A mass clearance of stock signals a strategic shift to cash preservation, as NZ manufacturers prioritise profitability over volume, clearing inventory by nearly 40 percent since the previous quarter.
The warehouses of Kiwi manufacturing facilities are at their emptiest since mid-2020, with huge priority being placed on lean profitability, according to new data from inventory management software provider, Unleashed.
The average small to medium sized manufacturer cut excess stock by 39.6 percent to $160,000 in the quarter ending September 30, while simultaneously lifting profit margins by 3.8 percentage points in Q3. The data reveals a sector in decisive pivot mode. Faced with challenging market conditions, manufacturers abandoned 'stock on hand' strategies, in favour of lean operations focused on freeing up capital.
The figures appear in the latest manufacturing report from inventory management specialist Unleashed. Unleashed is an inventory management software platform popular with small and mid-sized manufacturers; its quarterly report is based on data from more than 1000 New Zealand firms using the software, across manufacturing categories such as food and beverage, clothing and fashion, and construction.
"It's been a tough eighteen months, particularly for retailers, but we're now seeing a modest recovery in market demand for the first time, which is hugely encouraging," said Tim Deane, owner at Norsewear, a New Zealand clothing manufacturer that markets across Australia and New Zealand. "We need a sector-wide strategy to lower energy costs and better implement the use of technology to improve productivity."
The report, which also assesses the manufacturing health of UK and Australia, confirms supply chain normalisation after lengthy delays in Q2, with lead times across all manufacturers trimmed by 30.4 percent to 16 days, matching the same quarter of the previous year. This stability has enabled the sector's strategic pivot to just in time operations without compromising customer service levels—a stark contrast to the supply chain chaos experienced during peak pandemic periods.
“With the economy stagnant or potentially going sideways, our Kiwi producers are taking a staunchly conservative approach to their stockholding,” said Unleashed Head of Production & Distribution Jarrod Adam “Especially with supply chains normalising, they've had the confidence to clear warehouses and free up cash rather than gamble on demand that may not materialise"
"The story here is survival," said Adam. "Revenue has been pressured across most sectors, but manufacturers have protected margins through discipline—cutting costs, focusing on higher margin products, and running the leanest operations on record. It's tough going, but it's smart management."
Brewers clear warehouses to historic lows
The beverage sector led the inventory drawdown, slashing stock holdings by more than half this quarter, from $214,726 to $102,193, the lowest level in Unleashed’s records. The sector is navigating sustained demand weakness as discretionary consumer spending remains under pressure. However, despite revenue falling 26 percent in the quarter, Kiwi brewers grew margins from 24.43% to 27.08%, demonstrating disciplined cost control.
Food sector doubles margins despite revenue collapse
Food producers achieved the most dramatic margin recovery, nearly doubling profitability from 20.55% to 30.71% in the quarter ending October 1, despite a hefty 39.4% revenue decline.
Facing significant headwinds from cost of living pressures and reduced consumer spending on premium local food products. The sector's large 49.4% margin improvement suggests firms successfully implemented pricing adjustments and shifted toward higher margin product lines.
Kiwi construction builds margins as projects dry up
The construction sector faced significant headwinds with revenue falling 31.8% in the quarter ending October 1, yet grew margins by 41.1% while cutting inventory by 28.4%.
Navigating the lagged impact of elevated interest rates on residential building activity and employment cuts, the sector more than halved purchase order values as firms shifted from anticipatory ordering to demand matched procurement.
About the Manufacturing Health Index
The Manufacturing Health Index assesses SME manufacturer performance via a big data approach. Drawing on anonymised, aggregated transactions from Unleashed using manufacturers in the UK, Australia and New Zealand, the dataset spans Q1 2018 to Q3 2025 and tracks sales revenue, gross margin percentage, purchase orders, lead times, and stock on hand.
About Unleashed Software
With more than 950 five star reviews on Trustpilot, Unleashed is the cloud inventory solution trusted by manufacturers worldwide. Learn more about how Unleashed can help your business better manage sales, production, purchasing, and forecasting at unleashedsoftware.com
