Manufacturing At The Halfway Point: Where Industry Trends Stand

Introduction: An honest mid-year check  

With more than 30 years supporting the entrepreneurial spirit, we know the importance of amplifying our customers' voices. It's your wants, your needs, and your ambitions that drive us to build industry-specific ERP solutions. 

When you spend that much time in conversation with owners and operators, you start to hear the things that occupy their minds long after the clock punches out. The margin that doesn't quite add up. The key person who's about to retire and take thirty years of knowledge with them. The supplier who went quiet. Those conversations don't stay on the shop floor; they follow people home. And they follow us back to the drawing board. 

That's why, every year, we take a moment to put our finger on the pulse of Australian manufacturing and publish our Trend Report: A look at the trends we see shaping the year ahead and how businesses like yours can get ahead of them. 

What makes this report different? 

We saw the opportunity to revisit our previous predictions halfway through the year, because the manufactures we work with deserve honest answers. So, we went back through the data. We looked at what held up, what we underestimated, and what we missed entirely. We gathered our findings and put them in this report, so you don’t have to do any of the research yourself.

A note on our approach: As we sit at mid-year, full 2026 year-end data isn't yet available. Where we cite 2025 comparisons, we're using them to track momentum into 2026. Alongside those trends, our observations are grounded in direct conversations with employees and owners across the sector. 

Inside this briefing 

• Four trend pillars revisited: Digital, workforce, supply chain & sustainability, cybersecurity 
• AI in manufacturing: Enthusiasm vs. verified adoption 
• Trends we missed: Profitability squeeze, policy filters, WFM sequencing, sovereign capability 
• New Zealand spotlight: Four refreshed recommendations for H2 2026 

Prediction 1: The digital shift  

Results: That prediction held. 

Ninety-percent of global manufacturers now view digital tools as a baseline operational requirement, a shift from previously seeing it as a competitive edge. Sixty-percent of those actively using smart capabilities in daily operations, while 18% remain stuck in pilot mode. Additionally, in a global survey of manufacturers, the ERP software market grew from USD 1.65 billion in 2025 to USD 1.91 billion in 2026, an indicator that business owners are increasingly aware of their need to modernise, while 61% of manufacturers say they intend to increase digital spending in general. 

Digital ambition was real, and the spend is following. It’s important to note that the current gaps lie during execution. Legacy system integration is still the slowest part of most programmes, and high energy costs are squeezing the profits available for the next wave of investments. 

Another important block is that organisational resistance (the human side of change) continues to be a bigger drag than most technology roadmaps admit. Cloud platforms that look clean in a demo are expected to easily talk to ageing shop-floor systems that were never designed for them. 

The good news is that the government has taken note and has thrown real weight behind this too. The AUD$22 billion Future Made in Australia agenda and DISR Industry 4.0 Testlabs are giving manufacturers real support to modernising and funding routes. Unfortunately, money and policy can't solve integration debt or change fatigue on their own.  

The practical takeaway at mid-year: The manufacturers pulling ahead are the ones who have successfully connected sales, operations, inventory, and finance into a single system, allowing them to see true job costs without opening three spreadsheets. 

What the data says at mid-year 

• 90% of global manufacturers treat digital tools as a baseline requirement
• 60% of global manufacturers use smart capabilities daily; only 18% remain in pilot phase
• Australian ERP market: USD 1.65B (2025) → USD 1.91B (2026)
• 61% of manufacturers globally plan to increase digital spending
• Primary friction: legacy integration, energy costs, organisational resistance 

Prediction 2: The workforce challenge 

Results: Accurate, but not the full picture. 

Seventy-one percent of manufacturers report skills shortages negatively impacting productivity and growth. Technical and trade roles make up 28% of the manufacturing workforce, a number that more than doubled in the economy-wide average. In food and grocery manufacturing, more than 40% of the workforce faces retirement over the next decade, rising to 60% in roles such as forklift drivers.

That part of the prediction was right. What we did not fully call was the nuance underneath the headline. 

