Manufacturers set to expand production over the next year: report

CommBank has published a new report that says that it expects Australian manufacturers to increase production volumes in the next 12 months, supported by higher capital expenditure and investment in technology.

According to the 2023 CommBank Manufacturing Insights Report, the majority of Australian manufacturers surveyed are confident in the short-term outlook for business conditions, likely buoyed by a stronger-than-expected financial performance in the past year. 70% of manufacturers reported profit growth in the past 12 months, compared to just 52% last year. Manufacturers are optimistic with 74% anticipating increased profits in the next 12 months.

This is notwithstanding broad challenges facing the industry, with 75% expecting increases in operating costs and 92% saying lingering supply chain issues are holding back capacity or growth. Around 86% of manufacturers said this is impacting cash flow.

Jerry Macey, CBA Executive Manager Consumer Diversified Industries, said Australian manufacturers had a strong track record of rising to disruption by adapting their operational performance and investment programs to the operating environment.

“We share the broad-based optimism of the manufacturing sector and we are here to support their growth aspirations,” he said. “Manufacturers aren’t ignoring challenges but rather are ramping up their investment in 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.”

The top-ranked business priority for Australian manufacturers in the year ahead is investing in new technology, with 87% of manufacturers expect to increase expenditure — even higher in regional locations, where 99% of manufacturers are planning to invest more.

Other key business priorities in the next 12 months include adapting processes to drive greater efficiency and productivity, improving quality and increasing capacity.

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

Many manufacturers are also turning to emerging technology to drive efficiencies and customer utility. The fastest-growing areas of adoption in the next two years are expected to be next-generation enterprise resource planning (ERP) systems (31%), autonomous systems and equipment (31%) and artificial intelligence (30%).

Macey said the research shows that by 2025 many innovative technologies, from 3D printing to blockchain and digital twins, will be commonplace across the manufacturing industry.

Manufacturers are also turning to sustainability measures to have a positive impact and strengthen business outcomes, with 80% saying sustainable manufacturing is an important part of their business strategy.

“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 said.

The research in the CommBank Manufacturing Insights report is based on an online quantitative survey conducted by ACA Research on behalf of the Commonwealth Bank. The survey was in field during January 2023 and was completed by 300 key influencers or decision-makers from Australia’s manufacturing industry.

To read the report click here.

Image: iStock.com/Kongga