The tight market around local manufacturing for Australian SMEs is not expected to change in the next 12-18 months.
This is according to International Sourcing Expo Australia's (ISEA) global exhibition director Julie Holt.
She said that volume manufacturing is going to be “stymied generally” due to a reduction in production capacity.
“So that affects SMEs that might still want to put in volume runs,” Holt said.
“Everything is kind of inside the squeaky wheel - the person that's got the most money will obviously get those contracts confirmed and shipped, because there is a reduction in shipping capacity.
“Everything's more expensive because access to capital insurance might also impact some of the more traditional supply sourcing regions, and that suddenly might impede SMEs that may source from those countries.”
Holt continued saying that if SMEs have the capacity, then the costs can suddenly blow out.
“So that's all a challenge for SMEs who probably need to pivot and bring forward investments in their own production capabilities if that's something that I think has been considered at any point pre-pandemic.
“Or they need to look at nearshoring or just bringing their business or their production a bit closer.
“Or even, depending on what they do, instead of trading in finished goods, look into license, or they might just develop resilience through creativity and design, eCommerce and drop shipping.
“I don't think there's gonna be much of a change in the next 12 to 18 months.”
This advice comes as some SMEs voice concerns around local manufacturing. At Ragtrader Live this year, Henne founder Nadia Bartel said the few factories Australia has tend to focus on brands that offer large contracts.
“When you're a small brand, you're not going to be producing 2-3000 garments - you sort of focus in a couple of 100,” Bartel said. “So I think it's just they don't have the manpower behind them.
“They don't have the machinery, a lot of it's moved overseas.”
She said that some of the products Henne sells are very hard to produce in Australia, leading her to move much of Henne’s production overseas.
“You can call around, you can ask and you can try but no one is really helpful in a way,” Bartel explained. “Like the pattern maker doesn't talk to the factory, and it's just really hard to find an answer.
“A lot of the factories in Australia actually won't even take you on, so it was a very, very long process.”
This forced Bartel to launch her brand through manufacturing contracts with China.
“It was a bit heartbreaking when I had to move to China initially when I did try to do it in Australia for many years, but it's exciting now that obviously I've got a bigger team behind me and more money.. so I can hopefully move more and more to Australia again.”
Henne now produces much of its range through local manufacturing. And despite the expected higher price point, its consumer base are still willing to pay.
Ngali founder Denni Francisco also voiced her concern around local manufacturing challenges, saying that smaller brands are getting pushed out.
“Our lead times have extended, our prices have increased, minimum orders have increased,” Francisco said.
“It’s become more and more difficult. So now, we're having to look at the real possibility of manufacturing offshore.”
Indeed, with the market perception that being 100% Australian made is a viable goal for local businesses, Francisco said that this is not enough.
“Our business is about making a contribution and being a business for good – in terms of supporting our First Nations artists, supporting our kids’ education – so we have to build a viable, sustainable business in order to do that,” Francisco continued.
“And if we cannot do that in Australia, we still have to find a way to do that – so that we're still giving back and still making a difference.”
For smaller brands, Francisco said they must think beyond just being Australian made.
“And I know that people say they'd love things to be Australian made, but they probably also love that – through fashion – children's education can be improved, First Nations communities can improve.
“So you have to weigh that up, because just being Australian made right now is not enough.”