Manufacturer: Definition, Types, and Role In The Supply Chain

Manufacturing is the backbone of consumerism across countless industries. From the cars we drive to the products we use to the food we eat, manufacturers transform the world’s raw materials into the products that sustain modern life (and even the machines that produce the production).

While it helps to have a general understanding of how manufacturing works, it’s especially helpful for those in ecommerce who want to find manufacturers that are the right fit. In this post, we’ll take a look at some key considerations, like what manufacturers are, a few types of manufacturers, and the role manufacturers play in turning parts into a whole.

What is a manufacturer?

A manufacturer is an entity that produces physical goods or products through various manufacturing processes. These processes often combine the use of machinery, human labor, and chemical processing. Manufacturers operate in every industry that involves the creation of goods, like automotive, electronics, pharmaceuticals, food and beverage, textiles, and more.

A manufacturer’s main role is turning raw materials or semi-finished products into finished goods. These goods can then be sold directly to consumers, other manufacturers for further processing, or wholesalers and distributors. Manufacturers might own all of their production facilities, outsource some processes, or operate as part of a larger supply chain ecosystem.

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Types of manufacturers

Manufacturers can be broken into many different categories, based on traits like the nature of the product, business relationships involved, and how the goods are produced and presented to the market. Let’s look at four key types.

1. Discrete manufacturers

Discrete manufacturers focus on creating distinct, individually countable products that use separate production steps and assembly processes like wielding, painting, fastening, and more. Examples of this include companies producing automobiles, industrial machinery, aircraft, furniture, toys, medical devices, and electronics like smartphones, computers, and appliances.

2. Process manufacturers

In contrast to discrete manufacturers, process manufacturers use mass production in continuous processes to produce goods in bulk on a large scale. Here are some common examples of products and industries that fall under the process manufacturing umbrella:

  • Chemicals like paints, solvents, and fertilizers
  • Food and beverages
  • Petroleum products like gasoline and fuel oil
  • Pharmaceuticals
  • Paper products
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3. Original equipment manufacturers (OEMs)

Original equipment manufacturers (OEMs) specialize in producing parts, components, or even entire products that are then rebranded and sold by another company. For example, a company specializing in car engines might be a manufacturing partner to various automakers, or a manufacturer might create generic computer parts that are then assembled and sold under a big tech brand name.

4. Contract manufacturers

Contract manufacturers don’t focus on selling their own branded products. Instead, they provide production services to other companies on a contractual basis. For example, this might include a clothing manufacturer that produces garments for a fashion label, or an electronics manufacturer that assembles circuit boards for a tech company’s new technologies.

Common manufacturing techniques

In manufacturing, companies choose their production strategies based on what best suits their product and market demand. Let’s explore three popular methods: make to order (MTO), make to stock (MTS), and make to assemble (MTA).

Make to order (MTO)

MTO is common in industries that require customized products, such as aerospace and construction. Production begins only after receiving a definite order. An example is building an aircraft for a specific government contract, or starting a construction project after securing a lease agreement with a tenant. The advantage of MTO is that it avoids excess inventory since production aligns with confirmed orders. However, this method can lead to variability in workload and revenue, depending on how frequently orders are placed.

Make to stock (MTS)

MTS involves producing goods based on predicted demand, using historical sales data and market trends. This approach is typical in industries with stable and predictable demand. It allows companies to optimize production schedules and material purchases, potentially reducing costs. The risk, however, is overproduction if demand forecasts are inaccurate, which can lead to surplus inventory and increased storage costs.

Make to assemble (MTA)

MTA is a hybrid approach where companies manufacture basic components based on forecasts but do not assemble them into final products until an order is received. This strategy can reduce lead times and make deliveries faster once an order is placed. However, like MTS, it carries the risk of overproducing components if demand forecasts do not align with actual sales, leading to unused inventory.

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History of manufacturing

We’ve come a long way since pre-industrial times, when manufacturing involved simple survival tools and handcrafted goods. Here’s a brief history of how it all came to be.

The Industrial Revolution spanned the 18th and19th centuries. During this time, steam-engine-powered factories and machines drastically increased production output. In the early 20th century, the development of the assembly line, along with electricity, made complex products more affordable and efficient to produce.

history of manufacturing

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In the late 20th century, lean manufacturing techniques emphasized waste reduction and customer focus. Robots began automating dangerous and repetitive tasks. Globalization shifted manufacturing hubs to Asia.

Now, in the 21st century, technologies like 3D printing enable us to rapidly prototype and customize production. Smart factories use sensors and data to optimize operations in real time. We’re also driven by sustainability concerns, which are driving innovation in waste reduction, recycled materials, and how long products last.

A manufacturer’s role in the supply chain

Manufacturers play a pivotal role in designing and producing goods, as well as making sure they get to the right place. Let’s look at a few of their key responsibilities within the supply chain.

Sourcing raw materials

Manufacturers are responsible for procuring the essential materials and components needed for their manufacturing process. This involves building and maintaining strong relationships with reliable suppliers, negotiating prices to ensure cost-effectiveness, and maintaining strict quality control of materials to guarantee they meet production standards.

Designing products

Many manufacturers actively participate in the design and engineering of their products. This involves conducting market research to understand consumer needs, creating innovative solutions, and developing prototypes to refine designs before they’re ready for full-scale production.

Production

This core function involves operating machinery, managing assembly lines, and implementing rigorous quality control measures. It’s critical to manage materials and labor resources efficiently so that products can be made on schedule and according to specifications.

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Supply chain integration

Successful manufacturers collaborate with their supply chain partners, sharing information, addressing business concerns, and coordinating activities. This integration helps streamline processes, improve visibility, reduce waste, and ensure the entire chain operates smoothly.

Logistics and distribution

Manufacturers package and prepare goods for shipping, collaborating with logistics providers to choose appropriate transport methods. They often work closely with wholesalers and retailers to manage inventory and ensure products reach the right stores. They may even handle direct-to-consumer (DTC) sales through their own channels.

Local vs. overseas manufacturers

When setting up manufacturing or wholesale operations, one key decision is choosing between local and overseas manufacturers. Each option has its distinct advantages and challenges, and often, businesses find it beneficial to have both.

Local manufacturer

Opting for a local manufacturer means working with a supplier within your country. The benefits are many—easier communication and faster shipping are at the top of the list. Language barriers are less of a problem, and quicker delivery times can be a real advantage when you need to replenish your stock quickly.

Overseas manufacturers

Manufacturing abroad in countries with lower labor costs can significantly reduce your production expenses. For retailers looking to maintain competitive pricing, this offers a major advantage. However, overseas manufacturing comes with the risk of longer lead times, possible customs delays, and the complexities of international logistics.

Given these considerations, it’s common for businesses to maintain relationships with multiple manufacturers. This strategy enables them to leverage the benefits of each, addressing the business concern around market adaptation effectively.

Manufacturers make the world go round

Manufacturing is a wide world with various considerations, implications, and players. When you think about it, every item you touch outside of the natural world is a product of the manufacturing industry. The growth and influence of this industry is impressive, and it keeps getting better with the development of new technologies, processes, tools, and outlooks.

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