The stockpile is over: why Australian businesses are rethinking the role of inventory

There is no one-size-fits-all inventory strategy

Data from Unleashed's Manufacturing Health Index on 1,578 SME manufacturers across the UK, Australia and New Zealand, shows that revenue, margins, inventory and ordering behaviour are moving in ways that do not necessarily follow the script.

Construction is facing a significant downturn, yet some businesses serving the sector are maintaining margins. Personal care is growing despite the broader cost squeeze. Within the energy sector, businesses operating in the same broad market are reaching very different conclusions about how much stock they need to hold.

This is important because there is no single manufacturing economy in 2026.

There are thousands of individual businesses making different decisions based on their customers, supply chains, product mix and appetite for risk. That makes blanket inventory strategies increasingly difficult to justify.

A business that relies on imported components with long and unpredictable lead times may need a very different stock buffer from one sourcing locally. A business supplying a volatile construction market should not necessarily manage inventory in the same way as a business experiencing sustained growth in personal care.

From stockpiling to smarter decision-making

The common thread is visibility. When conditions are stable, businesses can afford to make decisions based on historical patterns, spreadsheets and assumptions about supplier lead times. When conditions change rapidly, those assumptions become dangerous.

Businesses need to know what is actually moving, what is sitting on shelves, what has been ordered, what customers are buying and where cash is tied up. They need to be able to distinguish between inventory that protects revenue and inventory that simply consumes working capital.

The 60% fall in average Stock on Hand should therefore be seen as both a warning and an opportunity. It is a warning that businesses cannot afford to let inventory levels drift upwards simply because uncertainty makes it feel safer to have more stock. It is also an opportunity to rethink inventory as a strategic lever rather than a cost of doing business.

The businesses best positioned for the next phase of uncertainty will not necessarily be those holding the biggest warehouses, nor will they necessarily be those carrying the leanest inventories. They will be the businesses capable of making informed decisions about why they are holding every unit of stock. That means moving beyond the old choice between stockpiling and running lean. The smarter approach is dynamic; continually adjusting inventory to reflect real demand, supplier reliability, cash-flow pressures and changing market conditions. For Australian businesses, getting that balance right has never been more important.

The dramatic fall in inventory tells us that businesses are already acting. The next question is whether they have the visibility and control to make sure they are cutting the right stock - and freeing up cash without cutting into their ability to grow.

In an uncertain economy, resilience is not about having more of everything. It is about knowing exactly what you need, when you need it, and why.