Understanding Manufacturing Production and Its Different Types

What Is Manufacturing Production?

Manufacturing production efficiently produces goods for sale. Three types of manufacturing production processes are: make to stock (MTS), make to order (MTO), and make to assemble (MTA). These strategies have advantages and disadvantages in labor costs, inventory control, overhead, customization, and production speed.

Key Takeaways

• Manufacturing production refers to strategies used to produce goods for sale.
• Variables impacting manufacturing production include raw material availability, marketplace demand, labor costs, and inventory costs.
• A company that uses the make-to-stock (MTS) strategy matches inventory with consumer demand.
• A company that uses the make-to-order (MTO) strategy produces after receiving a confirmed customer order.
• A company that uses the make-to-assemble (MTA) strategy stocks basic parts but assembles after a customer places an order.

Understanding Manufacturing Production

Manufacturing is the creation and assembly of components and finished products for sale on a large scale. It utilizes various methods, including human and machine labor, and biological and chemical processes, to turn raw materials into finished goods.

Production is similar but broader, encompassing processes and techniques to convert raw materials or semi-finished goods into finished products or services, with or without machinery. Manufacturers need to match their production methods to market needs, available resources, order volume, seasonal shifts in demand, overhead costs, and other variables.

Types of Manufacturing Production

Make to Stock (MTS)

Make to Order (MTO)

The make-to-order (MTO) strategy allows customers to order products built to their specifications, which is useful for heavily customized products. Examples include computers, automobiles, heavy equipment, and other big-ticket items. MTO alleviates inventory problems but increases customer wait time. This strategy is not suitable for all product types.

One limitation of MTO products is higher production costs due to the required customization.

Make to Assemble

The make-to-assemble (MTA) strategy is a hybrid of MTS and MTO. Companies stock basic parts based on demand predictions but assemble them after customers place orders. This strategy allows fast customization based on customer demand, such as in the restaurant industry. The downside is the potential overload of orders compared to available labor and components.

Special Considerations

The just-in-time (JIT) inventory system focuses on inventory management in manufacturing production. It benefits companies by decreasing waste and inventory costs, only receiving goods when needed for production.

Companies using JIT inventory systems do not store large inventories. Instead, deliveries arrive in smaller quantities as needed. Efficient scheduling is crucial to prevent delays due to material shortages. Electronic inventory systems help monitor and respond quickly to low inventory.