What is it like to run a manufacturing business?
The coronavirus pandemic recovery is providing real opportunities for owning a manufacturing business but what is it like? Starting a manufacturing business or buying an existing business could be excellent options for a budding business owner.
Running a manufacturing business is very different from a service business, and the priorities to be successful need to be understood.
The decline of manufacturing in many western economies means that fewer people have experience in running manufacturing businesses.
Brendan Barrow, a business mentor and consultant who has run several manufacturing businesses, explains not only what manufacturing is but what is involved in owning a manufacturing business.
What is manufacturing?
Here is how I define manufacturing related terms rather quote from a dictionary.
The manufacturing industry is a “conversion industry” made up of many manufacturing businesses that range in size from micro to massive.
Manufacturing, by definition, covers a wide range of processes that convert raw materials or ingredients into products.
Manufacturing businesses have a production process and other supporting functions like warehousing, logistics and maintenance.
The term production or production management usually relates to the core production process.
Operations or operations management usually includes supporting functions, as well as production.
Manufacturing management or Factory mangement may be used similarly to “operations management”.
A factory is the site or buildings where production, fabrication, processing and packaging are done. Factories can range in size and complexity from small industrial units to huge areas.
Each company will have its definition of what is included in these terms.
What does a business function mean?
For any business to work effectively, certain things have to happen in harmony, and we call these things business functions. They include things such as marketing, sales, finance and operations. Some of these business functions are critical for your business to thrive.
(Should I Own A Business podcast episode 6 Critical Business Functions gives you a lot more information)
We talk about functions rather than job descriptions or roles because who does them is a separate discussion. The fact is they have to be done by someone.
In a manufacturing business, the efficiency of the production and operations functions are critical.
Which sectors are there in the manufacturing industry?
Manufacturing or production processes can be very different depending upon their sector.
- food production
- beverage production
- heavy industrial chemicals
- speciality chemicals
- ship/boat building
Some sectors have continuous processes such as industrial chemicals, where others produce batches. Hence the terms continuous process and batch process manufacturing.
Smaller manufacturers are likely to be batch processors.
Some companies make products for sale to consumers while others sell to other businesses.
What is it like running a manufacturing business?
Like owning any business, it can be rewarding, good fun and very challenging!
As the owner, you must be across all the functions to make sure your products are correctly made, efficiently, and on-time to meet what your customer needs.
In addition to managing your business, here are some examples of what a “manufacturing manager” might do daily:
- Production planning so your materials, processes and labour are used efficiently to meet deadlines.
- Process control, quality assurance and quality control to make sure your products meet their specification.
- Packaging, storage and shipping is done efficiently.
- People motivation and management and training to keep your team engaged.
- Maintenance, housekeeping and cleaning to maximise your efficiency.
- Health, safety, environment and certification compliance to meet your legal obligations.
Being calm, logical and decisive are traits of competent production and operations managers. When things don’t go to plan, resourceful manufacturers find creative solutions quickly.
The size of your business will determine how much you can delegate these tasks or cover them yourself.
Manufacturing businesses are physical as opposed to just digital and typically they have office, production and storage space.
Which type of person might manufacturing suit?
A manufacturing business may be suited to people who typically:
- are practically minded
- are happy to do physical work and get their hands dirty
- organize people and systems
- have a natural sense of efficiency and planning to get things done
- have technical knowledge of their products
- are resourceful and creative problem solvers
- show attention to detail
- anticipate problems
- cope with several complex processes
- are decisive
Is manufacturing for big companies only?
No, manufacturing is for a whole range of companies from micro-businesses to global giants.
Small to Medium Businesses (SMBs) can also take advantage of advanced manufacturing which is becoming cheaper.
What does “make to order” mean?
Generally, there are 3 approaches (or a combination) in manufacturing business models. ( Our article What does business model design mean ? explains how important these are.)
Make To Stock (MTS) is where standard items are made and held in stock waiting for a customer to buy them.
Make To Order (MTO) is where items are made only when an order is received from a customer. MTO means you only produce things that are guaranteed to sell.
