Difference between Manufacture and Production

When it comes to manufacture and production, the two terms are often interchangeable. This is because both are involved in the creation of goods or services to meet customer needs and quality standards. Thus, people are often feeling confused about the difference between manufacture and production.

However, there are subtle differences between the two that are important to understand to make informed decisions about your business strategy. In this article, we’ll explore the definitions of manufacturing and production and the key differences between the two.

Definition of Manufacture and Production

In conclusion, while manufacturing and production are related terms, they refer to different aspects of the production process. To understand more, here are the detailed definitions of each term:

Manufacture

Manufacturing refers to converting raw materials into finished products, often on a large scale. Manufacturing can be a complex process involving various stages, from design and prototyping to production and quality control.

It involves using machines, tools, and labor to transform materials such as metal, plastic, or wood into products that can be sold to consumers.

Production

Production, on the other hand, refers to the process of creating goods or services using a combination of resources such as labor, capital, and materials.

This can include manufacturing but also encompasses other activities such as assembly, packaging, and distribution. In other words, production is a broader term encompassing all the steps in creating a product or service.

The key difference between manufacturing and production is that manufacturing refers to the physical process of creating a product. In contrast, production refers to the entire process of creating and delivering a product or service. In short, manufacturing is a subset of production that focuses specifically on creating physical products.

Purposes of Manufacture and Production

While manufacturing and production are closely related, they have distinct differences in terms of their focus and purpose. Here is the explanation:

Manufacture

Manufacturing focuses on the physical transformation of materials into products. The primary purpose of manufacturing is to create products that meet specific customer needs and requirements.

That’s why manufacturing is typically used in industries that produce physical goods such as automobiles, appliances, and electronics.

Production

Meanwhile, production is focused on creating value by delivering goods and services to customers. The primary purpose of production is to create value for customers and generate revenue for the business.

Therefore, it is used in various industries such as healthcare, education, entertainment, and many more.

Methods of Manufacture and Production

Understanding the difference between manufacturing and production methods is important for businesses that want to optimize their operations and improve their bottom line. There are various types of manufacturing production processes, each with its advantages and disadvantages.

Types of Manufacture

Here are three of the most common methods used in the manufacturing industry:

Make-to-Stock (MTS)

Make-to-stock (MTS) is a manufacturing process where products are produced in advance and stored in inventory until a customer order is received. This means products are created based on anticipated demand rather than customer orders.

MTS is often used for products with predictable demand, such as essential consumer goods like toothpaste or packaged food. The advantage of this method is that products can be shipped out quickly because they are already produced and available in inventory.

Make-to-Order (MTO)

Make-to-order (MTO) is a manufacturing process where products are only produced after receiving a customer order. This means that products are customized to the specific requirements of the customer.

This method is often used for products that require customization, such as specialized machinery or customized clothing. MTO can help reduce inventory costs since products are only produced once ordered.

Make-to-Assemble (MTA)

Make-to-assemble (MTA) is a manufacturing process where products are produced semi-finished and then assembled into finished products based on customer orders. This means that the components are produced in advance. Still, the final assembly is done based on the customer’s specific requirements.

MTA is often used for products with a standard set of components but requires some customization during assembly. This approach can offer the advantages of both MTS and MTO, allowing for faster delivery times while avoiding excess inventory.

Types of Production

On the other hand, there are several types of production processes that businesses can use, and each has its own advantages and disadvantages. Here are five types of most commonly used methods:

Mass Production

Mass production is a type of production process that involves producing large quantities of standardized products. This approach is often used for products with high demand and relatively simple to manufacture.

Mass production typically involves assembly line production, with each worker performing a specific task in the production process.

Batch Production

Batch production is a production process that involves producing a specific number of products at one time. This approach is often used for products that require some level of customization or are too complex for mass production.

This method typically involves setting up a production line for a specific product or group of products and producing a set number of units before switching to another product.

Job Production

Job production is a type of production process that involves producing a single product or a small number of products, typically to order. This approach is often used for highly customized products or requiring a high degree of skill to produce.

Job production typically involves a skilled artisan or team of craftsmen working on a single product from start to finish.

Just-In-Time (JIT) Production

Just-In-Time (JIT) production is a type of production process that involves producing products only when they are needed, in the exact quantities required. This approach is often used for products with a high customization level or products with a short shelf life.

