First, I agree that we should be able to pay a smith to either fix or upgrade a piece of equipment. Hand it and some money to the smith, come back a week later, and it's repaired or upgraded. To commission a new item would be similar: you pay up front and pick it up a week later. That could include different specialized smiths able to produce or upgrade either higher grade weapons, armor, arrows, and other items, as well as generalists who would be able to produce the most basic gear of any type.
They could include a Party Skill which allows your party to repair weapons over time, so those Cracked Spears eventually get fixed to Rusted or Bent. With higher party skill in Smithing, the Bent Spears can be brought up to Crude status, and so on, one step at a time. If weapon and armor degradation were a thing, it would add a whole new dimension to campaigns, where a long campaign would wear down the army's gear until it was forced to return to a town or castle to recover, recruit, resupply, and repair, along with a bit of R&R.
Having the ability to make weapons from raw materials sounds good from a village or town smith's perspective, but if you're playing as a roving warrior, it makes NO sense. Taleworlds hasn't implemented enough of an economy to make playing a non-combat character actually viable and interesting, otherwise I'd gladly leave the smithing skill for the player as a means of playing a smith, NOT a warrior. As it stands, it's a joke.