Beneath the headline, the pressure is unevenly distributed. Skill Level 3 roles, which include the technicians and tradespeople manufacturing relies on most heavily, recorded a vacancy fill rate of just 54.3% in the September 2025 quarter, the lowest of any skill tier and well below the national average of 70.2%. The shortage is less of a blanket crisis, like we predicted, and more a structural gap concentrated in the exact technical trades manufacturers cannot easily replace or retrain. 

The more important story emerging at mid-year is what we are calling the “automation sequencing problem.” Manufacturers are investing in shop-floor automation like robots, sensors, connected machines, while still running rostering, timesheets, and labour cost tracking on paper or spreadsheets. That creates a dangerous blind spot. You can have a highly automated line and still have almost no real-time visibility into labour cost, attendance, skills coverage, or award compliance. Generative AI is starting to augment roles and raise the bar on digital literacy, but it does not fix a broken sequencing decision. 

What the data says at mid-year 

• 71% of manufacturers say skills shortages are hurting productivity
• 40% of food and grocery manufacturing workers face retirement this decade
• Overall occupational shortages eased: 36% (2024) → 29% (2025)⁹ 
• Technical Skill Level 3 fill rate still only 54.3%
• National vacancy fill rate reached 70.2% by September 2025 
• Core risk: automated production paired with manual workforce management 

Prediction 3: Supply chain & sustainability 

Results: This shift has happened. 

The Australian supply chain management market is projected to reach roughly USD2.28 billion by 2034. Sustainability has moved from voluntary ESG narrative to procurement gate. The federal Environmentally Sustainable Procurement Policy now requires sustainability compliance for government tenders. This means if you want public-sector work, you need the data to prove you can meet the standard. 

Where the mid-year picture is tougher than we framed it: Output recovered, but profitability did not keep pace. Manufacturing output returned to 1.2% growth in the year to December 2025, reversing 2024 contractions. At the same time, input cost inflation across energy, freight, and raw materials has crushed margins and restricted profits. 

Sovereign capability has also sharpened as a commercial filter. Defence, healthcare, and energy buyers are actively prioritising Australian-made suppliers. This is a growth lane for SMB manufacturers who can prove consistent delivery, traceability, and cost control. Hidden freight costs, landed-cost surprises, and material variance are exactly the kinds of leaks that surface once ERP visibility is in place. 

Sixty-four percent of businesses initiated carbon reduction projects in 2025. Many are blocked from following through by physical infrastructure limits—plants that cannot support solar, battery, or grid upgrades without major capital works. The ambition is there, but assets have not caught up.  

What the data says at mid-year 

• Lean-to-resilient shift is now permanent operating practice 
• Government tenders now require sustainability compliance data 
• Supply chain management market projected at ~USD 2.28B by 2034
• Lean-to-resilient shift is now permanent operating practice 

Prediction 4: Cybersecurity  

The result: Correct, but on a much larger scale than we originally reported. 

Forty-six percent of manufacturers globally experienced a cyber incident in the past year. Industrial ransomware attacks surged 87% in the year to 2025, with manufacturing alone accounting for roughly 65% of all recorded incidents. Twenty-five percent of those incidents caused full site shutdowns and 75% caused some form of operational impact. Ransom-induced downtime is costing manufacturers an average of $1.9 million per day—losses that often exceed the ransom demand itself. These are not abstract industry figures, they’re fact. No one thinks an attack will hit their shop until it does. 

What the original report underweighted was the legislative wave that followed. The Cyber Security Act 2024 introduced mandatory 72-hour ransomware payment reporting for businesses earning AUD$3 million or more, effective 30 May 2025. Mandatory smart device security standards follow from March 2026. The expanded Security of Critical Infrastructure (SOCI) Act now covers eleven sectors, including food, grocery, energy, and water, and requires Critical Infrastructure Risk Management Programs. Privacy Act penalties can reach AUD$50 million or 30% of turnover.

Specialised threat actors are actively exploiting OT/IT convergence. Network segmentation standards such as ISA/IEC 62443 are moving from best-practice guidance to practical necessity. Cybersecurity is becoming a legal compliance obligation with board-level consequences. 

