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Manufacturer 101: Everything You Need to Know

August 21, 2023
Written and researched by experts at AvadaLearn more about our methodology

By Sam Nguyen

CEO Avada Commerce

This article will delve into what manufacturer is, its significance, different processes, and how it differs from wholesalers, retailers, and distributors.


What is a Manufacturer?

In simple terms, a manufacturer is an entity or individual responsible for producing goods. This process involves transforming raw materials into finished products for distribution and use. The journey from conception to the end product involves several stages: design, sourcing, production, and quality assurance.

One of the primary responsibilities of a manufacturer is to ensure that their products meet the required certification standards. This involves conducting performance tests and quality assurance checks to ensure the goods comply with all international standards. 


Customer satisfaction is a crucial priority for manufacturers. They aim to produce goods that meet and exceed customer expectations by adhering to strict quality assurance measures. Satisfied customers are more likely to become loyal to the brand and recommend it to others, contributing to the success and growth of the business.

Reasons why manufacturing is important

Manufacturing is of paramount importance for several reasons:

  • Economies of Scale: Producing items in bulk reduces the cost per unit, as fixed costs are spread over a larger volume. This cost efficiency enables manufacturers to offer competitive prices, making their products attractive to consumers.
  • Automation and Efficiency: To meet large-scale production demands, manufacturers frequently employ automated systems. It also simplifies complex assembly tasks, resulting in higher accuracy and consistency in product quality.
  • Cost Savings on Raw Materials: Bulk purchasing of raw materials allows manufacturers to negotiate discounted prices with suppliers. This cost-saving strategy further contributes to improved profit margins.
  • Effective Inventory Management: Managing inventory is crucial for manufacturers. They can determine a realistic production approach and maintain optimal inventory levels by analyzing demand forecasts. This helps avoid excess inventory or stockouts and ensures a smooth flow of goods from production to distribution.

What are the Manufacturing Processes?

Manufacturing processes encompass manufacturers’ methods to transform raw materials into viable finished products. Advancements in manufacturing technology have revolutionized the industry, introducing innovative tools and techniques that streamline the production process. 

Let’s delve into some of the most preferred tools and technologies used in modern manufacturing:

Additive Manufacturing: Additive fabrication, commonly known as 3D printing or rapid prototyping, is a revolutionary process that involves creating three-dimensional objects by adding layers of material on top of each other. 

  • 3D Printing: Among the most prevailing techniques in additive fabrication, 3D printing employs a layer-by-layer approach to construct complex objects.
  • Laser Sintering: Laser sintering utilizes a high-powered laser to fuse powdered materials, creating a solid structure.

Software Solutions: Manufacturers heavily rely on specialized software to streamline various aspects of their operations. These software tools automate material requirements planning, inventory control, accounting, and more, improving efficiency and accuracy in managing day-to-day operations.

Automated Production Systems: Automation has become a game-changer in the manufacturing industry, replacing manual labor with advanced technologies to improve efficiency, quality, and productivity. Some notable automated systems used in manufacturing include:

  • Assembly Systems: These systems use robotics and precision machinery to assemble components rapidly and consistently, reducing human errors and enhancing production speed.
  • Conveyor Belts: Playing a crucial role in moving materials and products along the production line, conveyor belts ensure smooth and continuous manufacturing processes.
  • Artificial Intelligence (AI): AI-driven technologies enable manufacturers to optimize their business goals through data analysis, predictive maintenance, and real-time decision-making.

What is Lean Manufacturing?

Lean manufacturing is a strategy to optimize production processes and reduce waste to create finished goods efficiently. It originated in Japan and has gained global popularity as a means to add more value to products by eliminating unnecessary steps and inefficiencies in the manufacturing process.

The main focus of lean manufacturing is to minimize waste in the following 7 areas:

  1. Material Movement: Evaluate the efficiency of moving materials and products within the production process to minimize unnecessary transportation costs and delays.
  2. Inventory Management: Optimize inventory levels to reduce excess stock, free up space, and minimize the risk of damage or obsolescence.
  1. Process Efficiency: Streamline work processes and equipment movements to reduce unnecessary motion and save valuable time.
  2. Lead Time Reduction: Identify areas where waiting times can be minimized, such as waiting for material deliveries or repairs.
  3. Production Optimization: Avoid overproduction by producing goods in line with actual demand, preventing unnecessary expenses and inventory buildup.
  4. Process Simplification: Eliminate unnecessary steps and complexity in manufacturing processes to improve efficiency and resource utilization.
  5. Defect Prevention: Focus on producing high-quality products from the outset to reduce defects, recalls, repairs, and associated expenses.

By addressing these areas and applying lean principles, businesses can create a more efficient and customer-focused manufacturing process, resulting in higher customer value and improved profitability.

Manufacturers vs Wholesalers vs Retailers vs Distributors

Manufacturers, wholesalers, retailers, and distributors play crucial roles in the supply chain, each contributing to the distribution process in unique ways. Together, these entities collaborate to meet customer needs and ensure the efficient delivery of products to the market.

  • Manufacturers are responsible for producing goods and products from raw materials or components. They play a central role in the production process and directly relate with retailers and distributors. Manufacturers supply products to these intermediaries for further distribution.
  • Wholesalers act as intermediaries between manufacturers and retailers. They buy goods in bulk from manufacturers and sell them in smaller quantities to retailers. Wholesalers complete the distribution chain and ensure products reach retailers efficiently.
  • Retailers are the final link in the supply chain, selling products directly to consumers. They directly relate with end-users and purchase goods from wholesalers or distributors. Retailers cater to the specific needs of consumers and provide products through various channels, such as physical stores or online platforms.
  • Distributors play a crucial role in bridging the gap between manufacturers and retailers. They buy products from manufacturers and sell them to retailers, maintaining a diverse inventory to meet retailers’ demands. Distributors facilitate the smooth flow of goods through the supply chain.

