology investments, such as in cloud migration, automation, artificial intelligence, and machine learning.
Almost nine in ten manufacturers are looking forward to increasing their technology investment in the next year.
The adoption of the following emerging technologies is also expected to see rapid growth in the coming year.
Image from CommBank
The research also estimated that by 2025, many innovative technologies, ranging from 3D printing to blockchain and digital twins, will be commonplace across the manufacturing industry.
Meanwhile, sustainable practices are also taking centre stage, with 88 per cent of manufacturers considering sustainability as a crucial part of their business strategy. These initiatives are aimed at improving competitiveness and compliance, meeting stakeholder expectations and boosting businesses’ financial position.
“Manufacturers understand they can have a positive impact by focusing on sustainability initiatives while achieving better business outcomes, from competitiveness to financial performance. This is manifesting in a range of programs, from operational waste and carbon reduction to heightened diversity and improved governance processes,” said Jerry Macey, CBA Executive Manager for Consumer Diversified Industries.
“There is a strong correlation between the manufacturers targeting growth in the year ahead and those adopting sustainability initiatives. It reiterates the links between sustainable practices and adaptability, resilience, and performance,” Macey added.
Optimistic yet grounded in reality
The vast majority of manufacturers are looking forward to increased profit as they invest heavily in technology and sustainable practices that strongly support business outcomes.
About 92 per cent of respondents expressed a positive outlook on business conditions over the next 12 months. Meanwhile, 76 per cent expect revenue to increase and 74 per cent look forward to increased profit in the same period.
Revenue and profit forecasts began to improve in early 2022 as the industry recovers from the disruptions caused by the pandemic. Since then, manufacturers have outpaced their predictions for financial and production performance.
Despite the optimistic outlook, Australian manufacturers are not ignoring the headwinds, with the majority currently navigating through persistent supply chain challenges and constrained cash flows. Thus, only 58 per cent are targeting growth in the year ahead, down from last year’s 65 per cent.
Image from CommBank
History would suggest that the manufacturing sector has gained the knowledge and experience they need to ensure efficiency amid global economic uncertainties. Aussie manufacturers have leveraged their arsenal of capabilities to emerge from the disruptions caused by the pandemic and even well before that with confidence originating from demonstrated agility and resilience and that is set to continue.
“Manufacturers aren’t ignoring challenges but rather are ramping up their investment in becoming leaner, stronger and more productive,” Macey said.
CommBank Manufacturing Insights is an exclusive, wide-ranging analysis of Australian manufacturers and provides a closer look into how manufacturers are navigating the industry’s emerging challenges and opportunities, with a focus on trends in business performance, inflation and supply chain management, digital transformation, and sustainable manufacturing.
CommBank partnered with ACA Research to conduct an online quantitative survey among Aussie manufacturers. The survey was conducted in January 2023 and was completed by 300 key influencers or key decision-makers in the industry.
To learn more about the drivers of business performance in the Australian manufacturing sector, read the full report at commbank.com.au.