Lead times have more than halved (55 percent reduction) since the tail end of last year, down to just 14 days on average, which is a new low-water mark for the Australian manufacturing industry over the last five years.
According to figures from inventory management software brand Unleashed, the quickening of lead times comes as supply chain conditions improve.
“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,” it says.
“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.”
Unleashed’s report analysed businesses across 12 manufacturing sub-sectors in Australia, New Zealand and the United Kingdom to assess the overall health of the sector.
Australia saw a greater reduction in lead times than the UK (43 percent reduction) and NZ (53 percent reduction).
On a less brighter note, Australian SMB manufacturers saw sales revenue stall this quarter after enjoying their best quarter in five years.
The Unleashed Manufacturing Health Index revealed a 12 percent dip in average sales performance since the end of 2023, sitting against the background of a broader upward swing for the sector which remains 11 percent ahead year-on-year.
“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’s Head of Product Jarrod Adam.
Only two of the 12 sub-sectors saw increases in revenue over the quarterly period, with beverages registering a 24 percent increase and construction & building sitting at 6 percent.
However, Adam says the Future Made in Australia budget may see a change on the horizon for some of these sectors.
“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,” he added.
While Australian beverage makers have thrived, their compatriots in food have seen a 13 percent drop in sales revenue in the last quarter, and 16 percent year-on-year.
Sales revenue has jumped 6 percent since last quarter amongst manufacturers in the building and construction sector and 13 percent year-on-year, while the industry has seen a dramatic 26-day drop in average lead times since the tail end of last year.
The report reveals that Australian manufacturers are increasingly diversifying their sales models, with 48 percent of Australian and New Zealand firms now using or have used eCommerce tools, which is up from just 4 percent 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 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.”
