Australian SMB manufacturers are facing a tale of two trends. While they capped off 2023 with their strongest quarter in five years, a recent report by Unleashed, an inventory management software company, reveals a 12% decline in average sales performance during the first quarter of 2024.
This dip comes despite a positive year-on-year outlook, with sales still 11% higher compared to the same period in 2023.
“As supercharged inflation starts to cool, it’s laid bare how these high interest rates are cutting into the amount of spare change Australians have, which hits at the heart of our local manufacturers,” said Unleashed Head of Product Jarrod Adam. Only two of the 12 subsectors (Beverages and Building & Construction) saw increases in revenue over the quarterly period, however last week’s Future Made in Australia budget may see a change on the horizon for some of these sectors, says Adam. “For local manufacturers like those in food who are producing more costly, higher quality goods, they’ll be particularly sensitive to tightening consumer spending. But on the flipside, last week’s budget allocation is a massive boost for other parts of our manufacturing sector, giving them long term confidence for reinvestment,” said Adam.
Alex Boury, General Manager of Construction at construction software business COINS, says the manufacturing revenue growth points to an emphasis on productivity in the sector.
“The construction industry traditionally operates on single digit profit margins, and right now there is demand in the sector to boost productivity. We are seeing the value investing in technology can bring to construction, not only in transforming business and project management, but in areas such as offsite manufacturing which can improve efficiencies on-site drastically,” said Boury.
Strategies to Enhance Efficiency and Productivity
Technology Investments: Consider software solutions for tasks like inventory management, production planning,and scheduling. These can automate processes, streamline workflows, and optimize resource allocation. Additionally, explore automation opportunities for repetitive tasks on the manufacturing floor using robots or cobots.
Offsite Manufacturing: As suggested by Alex Boury, investigate the feasibility of offsite manufacturing for your specific products. This approach involves prefabricating building components or product elements in a controlled environment before transporting them to the final assembly site. Benefits of offsite manufacturing include:
Improved quality control due to a controlled environment.
Reduced waste and rework.
Enhanced safety on the main construction or assembly site.
Faster project completion times.
Employee Training and Upskilling: Invest in training programs to equip your workforce with the latest skills and knowledge to operate new technologies or implement process improvements. This could include training on specific software, lean manufacturing techniques, or quality control methods.
Focus on Data-Driven Decisions: Leverage data analytics to gain insights into your production processes. Identify bottlenecks, analyze equipment performance, and optimize production scheduling based on real-time data.
Continuous Improvement: Embrace a culture of continuous improvement within your organization. Encourage employees to identify areas for improvement and implement small, ongoing changes to optimize efficiency.
Streamline Supply Chain Management: Work closely with suppliers to ensure timely deliveries and reduce lead times. Explore options for near-shoring or local sourcing of materials to mitigate potential disruptions in global supply chains.
eCommerce a key
Although the majority of the manufacturers in the report are B2B firms using traditional sales channels, Australian manufacturers are increasingly diversifying their sales models. 48% of Australian and New Zealand firms are now using or have used eCommerce tools, up from just 4% in 2021.
“While it’s disappointing to see sales revenue drop in Q1 2024, there have been stand-out performances in some categories, notably Beverages,” said Unleashed’s Jarrod Adam.
“Year-on-year growth is heading in the right direction after a couple of years and it’s promising to see just how much emphasis these SMBs are putting on productivity gainers like better stock control and diversified sales channels.”
Laser focus on stock control paying off for Australian manufacturers
A bright spot for the broader industry has been the quickening of lead times as supply chain conditions improve.
Lead times have more than halved (55% reduction) since the tail end of last year, down to just 14 days on average, a new low-water mark for the manufacturing industry over the last five years.
The improvements are both a symptom of normalising supply chains globally and the knock-on effect of Australian business’ laser focus on logistics over the past three years.
Most evidently, Australian producers of medical supplies, among the most impacted by supply chain issues in the past, have seen the time between ordering and receiving goods whittled down from a mid-pandemic peak of 61 days to an average of 14.
Beverages continue to shine, food less so
Of the 12 manufacturing subsectors analysed, Beverages (24% increase) and Construction & Building (6% increase) were the only two sectors to see revenue growth since the previous quarter.
This marks an impressive revenue trajectory for the Beverages sector, up 43% year on year, the highest of any subsector.
While Australian beverage makers have thrived, their compatriots in food have sputtered, dropping 13% in sales revenue in the last quarter, and 16% year on year.
The Beverages sector has also seen a reduction in lead times. The current performance of 10 days to receive goods is down 36% on the previous quarter and marks the fastest lead times of the 12 Australian manufacturing subsectors.
Building and Construction
In spite of the negative sentiment directed at the state of the Australian Building & Construction industry, the numbers tell a different story.
Sales revenue has jumped 6% since last quarter amongst manufacturers in the sector and 13% year on year, and the industry has seen a dramatic 26 day drop in average lead times since the tail end of last year.
Keep up to date with our stories on LinkedIn, Twitter, Facebook and Instagram.
We explore 7 powerful strategies that can help manufacturers significantly increase output, cut costs, and improve efficiency. Manufacturing, manufacturers Dynamic Business
