What Is Make to Order (MTO)?
Make to order (MTO), or made to order, is a business production method that normally we could in shoppers to shop for products which could be customized to their specifications. It is a manufacturing process in which the producing of an products begins best possible after a confirmed purchaser order is received. It is also known as mass customization.
Key Takeaways
- Make to order (MTO), or made to order, is a business production method that normally we could in shoppers to shop for products which could be customized to their specifications.
- The manufacturing way of an MTO products begins best possible after a confirmed purchaser order is received.
- Advantages to MTO include customization for customers, aid in stock obsolescence and finished pieces inventory, and overall waste.
- Disadvantages to MTO include higher costs and bigger wait circumstances for a finished product.
- MTO can be contrasted with make to stock (MTS) manufacturing, in which inventories are produced in advance of customers buying them off the shelf.
Working out Make to Order (MTO)
The make-to-order (MTO) method means that an organization best possible manufactures the highest product once the customer places the order, growing additional wait time for the consumer to procure the product, on the other hand bearing in mind further flexible customization when when compared to shopping for at once from retailers’ cupboards.
This type of manufacturing method is referred to as a pull-type supply chain operation on account of products are best possible made when there is corporate purchaser name for. The pull-type production taste is employed throughout the assembly industry where the volume needed to be produced in keeping with product specification is one or only a few. This incorporates specialized industries very similar to construction, plane and vessel production, bridges, and so on. MTO may be appropriate for very configured products very similar to computer servers, automobiles, bicycles, or products which could be very expensive to stick inventory.
With the intention to arrange inventory levels and provide an higher level of customization, some corporations adopt the make to order production tool. The MTO method relieves the problems of additional inventory that is common with the traditional make-to-stock method. Dell Laptop techniques is an example of a business that uses the MTO production method, wherein consumers can order a fully customized computer online and procure it in a couple of weeks.
The principle benefit of the MTO tool is the ability to fulfill an order with the suitable product specification required throughout the shopper. Product sales discounts and finished pieces inventory are also diminished, and stock obsolescence is managed. However, for an MTO tool to succeed, it should be coupled with proactive name for keep watch over. It should also be considered that the MTO tool is not appropriate for all types of products.
Related to MTO is assemble to order (ATO), which is a business production method where products ordered via consumers are produced in brief and are customizable to a undeniable extent. The assemble-to-order (ATO) method requires that the elemental parts of the product are already manufactured on the other hand no longer however assembled. Once an order is received, the parts are assembled in brief and sent to the customer.
Make to Order (MTO) vs. Make to Stock (MTS)
Typical production methodologies produce products and stock them as inventory until a purchaser buys them. This is known as make to stock (MTS). However, this system may be liable to wastage and obsolescence, as inventory sits on cupboards expecting achieve. This problem is particularly acute in an industry like generation, where the pace of building is speedy and the problem of outdated inventory might simply in brief get up.
In thought, the MTS way is a good way for a company to arrange for will building up and decreases in name for. However, inventory numbers and, therefore, production, are derived via growing long run name for forecasts in line with earlier wisdom.
There is a best likelihood that the forecasts shall be off, even though via merely reasonably, that implies that a company might be stuck with a substantial amount of inventory and too little liquidity. That’s the number one drawback of the MTS way of producing. Erroneous forecasts will lead to losses, stemming from further inventory or stockouts, and in fast moving sectors, very similar to electronics or computer tech, further inventory can in brief turn into outdated.
Limitations of Make to Order (MTO)
The two number one drawbacks of make-to-order keep watch over are timeliness and worth of customization. If products are already on the shelf as with MTS, then a purchaser don’t need to wait until the product is made, assembled, and dropped at spec. Price may be a component; pre-made and available products are all alike and so manufacturing costs are diminished as a result of economies of scale. Make to order will tend to be more expensive for the consumer as it involves customizable parts and finishes.
