Manufacturing: types, examples and risks (2023)

From phones to clothing to vehicles, manufacturing turns raw materials into products using machines. Different manufacturing styles meet different needs, whether it's small batch custom production or fully automated factories running 24 hours a day. Modern manufacturing has been made possible by technological advances, and technology continues to transform manufacturing operations around the world.

What is manufacturing?

Manufacturing is the process of converting raw materials and components into tangible products using machinery, usually by volume. Manufacturing makes it possible for an inventor's idea to complete the journey to become a consumer's favorite device. An optimized manufacturing process can mean the difference between success and failure for any product.

What is a manufacturing company?

A manufacturing company is any company that uses raw materials or components to create finished products.manufacturing companiesWe make most of the products we use, including electronic devices, furniture, medical equipment, and aircraft. These products can be distributed directly to customers or through intermediaries such as retail stores. Some manufacturers make components that are incorporated into the products of other companies.

Manufacture x Wholesale:Wholesalers act as intermediaries between manufacturers and retailers. They buy products in bulk from manufacturers, then store them and resell them to retailers and other businesses in smaller quantities at a higher unit price.

• Main differences:While manufacturers design and build products, wholesalers focus on distributing those products. Using wholesalers to handle distribution allows manufacturers to reach customers with less investment and allows them to direct their energies into design and manufacturing. Wholesalers can also add value by helping to market and support products.

Manufacturing versus production.The terms manufacturing and production are often used interchangeably. However, manufacturing is only one type of production. While manufacturing refers to the process of making products from raw materials using machines, production is a broader term that can be applied to the creation of many different products and services through manual and automated processes.

• Main differences:While manufacturing results in physical, tangible products, the term production can also be applied to less tangible products. This includes the results of service companies such as stock analysts, cleaners, dentists, and authors.

main conclusions

• Manufacturing is the process of assembling raw materials into products using machines, usually on a large scale.
• Manufacturing generates more than 11% of total US economic output, and manufactured goods account for the majority of world merchandise trade.
• The three main types of manufacturing are make-to-stock (MTS), make-to-order (MTO), and make-to-assemble (MTA).
• Manufacturing systems accommodate different product volumes and customer requirements, from systems for small batch custom products to fully automated high volume factories.
• Technologies poised to transform manufacturing include the Internet of Things (IoT), artificial intelligence, blockchain, and robotics.

explanation of manufacturing

Manufacturing aims to create as many products as the market can buy at the lowest cost. This is only possible with the use of machines and automation.

Manufacturing can be classified into two broad categories: discrete and process manufacturing. Discrete manufacturing conversionsraw materials and componentson items ranging from cars to cell phones to clothing. Process manufacturing, on the other hand, combines ingredients according to formulas or recipes to produce large quantities of goods such as beverages, chemicals, and pharmaceuticals.

Manufacturing involves multiple steps to transform raw materials into finished products, including product planning and design, prototyping, commercial production, inspection, and delivery. Manufacturers often use assembly lines to produce goods faster, with lower labor costs and skill requirements. With this approach, products are manufactured in stages as they move to successive work stations along an assembly line.

Why is manufacturing important?

Manufacturing continues to be an extremely important part of the US and global economy. Manufacturers account for more than 11% of total US economic output, employing 12.8 million people and generating $2.3 trillion in output in 2018, according to the National Association of Manufacturers. Most of these companies are small: Of the nearly 250,000 companies in the US manufacturing sector, three-quarters have fewer than 20 employees.

Manufactured goods also account for the bulk of world trade. they understood71% of total merchandise exports in 2020, with a total value of 12.1 trillion dollars, according to the analysis of the World Trade Organization. Around the world, manufacturing iskey to increasing productivity and economic growth, according to the United Nations Industrial Development Organization (UNIDO), which says there is a strong relationship between manufacturing-led economic growth and lower levels of national poverty.

manufacturing history

While manufacturing innovations such as printing emerged during the Middle Ages, the history of modern manufacturing began in earnest with the Industrial Revolution. In the late 1700s, many cottage industries were revolutionized by the introduction of machines. These industries included textile manufacturing, which was transformed by three machines: the Jenny spinning machine, the power loom, and the cotton gin.

For centuries, textile manufacturing was based on turning wool and then cotton into yarn using manual spinning wheels. Spinners operated a spindle to generate a single thread which was then delivered to a weaver.

