The Difference Between Product and Project Manufacturing

by | Oct 10, 2023 | Blog, Industry Article

Written by: Paul Hogendoorn, MEE Cluster Digital Transformation Consultant

I’ve been working with Western Canadian manufacturers through the MEE Cluster for just under a year now, and most of the manufacturers I’ve engaged with are ‘project based’ manufacturers, and not ‘product based’ manufacturers. From a technology adoption perspective, and even a continuous improvement perspective, it’s important to understand the difference – and to be frank, many (but not all) technology solution providers don’t. The result, in my opinion, is that the project-based manufacturers, although desiring to adopt technologies, and incentivized to do so, struggle to find technologies that fit their operations, and the only path forward for them seems to be to change their operations to suit whatever new technology is being proposed to them. And understandably, they are hesitant to take that step.

A product-based manufacturer is a company that makes the same product repeatedly. Sometimes its continuous, sometimes its in batches every week, or month, or whenever the demand requires, but the product and the process to make it are the same every time. A factory that produces car parts is the most obvious example of this, but food and beverage packaging plants, injection molders of standard products, and producers of standard building materials are product-based manufacturers as well. There are standard bills-of-materials for each product, standard operating procedures and work instructions, a fixed priced, and usually a very good historic understanding of the cost of producing it.

A project-based manufacturer is completely different. The projects vary in size and complexity and each one is different. Many of them require the project to be nearly fully designed just so the costs can be closely estimated in order for the manufacturer to even submit a bid, and often they aren’t awarded the job as someone else submitted a more competitive bid.

A typical project-based manufacturer will have multiple manufacturing projects on the go at the same time. Some may be in the building for 6 months and have 6 figure price tags. Others may be quick 2-week turnarounds, for retrofitting, renewing, repairing or upgrading something they built before. Some projects sit stationary in the facility for the whole duration, while smaller projects may be shuffled about. And all of them will require access to the same skilled workers, be they fitters, welders, machinists, operators, or electricians.

Product based manufacturers get to refine and improve their specific manufacturing processes using empirical comparative metrics that are easy to implement and can be effective drivers of continuous improvement. Measurements like “OEE” (overall equipment efficiency) and simple “uptime and downtime” for instance. In project-based manufacturing, “uptime” and OEE is not as easy to implement, and improving on those metrics is not nearly as impactful as it is in product-based manufacturing – in fact, sometimes it misdirects effort and hurts more than it helps. “Wait time” is a far bigger factor for them.     

Getting the right things done at the right time is far more critical in project-based manufacturing than machine uptime or OEE. Having a great uptime in your machine shop making parts that aren’t needed until weeks (or months) later in the assembly stage does nothing to improve productivity or profitability, but instead ties up capital by creating the need to store and manage something of higher value for weeks or months. Optimizing your X-Y cutter (plasma, laser, or waterjet) for machine uptime actually hurts you if your fab and weld shop are now waiting for a few small parts that are not part of the optimized cut list for the material on the table. Where a product focused manufacturer may benefit from monitoring and minimizing the time that the work is actually happening to a product (machining, molding, cutting etc), a project focused manufacturer benefits the most by measuring and minimizing the time between the different value adding operations.   

These are not subtle differences – these are major differences. These differences are the reason that technology that seems so easy and logical to adopt in a product-based manufacturer are difficult and seemingly illogical for a project-based manufacturer. Uptime and OEE are easy and effective for product-based manufacturers, but not easy or effective for projects.

Quoting and estimating is absolutely vital for project focused manufacturers, but is largely unnecessary for product based manufacturers. Even CRM tools can be fundamentally different; the primary salesperson in a project based manufacturer is often the potential project manager or the engineer. These companies don’t rely on filling their hoppers, qualifying leads and following a prescribed approach to making sales. Instead, they develop their own project quoting templates, rely on their skills with their engineering and design tools, and leverage their accumulated knowledge of systems they designed and built before. About the only information technology that overlaps these two manufacturing sectors is basic accounting and financial reports. Since one of the primary goals of software is to automate and simplify repeatable tasks and processes, its no wonder that many project based manufacturers are left wondering why software doesn’t seem to fit them, or they don’t fit it.

And that’s where the MEE Cluster can help. As well as doing a LEAN assessment on a manufacturing company’s plant floor operations, the MEE Cluster can also do a “digital Gemba” on all the associated administrative tasks and processes involved with manufacturing – from estimating and quoting new work, all the way through to shipping, final documentation and customer sign off. Getting projects quoted more accurately and more quickly can lead to more business. Getting things done on time against the plan can result in more capacity. Utilizing resources more effectively (when required – not too early, never too late) results in increased profitability.

Digital technology can benefit project focused manufacturers as much as it benefits product focused manufacturers, but its likely different technology, or its technology applied differently.   

Contact the MEE Cluster today if this column resonates with you and your operation.

About the Author

Paul Hogendoorn
MEE Cluster Digital Transformation Consultant

Paul has 40 years of experience in manufacturing and technology industries, having co-founded multiple companies, building them from start-ups to internationally recognized brands. Paul Hogendoorn is a co-founder of FreePoint Technologies (2013), a co-founder of OES-Inc (1981) and related companies OES-A (El Paso), IST and

Paul is a self described “incurable entrepreneur” that leveraged natural technology development skills to successfully launch numerous companies, building them to international acclaim and significance, and effectively transition them to future owners and management teams for continued growth and prosperity. His primary skills include: ‘tactile’ information technology (IIoT) development and implementation skills, proven sales and marketing abilities, and demonstrated leadership, vision casting and team building skills. Primary assets include a vast knowledge of manufacturing machines, methods and industry verticals; comprehensive understanding of technology development from design of hardware, firmware and software to team building, R&D ITC and intellectual property protection applications; decades of trust-based relationships with technology companies, manufacturing companies, industry influencers and leaders.