Manufacturing in the 21st century...

So…where does all your stuff come from? How is every Nestlé water bottle, Dove soap bar, Macbook Pro, and?IKEA Po?ng Chair?perfectly identical?

(Not that every company?does it right every time).

Well, if you’ve ever asked any of those questions before, you’re in luck.?Well, if you’ve ever asked any of those questions before, you’re in luck. We're going to cover the chain of events that take place before a product like the P?ang chair ends up in your hands. We’ll compare how different types of products are designed and how materials are picked out and purchased. Then we’ll talk about who does what to make all the parts come together, and how the end product ends up on a shelf at your local Target or IKEA.

If you want to get into the nitty gritty step-by-step manufacturing line for a chair or water bottle, check out?How it’s Made?(a Canadian documentary series). They’ve saved us both a ton of time by spending the last two decades video-taping how thousands of different products are made (1,664 to be exact).

For starters,

Let’s cover some important basics.

TLDR:

• R&D = Researching what to make.
• Design = Planning to make a thing.
• Manufacturing = Making the thing.

Each of the processes below might be taken care of either by a company that wants to produce something, or one they hire

Step 1: R&D

Market research:?Companies spend a ton of time doing market research to figure out 1) their best customer, 2) how those customers think and behave, and 3) the competition. This ‘research’ involves surveys, collecting data, modeling the data, and reporting research findings.

They figure out what kind of ideas or new products the company should develop. They share these findings with technical research and design teams to help them decide what kind of products to work on.

Sometimes the opposite happens — a research or design team has already come up with ideas and needs to figure out the best market.

Technical research:?A tech research team doesn’t usually come up with end products. Rather, they come up with new technologies, or discoveries that can eventually be used in a product.?Typically, they’re told what they should work on by market researchers, or they’re asked by a design team to come up with a specific type of tech to help them complete a product. You’ll find these teams either, science/engineering labs, or alongside design teams in product innovation labs (like?IKEA’s).

“Tech-first” companies are different. Their research is driven by trends in their field instead, so they start out by trying to either discover or improve cutting-edge tech. They let the market researchers and designers worry about the best use for the new ideas afterwards. Sometimes if the tech is the first of its kind, there might not even be a market for it yet.

User research:?A user research team figures out how consumers respond to different ideas or designs. They work with, or within a design team and iteratively put out a bunch of different products to figure out what’s best. This happens while the product is being designed and re-designed, but before it’s made in large batches.

Step 2: Design

Not to state the obvious, but a design is a plan to create something.

Designing something typically involves drawing up diagrams of the end product and a list of design specifications (aka ‘specs’).

A spec is kind of similar to a description.?A list of design specs is kind of like a rubric: a list of criteria and descriptions that tells you what a successful end product should look like.?There are lots of types of specifications (e.g. Requirement specs, Functional specs, Design specs, Material specs, Test specs, Performance specs, and Quality specs.) If you’d like to read more about the design-testing process, click?here.?Once the chair’s built, we can look back at our drawings and specs and see if it turned out exactly how it was designed. Often there’s a lot of back and forth during this process to get the product to look exactly how designers envisioned it.

There are also lots of different softwares and tools that designers use to put all of these specs together. They also use these tools to communicate their work to other people within a company—those who find the materials for the product, those who actually build it, and those who sell it. Designers who are working on physical objects, like a chair, or a car engine, might use?SolidWorks?or?Onshape. These are 3D design softwares, which are also called Computer Aided Design (CAD).

Step 3: Manufacturing

Manufacturing. The making of all physical things. Once the design is completed it’s sent to a manufacturer.

1.What is it? Manufacturing is an all-encompassing term for the trillion-dollar industry that uses raw materials, chemicals, labour, machinery, and software to make physical products. The largest companies produce cars or consumer electronics (like VW, Toyota, and Apple) — each of these companies bring in over $200B of revenue each year and employ hundreds of thousands of people.

