Table of Contents
- Does the manufacturing process create added value?
- What is the nature of manufacturing?
- What are the types of manufacturing processes?
- How is the manufacturing process organized?
- What to read next
What’s it: The manufacturing process is the work steps and actions involved in converting inputs into outputs. Inputs can be raw materials, semi-finished goods, or components. Meanwhile, the output can be finished or semi-finished goods. The process may vary between items, possibly involving molding, machining, joining, and forming.
In addition to the raw materials used, the process requires various other inputs such as labor, machinery, equipment, and chemical or biological processing. How significantly other inputs contribute to the process, it depends on the nature of the manufacturing process, whether labor-intensive or capital-intensive. For example, capital-intensive manufacturing relies more on machinery, equipment, and automation than on labor. Labor-intensive manufacturing is the opposite.
Does the manufacturing process create added value?
Yes. Manufacturing increases value-added, enabling firms to sell output at a higher price than the inputs used. By processing raw materials or assembling components into something more valuable, manufacturers add value.
This added value leads to higher prices, making manufacturing a profitable business. For example, processing iron ore into steel bars and then various equipment such as vehicles can increase its value many times over. Likewise, converting cotton into clothing can also be a multi-million dollar business.
What is the nature of manufacturing?
The basic nature tells us whether a manufacturing process relies more on machines or on physical capital such as machines. Based on this, the manufacturing process can be divided into two categories:
- Capital-intensive manufacturing
- Labor-intensive manufacturing
Each differs in aspects such as capital investment requirements, operating flexibility, economies of scale, and customization.
Capital-intensive manufacturing
Modern large-scale manufacturing is usually more capital intensive. Some rely on computer-aided machines to automate processes with less human intervention. Thus, in their cost structure, costs for capital (such as machinery) have a higher proportion than labor costs.
Such manufacturing requires a significant initial investment in machinery, plant, and equipment. Thus, in reaching the break-even point and profit, manufacturers seek to increase output to achieve economies of scale as quickly as possible. Higher economies of scale allow costs to come down.
Generally, standardized products adopt capital-intensive manufacturing. Manufacturers sell them to the mass market with significant potential demand available to justify the capital investment. Although profit margins are relatively low, they can benefit from reduced costs through economies of scale.
Labor-intensive manufacturing
Labor-intensive manufacturing relies more on labor than on machines. Thus, labor costs have a higher proportion than capital costs.
Take textile manufacturing, for example. It is generally labor-intensive and highly dependent on wage levels to maintain operating costs and competitiveness. Thus, when wages rose and were already high, some relocated their factories to low-wage countries like China and Bangladesh.
Labor-intensive manufacturing is usually also applied to customizable products. It allows manufacturers to offer personalized products and charge high prices. However, low economies of scale and complex human resource management are usually its drawbacks.
What are the types of manufacturing processes?
Manufacturing processes will vary between companies, depending on what goods they produce and their manufacturing system setup. How materials and components are changed or converted, it can involve several manufacturing methods. The five types of manufacturing processes are molding, forming, machining, joining, and machining.
Molding
Molding processes liquid or pliable raw materials and shapes them using a rigid frame. Manufacturers usually use it to produce goods made from raw materials such as plastic, metal, or glass.
The term molding is synonymous with casting. The first usually involves plastic. Meanwhile, the second uses metal materials in the process.
First, manufacturers heat the raw material until it becomes liquid. Then, they then poure it into the mold. The liquid then solidifies and adopts the shape of the mold used. In expendable mold casting, they must crush the mold to remove the part. Meanwhile, in permanent mold casting, they can use the mold repeatedly.
Forming
Forming uses compression or other types of stress to shape a workpiece to the desired shape without adding or removing material. As a result, its mass also remains unchanged.
This manufacturing process is most often used to process metals. However, plastics also often involve this process.
Machining
Machining involves cutting material into a final shape to the desired specifications. It involves equipment such as saws, shears, and spinning wheels. It can also use other methods such as laser machines to cut metal. Using chemicals through a photochemical process is another method to make small thin metal parts with complex designs.
Machining is widely applied to make metal products. Furniture production also often involves this process.
Then, machining usually involves computers – called Computer Numerical Control (CNC) – to increase efficiency. CNC controls operations without involving human intervention. Therefore, it reduces the labor cost.
Joining
Joining involves combining several parts or components to make one part. It can involve welding, soldering, mechanical fastening, or brazing to join materials or components.
Take, for example in constructing a car body. Mechanical and thermal joining procedures are used to join materials and components to form a car body.
Shearing
Sheet metal shearing uses a shear cutting machine and makes them into smaller parts. It is usually applied in working with aluminum, brass, or paper and plastic inputs. The resulting pieces then go into the next manufacturing process, such as the forming or drawing process.
How is the manufacturing process organized?
Earlier, we discussed how materials and components are processed, so now we discuss how the manufacturing process is organized. It forms a manufacturing system. The system chosen usually depends on the available capital, facilities, staff, and information systems. The four common manufacturing systems are:
- Flexible manufacturing system
- Continuous manufacturing system
- Intermittent manufacturing system
- Custom manufacturing system
Flexible manufacturing system
Flexible manufacturing systems can handle batches like intermittent manufacturing but rely more on machines than labor. Manufacturers can produce output at high volumes by implementing robots and automation to reduce human intervention.
Besides producing products at higher volumes, the system is also easy to reconfigure to produce other products. However, flexible manufacturing requires significant capital investment.
Mass customization is another variation for a flexible manufacturing system. It allows manufacturers to design and customize products simply but can produce products on a mass scale.
Continuous manufacturing system
The manufacturer organizes the production line into sections. In each section, there is a workstation. When the finished materials and components are processed at the initial work station, they are transferred sequentially along the line and stopped at the next station for further processing. This process continues until the final output is produced.
Continuous manufacturing systems are suitable for producing standard products at high volumes, reducing unit costs through economies of scale.
But, it requires a large initial investment. In addition, low flexibility and differentiation are other drawbacks.
Intermittent manufacturing system
Intermittent manufacturing systems produce identical outputs in limited quantities (batches). Each batch goes through one stage of production before moving on to the next stage.
Compared to custom manufacturing, intermittent manufacturing systems offer advantages such as higher economies of scale. In addition, manufacturers can produce more varied goods using the same production line.
Custom manufacturing system
Under this system, manufacturers produce goods specifically designed for customers. In addition, manufacturers produce goods when an order is placed, so they are usually unique for each customer.
This method does provide more flexibility and is usually relatively simple. In addition, products are more customizable and by the tastes and desires of customers.
However, custom manufacturing can be very expensive with low economies of scale. In addition, it takes more time and tends to be labor-intensive because it often relies on hands with the help of machines.
What to read next
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- What Are Business Resources Examples
- Examples on How Businesses Add Value to Products
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- Enterprise: Meaning, Purposes, Types
- How Businesses Build Competitive Strategy
- How does a business work?
- Business Process: Definition, Importance, and Management
- Manufacturing Process: Definition, Examples, and Types
- How Low-Cost Inputs Affect A Company’s Competitiveness
- Human Resources in a Business