For SMB manufacturers, the uncomfortable mid-year truth is this: If your incident response plan has not been reviewed against the new reporting thresholds, and if your OT environment still trusts the same flat network it did two years ago, you are already behind the regulatory curve, not just the threat curve. 

What the data says at mid-year 

• 46% of Australian manufacturers had a cyber incident in the past year
• Industrial ransomware attacks up 87% in 2025; manufacturing = ~65% of incidents
• 25% of incidents caused full site shutdowns; avg downtime ~USD$1.9M/day
• Cyber Security Act 2024: 72-hour ransomware payment reporting ($3M+ revenue)
• Expanded SOCI Act covers 11 sectors including food, grocery, energy, water
• Privacy Act penalties: up to $50M or 30% of turnover

AI in Australian manufacturing: Enthusiasm is high, reality is messier 

In 2026, we asked SMB leaders for their views on AI. The original survey pointed to high AI enthusiasm among manufacturers with roughly 75% believing AI could improve efficiency and around 40% saying they use AI daily or weekly. Those figures reflect a genuine sentiment, but do not match the measures of actual adoption. 

The ABS Business Characteristics Survey for 2024–25 puts AI adoption at 12% across all Australian businesses, and 11% for small and micro firms. Broader industry surveys, depending on how loosely they define AI use, land somewhere between 29% and 44%. Mid-market firms (20–199 employees) show higher uptake, around 68% in some studies; micro-businesses sit closer to 33%. None of these stats point to a sector that has already operationalised AI at scale. 

Dig into maturity and the picture gets clearer. Roughly 60% of AI adopters are basic users, using AI for summarisation, documentation, and consumer-grade tools. Only about 5% are fully enabled with strategic, data-integrated workflows. Investment is not imaginary: business AI R&D expenditure surged 142% in 2023–24 to AUD$668.3 million, and the DISR National AI Plan (December 2025) has added policy weight. However, capital barriers in physical manufacturing are real, and the number-one adoption barrier remains lack of trust and a desire for human control, cited by 65%.

What manufacturers actually want is not another standalone AI product bolted onto a messy data estate. They want AI embedded inside systems they already trust, with manufacturing-specific logic, human-in-the-loop controls, and wins that show up in hours saved on reporting, documentation, and admin, not in a transformation roadmap that never leaves the whiteboard. That is the Practical AI opportunity for the rest of 2026. 

What the data says at mid-year 

• 12% AI adoption across Australian businesses; 11% for small/micro firms
• Industry surveys (looser definitions) found roughly 29–44% SMB AI usage 
• ~60 % of adopters are basic users; only ~5% are fully enabled 
• Business AI R&D spend up 142% in 2023–24 to AUD$668.3M
• Top barrier: lack of trust / desire for human control (65%)
• Demand signal: AI inside trusted systems, not bolted-on tools 

What we didn't see coming: Emerging trends worth watching 

Four pressures that were underweighted or absent in the original report that now matter for every planning conversation in the second half of 2026. 

The profitability squeeze 

Output is recovering, but margins are being crushed. Input cost inflation across energy, freight, and raw materials is restricting capital for digital projects, even among manufacturers who want to invest. Visibility into true job costs (labour, materials, freight, variance) has never mattered more. Growth without margin is not a strategy. 

Government policy as a competitive force  

The AUD$22 billion-plus Future Made in Australia agenda, the National Reconstruction Fund, and mandatory sustainability procurement rules are reshaping where manufacturers can win work. Those without ERP-backed compliance, traceability, and sustainability data are being locked out of government and prime-contractor supply chains.

The WFM sequencing blind spot 

Automating the shop floor while maintaining manual workforce management creates legal and financial exposure around awards, attendance, and labour cost. This is the missing link most SMBs have not addressed yet and it sits directly between productivity gains and the ability to prove them. 

Sovereign capability focus 

Defence, healthcare, and energy sectors are actively prioritising Australian-made supply. That is a genuine growth opportunity for SMB manufacturers with the operational maturity to prove they can deliver consistently, on cost, with the quality and traceability buyers now expect. 

New Zealand spotlight 

A shorter read for a market we serve with similar pressures, and a few sharper edges. New Zealand manufacturing is on a parallel path, with a few important differences in pace and posture. 

