Difference Between Manufacturing and Production

Edited by Diffzy | Updated on: September 07, 2023

       

Difference Between Manufacturing and Production

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Introduction

When it comes to converting raw materials into goods, manufacturing and production are two terms that are closely related to that process. These terms are used when it comes to making goods from raw material; even though their definition is very similar,, they have two completely different relations. This article will help clarify and point out the significant differences between these two terms.

Manufacturing vs. Production

The main difference between manufacturing and production is that manufacturing is about converting raw materials into complete goods with the help of machinery. Meanwhile, production is related to the series of processes or methods involved in converting inputs like raw materials or semi-finished goods into finished products or services, and these series of processes may or may not involve the usage of machinery. To add to it, we can say that production is a broader term as compared to manufacturing, and it can be said that manufacturing is production, but production is not just manufacturing.

Difference Between Manufacturing and Production in Tabular Form

BASISMANUFACTURINGPRODUCTION
ConceptRaw materials are obtained and processed to get complete goods.Raw materials are owned by the company and are processed to get outputs.
OutputThe outputs are finished goods.The output can be finished goods or services.
Nature of InputThe inputs used in manufacturing are tangible in nature.The inputs used in the processes can be tangible and intangible in nature.
RequirementsManufacturing labor and machinery are required.Machinery may or may not be required.
Result of End ProductThe goods resulting from manufacturing are ready to be sold.The result that arises from production is a utility that can be used immediately or later.
ProcessManufacturing is the transformation of raw materials into finished goods.Production is the process where inputs are converted into outputs.
AdditionsEvery type of production does not come under manufacturing.Every type of manufacturing comes under production.

What is Manufacturing?

Manufacturing refers to converting raw materials into finished goods with the help of manufacturing labor, machinery, and tools. The process involves transforming raw materials into finished products through manufacturing engineering. It involves the selection of materials to be used with the design of the product in mind and altering those materials into finished products through various manufacturing processes. The finished products are then sold by businesses for a higher cost than the value of the raw materials that were used.

Manufacturing is essential and plays a big part in the economy because the process of manufacturing involves converting raw materials like ore, wood, steel, oil, corn, grain, gasoline, lumber, and forest resources into finished products like metal goods, furniture, cars, and clothes. Refining these raw materials into finished products adds value and increases its usefulness. This, in turn, increases the demand for these goods, which leads to an increase in their prices, making the manufacturers a very profitable and important part of the business cycle.

Types of Manufacturing Techniques

Make to Stock (MTS)

Make-to-stock is a traditional production technique where the manufacturing of a product is based on forecast demands; forecast demand is a technique that makes use of historical data to estimate and predict a customer’s future demand for a product or service. The make-to-stock technique involves a company evaluating and making estimates on how many units of goods will be sold over a given period and then planning to manufacture that many goods. Goods are held as inventory up to their release.

When dealing with the release of a product in advance, a company should have adequate information and knowledge about that said product and have an estimate of how many products will be needed to be manufactured; this is where the forecast demand technique comes into play. Companies using MTS gain an edge over their competitors as they can capitalize on sales of the economy by setting the number of goods to be manufactured and planning the raw materials and machinery needed for the manufacturing process. This helps them to build a solid and reliable manufacturing plan. But the problem with this technique is if a company fails to meet expectations, then it is left with unusable products and surplus inventory.

Make to Order (MTO)

Make-to-order is the complete opposite of make-to-stock as this technique involves working directly with the targeted audience to understand their needs and what they prefer their product to be like. After having discussions with the customers, a contract is signed by both parties and then manufacturing is started on their desired product. Usually, the manufacturers will provide the customers with a prototype of the products they want to make sure it's up to their expectations.

This technique is very common in industries where there are demands for specialized products that serve a specific purpose. Since the products manufactured are specialized and for a specific purpose, the manufacturers will usually charge a premium for these products due to them not being available so easily in the market.  The downside of this technique is that some customers might have unrealistic or uneven demand which results in a slower manufacturing process.

Make to Assemble (MTA)

The companies adopting the make-to-assemble technique will start production on different parts of a product and when a customer places their orders, the companies will then use the already produced parts and assemble them to make the finished product. This technique allows them to have a head start and deliver the products faster to their customer as they have partially completed the product and what’s left is to assemble them into one finished product. The downside of this technique is the company risks being stuck with an inventory of forecast demands because it did not materialize. Also, the company is bound to lose the benefits of both MTO and MTS by trying to balance each type of process. [2]

Types of Manufacturing Processes

Discrete Manufacturing

This process allows the manufacturer to specifically identify each product that was manufactured, hence the name discrete manufacturing. This manufacturing process creates a list of materials that track where each raw material or part goes into which unit.  During this process, units are made on a production line where the workers follow a production schedule and make a record of each material used.

Process Manufacturing

This process is divided into two parts. Firstly, batch process manufacturing uses a recipe, and based on that, manufacturing of the product is done on a specific standard. It is often used in the food and beverage industry to make identical goods with the same quality and quantity. Secondly, continuous process manufacturing involves processes that manufacture goods continuously 24/7 to produce a flow of production to manufacture and produce materials uninterrupted.

