Make to Order vs Make to Stock

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Jackson Hagerman

Make-To-Order vs. Make-To-Stock

Make-To-Order (MTO) is a strategy used by manufacturers to make custom orders for customers according to their specifications. These products are usually made in only low volumes. Make-To-Stock (MTS) is a strategy that involves holding items in stock for immediate delivery to minimize customer delivery times. This is very feasible for standardized products with high volume demand and displays fairly accurate forecasts. This model is suited better for organizations who use a continuous-flow process.

The gradual change from MTS to MTO in the auto industry is one that has been happening over the last 10-15 years due to internet growth. It impacts the customer because you no longer have to go to a car lot to pick out your vehicle. It has become easier to go to a manufacturers website, pick a stock automobile model, outfit it to your very own specifications, and have it delivered to your nearest dealership. Some disadvantages to this is there is no test drive, or a chance to negotiate a fairer price for the automobile. Customers who still use the "car lot" experience usually need the new automobile sooner and don't have the time to wait on a custom automobile. They may also prefer the assistance of an experienced car salesman.

The change in these strategies are impacted more on the manufacturer than the customer. The manufacturers have had to adjust to the change more than customers. For some, it has pushed the manufacturers to the JIT system, cutting the inventory costs and material waste. It has also increased cash flow due to lower inventory. The work flow structure has also changed in customization, allowing the manufacturers to try different demands. I believe the change from MTS to MTO is beneficial and advantageous to manufacturers because it brings many benefits to manufacturers in terms of cost and profit. Of all the benefits, the more important are lower inventory levels, maximum sales,...
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