At a national level, most businesses are also forecasting revenue and profit growth in line with rising output. This is reflected in business optimism, with 83 per cent expressing confidence in conditions over the next 12 months.
However, as businesses strive for growth, they face persistent challenges. According to respondents, cost-related factors, driven by energy prices (80 per cent), inflation (74 per cent), and interest rates (72 per cent), are set to be the highest-impact issues this year.
Around two in three also say changing customer preferences will have an impact in 2024. That follows reports that the top-rated shifts in customer behaviour last year were expectations for lower prices (32 per cent) and faster delivery (31 per cent).
CommBank’s National Head of Manufacturing and Wholesale Trade Maria Christina said that while elevated costs and customer expectations have increased the focus on productivity, a shortage of skills, labour, and outdated equipment are holding businesses back.
“While manufacturers and distributors have been tested by economic uncertainty and labour shortages, most report healthy capacity utilisation rates – which measures the percentage of potential output that is being realised. In fact, more than half say utilisation is running above 85 per cent, which is a testament to the resilience and innovation of Australian manufacturers," she said.
“To grow capacity in step with expected demand in 2024, businesses are doubling down on investment in technology and equipment, and upskilling employees. These initiatives help optimise operations and the workforce in pursuit of productivity.
“The Government’s newly announced Future Made in Australia Act will seek to support the efforts already underway. This could also help the domestic sector respond as many downstream customers gravitate to local or regional suppliers.”
With the top goal of improving productivity, 81 per cent of businesses are planning to increase technology investment in the next 12 months. Among the emerging technologies set to impact the industry most, those enabling supply chain efficiencies and artificial intelligence and machine learning top the list.
The potential benefits of artificial intelligence are widely recognised, with two in three saying it improves demand forecasting and inventory management and makes the supply chain more sustainable. Still, 62 per cent face integration challenges and 60 per cent say a lack of skills makes AI difficult to fully leverage.
Many manufacturers and distributors are also advancing their sustainability journeys with almost two in three having advanced sustainability initiatives. 37 per cent have adopted renewable energy or on-site generation, with a further 43 per cent planning to follow. Should those intentions materialise, the current average proportion of renewables in the energy supply mix will increase. According to businesses, this is currently 33 per cent of total energy usage across the supply chain.
About the report
This edition examines businesses’ performance and outlook and pathways to adapt to changing economic, customer and productivity drivers. It focuses on technology investment and sustainable manufacturing and their operational impact.
The report is based on a survey of 464 respondents that, for the first time, combines decision-makers from both manufacturers and distributors to evaluate trends across the supply chain. Fifth Quadrant conducted the online quantitative survey on behalf of the Commonwealth Bank between late January and the end of February 2024.
The full report can be accessed here.
