What is MTO?
Make to Order (MTO) is a manufacturing strategy in which products are only made after a confirmed order is received, also known as mass customization. This manufacturing planning process is typically used for customized orders and is also referred to as the pull-type supply chain model as products are only produced while there is demand.
MTO vs. MTS:
While the Make to Order manufacturing model only begins production after receiving the order’s receipt, Make to Stock (MTS) conversely creates products based on predicted customer demand. This is a more common type of manufacturing method. With this model in mind, businesses stock their shelves with products according to predicting future sales. Though these businesses may be prepared ahead of time, if not enough orders are received, the products are eventually moved into inventory. After a while, these products will go to waste. This is where Make to Order operations took over. The Make to Order model depends on actual demand of the consumers, and not forecasts.
Advantages of MTO:
There are several advantages of running a Make to Order operations in your manufacturing business. One of the important advantages is that this Make to Order process is guided by lean manufacturing practice. Meaning, Make to Order allows your business to run lean, reducing waste and raw materials held in stock. It’s a newer manufacturing method that was created in relation to lean manufacturing. Another advantage of Make to Order production planning is the capability of executing an order with the exact product requirements given by the customer. Additionally, these unique and personalized products are attractive to the market. Customers get excited about the idea of purchasing and owning an individualized product.
Disadvantages of MTO:
The Make to Order manufacturing model however also has its disadvantages. The two main disadvantages of make to order manufacturing are promptitude and cost of customization. Since products are not created until there is a customer order, it may take a while for the customer to actually get the product after the completed customized production and delivery. The unpredictability of demand in the market also compels manufacturers to store enough supply of raw materials in order to be ready when a purchase is placed. The more customized a product, the more difficult it is to predict consumer demand. This could reflect with high sales occurring during a couple months of the year, while the rest experiences low sales.