SMEs want greater investment in manufacturing to curb supply chain issues

Australian small and medium enterprises (SMEs) believe investment in local manufacturing is needed to revive the country’s ongoing supply chain challenges.

In a NAB report, 70 percent of respondents are eager to see a bigger investment in local manufacturing to aid the supply chain issues Australia is currently facing.

While Australian businesses continue their recovery from the global pandemic, supply chains remain a significant issue for SMEs with more than one in four citing supplies of stock as an issue for their operations.

For those businesses in wholesale, this same concern rises to 50 percent as they struggle to match their customer’s delivery expectations or manage their outgoing costs.

Andrew Irvine, NAB Group Executive for business and private bank said the research findings reflected what he was hearing directly from Australian businesses.

He said, “The topic of supply chains has quickly moved from a subject for the board room to something now discussed around most people’s kitchen table. We are all now intimately aware of how fragile our supply chains can be in the face of a natural disaster, health crisis or international incident.”

Irvine said investment in local manufacturing facilities together with strong transport infrastructure is critical to improving the country’s future resilience.

“We have a team of expert business bankers who specialise in supporting manufacturers and lending to the industry is up 15 percent in the last year to enable the domestic production of everything from farm fencing to coffee beans,” he said.

“We’ve also made sure that businesses who need to place forward orders to secure stock have been able to keep moving with working capital lent increasing by 36 percent over the last year.”

Australian businesses have proved to be ingenious in managing sudden supply chain challenges with 38 percent moving to a model where they have multiple suppliers for an item and 27 percent are investing in storage to hold more stock and raw products.

For the end consumer, the impacts of supply chain challenges are also apparent when they find an item is unavailable for purchase or find prices have increased to compensate for the businesses’ own costs. Around 3 in 10 Australian SMEs say they have had to raise prices because of supply challenges or are planning to do shortly.

Jo Fallshaw, managing director of Fallshaw Group, which designs and manufactures mobility equipment from Victoria said a strong manufacturing industry is important to Australia.

“The manufacturing industry has not only supply chain implications, but also employs so many people, making up 8 percent of our country’s workers,” Ms Fallshaw said.

“Manufacturing locally makes sense commercially and from an ethical point of view. Our customers are increasingly more demanding about the providence of their purchases, so manufacturing here in Australia means we can give them assurance that the item has been created in an environmentally responsible way by people who are being paid well for their work.”

The research showed that Western Australian businesses were experiencing the most significant supply chain issues at 35 percent followed by New South Wales at 24 percent, South Australia at 24 percent and Tasmania at 25 percent.

While supply chains are reported as a “significant” issue for almost one in two (47 percent) wholesale businesses, it has also been particularly problematic in manufacturing (44 percent), retail (37 percent) and construction (30 percent).