Australian manufacturers cut stock as sales revenue falls

Australian manufacturers cut average stock on hand to AUD $185,134 in the second quarter, according to data from Unleashed. That was down 60% from AUD $462,735 a year earlier.

Inventory levels also fell 11% from the first quarter, suggesting businesses continued to reduce stock holdings after building larger buffers last year.

The findings were drawn from anonymised records across hundreds of Australian manufacturers. Unleashed said the shift reflected efforts to free up cash tied up in inventory as imported raw materials and components became more expensive.

The drop in stock holdings came alongside weaker sales revenue. Average sales revenue across all industries fell to AUD $385,395 in the second quarter, down 33% from AUD $573,859 a year earlier.

Together, lower inventory and softer revenue point to a tougher operating environment for manufacturers, which are balancing the need to preserve cash against the risk of running too lean on key product lines.

Internal pressures

Jarrod Adam, Head of Product at Unleashed, said many of the most immediate inventory problems were tied less to external disruption than to internal systems and planning decisions.

"Global uncertainty isn't going away, but manufacturers don't have to be at the mercy of it. The businesses performing strongest today are the ones focusing on the operational levers they can control," Adam said.

He added that inventory settings often left unchanged after software implementation can create purchasing and stock management problems over time.

"Inventory should be one of your greatest competitive advantages, not a hidden liability. When supplier lead times aren't configured correctly, businesses risk making purchasing decisions based on outdated or inaccurate information, leading to costly stockouts, excess inventory and unnecessary pressure on cash flow," he said.

The comments reflect a wider issue for manufacturers that have spent the past several years adapting to shipping delays, price volatility and uneven demand. While those conditions encouraged many businesses to build safety stock, the latest figures suggest some are now reversing that approach.

For finance teams, inventory remains one of the largest uses of working capital. Carrying too much stock can tie up funds and increase storage costs, while carrying too little can disrupt customer fulfilment and leave businesses exposed when supply conditions shift.

Working capital

Adam said the central challenge was not simply holding less stock, but holding it more accurately and with clearer visibility over commercial risk.

"Environmental factors can quickly affect input costs and margins, so purchasing may need to be more conservative, supply contingency needs to be built in, and stock decisions should be backed by accurate, real-time data. The businesses that perform strongest are the ones that understand where stockouts will have the biggest commercial impact and manage those risks deliberately," he said.

The data suggests businesses are reassessing where to commit capital at a time when margins are under pressure. Manufacturers that stocked heavily to protect themselves during periods of disruption may now be questioning whether those higher inventory levels remain justified.

At the same time, reducing stock can expose weaknesses in planning processes. Poor forecasting, weak inventory visibility and inaccurate supplier lead times can all lead to ordering mistakes, especially when businesses are trying to free up cash quickly.

Adam said some changes can be made without large spending commitments.

"Something as simple as reviewing supplier lead times can have a significant impact on purchasing accuracy, customer fulfilment and cash flow. It's one of those operational improvements that doesn't require major investment but can deliver meaningful business outcomes," he said.

Safety stock

The second-quarter figures indicate manufacturers are moving away from the large safety-stock positions many adopted when supply chains were under heavier strain. That does not remove the need for contingency planning, particularly for products that account for a disproportionate share of revenue.

Businesses with high-revenue items may still need to protect supply more carefully than the averages suggest, especially if shortages in a small number of lines can have an outsized effect on turnover and margins.

Adam said the next phase for manufacturers was to improve the quality of their inventory data and purchasing decisions.

"We've seen many manufacturers move away from the large safety-stock buffers they built during periods of uncertainty. The next step is making sure every purchasing decision is backed by accurate data so businesses can remain agile without increasing risk. There will always be global events outside a business's control. The manufacturers that will thrive are those that invest in the operational disciplines they can control, from accurate forecasting and supplier management through to inventory visibility and planning," he said.