Here is the table illustrating the differences between Manufacturers, Wholesalers, Retailers, and Distributors:

Aspect Manufacturers Wholesalers Retailers Distributors
Role Produce goods and products Act as intermediaries between manufacturers and retailers Sell products directly to consumers Bridge gap between manufacturers and retailers
Relationship with Customers Direct relationship with retailers and distributors Buy from manufacturers and sell to retailers Direct relationship with end-users Buy from manufacturers and sell to retailers
Purchasing Buy raw materials and components Buy in bulk from manufacturers Buy from wholesalers or distributors Buy from manufacturers and sell to retailers
Inventory Management Maintain inventory of rawmaterials and finishedgoods Store large quantitiesof various goods Hold smaller quantitiesof goods for sale Maintain inventory ofvarious goods
Pricing Set wholesale prices forwholesalers and markupbefore selling to retailers Buy at wholesale pricesand add a markup beforeselling to retailers Set retail prices forend-users with a markup Set their prices andoffer discounts toretailers
Sales Volume High Large Small Moderate to Large
Relationship with Distributors Direct relationship withdistributors Act as intermediariesbetween manufacturersand retailers Direct relationship withmanufacturers

Retailers to Consumers

Retailers play a vital role in the supply chain, bridging wholesalers and end consumers. They provide customers with a diverse shopping experience through physical stores and online platforms.

Giant retailers like Amazon and Alibaba display a wide range of products wholesalers provide on their websites. On the other hand, brick-and-mortar stores allow customers to physically interact with the said goods before purchasing. 

Retailers typically buy products in small quantities from wholesalers and sell them at the recommended retail price. Additionally, they can leverage third-party e-commerce platforms to showcase their products virtually, expanding their reach to a broader audience.


Offshore Manufacturing

Offshore manufacturing refers to producing goods in a different country from where the company is based. It involves assembling raw materials and completing the manufacturing process in the offshore location. 

This approach is often adopted to take advantage of lower labor costs or access specialized skills and resources available in that country. Companies may design and plan their products in one country but manufacture them in another to achieve cost efficiencies and competitiveness in the global market. 

Types of Manufacturing Production

There are three main types of manufacturing production: Make-to-Stock (MTS), Make-to-Order (MTO), and Make-to-Assemble (MTA).

Type #1: Make-to-Stock (MTS)

Make-to-Stock is a manufacturing production strategy in which products are created based on customer demand forecasts and kept in stock before receiving specific orders. The idea behind MTS is to have a ready inventory of products to fulfill future customer orders promptly. 

MTS is particularly suitable for products with stable and predictable demand patterns. It ensures that the manufacturer is well-prepared to meet customer needs and reduces lead times for delivery. By having products readily available in stock, manufacturers can respond quickly to customer orders, especially during peak seasons or high-demand periods.

However, there are potential risks associated with MTS. If demand forecasts are inaccurate, there might be a surplus of inventory, leading to higher storage costs and potential wastage. On the other hand, insufficient production could result in stockouts, potentially leading to lost sales and dissatisfied customers.


Type #2: Make-to-Order (MTO)

Make-to-Order (MTO) is a manufacturing strategy where products are only produced once a customer order is received. Unlike Make-to-Stock (MTS), where products are pre-manufactured and kept in inventory, MTO manufacturers start production after receiving specific customer orders.

The MTO approach allows for a higher degree of customization and flexibility. Each product can be tailored to meet individual customers’ specific requirements and preferences. This strategy is commonly used for products with unique features or specialized configurations.

By adopting the MTO approach, manufacturers can avoid the risks of overproduction and excess inventory. It enables them to respond more to customer demands and reduces the need for storage space and carrying costs associated with unsold products.

However, the MTO strategy also comes with specific challenges. Since production begins after receiving orders, lead times may be longer, and customers may need to wait for their products to be manufactured. Manufacturers must have efficient production processes to ensure timely delivery and customer satisfaction.


Type #3: Make-to-Assemble (MTA)

Make-to-Assemble (MTA) is an advanced manufacturing strategy where all components needed to create the final product are kept in stock. When an order is received, the pieces are assembled, and quality control evaluations are conducted.

MTA products offer customization options but are less personalized than made-to-order solutions. This method allows manufacturers to anticipate market demand and keep essential parts in the warehouse for quick assembly when an order is placed, avoiding overproduction. 

How to Reduce Manufacturing Risks

To mitigate manufacturing risks, manufacturers must address supply chain vulnerabilities. This involves finding reliable suppliers and keeping track of critical raw materials. Outsourcing components from reputable suppliers who can meet delivery deadlines is essential.

Operational risks should also be considered. Manufacturers should allocate funds for machine replacements and have backup power supplies to prevent production disruptions. Data loss is another potential risk, so implementing regular data backups, software updates, and cybersecurity measures is necessary.

Final Words

This article is about what manufacturers do, their importance in the production process, different manufacturing processes, and how they collaborate with other entities in the supply chain to bring products to end consumers. 

Sam Nguyen is the CEO and founder of Avada Commerce, an e-commerce solution provider headquartered in Singapore. He is an expert on the Shopify e-commerce platform for online stores and retail point-of-sale systems. Sam loves talking about e-commerce and he aims to help over a million online businesses grow and thrive.