Distinction Between Made to Order and Made to Stock

Topics: Manufacturing, Build to order Pages: 2 (301 words) Published: May 27, 2013
MTO- Made to order
A business production strategy that typically allows consumers to purchase products that are customized to their specifications. This strategy only manufactures the end product once the customer places the order. This creates additional wait time for the consumer to receive the product, but allows for more flexible customization compared to purchasing from retailers' shelves The make to order (MTO) strategy relieves the problems of excessive inventory that is common with the traditional make to stock (MTS) strategy. Examples:

1)      Dell computers
2)     Subway burgers
3)     Tailored Suits and Shirting
4)     Made-to-order services for boiler plant rigs.

MTS- Made to stock
A traditional production strategy used by businesses to match production with consumer demand forecasts. The make-to-stock (MTS) method forecasts demand to determine how much stock should be produced. If demand for the product can be accurately forecasted, the MTS strategy can be an efficient choice.

The main drawback to the make-to-stock (MTS) method is that it relies heavily on the accuracy of demand forecasts. Inaccurate forecasts will lead to losses stemming from excessive inventory or stockouts. Common alternative production strategies include make-to-order (MTO) and assemble-to-order (ATO)

Build to stock or MTS is frequently considered as an appropriate solution for products where there are few product lines and long changeover times between costly products  
There are several situations where a build to stock system can be appropriate. One is where the demand for the product is highly predictable or has a seasonal element. For example, a Halloween costume company may produce a fixed number of costumes in the run-up to Halloween, rather than waiting until late October to see if demand increases. Other examples are :

1)     FMCG products like lux, colgate, etc
2)     Diet coke
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