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Manufacturing

Manufacturing is a very simple business; the owner buys the raw material or component parts to manufacture a finished product. To function as a business the manufacturer needs to cover costs, meet demand and make a product to supply the market.

The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications. Manufacturing commonly employs a man-machine setup with division of labor in a large scale production.

A factory operates one of three types of manufacturing production:

  • Make-To-Stock(MTS) : A factory produces goods to stock stores and showrooms. By predicting the market for their goods, the manufacturer will plan production activity in advance. If they produce too much they may need to sell surplus at a loss and in producing too little they may miss the market and not sell enough to cover costs.
  • Make-To-Order(MTO) : The producer waits for orders before manufacturing stock. Inventory is easier to control and the owner does not need to rely as much on market demand.
  • Make-To-Assemble(MTA) : The factory produces component parts in anticipation of orders for assembly. By doing this, the manufacturer is ready to fulfil customer orders but if orders do not materialize, the producer will have a stock of unwanted parts.
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