Definition
Manufacturing refers to the process of producing goods or products using machinery, tools, and human labor, the result of which is a tangible output or product, frequently on a large scale. On the other hand, production is a more general term that includes both the creation of tangible goods (like manufacturing) and intangible goods, such as services. So, while all manufacturing is a form of production, not all production necessarily involves manufacturing.
Key Takeaways
- Manufacturing and Production both relate to the creation of goods, however, they have distinct differences. Manufacturing specifically involves converting raw materials into finished goods, typically through the use of machinery, labor and an organised production process.
- On the other hand, production is a broader term that encompasses not only the manufacturing process but also other stages like design, procurement of raw materials, distribution, marketing and selling the final product. Production therefore represents the entire supply chain process.
- Understanding the difference between manufacturing and production is key for businesses to efficiently allocate resources and optimise processes. By clearly distinguishing between the two, businesses can better manage each aspect and ensure each stage of creating a product is effectively monitored and controlled.
Importance
The finance term: Manufacturing vs Production is important because it helps delineate two essential processes in the business world, particularly in the industrial sector.
Manufacturing refers to the process of creating a good or service by employing machinery, raw materials, human effort, and tools, typically on a mass scale.
It is a phase within the broader concept of production, which encompasses the entire journey from obtaining raw materials to the delivery of the final product or service.
By understanding the distinction between these two terms, one can gain a clearer perspective of a business’s operation, efficiency, cost structure, and potential profitability.
It also enables better strategic decision-making, financial analysis, and process optimization.
Explanation
Manufacturing and production are two integral parts of the supply chain process and are key to understanding the operations of any business, especially within the industrial sector. Manufacturing primarily refers to the process of converting raw materials or components into finished goods using a clearly defined and controlled process. The purpose of manufacturing is to add value to an initial product, transforming it into a new product with higher utility and demand in the market.
For instance, a company manufacturing furniture would purchase raw materials like wood, fabric, and screws, and through utilization of skills, machinery, and labor, these materials are transformed into valuable finished goods like tables, chairs, or sofas. Production, on the other hand, encompasses not only manufacturing but also a wider range of activities. It includes the entire process from the inception of a product’s idea, through production planning and control, to the final creation and marketing of a product.
Production has a more comprehensive scope, ensuring that the final product is created, meeting not just quantity but also quality standards, effectively using resources, and aligning the final product with market expectations. For example, in the furniture company, production might start with design brainstorming, move into sourcing materials, manufacturing, quality control, and end up in marketing and selling the finished products. Production’s purpose is broader, aimed at generating the maximum level of customer satisfaction and profitability for a business organization.
Examples of Manufacturing vs Production
Automobile Industry: In this industry, “manufacturing” typically denotes the process of assembling various components to create a finished vehicle. This involves steps like putting together the engine, installing electrical systems, painting the body, and fitting the interiors. On the other hand, “production” in an automobile industry context would cover the entire spectrum of activities, not just limited to manufacturing. This includes concept development, design, sourcing raw materials, the manufacturing process itself, quality checks, marketing, and distribution.
Textile Industry: In the context of the textile industry, manufacturing refers to the process of turning raw materials like cotton, wool, and polyester into finished goods such as clothes, carpets, and curtains. The production process in the textile industry describes the entire journey these goods take, right from the cultivation of raw materials, through manufacturing, all the way to the shipping and selling of the finished items.
Food and Beverage Industry: A food or beverage manufacturer might convert raw ingredients into packaged goods such as cookies, soda, or frozen meals. The machinery, workers, and processes involved in creating these goods are all part of the manufacturing process. However, the term “production” is more encompassing and includes steps like recipe formulation, sourcing of ingredients, packaging design and development, marketing strategies to promote the food or beverage product, and transportation to outlets or consumers.
Frequently Asked Questions: Manufacturing vs Production
1. What is the basic difference between Manufacturing and Production?
Production involves creating ‘something from nothing’. This could mean assembling raw materials or processing raw items into new products. Manufacturing, on the other hand, involves the making of goods in large quantities through machine processes or assembly lines. Manufacturing is essentially a subset of production.
2. Can you provide an example of Manufacturing vs Production?
Certainly, a good example can be seen in the furniture industry. The process of cutting trees and transforming the wood into lumber is an example of production. Taking that lumber and converting it into a dining table or chair on a large-scale is an example of manufacturing.
3. Is Manufacturing more complex than Production?
Complexity can vary in both cases. However, manufacturing often tends to be more complex as it usually involves multiple stages of production, intricate designs, large scale and sophisticated machinery.
4. How do Manufacturing and Production both affect the economy?
Both manufacturing and production are key drivers of a nation’s economy. They contribute to a significant portion of the Gross Domestic Product (GDP), generate employment, and foster economic growth. Positive growth in both sectors usually reflects well on the overall economic health of a country.
5. What are some careers in Manufacturing and Production?
Common careers in this sector include Production Manager, Manufacturing Engineer, Quality Control Analyst, Production Planner and many more. Roles can range from overseeing the production process, designing and improving manufacturing systems, to ensuring the quality of the products being produced.
Related Entrepreneurship Terms
- Direct Costs
- Indirect Costs
- Mass Production
- Goods and Services
- Economies of Scale
Sources for More Information
- Investopedia: A comprehensive financial website with a vast range of definitions, articles and financial tools.
- Accounting Tools: A trustworthy source that focuses on finance and accounting topics.
- Corporate Finance Institute: An educational platform that offers online courses and resources about finance.
- Harvard Business Review: A respected source for articles and case studies about various business topics, including finance.
