Make to Order
Improving Flexibility and Meeting Customer Expectations in a Make-to-Order Environment
What is Make to Order ?
Make to Order (MTO) is a manufacturing process or a strategy where manufacturing the end product is demand driven and only begins once a customer’s order is received. Although this strategy creates additional waiting time for the customer to receive the end product, it allows for more flexibility in that it enables customers to buy products that are customized to their individual specifications, in comparison with buying directly from the retailers’ shelves.
Traditional production models manufacture products and store them in inventory until it is bought by a client. This approach is known as Make to Stock (MTS). However, this production strategy is prone to a lot of waste and is also at risk for obsolescence. MTO solves the problems associated with having excessive inventory on hand and the high costs that are associated with having higher levels of inventory. MTO also ensures improved customer satisfaction. MTO strategy is adopted by the assembly industry where the quantity produced per product is low. As a result, this strategy is employed by construction, aircraft, and automotive industries. It works best for highly configured products, such as automobiles and computer servers.
Companies that use a MTO production strategy can plan production to some extent based on previous historical information and patterns. To use MTO, the ERP system your organization uses needs to respect that. It provides more flexibility in that you have an improved ability to take an overview of things and make on-the-go decisions. For example, things like order prioritization and stocking becomes very easy.
Features for an MTO specific ERP system include:
Production line flexibility
Ability to intelligently connect sales and production
Efficient inventory management
Ability to fulfill orders with product specifications requested by clients
Improved customer satisfaction as a result of getting products that are highly customized to their specifications
Reduced inventory levels and lowered stock obsolescence
Reduced inefficiencies and wastage
Improved competitive advantage as a result of lowered lead times