Manufacturing splits into haves and have-nots, research finds
An index from inventory software company Unleashed shows some firms are faring better than others despite the sector’s overall rebound.
The manufacturing sector has recovered from the pandemic but progress is uneven and industries are split between the haves and have-nots, research finds.
Inventory management software company Unleashed found the sector had an average “health” score of 63 out of 100 during the September quarter, with the performance of clothing, automotive and building manufacturers moderating how poorly cosmetics, sports and recreation manufacturers fared.
Head of product Jarrod Adam said the sector was resilient despite “negative rhetoric” in the news, which had failed to paint a true picture of the industry.
“Australian manufacturing is facing various headwinds including pressure from overseas manufacturing, market consolidation and tightening pockets, but it's showing that it’s remaining resilient, despite it all,” he said.
“If you were going off of the news alone, you would probably think industries like construction, beverage, and clothing manufacturing were on the brink of collapse.”
“The truth is, as always, in the numbers.”
Unleashed’s Manufacturing Health Index rated small to medium-sized manufacturers on a fitness scale between 0-100 during the September quarter. The index took into account sales, expenditure and efficiency metrics.
“Despite a positive overall score, Q3 has been a case of the ‘haves and the have nots’ in Australian manufacturing,” its findings said.
The majority of the 16 industries studied either performed “poorly” or “very well”, with nine recording a score of 39 or below, while the others scored 57 or higher.
Industrial machinery, raw material and equipment and automotive and automotive supplies manufacturers were given a “perfect 100 point bill of health”, Unleashed said, reflecting the way they maximised operational efficiency amid a difficult economic environment.
Clothing manufacturers came in third with a score of 96. This reflected improved profitability and lead times, which had come down from an industry-high 56 days last year to 24 days last quarter.
Higher profits for building and construction manufacturers meant they were in “strong health” with a score of 76.
On the other end of the index, cosmetics and personal care manufacturers fared poorly last quarter. “Heavy” consolidation and international entrants placed pressure on the profit margins of small to medium-sized brands, resulting in manufacturers scoring only 13 out of 100.
Sports and recreation also experienced “diminishing profitability” with a score of 17.
Food manufacturers scored 31 while “resilient” firms in beverages landed in the middle of the index at 57, the sole industry that registered within the “shrinking middle class” range between 40-60.
Other findings from Unleashed’s report showed costs from overstocked industries averaged $259,390 across the 16 industries analysed, up from $244,205 in 2022.
This was prevalent in building and construction manufacturers, who saw their costs rise by over $12,000 during the past year to an average of $309,713.
Meanwhile, clothing manufacturers experienced a significant drop from $208,847 to $133,619.
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