Make To Assemble (MTA) is when components are made to stock but not assembled until customer orders a finished item.
What is Just In Time?
Just In Time (JIT) aims to produce a finished product for when a customer needs it. The JIT concept is to minimize the money tied up (called working capital) in materials, labour, production and storage and minimize the working capital required to run the business. Money tied up in raw materials, work in progress or finished goods is a waste.
What does lead time mean?
Lead time is the time it takes to complete a production process.
If you have multiple processes, then the individual process lead times can be added together for an overall manufacturing lead time.
Lead time is an important part of measuring efficiency and customer service. Reducing lead times also helps to minimize the working capital required to run a manufacturing business.
What is micromanufacturing?
Micro-manufacturing refers to the size of the company and not the size of the products. Many countries describe the smallest firms that employ one or a few people as “micro-businesses”. Increasingly, micro-businesses are involved in manufacturing or micro-fabrication.
Micro businesses are prevalent in all economies and account for the greatest number of businesses.
What do Advanced Manufacturing and Industry 4.0 mean in simple terms?
Advanced manufacturing is a catch-all name for manufacturing processes that use new technology to improve products or processes.
Industry 4.0 is a term to describe the cyber connected world of:
- additive manufacturing,
- data and
- artificial intelligence.
All these are coming together in ways that have not been possible before, because of digital technology.
Industry 4.0 can include cloud computing, the internet of things (IoT) and the industrial internet of things (IIOT).
Here’s another article about robotics 5 Drawbacks about manufacturing with robots and automation.
Is 3D printing the same as additive manufacturing?
Additive manufacturing is characterized by 3D “printing” technology where layers of material are progressively added to build a 3D shape.
Depending upon the materials and end product design, an item may be fully completed in this way.
Some designs may require extra material to be applied, which is then removed by machining, to give precisely engineered tolerances.
Additive manufacturing is the opposite of traditional subtractive methods that machined away material.
Additive manufacturing can have significant advantages in faster production time and less material waste.
The nature of additive manufacturing means that an individual product can be made, which is a massive advantage over traditional manufacturing processes.
Does manufacturing have to be advanced to make money?
No, not at all, but low tech will probably only be profitable in niche or speciality areas. Some excellent manufacturing companies use traditional methods and are highly profitable.
Some production processes lend themselves to process automation and manufacturing with robots.
Highly automated processes usually are in high volume production where they can justify the cost of robots.
Often, the higher the degree of automation, the less flexible the process is to change.
Smaller manufacturers may prefer to have less automation but higher flexibility.
Our blog called Manufacturing with robots- Real Experience explains this more.
Can I turn my hobby into a manufacturing business?
Starting a manufacturing business could be the natural extension if you are a “maker” or have a hobby based on transferable skills.
Test the viability of a micro-manufacturing business on a part-time basis. Generate prototypes, test customer feedback and build a business while limiting your risk.
Starting small does not mean ending small!
Are there hidden benefits in local manufacturing?
· Any Intellectual Property such as patents and trademarks remain within your local legal system.
· The “know-how” you accumulate enhances the value of your business, not someone else’s.
· Manufacturing requires higher skills, not just less low-value jobs.
· Government Funding may be available depending on where you are based.
· Savvy investors are always looking for new opportunities.
Understanding The Reality of Business Ownership
The Should I Own A Business Podcast explores the reality of being a business owner.
Local manufacturing presents a huge opportunity for new business owners but running a manufacturing business efficiently is fundamental to success.
Here are some other resources you might find helpful:
You might like episode 14 called How to Evaluate a Business Idea which helps you decide if a business idea is suitable or viable.
Article on why most great business ideas fail.
We also have a free test to see which areas you might need to consider before starting a business.
About the author: Brendan Barrow has extensive experience in leading and managing manufacturing businesses on 3 continents.
Brendan Barrow Co-Host
The Should I Own A Business Podcast-Listen Before You Leap.
Avoiding new business failures, one owner at a time.