Forty percent of NZ manufacturers were actively implementing Industry 4.0 technologies in 2025 — up 11 percentage points since 2023. Food and Beverage manufacturers are leading this charge, supported by Callaghan Innovation's Industry 4.0 Demonstration Network.

Digital ambition is real, but so is the productivity gap: NZ manufacturing labour productivity sits at roughly 54% of US levels. Digital tools and fit-for-purpose ERP remain the clearest practical path to closing that gap. 

On AI, NZ SMEs show a wider adoption lag than their Australian peers. Sixty-eight percent of NZ SMBs report no plans to evaluate or invest in AI, compared with 38% in Australia. Larger NZ enterprises are further ahead with about 67% actively using AI. This widens the SME gap. NZ's national AI strategy, Investing with Confidence, emphasises practical application and human-in-the-loop requirements over foundational model building. That cautious pragmatism will sound familiar to Australian manufacturers who want useful tools, not hype cycles. 

Cybersecurity is accelerating fast. Fifty-three percent of NZ SMEs experienced a cyber threat in the first half of 2025, up from 36% in 2024, with average breach costs around NZD$173,000. Cybersecurity is becoming a present operating cost globally. 

For manufacturers selling into or operating across both markets, the same fundamentals apply: connected operations, workforce visibility, resilient supply chains, cyber hygiene, and practical AI, with NZ needing particular care on SME-scale adoption support and productivity lift. 

NZ at a glance 

• 40% of NZ manufacturers implementing Industry 4.0 in 2025 (up 11 pts since 2023) 
• 68% of NZ SMEs have no plans to evaluate AI (vs. 38% in Australia)
• 53% of NZ SMEs hit by a cyber threat in H1 2025 (up from 36% in 2024)
• Average NZ breach cost ~$173,000
• NZ manufacturing labour productivity ~54% of US levels

Where to focus for the rest of 2026:

Our original trend report closed with actions. At the mid-year mark, this is much tighter, more urgent, and grounded in what has come to be from the end of 2025 and into 2026. 

1. Stop planning, start connecting 
   The window for endless pilot projects has closed. Manufacturers still evaluating ERP while peers generate real visibility into costs, margins, and capacity are falling behind in ways that compound every quarter. Connect the core and make true job cost visible. The time to act is now. 
2. Fix the sequencing problem 
   If you have automated your shop floor, but workforce management still lives on paper or spreadsheets, you have a blind spot that is costing you money and creating compliance risk. Connect labour data to production data before you add more technology. Automation without workforce visibility is not a full system. 
3. Treat cybersecurity as a legal obligation, not just a risk 
   The Cyber Security Act 2024 and the expanded SOCI Act have changed the compliance landscape. If your business earns AUD$3 million or more and you have not reviewed your incident response plan, ransomware payment reporting process, and OT/IT segmentation, you need to once you finish reading this report. This is board-level accountability, not an IT tidy-up. 
4. Start your AI journey where it earns trust 
   Do not try to implement AI everywhere at once. Start with documentation, reporting, and administrative tasks where wins are fast and visible. Build from data you already have inside your ERP. Keep a human in the loop. Practical beats ambitious every time, and trust is the scarce resource, not algorithms. 

Closing 

Mid-year is a useful moment for manufacturing leaders because it forces a clearer question than January ever does: what did we believe, what actually happened, and where should attention go next? 

The forces we named at the start of 2026 are still the right forces. Digital is baseline. Workforce pressure is structural and sequencing-sensitive. Resilience and sustainability are procurement gates, not posters. Cyber is a legal obligation. AI is real, but mostly still shallow. Around those pillars, the profitability squeeze, policy filters, and sovereign demand are reshaping who wins work. 

None of that requires a five-year transformation. It requires connected systems, honest visibility, and a bias for practical next steps. That is the work of the rest of 2026. 

About ECI Solutions 

ECI Solutions provides manufacturing-specific ERP and business software for Australian and New Zealand SMBs. We work with owners and operators who need real visibility across production, inventory, workforce, and finance—without enterprise complexity. Our job is to help manufacturers run tighter, see clearer, and grow on purpose.