Make to Order

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Make to Order Definition

Make to Order (MTO) is a business manufacturing approach wherein production is commenced only on the receipt of a confirmed customer order. It entitles the customers to buy personalized items that fit their unique requirements. It is a pull-type supply chain strategy as customer demand “pulls” the item production.

The order-driven production method is apt for highly structured products like automobiles, aircraft, computers, medical devices, and marine vessels. Also referred to as Build to Order (BTO), it is employed for items that are costly to store or create.

Make to Order Definition

Make to Order (MTO) is a production strategy wherein customers get custom-tailored items per their special requirements.
Under MTO, the manufacturing of an item starts only after an order is placed. It contrasts with the Make to stock (MTS) approach, where the production begins before the order confirmation.
The advantages of the MTO approach are enhanced customization level, no excess inventory, better productivity, and greater variety.
Disadvantages of MTO include additional waiting time, irregular sales, availability of raw materials, and varying product demand.

Make to Order Explained

MTO is a prevalent manufacturing tactic often utilized for specialized goods with low volume. However, it contradicts the Make to Stock (MTS) production approach whereby manufacturing begins way before receiving an order.

MTO begins with the customer placing the order citing unique requirements. The customer order starts all supply chain actions from procuring raw materials and manufacturing parts to the final assembly. In other words, all raw materials and components are procured only after the order confirmation from the customer.

This approach ensures there is minimal wastage as nominal inventory is maintained. However, since there is no mass production, the company doesn’t enjoy any economies of scale. Therefore, the additional cost of customization is recovered from the customer in the form of higher prices.

A major drawback of this strategy is the substantial time lag between the placing of an order and its delivery. Therefore, it is ideal for commodities that have a short manufacturing cycle. Moreover, businesses following this approach have to deal with the rush in peak seasons and low sales in the lean times. Therefore, they have to ensure the availability of material and resources at required times.

With challenges like additional waiting time, unstable sales figures, and accessibility of raw material, the success of this methodology is directly related to the level of product demand. Therefore, continuous assessment of future demand variations and their influence on the production must be made to ensure guaranteed results.

The wedding industry is an apt example of an industry that thrives on the MTO strategy. From clothes and accessories to venue decoration and cake, each wedding is custom-tailored to the whims and fancies of the bride and groom.

Besides, manufacturing businesses also use the MTO strategy for high-end exclusive products like sports cars, jewelry, etc. Also, large products such as aircraft, ships, and medical equipment that are not mass-produced are made-to-order.

Advantages of Make to Order strategy

Competitive advantage

MTO strategy fulfills a customer order with the exact item specifications as required. Each product is personalized to the extent that there is minimal competition. As a result, it gives the firm an edge over its rivals.

Absolute customer satisfaction

With products delivered as per their needs and requirements, customers experience enhanced satisfaction. It also facilitates a more personalized shopping experience than the usual purchase decisions.

No more over-stock or waste

It supports the surplus inventory problems often witnessed in the MTS manufacturing strategy. In MTO, the production stage begins only after the order confirmation is received and in the prescribed quantity. It eliminates the possibility of excess unsold products in store.

Efficient use of resources

This manufacturing method directs all efforts toward personalizing a product as per the customer’s needs. Since the production starts after the order is received, the company allocates only the required workforce and machinery, leaving no room for wastage. It also ensures that human power and equipment are used to their optimum capacity. Needlessly, it confirms the effective utilization of financial and other resources.

Extensive selection

Large-scale manufacturing does not include much variety in items due to mass production. Nonetheless, MTO promotes mass customization and develops each product as per the different set of specified requirements. Hence, all items inhibit a certain individual uniqueness lacking in the MTS methodology.

Make to Order Examples

A Forbes article lists some of the brands that are investing in personalization by creating MTO products. In addition, it discusses how both start-up companies and well-established firms adopt the personalization and MTO approach to expand their customer horizon and product lines.

According to the article, Nike offers custom-designed sneakers that are made to fit the customer perfectly using its 3D sneaker customization platform. FitMyFoot is also in the same space providing personalized shoes and insoles using its app to take foot measurements. MTailor is making headway in the apparel industry by presenting perfect fit on clothes. Thus, these companies have taken the MTO concept to the next level by leveraging technology.

A recent Reuters news report discusses the launching of a customized plant-based 3D printed burgers by Israel’s food-tech firm SavorEat. It is among the first enterprises to employ 3D printing technology to cook food.

The company allows customers to determine the amount of protein and fat to be added in their burgers. It is a perfect choice for the one-third of the U.S.’s “flexitarian” populace looking for a healthy substitute to reduce their meat consumption.

The company’s chairman and chief scientist also confirmed that it is working on a plant-based version of the pork breakfast sausages for the U.S. market.

Make to Order vs Make to Stock

The major difference when considering make to order vs make to stock lies in the type of supply chain operation. MTO practices a “pull” type supply chain as actual customer demand pulls the manufacturing of a product. While MTS practices a “push” type supply chain whereby anticipated customer demand “pushes” the product manufacturing.

Under the MTO process, the company must have a confirmed order before the commencement of the item production. On the other hand, MTS is a procedure where the production of an item is finished before the sales orders are received. Hence, the order precedes production in MTO while the order succeeds production in MTS.

Examples of industries using the MTO approach are computer servers, aircraft, automobiles, and bridge construction. At the same time, Fast-Moving Consumer Goods (FMCG) is a notable example of an industry following the MTS methodology.

Particulars	Make to Order	Make to Stock
Supply chain	Pull	Push
Demand	Actual	Anticipated
Final product	Highly customized	Mass-produced
Inventory	Small	Large
Wastage	Less	More
Economies of scale	None	Available
Delivery time	Long	Immediate
Cost of the final product	High	Relatively cheap

Frequently Ask Questions (FAQs)

Q#1 – What is Make to Order and Make to Stock?

A – MTO (Make to order) & MTS (Make to stock) are two different business manufacturing tactics. MTO refers to a procedure where an order must be placed to begin the production of a custom-tailored item. At the same time, MTS is an approach whereby items are already stocked based on the anticipated customer demand.

Q#2 – Name some companies following the Make to Order approach.

A – Dell Computer Corp. is a well-known company that successfully uses the Make to Order production strategy. Dell can take the customer order to production within 24 hours and deliver the finished product in a few days. Optical chain Vision Express (U.K.) has adopted this approach to assemble frames and custom lenses within hours as against weeks taken by other companies.

Q#3 – Why is Make to Order a beneficial strategy?

A – Make to Order is beneficial as it adds a personal touch to the required item. Also, it avoids the problem of surplus inventory, reduces wastage, and ensures production efficiency as compared to mass production. In addition, there is a lot of variety, and you undergo a personalized shopping experience.

Q#4 – What are the disadvantages of the Make to Order approach?

A – The drawbacks of Make to Order include extended waiting time, fluctuating sales, ensuring the availability of primary resources, and inconsistent product demand. Thus, a frequent marketplace evaluation and its relation to the MTO strategy are mandatory for successful results.