A manufacturer is a person or a registered company which makes finished products from raw materials in a bid to make a profit. The goods are later distributed to wholesalers and retailers who then sell to customers.
The retailers display the products via brick and mortar stores or on 3rd party ecommerce platforms. In the manufacturing industry, products are made in large-scale so as to meet the irresistible demand from consumers.
It's standard practice to indicate the place of manufacture. This information is usually displayed on the packaging material. In ordinary circumstances, the manufacturer has to meet a certain threshold and conform to the set standards.
What is a Manufacturer?
The term manufacturer is something that appears often in the business world, but how much do you know about it? Let’s discuss the meaning of manufacturing.
Primarily, manufacturers ought to meet product certification requirements. This process involves performance tests and quality assurance tests of the goods which are being produced. The certification bodies emphasize on meeting all the applicable international standards. It's a strategy to enhance consumer protection.
A manufacturer needs to observe all quality assurance measures to avoid any potential lawsuits from the consumers. Take note, the ultimate goal is to elevate customer satisfaction.
And why is manufacturing so essential?
Manufacturers tend to produce items in bulk and remove all the assembling complexities by use of automated systems. Mass production lowers labor costs and the raw materials can be purchased at discounted prices. This results in attractive profit margins and higher accuracy in product quality.
Into the bargain, is the need to manage inventory in a comprehensive manner. A manufacturer uses demand forecasts to determine a realistic production approach.
Technically, the manufacturer works with raw materials to come up with a complete and commercially viable product. Trendsetting Manufacturing technology predominantly rules the entire business.
In the general run of things, these are the most preferred tools in the manufacturing process;
- Additive Fabrication- It's a process which involves binding two materials together. The most prevailing one is rapid prototyping which assembles the physical parts using 3D Computer Aided Design(CAD) data. Other techniques include laser sintering and 3D printing.
- Software- Manufacturers use business automation and inventory management tools which help them with material requirements planning, inventory control, and proper accounting. Aside from that, these systems automate custom quoting for the high-end customers, manage orders and process all purchases fr0m wholesalers. A high-scale manufacturer uses elite software which is powerful enough to handle both the financial and warehouse management, quite accurately.
- Automated systems- This is an outstanding move to produce goods which are of good quality and it consistently speeds up the entire process. Remember, the supply must ultimately meet the demand. The systems use artificial intelligence which the manufacturers solely depend on, to make wise decisions on the optimization of their business goals. In the present day, the use of assembly systems and conveyor belts in the manufacturing sector proves to be a huge asset in meeting all the tasks.
What is Lean Manufacturing?
If you’re keen to create finished goods fast with minimal stress, then you might decide to upgrade your strategy with lean manufacturing. Lean manufacturing is a way of managing your manufacturing jobs, so you reduce the potential waste in the process. The idea is that by reducing manufacturing jobs, and waste from the assembly line, you can give your customers more value.
Lean manufacturing is a concept that’s started life in Japan, but it’s quickly gained popularity around the world. Lean manufacturing ensures that the amount of waste produced by your business is as low as possible, so the value of your products is increased. There are 7 things to look at when reducing waste in your business:
- Transport: Moving products regularly doesn’t usually add value, but it does cost money.
- Inventory: More products take up more space and increase the risk of damage.
- Motion: Getting to work and moving equipment around can waste time
- Waiting: Waiting for delivery of materials or repairs is time-consuming
- Overproduction: Making too much of a product or making it too often can waste money
- Over processing: Using machines and methods that take longer and don’t add value
- Defects: Products being recalled, repaired, or replaced
Achieving lean manufacturing means thinking about your business from your customer’s perspective. Consider how you can improve production methods by getting rid of wasteful practices and anything that takes excessive time without adding value. Some companies decide to implement lean strategies in their entire company straight away, while others make small changes to their processes, one step at a time. Implementing any kind of lean functionality should be beneficial to your business.
Manufacturers vs Wholesalers vs Retailers vs Distributors
In the best possible way, these terms have a very close relationship. On the other hand, a clear line needs to be drawn. A wholesaler in this line of trade is more or less an intermediary between the distributor and retailers.
So why is it prudent to work with wholesalers? They make the whole chain of distribution complete. Also, they're able to source products from different distributors. In other words, they fulfill orders made by retailers. It's part of the supply chain and a process to meet the customers' needs.
Ideally, Distributors work hand in hand with the manufacturers. For this to prevail, there ought to be a very strong business relationship between the two parties. More often than not, both counterparts enter into legal agreements so as to make all transactions formal and fruitful. On top of that, manufacturers can supply goods to distributors on credit. This explains why a good rapport between both parties needs to be built.
While the two have the closest connection, it's quite unusual for the distributor to directly sell products to the consumers. Customarily, this is unquestionably not feasible. And the reason is pretty much simple. A distributor deals with the goods in bulk. To make the whole process unchallenging, they have to sell the products to wholesalers who make a purchase in large quantities.
It's certain that a wholesaler needs to have a flexible purchasing power. This helps them buy goods in high-volumes. As a result, it attracts a discounted price which trickles down to increase their profit margins. In furtherance of that, so many retailers can actually count on the wholesaler. As a matter of fact, the wholesalers have a wide range of products due to the close links with different distributors.
