Manufacturing is the creation of finished goods through the use of tools, human labor, machinery, and chemical processing. It allows businesses to sell finished products at higher costs than the value of the raw materials used. Large-scale manufacturing leverages assembly line processes and advanced technologies, enabling mass production and economies of scale.
Key Takeaways
- Manufacturing transforms raw materials or parts into finished goods using tools, human labor, machinery, and chemical processing.
- Before the Industrial Revolution, most products were handmade using simple tools and human labor.
- The Industrial Revolution introduced mass production, assembly line manufacturing, and mechanization, expanding production quantities while reducing costs.
- Analysts track the ISM Manufacturing Report as an economic indicator of market trends.
- Manufacturing encompasses various types, processes, and techniques.
Understanding Manufacturing
Manufacturing is integral to the economy, encompassing processing and refining raw materials like ore, wood, and foodstuffs into finished products such as metal goods, furniture, and processed foods. This transformation adds value, raising the finished product price and contributing significantly to economic profitability. Efficiency in manufacturing can lead to higher productivity and cost savings by:
- Reducing redundancies
- Improving work quality
- Updating equipment and procedures
- Setting realistic goals
- Streamlining intake, supply chain, and distribution channels
Types of Manufacturing
Traditional Manufacturing
Historically, goods were manufactured using basic tools through traditional processes. While labor-intensive, handmade goods can often command premium prices depending on the supplier and type of goods produced.
Mechanized Manufacturing
Mechanization allows for mass production on a grand scale, requiring fewer manual interventions. Highly skilled individuals ensure machines operate effectively and efficiently.
Additive Manufacturing (3D Printing)
Additive manufacturing involves building layers to create three-dimensional shapes and patterns using specialized equipment like 3D printers.
Advanced Manufacturing
Combining new forms of technology to refine and enhance production processes results in increased output and efficiency.
Contract Manufacturing
Companies often outsource certain manufacturing processes to third parties to streamline production and focus on core competencies.
Types of Manufacturing Techniques
Make to Stock (MTS)
MTS involves manufacturing standardized products based on forecasted demand. Companies plan inventory builds, capitalizing on economies of scale, although the downside is surplus inventory when expectations are unmet.
Make to Order (MTO)
MTO processes start manufacturing upon customer order specifics, focusing on special products. This method has the benefits of high individualization and no inventory holding but may experience uneven demand.
Make to Assemble (MTA)
MTA begins with producing parts, which are then assembled upon receiving customer orders, balancing between MTS and MTO principles.
Types of Manufacturing Processes
Discrete Manufacturing
Each product is distinct, with items being tracked individually using a bill of materials on a production line.
Process Manufacturing
This includes batch and continuous process manufacturing. Batch manufacturing follows a recipe or formula, whereas continuous manufacturing involves constant, ongoing production for long periods.
Mixed Mode Manufacturing
Combining discrete and process manufacturing, often beginning with batch processes and refined using discrete methods for unique final stages.
Job Shop Manufacturing
Specialized manufacturing for small quantity batches that are outside normal production runs, requiring unique setups and processes.
Repetitive Manufacturing
Breaking long processes into smaller production cells dedicated to sub-components, ensuring continuous flow through manufacturing lines.
History of Modern Manufacturing
Handmade products ruled before the Industrial Revolution introduced high-volume production. Innovations such as steam engines and assembly lines reduced human labor needs while boosting production. Computers and precision equipment also advanced manufacturing methods requiring higher-skilled labor and capital investment.
Measuring Manufacturing in the Economy
Economists use various metrics, such as Manufacturing Value Added (MVA), to assess manufacturing’s role in an economy. Surveys from bodies like the Institute for Supply Management (ISM) provide insights into sector employment, inventories, and orders, acting as early economic indicators.
Steps of Manufacturing
- Develop the Idea: Concept development and product vision.
- Perform Market Research: Exploring raw materials, equipment needs, and competitive differentiation.
- Design the Product: Incorporating customer, manufacturing limitations, and cost considerations.
- Finalize and Prototype: Creating a test product that mirrors commercial production.
- Prototype Testing: Assessing and refining costs and efficiencies.
- Manufacture the Good: Full-scale production planning, including machinery, labor, and storage.
- Monitor the Process: Ongoing evaluation to meet cost and demand expectations.
Manufacturing vs. Production
Manufacturing:
- Often requires raw material procurement
- Yields physical goods
- Depends heavily on machinery and labor
- Specific type of production process
Production:
- Often involves pre-owned input materials
- Can result in tangible or intangible goods
- Might not require machinery
- Broad; inclusive of manufacturing processes
Example of Manufacturing
Toyota Motor Corporation uses lean manufacturing principles for efficiency:
- Jidoka: Automatic halting of production for defect prevention.
- Just-in-Time: Producing only what is essential, reducing excess reserves.
What Is Lean Manufacturing?
Lean manufacturing focuses on enhancing efficiency by minimizing production time and waste.
How Do You Calculate Manufacturing Overhead?
Calculate manufacturing overhead by dividing total indirect manufacturing costs by monthly sales, and multiply by 100 for the percentage.
What Is the Purpose of Manufacturing?
The purpose is transforming raw materials into finished products efficiently, optimizing specific resources for customer sale.
What Are the Steps of Manufacturing?
The process starts with concept and information gathering, followed by prototyping, production, inspection, and final delivery.
The Bottom Line
Turning raw materials into finished goods has evolved drastically. From handmade items to automated mass production, technological advancements like 3D printing allow personal production at home, changing the manufacturing landscape.
Related Terms: Assembly Line, Economies of Scale, Productivity, Supply Chain.
References
- Machine Metrics. “A Guide to Measuring and Improving Manufacturing Efficiency”.
- Additive Manufacturing. “What Is Additive Manufacturing?”
- Thomas. “What Is Advanced Manufacturing?”
- Marlin Steel. “What Is Contract Manufacturing?”
- 3D Insider. “A Detailed History of 3D Printing”.
- U.S. Bureau of Labor Statistics. “Industries at a Glance: Manufacturing: NAICS 31-33”.
- TWI. “What Is Manufacturing?”
- Ford. “Company Timeline”.
- Institute for Supply Management. “ISM Report on Business”.
- U.S. Bureau of Economic Analysis. “Gross Domestic Product by Industry Group”, Page 23.
- Toyota. “Toyota Production System”.
