In the world of manufacturing, the traditional debate between Make To Order (MTO) and Make To Stock (MTS) often presents a false choice, suggesting companies must navigate their complex environments using one strategy over the other. However, this binary view overlooks the intricate dynamics and evolving demands of modern production environments and supply chain networks. Why limit your strategy when integrating MTO and MTS can offer the best of both worlds? This blog post aims to provide supply chain professionals with a deeper perspective on how to effectively integrate MTO and MTS within their operations.
At the heart of MTO is the principle of initiating production based on specific sales orders, which allows for customization and minimizes inventory costs. MTS, on the other hand, anticipates customer demand through forecasts, ensuring products are readily available but risking potential overstock. While these definitions serve as a foundation, the reality is that manufacturing operations rarely adhere strictly to one approach. The question arises: in a market that values both customization and immediacy, is choosing between MTO and MTS really necessary?
The modern manufacturing landscape demands a more nuanced strategy, one that combines MTO and MTS to navigate the complex web of product requirements, sales orders, and forecasts. This hybrid approach recognizes that different products may require distinct strategies within the same company. For example:
Achieving flexibility in manufacturing requires a tailored approach to production triggers, with the understanding that these triggers can vary significantly across products and even within the same product line. Key triggers include:
Production Order: Initiated by sales orders or forecasts, suitable for semi-finished and finished goods..
Product Requirement: Triggered by material needs stemming from downstream requirements and production orders or insufficient inventory levels, applicable to semi-finished and finished goods.
None: Some items, especially raw materials, might not directly trigger operations but could lead to purchase orders based on net requirements.
The complexity deepens with products that have a Bill of Materials (BOM) structure, involving multiple levels of semi-finished products. The strategy for triggering production of these semi-finished goods can differ, influenced by sales orders, forecasts, or the requirements of finished goods production. This scenario often results in a mixture of MTO and MTS across different BOM levels, requiring even more nuanced planning and execution.
In the complex landscape of manufacturing where Make To Order (MTO) and Make To Stock (MTS) strategies intertwine, the importance of agile and adaptive planning tools cannot be overstated. These tools are crucial for navigating the multifaceted challenges of integrating diverse production triggers, such as sales orders, forecasts, and minimum stock levels, into a coherent operational strategy.
Choosing the right planning tool becomes crucial, as it must not only accommodate the intricacies of different manufacturing processes but also enhance the strategic flexibility between MTO and MTS models. One example of such a tool is Checkmate, which stands out for its versatility in handling various production triggers enabling manufacturers to optimize both resources and customer satisfaction, ultimately leading to a more resilient and responsive production strategy.
The choice between Make To Order and Make To Stock is no longer a binary decision in the complex landscape of modern manufacturing. By embracing a hybrid approach and utilizing sophisticated planning tools, companies can achieve a balanced, responsive production strategy. This strategy not only caters to the diverse needs of today's market but also positions businesses for resilience and success in the face of evolving challenges. For supply chain professionals, understanding and implementing this nuanced approach is key to driving operational excellence and competitive advantage.