In the late 1700s, James Hargreaves invented Jenny spinning, which combined a steam engine with other innovations to allow a single operator to spin eight line shafts at once. Later upgrades increased this to 80 spindles. Meanwhile, Edmund Cartwright's power loom mechanized the slow manual process of turning yarn into cloth. On the other side of the Atlantic, Eli Whitney developed the cotton gin to speed up the slow process of separating cotton from its seeds.

The advent of these machines transformed textile manufacturing from a craft trade to a factory-based industry, and increased productivity made clothing more accessible to many more people.

Automation similarly transformed the number of other products manufactured, and new techniques and technologies continued to drive new advances. Mass production was popularized in the early 20th century by Henry Ford, who applied assembly line techniques to build automobiles at low cost. Lean manufacturing, pioneered by Toyota in Japan during the 1970s, aimed to make manufacturing faster and more efficient while reducing defects. Today, robotics and process automation continue to transform manufacturing, increasing productivity and lowering production costs.

types of manufacturing

Build strategies can be categorized into three types, each designed to support different business requirements: make-to-stock, make-to-order, and make-to-assemble.

Manufacture against stock (MTS):Make-to-Stock (MTS) is a widely used manufacturing strategy in which the manufacturer determines how much of a product to produce based on demand forecasts. The company or distributor/retailer then holds the products as inventory until they are sold. The benefits of MTS are twofold: customers can receive products with immediate delivery, while manufacturers benefit from economies of scale. Predicting demand accurately is critical to the success of this method. Producing too few items results in unmet customer needs and lost revenue opportunities, while producing too many results creates excess inventory that may not sell.

Make to Order (MTO):With make-to-order (MTO), a manufacturer makes products only after receiving an order for them. This means that the company does not run the risk of creating unsold products and can customize products to customer specifications. MTO is commonly used for high-value, labor-intensive manufactured products and in situations where product storage would not be practical. Commercial aircraft, for example, are MTO products.

Make to Assemble (MTA):Sometimes called assemble-to-order, the make-to-assemble (MTA) method is a combination of MTS and MTO. The manufacturer creates an inventory of components before receiving orders from customers, but only assembles them into products based on the orders it receives. This strategy is often used in situations where significant effort and cost are required to manufacture the components, but it is relatively quick and easy to assemble them into final products. The benefit of MTA is that manufacturers can offer customers a broader selection of options without risking final assembly until they receive a firm order.

Manufacturing Systems

Manufacturing systems generally fall into four main types, ranging from systems designed to handle small batches and low-volume products to fully automated factories that can produce large volumes of products at low cost.

• Custom manufacturing system:In a make-to-order system, products are made to order for each customer. Individual, high-value items are produced by a single skilled artisan or a small group of workers, largely by hand or with specialized machines. Because custom manufacturing focuses on quality rather than volume, this system has the highest unit costs.
• Intermittent manufacturing system:In this approach, a single production line is designed with the flexibility to manufacture different products. Products are made in batches based on customer orders, and the production line is reconfigured after each batch to make the next set of products. Intermittent manufacturing systems typically handle small volumes of each product.
• Continuous manufacturing system:This is designed for mass production of a single product. Semi-skilled workers at each station along an assembly line complete successive stages of assembling a product as it passes through. This approach is ideal for high-volume manufacturing, but requires high upfront costs.
• Flexible manufacturing system:This is a modern approach to creating a high volume system that can be relatively easily reconfigured to produce different products. Its goal is to automate all stages of production and includes the use of robots that can be reprogrammed to make different products. Because the entire process is designed to be automated and use as few people as possible, these systems can run 24 hours a day and produce large volumes of product at very low unit cost.

manufacturing examples

As companies grow, they need to adapt their manufacturing strategies and technologies to manage increased operational complexity, meet increased demand, and capitalize on new revenue opportunities. Here are two examples:

• Corkcicle began life developing an innovative bottle cooler product that allowed consumers to chill wines and other beverages without an ice bucket. With that success in hand, the company expanded to create a complete line of refrigeration products, from lunch boxes to sports canteens. With the increasing complexity of business,Corkcicle implemented an integrated ERP systemwhich provided greater visibility and control over inventory management and demand planning, as well as omnichannel commerce. The company also generated additional revenue with custom manufacturing options such as brand and team logos.
• Saddleback Leather started out with a single product: a custom leather bag that its founder designed to carry his school books. Fast forward to today and the company produces dozens of leather products, including briefcases, wallets, bags, belts, and jewelry that are sold directly to consumers on its website. With wildly fluctuating seasonal demand, inventory management is critical. To meet this demand without excess inventory,Saddleback implemented a cloud-based inventory planning solutionalong with an integrated ERP system, supporting manufacturing, e-commerce, and other functions.

manufacturing risks

Manufacturing is a complex and often capital intensive business, vulnerable to many risks. Factors that can derail manufacturing operations range from supply chain disruptions to forecast errors.