2. Who does it? When a company designs and wants to make a product, they might do it themselves using their own facilities. However, most companies don’t want to put down the money to set up their own factory, so they hire another manufacturer to produce it for them. This third-party is called a contract manufacturer (CM). The company that wants the product becomes a customer of the CM. For example: IKEA is a customer of contract manufacturers like?Gyllensvaans. There are quite a few different types of these relationships, so read more?here.

3. The Assembly Line (aka Progressive Assembly): This process was born during the industrial revolution. The idea is to have a bunch of workstations (with people and machines at each one) lined up side by side to build the product. They’re organized in order, so that the first workstation starts with nothing but loose parts. The first workstation puts together the first one or two parts, before passing it onto the next workstation. At each subsequent step, more parts get added, moulded, shaped, or refined. Every few seconds, minutes, or hours, each workstation will repeat the same thing over and over and pass on a half-made product until the very last workstation.

Let’s pause from the IKEA chair and take a look at cars for a second. Back in the day, they used to be manufactured like this:

Today, it looks a lot more like this:

4. Types of manufacturing: There are five main types of manufacturing processes. A production process for complicated or several products might use multiple. Very simply put:

• Repetitive Manufacturing:?a straight production line that puts out the same product over and over again 24/7. This system’s good for making lots and lots of one thing.
• Discrete Manufacturing:?A production line that is flexible and changes often. The set up has to be ready to produce multiple different complicated products.
• Job Shop:?A?small system that handles custom or bespoke low-volume manufacturing jobs. The machines and people are set up in groups, according to what kind of skills they have (instead of in an assembly line format, since there might not be a repeatable sequential set of steps).
• Batch Process:?The raw materials used to put together a product move along an assembly line, but in groups. Think of a company that makes cookies. They don’t bake one cookie one at a time over and over again. They bake batches of cookies over and over again. They might have a step-by-step process the same way an assembly line or repetitive process does, but they push a big group of cookies at once instead of one cookie at a time.
• Continuous/Process Manufacturing:?This is similar to a repetitive process, but it’s usually for chemicals or materials. So it’s not exactly like assembling the same thing again and again, it’s more like putting out a constant stream of chemicals.

5. How fast can we make stuff? There are a few business models manufacturers can choose from to manage their demand & production efficiency:

• Engineer-to-order:?In this model, when a manufacturer gets a request to make something, they don’t receive a complete design. Before it’s made, they need do lot of extra designing and engineering work to figure out how to build the product.
• Make-to-order (MTO):?The manufacturing process starts when a customer/designer sends in an order for a specific product. The production line only runs when there’s a confirmed order. This is especially good for building highly customized products (like baked goods).
• Assemble-to-order:?Manufacturers make the basic parts and wait for customer orders to come in before they assemble the final products (which they can do very quickly). This allows for minor customizations, since they haven’t put together the final product (but they can’t change anything major since they’ve already made the base parts).
• Make-to-stock (MTS):?Manufacturers (who have predictable customers) forecast demand to start building stuff before it’s purchased. This is considered a “push-type” system where the manufacturers are “pushing” the products they’ve made to buyers who haven’t yet made final purchases (as opposed to MTO, where the manufacturer is “pulled” to make stuff by a customer’s request).
• Lean manufacturing:?Lean manufacturing/Six Sigma/Just-in-Time manufacturing are all ways of reducing wastage and improving efficiency.?The idea is to use less resources, and make more stuff faster.?This is not to be confused with?Just-in-Time inventory.

So, IKEA’s case? IKEA and their contract manufacturers are constantly producing products in anticipation of us purchasing it.?If it’s not obvious, that’s MTS.

For a list of definitions, visit our?glossary.

Manufacturing is an enormous industry…

We're going to state the obvious: It’s large, a lot of it takes place in other countries, and it’s being automated. This is a bit outside of the scope of this piece, so we’ll cover the economics of the industry and all the mind boggling trends eventually, so stay tuned…

In the meantime, I’ll leave you with this relatively interesting?piece.