Retailers to Consumers
There are huge retailers such as Amazon and Alibaba where goods are displayed online by wholesalers. Notwithstanding that, brick and mortar stores make a huge contribution to the retail business. Here, customers get to purchase goods which are physically displayed on the shelves. A retailer often buys the products in small quantities and sells them at the recommended retail price. Retailers can make the most out of third-party ecommerce platforms which they use to display their products virtually.
If you’re selling to customers, there’s a range of ways that you can deliver your final product. Some companies use high tech solutions as part of the industrial revolution to automate the creation of manufactured goods, others make unique products one at a time.
When selling to customers, it’s important to ensure that you know exactly what kind of industry you want to work in, and how you’re going to differentiate yourself. Check some of the competitors in your market out in advance so you know what’s already available.
Remember that you can use all kinds of strategies to sell to customers, including selling direct, or selling through a wholesaler.
This is a term which refers to the process of assembling raw materials and come up with a complete product in a different country. An alternative term for this operation is ‘offshoring' which relates to the process of migrating a company's industrial processes to another country. Most companies go for this option if the labor expenses are cheaper in another country.
Here's an illustration.
Apple designs its products in the US but does all the assembling in China where the manufacturing costs are lower. Simple. It's not rocket science. Companies often look at the economies of scale.
Types of Manufacturing Production
For the most part, there are three predominant avenues when it comes to manufacturing products which are; Make-to-Stock (MTS), Make-to-Assemble (MTA), and Make-to-Order (MTA).
If you run a made to stock manufacturing business, then your inventory will be products created based on customer demand and forecasts. The idea is to have products in stock to prepare for the order that will come from your customer. This can lead to a risk of not meeting demands by producing not enough products, or too much. It’s also worth noting that your manufacturing output won’t be customizable.
It's a method which is often used by manufacturers to meet the anticipated customers' demand. Consumer forecasts are majorly relied upon while manufacturing the products.
And why is MTS important?
If a manufacturer produces a product which is on high demand at a particular season, this proves is the most appropriate plan to make a kill out of the potential customers in the market. The data is accurate and helps a manufacturer avoid having an excess inventory or less stock which might result in losses.
This strategy works well in an environment where there's mass production of goods. Moreover, it's a right-minded business management plan which reduces operating costs.
Made to order manufacturing means that you don’t simply stock the same product in mass quantities. Instead, the product design is adaptable, and the production line only begins creating items when an order is received. This helps to reduce the amount of space wasted in inventory management, and it can also allow for better personalisation. A possible downside of this production strategy is that a spike in demand could put significant strain on your company when you’re trying to fulfil orders.
It's a manufacturing process which begins once an order from a customer is received. This gives leeway for customization of products and easy management of inventory levels in the production systems. Interesting enough, it's a means to mitigate the production of excess inventory.
What makes this a preferred strategy, is its capacity to help a manufacturer fulfill an order with accurate product specifications from the customer. Assemble-to-Order(ATO) is quite similar to MTO. It's a production method which is suitable where the raw materials are readily available. Ultimately, the goods are produced faster when an order is made by a customer. This method requires the manufacturer to have all parts in the warehouse waiting to be assembled. This hastens the production process once an order is made.
On the contrary, there's a setback associated with the Make-to-Order strategy. If a product is labeled as MTO, then it tends to be more expensive for the buyer since there are customizations to be done. Customers tend to be reluctant in placing a deposit for the order if the product ends up costing much higher.
One kind of advanced manufacturing strategy is called assembled to order. This means that you have all the components required to make the final product in stock. When you receive an order, all that’s left to do is put all the pieces together and conduct some quality control evaluations. Assembled to order products do have some customization options, but they’re not as personalized as made to order solutions.
It's as simple as it sounds. The manufacturing company uses this method to keep a stock of the basic parts based on market demand forecasts. The parts are then kept safe in the warehouse and are assembled the moment a customer makes an order. Also, this allows room for making customization preferences.
Ordinarily, MTA seems like an amalgamation of both the make-to-stock (MTS) and make-to-order (MTO). Keep in mind, the manufacturer will need to avoid the overproduction of the inventory. So many industries make good use of this process.
How to Mitigate Manufacturing Risks
To begin with, a manufacturer needs to fend off the supply chain risk. It happens when the suppliers aren't reliable enough. This prevents you from making your products reach the end buyer. Keep a record of all important raw materials which are useful when an order is made. In that regard, a manufacturer ought to outsource the components from well-founded suppliers. One who is capable of meeting their promise by beating all delivery deadlines.
There are operational risks which come about in the course of the entire production process. A manufacturer needs to set aside money to replace machines which might breakdown or depreciate in the long-run. A backup power supply is something you might want to consider. The loss of power can result in losses especially if a customer has made an order which is urgently needed.
Remember, there are potential risks linked to data loss. Manufacturers need to back up their data. Both the software and hardware needs proper maintenance by doing updates which aid in cybersecurity and facing out the outdated machines.