Manufacturing operations involve direct materials, direct labor, and manufacturing overhead, with companies using these processes to produce goods for consumers. Direct materials are raw items or pieces of goods needed to produce products, while direct labor is typically skilled labor. Manufacturing overhead includes all costs not easily attributable to goods produced. Manufacturers group their manufacturing activities by type to create a logical flow.
Manufacturing operations represent the individual processes a business engages in to produce goods to be sold to consumers. The three critical parts of manufacturing operations are direct materials, direct labor, and manufacturing overhead, which includes all minor costs associated with the manufacturing process. Many companies use manufacturing operations to produce goods for consumers. While steel, mining, or automobiles may be the first industries that come to mind, fast food, postal service, and construction companies are other businesses that have similar operations, albeit in a service type setting. .
Direct materials include all raw items or pieces of goods needed to produce products. For example, a computer manufacturer will need a circuit board, chip, hard drive, CD-ROM, and other bits and pieces to make computers. Without these parts, society cannot produce the goods consumers want. Some manufacturers will use intermediate goods as part of their direct materials. For example, computer manufacturers may not produce the necessary memory chips; therefore, they buy these from a chip maker.
The labor force for the production of goods in manufacturing operations comes from people employed in the handling of machines or products by hand. This direct labor is typically skilled labor, meaning that workers need education or experience to produce goods. Manufacturers who mass produce goods may use unskilled labor in their manufacturing operations if they have a robust assembly line system in place. This requires little thinking or planning to produce goods; workers will simply manipulate the direct materials needed to produce finished products.
Manufacturing overhead is the portion of manufacturing operations that includes all costs that are not easily attributable to the goods produced. Utilities; minor parts such as screws, bolts and welds; labor for cleaning production facilities; and quality control costs are all kinds of production overheads. Since the company cannot attribute costs to specific assets, it will group them together and apply them based on activities or production processes. Manufacturers try to keep overhead costs to a minimum, as these costs can significantly increase the cost of the goods produced.
Manufacturers often group their manufacturing activities by type. This will create a logical flow to produce goods in an orderly manner. For example, preparing raw materials will start the manufacturing process, followed by cutting materials into the necessary shape, refining them and removing unnecessary parts. The parts are then assembled, prepared for finishing and finally completed as a final product. Other steps may be required, depending on the type of good produced or the amount of company that wants to refine raw materials for the production of goods.
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