The Supply Chain: The life of a ‘product’

Factories all across the globe are pumping plastic, metal, glue, and chemicals 24/7 to get furniture, clothing, household goods, electronics and food in your hands. But before those products get produced in large numbers, they have to be carefully designed and tested. This all happens years before it ever ends up on the shelves of Target or becomes available online on sites like Amazon. So we’ll zoom out and start there.

1. R&D:?Companies research how you and I (the consumers) are spending our money. They often buy data from other companies to see what exactly we’re buying, how much of it we’re buying, and where we’re buying it from. They also watch their competitors to see what types of products they’re producing as well. When the see an opportunity to make a new product that’ll grow their profits, they put together a plan to get the product built and sold.

2. Product Development:?Once the product team decides what the product should look and function, they send the details to a design team. This team might be part of the same company, or it may be part of another third-party company that they’ve hired/contracted. The design team figures out the important technical details of the product. For a design team at IKEA, these details might be the dimensions of the chair parts, type of screws, or type of wood they want to use. A hardware design team at Apple may have to decide what type of microprocessors to use in an iPhone (yes, an oversimplification). How the work gets split between product teams and design teams varies between companies.

3. Design:?Once the design gets approved by company leadership, the product and design teams communicate the existence of a new product to the sales team. This way, sales teams can figure out how much of the product will probably get sold. They also sometimes put the product up for sale before it’s even gone into production.

4. Early Sales:?Sales teams can start selling products before they’re even produced by setting up agreements and contracts with distributors and buyers. Distributors are organizations that agree to buy products in high volume either right away, or over time in the future. They’re usually not widely known to the public and don’t have a big consumer brand presence.

5. Quantifying demand:?The sales team works with operations and inventory teams to figure out how much of the product they should try to sell (and thus the quantity they should produce). Once they’ve figured that out, they communicate how many products they want to produce to the manufacturer. They also work with them to figure out how to efficiently use the factory (e.g. how fast to produce the products). The way this ‘communication’ takes place varies depending on whether the manufacturer is ‘in–house, or if the company’s using a contract manufacturer.

6. Design:?While the sales team communicates how much to produce to the manufacturer, the design team team is also simultaneously working to get all the technical nitty gritty details of producing the product to the manufacturer. The design team is also working with a procurement team to tell them what kinds of parts and materials they want to use in the product.

7. Procurement:?A procurement team may be part of the manufacturer or a totally separate entity. Their main goal (along with material resource planning teams) is to plan for the resources that are going to be needed to make the product. Once they figure out what they need, they buy raw materials and parts from other companies.

8. Raw materials:?Suppliers send chemicals, metals, parts, and equipment that was purchased to the manufacturer. The manufacturer uses all these things to build the final product.

9. Making & transporting products: Once the products are made, some are transported to the company’s own stores or warehouses, where they can be kept until they’re sold. Some companies won’t produce excess products that need to be stored — they’ll produce just enough for current demand and will wait until it’s almost out of stock to make more. The rest is sent to distributors that pre-ordered/pre-purchased the product.

How much of the product is made, how it’s moved, and how it’s stored in inventory depends on each company (there are a lot of different options, so we’ll dive deeper again later.) There’s also an enormous software layer between all of these stakeholders, which we’ll get to that too.

10. Finally, more sales:?The company might sell a portion of the final products directly to consumers and other businesses (e.g. on its own website or in its own stores). The rest of the product will be sold to a distributor. The distributor will sells the product to other companies or to retailers with a bigger brand presence (like Walmart).

Keep in mind, some types of products aren’t meant for you or me to buy — they’re meant to be part of complicated equipment or other things made by another company. Distributors specialize in selling these types of products as well.

*Note: this is missing some supply chain functions (like how inventory is managed, logistics, or how money exactly exchanges hands) for the sake of simplicity.