The latest data from inventory management software company, Unleashed, has shown the Australian manufacturing industry is restabilising after a long period of tumultuous supply chains, with food and beverage producers reporting a sharp rise in excess stock, after record lows at the end of last year.
Australia’s supply and freight networks have experienced significant setbacks over the past five years from the effects of COVID-19, geopolitical shifts, extreme weather events, and worker shortages – with the Australian government recently updating the National Freight and Supply Chain Strategy to help tackle the issue. The Australian Food & Grocery Council’s latest Supply Chain Survey Report showed nearly 80 per cent of surveyed companies reported experiencing moderate to large-scale supply chain disruptions. However, things are looking up, with Unleashed’s latest data suggesting the market is stabilising.
The Unleashed Manufacturing Health Index analyses over 1400 manufacturers across 12 sub-sectors in Australia, New Zealand, and the UK, to assess the overall health of the sector. The Q2 2025 report draws on data from every purchase, sale and stock movement made by each business in the study between Q1 2018 and Q2 2025.
After a record start to the year, independent food ($516,000) and beverage ($609,000) producers have maintained solid sales numbers in Q2. Both saw average quarterly revenue drop $50,000 from the opening quarter, but levels held well above Q2 2024.
Excess stock levels for beverage makers bumped up by almost 50 per cent QoQ, though only a relatively modest increase of 12 per cent compared to the same quarter last year. Food producers in particular will be monitoring excess stock levels carefully, with levels rising sharply from $30,000 in Q1 to $150,000 in Q2.
Average Q2 sales came in at $573,859, a marked dip of -10.2 per cent QoQ, but still representing a healthy rebound of 27 per cent YoY. Profit margins (excluding wages) for Australian manufacturers came in at 36 per cent, representing a negligible drop of -0.3 per cent QoQ and -0.6 per cent YoY.
Food manufacturing saw sales fall by $57,200 and margins drop 4.5 percentage points, likely due to higher freight and packaging costs combined with volatile commodity prices. Beverages also dropped by $55,800, but margins were up 2.6 percentage points, suggested to be caused by tighter price discipline or input relief.
The Q2 data showed a strong swing back to replenishment. Cautious confidence is being tempered by lengthening global supply chains, prompting more deliberate ordering strategies by manufacturers.
Lead days, which had been consistently trending downwards since the supply chain complications of the COVID period, registered their single largest quarter on quarter increase since 2020. The jump from 12 days to 25, reflects a more tumultuous global trade environment that has impacted supply chains. However, the 25 days is still within a normal range by historical standards.
Similarly, excess stock jumped considerably, nearly 3x up to $98,000, the largest quarter on quarter increase since 2020. The $98,000 in overstock is still below the threshold of concern for manufacturers.
Unleashed head of product, Jarrod Adam, said this year has been a tense standoff so far for Australian manufacturers.
“On one hand, the Reserve Bank has been bringing down interest rates, and there have been earnest efforts to onshore more Australian production of critical goods. On the other hand, tariffs have taken a hammer to many of our exports, and energy prices have bitten into margins,” said Adam.
“While lead days and excess stock are still within a normal range, the sheer velocity of their increases does raise questions. As trade conditions become volatile for Australian manufacturers, a focus on disciplined inventory management becomes all the more important.”
While revenues dipped amongst independent producers, there were bright spots ahead with purchase orders swelling from 177 in the opening quarter to 328 in Q2, the high water mark for the last two years.
