Manufacturing

What is Manufacturing?

Manufacturing refers to a large-scale production of goods using labour and machines, tools, chemical and biological processing, or formulation. The finished goods can be sold to other manufacturers for the production of other, more complex products, or sold to wholesalers, who in turn sell them to retailers, who then sell them to end users and consumers. Raw materials are transformed into finished goods on a large scale. Items used in manufacture may be raw materials or component parts of a larger product. The manufacturing usually happens on a large-scale production line of machinery and skilled labor.

Types of Manufacturing Processes

Manufacturing is a very simple business; the owner buys the raw material or component parts to manufacture a finished product. To function as a business the manufacturer needs to cover costs, meet demand and make a product to supply the market.

A factory operates one of three types of manufacturing production:

  • Make-To-Stock (MTS) – A factory produces goods to stock stores and showrooms. By predicting the market for their goods, the manufacturer will plan production activity in advance. If they produce too much they may need to sell surplus at a loss and in producing too little they may miss the market and not sell enough to cover costs.
  • Make-To-Order (MTO) – The producer waits for orders before manufacturing stock. Inventory is easier to control and the owner does not need to rely as much on market demand. Customer waiting time is longer though and the manufacturer needs a constant stream of orders to keep the factory in production.
  • Make-To-Assemble (MTA) – The factory produces component parts in anticipation of orders for assembly. By doing this, the manufacturer is ready to fulfil customer orders but if orders do not materialize, the producer will have a stock of unwanted parts.

All three types of manufacturing businesses have certain risks involved. Producing too many goods leads to financial losses as money is tied up in unwanted stock; producing too little means not meeting the demand, which can cause the customer to turn to competition and induce a drop in sales for the manufacturer.

To reduce the risks, any type of manufacturing business should focus on keeping production costs low, maintaining good quality control and investing in excellent sales management.

What is a Manufacturing Business?

A manufacturing business is any business that uses raw materials, parts, and components to assemble finished goods. Manufacturing businesses often employ machines, robots, computers, and humans to produce the merchandise and typically use an assembly line, which enables a product to be put together step by step, moving from one workstation to the next.

Manufacturing businesses can choose to sell their products directly to consumers, to other manufacturers, to distributors or to wholesalers. A manufacturing business may need many parts for the complicated assembly of a quality product or just the few for making a simple good.  Keeping production costs to a minimum, having good quality control and excellent sales management are key to reducing the risk in any type of manufacturing.

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