JIT production typically involves close coordination between suppliers and manufacturers to ensure that raw materials and components are delivered on time and in the correct quantities.

Flexible Manufacturing System (FMS)

Flexible Manufacturing System (FMS) is a production process involving computer-controlled machines and robots to produce a wide variety of products.

This approach is often used for products requiring a high degree of customization or with a short life cycle. FMS typically involves a high level of automation and can be reconfigured quickly to produce different products.

Resources Used in Manufacture and Production

Manufacturing and production are similar in their requirements for resources such as labor, energy, and capital. While both require resources such as labor, energy, and money, they differ in the resources utilized.

Manufacturing requires a significant amount of tangible raw materials, usually purchased from other sources. For example, a manufacturer might use raw materials like steel, plastic, and rubber to make a car.

On the other hand, the production process uses tangible raw materials and intangible resources. And it is more common for a production industry to create its resources since production converts different inputs like components or products to brand-new goods.

Additionally, manufacturing requires more machines and equipment, which requires significant energy to power. On the other hand, production requires more human labor and technology to create products or provide services.

Output from Manufacture and Production

The process of manufacturing produces physical matter, whereas production generates utility. Utility refers to the practical value of a product or service, while matter typically denotes a physical entity.

Production can result in a tangible or intangible product or service, such as clothing or medical care. In contrast, manufacturing produces a final physical product such as a book, television, or tractor.

In conclusion, the result of manufacturing is the goods that are ready to be sold, while the result of production can be goods, services, or utilities that can be used immediately or later.

Table of Comparison About The Difference between Manufacture and Production

A table comparing manufacturing and production would break down the key distinctions between these terms. Manufacturing focuses on creating physical products from raw materials, using specialized machinery. Production is a broader concept encompassing all activities that transform resources, including labor, into finished goods or even services. While manufacturing always results in tangible products, production can include both goods and intangible services.

Table Of Comparison

Based on the points of the key differences explained above, here are the head-to-head differences between manufacture and production:

Key Differences	Manufacture	Production
Definition	Manufacturing is the process of converting raw materials into finished products that can be sold to consumers.	Production is the process of creating goods or services that are meant for consumption, and it may include manufacturing.
Purpose	To create products that meet specific customer needs and requirements.	To create value for customers and generate revenue for the business.
Methods	Manufacturing transforms raw materials into finished goods with methods like Make-to-Stock (MTS), Make-to-Order (MTO), or Make-to-Assemble (MTA).	Production converts inputs into outputs with methods like Mass Production, Batch Production, Job Production, JIT Production, or Flexible Manufacturing Systems.
Resources	Tangible raw materials, labor, and machinery or other equipment are essential.	Machinery may or may not be required, while human labor and technology are essential.
Output	The result is the goods that are ready to be sold.	The result can be goods or services that can be used immediately or later.

To clarify, every type of production may not be manufacturing, while every kind of manufacturing comes under production. By understanding the differences, businesses can better manage their manufacturing and production processes to maximize efficiency and profitability.

However, both may produce physical goods that require packaging. Manufacturing companies typically prepare packaging for their finished goods to protect them adequately during shipping and handling.

Similarly, production companies must prepare packaging for their goods to ensure they are properly labeled, stored, and transported. Therefore, both processes need to prepare packaging costs.

To learn more about packaging and how to reduce its cost, check the comprehensive guide in the link below.

Read About: Easy Steps of How to Reduce Packaging Costs

Financial Analysis

From a financial analyst’s perspective, understanding the difference between production and manufacturing costs is crucial. Production cost takes a broader view, encompassing all the expenses required to get a product or service ready for sale. This includes direct costs like materials and labor, as well as indirect costs like rent, utilities, and administrative expenses. Essentially, it captures the entire value chain from conception to market.

Manufacturing cost, on the other hand, has a narrower focus. It only considers the direct costs associated with transforming raw materials into finished products. This approach, known as variable costing, excludes indirect costs often included in production cost analysis. Imagine a clothing manufacturer. Their production cost would include the cost of fabric, labor for cutting and sewing, and shipping the finished garments to stores. However, the manufacturing cost would only consider the fabric and labor directly involved in making the clothes.

This distinction between production and manufacturing costs can make it more challenging for financial analysts to get a complete picture of a company’s overall expenses. While manufacturing costs offer a clear view of direct conversion costs, they might overlook crucial indirect expenses that impact the final product’s price.