Mixed Mode Manufacturing

Some products require a combination of both discrete and process manufacturing; this is where mixed-mode manufacturing comes in. Some products are manufactured using batch processes before they are converted into more specific individual packages. In the early stages, process manufacturing is used to generate products, while the specifics of the delivery methods are added in the second half. [3]

Job Shop Manufacturing

Job shop manufacturing is used when there is a need for even more specific goods. This process is used when there is a batch of products to process, yet the batch is completely different from that of a company’s normal product. In this process, most of the products produced require a unique set-up and sequencing of process steps.

What is Production?

Production is the process of combining various inputs, both material and immaterial, to produce an output, the output being in the form of goods and services. The goods and services produced will have value and will add to the utility of the customers. Production is essential to the economy because the company produces outputs using inputs like land, capital, labor, etc.; this helps maximize the use of resources and also generates employment opportunities.

The process of production is also very complex in nature and involves the interaction of many factors such as technology, risk, markets, and resources. Production is very dynamic as it is constantly changing since both consumers and companies continuously seek to satisfy their wants. [4]

Factors of Production

Factors of production are the inputs that are used to produce an output in the form of goods and services. These are the resources needed for the creation of these goods and services. There are four factors of production:

Land as a Factor

When talking about land as a factor of production, it can take various forms, such as land used for agriculture, commercial land for real estate, and land where various resources are available; for that reason, land has a wide definition. Land with natural resources like oil and minerals can be extracted and polished for human consumption. While land can be used for agriculture, which adds value to it and serves as a utility to the farmers.

Labor as a Factor

Labor as a factor talks about the individuals who put in the energy and effort into bringing a product or service to the market. There are different forms of labor. The receptionist at the hotel is part of the labor, and the valet who parks your car is also part of the labor. These individuals put in effort to bring products or services to the market; labor is the primary driver of economic value. These individuals are paid according to their skills and training and are called “human capital” due to their ability to bring in revenue because of their work. They are also paid wages according to their skills and training because the better-qualified individual will bring in more physical capacity to the task.

Capital as Factor

Capital usually denotes money. Capital is not directly involved in the production of goods or services but it assists the processes that are used in production by allowing entrepreneurs and companies to purchase land, raw materials, and wages to be paid to laborers. Capitals are also of two types: private capital and commercial capital. Private capital involves vehicles owned by individuals for their personal use and is not considered a capital good, but commercial vehicles like buses are used for official purposes like transportation of the public and are considered a capital good.

Entrepreneurship as a Factor

Entrepreneurship is the missing part of the puzzle; it combines all the factors of production into a product or service. Entrepreneurs use their ideas, lay down the framework of their plans, and take the necessary actions. They are important because they are the ones taking the risk and the ones looking for any potential opportunities that may arise.

Main Differences Between Manufacturing and Production in Points

  • Manufacturing is the process where raw materials are converted into finished goods with the help of machinery, while production is the process of converting resources, which are material or immaterial, into goods or services.
  • Manufacturing involves the production of finished goods that are sold and ready to be used. On the other hand, production produces goods or services which act as a utility for the customers.
  • The use of machinery is mandatory in manufacturing, but in production, the use of machinery is not necessary.
  • The output of manufacturing is tangible in nature, while the output in production is tangible or intangible in nature.
  • All types of manufacturing are under production, but all types of production cannot be considered as manufacturing.
  • The procurement of raw materials is not needed in production, but in manufacturing, raw materials are procured from outside.

Conclusion

In today’s world, creating a product is a very challenging task as the inputs have to go through a lot of stages to become the desired output. Production will supply the goods or services that are used as a utility by the customers; meanwhile, when it comes to manufacturing, there is proper management and coordination are needed between the labor, machinery, and raw materials to obtain the finished products. The final results of both production and manufacturing can include selling the products produced. Manufacturers usually sell their products as soon as they are produced, but production companies can keep their products for a later date.

References

  • D. Vaidya, "Difference Between Manufacturing vs Production," [Online]. Available: https://www.wallstreetmojo.com/manufacturing-vs-production/.
  • W. Kenton, "Manufacturing: Definition, Types, Examples, and Use as Indicator," 16 September 2022. [Online]. Available: https://www.investopedia.com/terms/m/manufacturing.asp.
  • W. Kenton, "Manufacturing: Definition, Types, Examples, and Use as Indicator," 16 September 2022. [Online]. Available: https://www.investopedia.com/terms/m/manufacturing.asp#toc-types-of-manufacturing-processes.
  • B. Tomasetti, "What is Production?," 5 September 2023. [Online]. Available: https://www.carboncollective.co/sustainable-investing/production.

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"Difference Between Manufacturing and Production." Diffzy.com, 2024. Mon. 04 Mar. 2024. <https://www.diffzy.com/article/difference-between-manufacturing-and-production>.



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