What is Manufacturing? (Definition, Types and Examples)

Table of Contents0.1 1. Make-To-Stock (MTS)0.2 2. Make-To-Order (MTO)0.3 3. Make-To-Assemble (MTA)1 Related Frequently Asked Questions (FAQs) Manufacturing has existed for centuries and was originally carried out by skilled artisans, sometimes working with assistants, with the skills being passed down through apprenticeships. Manufacturers may have joined guilds who would protect the trade secrets […]

Manufacturing has existed for centuries and was originally carried out by skilled artisans, sometimes working with assistants, with the skills being passed down through apprenticeships. Manufacturers may have joined guilds who would protect the trade secrets and privileges of these artisans. Alternatively, manufacturing could take place on a less organised scale, often in rural areas, where craftspeople would supplement agricultural subsistence through home-based manufacturing. These manufacturing households were sometimes organised into joined-up enterprises through the putting-out system.

However, this early manufacturing system changed with the introduction of the factory system in Britain at the beginning of the industrial revolution in the late 18th century. This system took advantage of technological advances and used machinery powered by water, steam and, later, electricity allowing for large-scale production. 

The assembly line method of manufacture was described by Adam Smith in The Wealth of Nations, which introduced the concept of the division of labour. This meant that different people would each take just one part of a manufacturing process, for example cutting the wire for a pin, to create a more efficient and cost-effective process. Mechanisation and later automation drew on this concept to create highly repeatable manufacturing.

Rather than a single artisan producing an entire product as had occurred for centuries in the past, manufacturing was broken down into separate parts to create the basis for modern manufacture as we know it today.

At it’s core, manufacturing is a simple process; the raw materials or component parts are bought and then turned into a finished product. However, in order to succeed, the manufacturer needs to be able to cover the cost of making the product, meet demand and create a product that is desirable to the market.

There are three types of manufacturing production process; make to stock (MTS), make to order (MTO) and make to assemble (MTA).

These three manufacturing types work as follows:

1. Make-To-Stock (MTS)

In this system a factory produces goods that are held in stock at stores and showrooms. This means that a market for the goods needs to be predicted so that the items can be produced in advance ready for the consumer. However, producing too much can mean that surplus stock needs to be sold at a loss while producing too little may mean the market is missed and costs aren’t covered by sales.

2. Make-To-Order (MTO)

The make to order method allows the manufacturer to wait until orders are received before production begins. This makes it much easier to manage inventories and react to market demand. However, customers will need to wait for their products to be produced and the manufacturer will need a steady stream of orders to keep the factory in production and profitable.

3. Make-To-Assemble (MTA)

This method is similar to make to stock, except the factory will produce component parts in anticipation of orders for assembly. This means that the manufacturer is ready to fulfil customer orders as they arrive, but can leave the manufacturer with a stock of unwanted parts if there is no demand.

As shown above, all of these types of manufacturing have their own risks related to supply and demand. Produce too much and the market will be flooded, leading to a drop in prices and profit. Produce too little and the customer will go elsewhere and meaning that potential profit is lost. Quality control is also an important aspect of any manufacturing process in order to protect the image of your brand and products.

A successful manufacturing business requires a good mix of sales management, stock management, quality control and production costing.

Manufacturing is defined as the creation of new products, either from raw materials or components. Examples of manufacturing include automotive companies, bakeries, shoemakers and tailors, as they all create products, rather than providing services.

However, for example, logging or mining are not manufacturing, as they do not change goods into new products. Construction, while seemingly a manufacturing process, is actually its own category and not considered a facet of manufacturing either.

Manufacturing jobs can cover a wide range of skills, including assemblers, bakers, dental and medical appliance technicians, food processors, jewellers, metal workers, machinists, printers, quality controllers, tailors, upholsterers, welders, cutters and woodworkers.  

Manufacturing processes are changing along with the skills required to undertake them. With more cost-effective methods being sought out and increasing automation in manufacturing, the number of jobs in this sector are expected to decline. However, those that remain are likely to be more specialised and highly paid.

Increasingly sophisticated technology means that manufacturing will require staff skills and training to manage, while new materials and processes are changing particular industries. Nanotechnology is changing electronics production while lighter materials like aluminium and carbon fibre has changed the automotive industry. Elsewhere, pharmaceuticals are being revolutionised by bio-engineering and 3D printing allows for the creation of bespoke specialised components for industries like aerospace and medical. As robots become more sophisticated many manufacturing processes are being automated while big data allows manufacturers to analyse and target customer needs to guide product development.

Manufacturing is not only important in producing and delivering goods to the marketplace, but it is also important for economic reasons. In the United States, for example, manufacturing makes up 15% of the economic output. The mass production of items can provide a real boost to an economy, which can be measured by ‘manufacturing value added (MVA)’ indicators. These compare the manufacturing output to the size of the overall economy to create a percentage of gross domestic product (GDP).  The figures for manufacturing employment, inventories and orders are examined by manufacturing institutes, such as The Institute for Supply Management (ISM), whose reports inform financial analysts and researchers.

Manufacturing continues to be an import aspect of industry, not just to provide goods for the marketplace, but also to drive the economy. As manufacturing processes continue to advance, so the skills required have also developed, with this trend set to continue in the future.

Manufacture requires a careful balance of supply and demand, whether through making items for stock, for order, or for assembly, as well as an ability to read the demands of the marketplace.

Manufacturing has been an integral part of society for centuries and this looks to continue for as long as humans need products ranging from food and clothes to vehicles and pharmaceuticals.

Related Frequently Asked Questions (FAQs)

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