• Floating commodity prices:Raw material and component prices can fluctuate rapidly and unpredictably due to factors such as changes in global supply and demand. Even when manufacturers price materials themselves, they can be vulnerable to fluctuations in overall shipping costs.
• Supply Chain Issues:Supply chain issues can cause delays in getting critical components. The lack of availability of components can delay an entire manufacturing process.
• Product recall:Product defects can lead to costly recalls, lawsuits, and reputational damage. It is important to maintain rigorous and consistent quality control efforts throughout the entire production process, including a final inspection prior to product shipment.
• Normative compliance:Strict local regulations determine whether many products can be sold in markets around the world. It is vital that manufacturers review the regulatory requirements in their target markets before selling their products or risk being forced to pay expensive fines.
• Prediction errors:Inaccurate forecasts can result in more products being manufactured than can be sold or not enough to meet demand. Manufacturers can minimize risk by using software that takes into account historical and seasonal sales patterns, as well as external factors.
• Cyber ​​risks:Hackers routinely target manufacturing systems with ransomware and other malicious attacks. A focus on cybersecurity is critical for manufacturing companies.

future of manufacturing

Technology continues to transform manufacturing, just as it is transforming other industries. These are four of the most important technologies thatshape the future of manufacturing, according to EY:

• Internet of Things (IoT):Increasingly, manufacturing systems can be connected to the Internet and to each other in order to communicate critical information that is used to monitor and optimize manufacturing processes. For example, the machines can provide continuous information on environmental operating conditions or provide alerts when the supply of a specific component is low.
• Artificial Intelligence (AI):AI's promise to provide intelligent awareness of complex processes has considerable potential in manufacturing. Applications include predictive maintenance – By analyzing historical data to reveal patterns associated with failures, AI can predict when maintenance is required, helping to avoid costly production downtime. AI can also be applied to the supply chain to analyze the wide variety of factors that can affect the availability of raw materials.
• block chain:Blockchain, the underlying technology behind cryptocurrencies like Bitcoin, provides an immutable record of activities and transactions. In manufacturing, blockchain can be used to track items used in production, identify counterfeit components, and verify inspection and other process steps for regulatory compliance.
• Robotics:Robotics encompasses many different futuristic technologies; its application to manufacturing is clear. Robotics can be used to automate processes, reduce labor costs, and since they can work 24 hours a day, it can lead to dramatic productivity gains.

Manage and scale your manufacturing business with NetSuite

Modern manufacturing companies need technology that can scale with their business, while providing the flexibility to adapt to changing business conditions.Cloud-based NetSuite ERP Softwareprovides a single platform for managing complex business processes such as planning, procurement, manufacturing, supply chain, product data management, sales, and support.

NetSuite's integrated applications help companies reduce time to market, improve product quality, and improve service and support productivity. Support for multiple subsidiaries around the world helps streamline global operations and increases visibility at the regional and corporate level. Businesses can improve productivity by automating error-prone spreadsheet-based processes, while customizable dashboards provide real-time visibility into performance across all areas of the business.

Conclusion

Technology continues to transform manufacturing, just as it is transforming other vital sectors of the economy. Cloud-based applications can help manufacturers increase efficiencies, manage complex supply chains, and deliver products faster.

Manufacturing FAQ

What does manufacture mean?

Manufacturing is the assembly and transformation of raw materials into products using machines. It usually involves automating the production process to make products on a large scale at a lower cost.

What is manufacturing in simple words?

Manufacturing uses machines to make products that people or companies can buy.

What are the 3 types of manufacturing?

The three types of manufacturing are:

• Manufacture against stock (MTS): products are manufactured based on demand forecasts. They are then held as inventory in a warehouse or retail store until purchased by a customer.
• Make to Order (MTO): Products are made only when an order is placed by a customer.
• Build to Assemble (MTA): A company builds an inventory of components, but only assembles them into products when a customer places an order. MTA is sometimes known as assemble to order (ATO).

What are the different types of manufacturing?

The main types of manufacturing are make-to-stock (MTS), make-to-order (MTO), and make-to-assemble (MTA). With make-to-stock, manufacturers create products based on demand forecasts. With make-to-order, they build products based on the orders they receive. With build-to-assemble, they make components based on anticipated demand, but only assemble them when they receive firm orders.