Manufacturing

What Are the Differences Between a Merchandising Company & a Manufacturing Company?

Some companies specialize in creating products, others in marketing products and some do both. Applying an identifying label to a business correctly, namely calling one a merchandising company and another a manufacturing company, depends on factors such as the structure of operations and the means used to make profits, among others. A distinctive difference between a merchandising company and a manufacturing company is that a manufacturer produces and a merchandiser markets.

Basics

The basic difference between a merchandising company and a manufacturing company is that a manufacturer creates products and a merchandiser sells them. Merchandisers include both wholesalers and retailers. Consider, for example a factory that produces widgets and sells them in bulk to distributors, who in turn sell the widgets in smaller lots to stores around the country. In this example, the factory is the manufacturer and the distributors and stores are merchandisers.

Relationships

Merchandising companies that conduct business as wholesalers generally sell in bulk quantities and may sell only to retailers, not to the average consumer. Retailers, on the other hand, deal directly with the consumer. Stores are retailers' places of business. Manufacturers may sell directly to consumers. However, large manufacturing firms usually sell only to distributors, a type of merchandiser.

Inventory

Manufacturers have three classifications of inventory: raw materials, work in process and finished goods. Contrastingly, merchandisers do not maintain but one of these three, that is finished goods. Although, merchandisers may classify inventory into dozens of categories, each product on hand is ready for sale to consumers.

Profits

Manufacturers make profits by converting raw materials into a finished product that sells at a price that exceeds total production costs. These costs are categorized as direct...