With the manufacturing sector continuing to grapple with uncontrollable industry pressures – rising input costs, supply chain volatility, tax pressures – manufacturers must arm themselves with the core financial structures needed to support them through this predictably unpredictable environment.
While the recent Federal Budget announcements put a focus on stimulating innovation and investment for manufacturers, they also put an emphasis on how manufacturing business leaders forward plan their governance, cash flow and overall business structures for the long-term.
Amid a challenging period for the manufacturing sector, it’s critical manufacturers take steps to lock-in their long-term vision and invest in training pathways for the next generation.
Long-term forecasting and budgeting
Long-term planning can often feel like a bit of an educated guess, but by laying strong foundations in the short-to-medium term, manufacturers can facilitate lasting success and sustainability for their operations.
Allocating time to long-term forecasting and forward budgeting may seem like a luxury when day-to-day business operations are so demanding and time-consuming, but it will set businesses up to enter the new financial year with a clear understanding of what their capital requirements are going to be.
Commonly, we see manufacturers operating with a six-month vision, and while we acknowledge it can be difficult to forward plan when rapidly changing business conditions are affecting capital expenditure, the recommended time frame for this vision is a minimum of 24 months.
Businesses must ensure they have working capital to navigate the food and beverage industry’s natural seasonality, so if things get challenging in the short term, they can draw on the necessary reserves to weather these periods.
This has been brought sharply into focus over the first half of this year, rising input costs impacting the production of crops that supply the food and beverage sector. Adequate reserves have been essential in keeping many businesses afloat.
If not carefully considered and sequenced within broader cashflow cycles, capital expenditure can place strain on reserves. Manufacturers will benefit from a well-designed long-term plan that includes strategies for improving productivity and operational efficiencies through the acquisition or upgrading of facilities and equipment. Inherent in this plan is the early connection and clear communication with financial institutions to facilitate the necessary capital to grow, sustain and succeed operationally.
Training pathways for the next generation
A broad investment into the future manufacturing workforce is essential to ensure a robust and nimble education pathway that remains directly relevant to Australia’s manufacturing industry.
In practice, this could look like a shift away from generalised engineering degrees towards micro-credentials for those looking to step into the industry. The ability to use robotics and CNC machinery are emerging as high-value skills in manufacturing employees.
A significant challenge on this front though, is Australia currently lacks the educational framework to roll this out on the scale required to keep up with industry demands.
There are pockets around the country where mechatronics education is offered, but these are largely concentrated in metro areas. With most manufacturers operating in suburban or regional areas, access to these training pathways is not easy to come by.
Historically, there has been a reliance on migrant labour to fill the skilled manufacturing roles in regional areas, but now that businesses are being encouraged to embrace automation, they are facing the problem of a lack of human capital to operate the required machinery.
To combat this, businesses can look to internal training programs to invest in the growth of their existing employee base.
With the new financial year comes an opportunity for manufacturers to reflect on and assess how to best position themselves for the coming 12 months.
It will likely be a time defined by the same global volatility that has rattled the sector for the past year, but with forward planning, long-term budgeting and targeted training pathways for the next generation of workers, Australian manufacturers can thrive.
Ross Dixon is a Partner in the Albury Business Advisory division for RSM Australia, one of Australia’s leading professional services firms. Ross is also a part of RSM’s National Manufacturing Sector. Manufacturers can reach him via email.
