Make-To-Order (MTO): What is it and How Does It Work?

In the manufacturing world, Make-To-Order is a term used to describe a process where goods are explicitly manufactured after a customer has placed an order.

This can be contrasted with other methods like Make-To-Stock or Engineer-To-Order.

In this blog post, let’s look at what it entails and how it works!

Make-to-Order

What is Make-To-Order (MTO)?

It is a manufacturing process that starts after receiving a customer’s order. Companies can use this process for products that are customized or unique. This type of manufacturing helps to ensure that customers receive the exact product they want.

How does Make-To-Order work?

The process begins with the receipt of an order from a customer. Once the order is received, it is analyzed, and plans are made for producing the product. The actual manufacturing then takes place according to these plans, with the finished products being delivered to the customer once they are completed.

Steps in the MTO process

Make to Order Process
  • Receiving an order from a customer
  • Analyzing and planning the manufacture of the product
  • Manufacturing the product according to the plans
  • Delivering the finished product to the customer
  • Continual improvement of the process
  • Training employees in these methods
  • Maintaining records of all orders and products

The benefits of Make-To-Order manufacturing

There are several key benefits to using it for manufacturing products,

  • Increased customer satisfaction as products are made specifically according to their individual needs and specifications
  • More flexibility in product design, as a company can make changes more easily and quickly than with other manufacturing methods.
  • Faster turnaround times, as there is no need to wait for the stock to become available before production can begin.
  • Reduced inventory costs, as products are only manufactured when customers have ordered them.
  • Increased efficiency as the manufacturing process is tailored to meet each customer’s needs.

The disadvantages of Make-To-Order manufacturing

While there are many advantages to using it, there are also some potential drawbacks,

  • Higher costs due to the need for customized tooling and machinery, as well as the demand for more skilled labor
  • There are long lead times, as products often take longer to manufacture than those made using other methods.
  • Increased complexity in terms of planning and execution

When is Make-To-Order the best option for manufacturing products?

Make-to-Order is a good choice for companies that want more flexibility in terms of product design, faster turnaround times, and increased customer satisfaction. However, it is not always the best option, as it can be more expensive and have longer lead times than other manufacturing methods. Ultimately, whether or not to use MTO depends on its specific needs and its customers.

FAQs

What are Make to Order product examples?

Some examples are customized sneakers, made-to-order furniture, made-to-order clothing, and special orders for food items such as personalized pizzas or burgers.
With these products, the customer can select different colors, sizes, and designs made specifically for them. This type of manufacturing allows for a high level of customization and personalization that often isn’t possible with mass-produced items.
Many companies now offer online platforms that allow customers to fully customize the products they order, down to the most minute detail. This trend towards increased customization is likely here to stay, as consumers become savvier and savvier about the benefits of having precisely what they want – and nothing more.

How does Make to Order impact inventory?

Products made with a make to order process tend to have a lower inventory turnover rate. This is because the products are made specifically for each customer, so there is no need to keep large quantities of the product on hand. This can be beneficial for businesses that want to avoid dealing with excess inventory, but it can also lead to longer wait times for customers.

Is Make to Order better for high volume or low volume production?

Generally speaking, Make to Order is more beneficial for low-volume production companies. This is because it can be difficult and expensive to set up the necessary infrastructure for high-volume production. Also, make to stock production often results in excess inventory, which can tie up a company’s financial resources. However, make-to-order products can be less efficient than make-to-stock production, and it may not be possible to meet customer demand if orders are received too late in the production process. As a result, companies must weigh the pros and cons of each type of production before deciding which one is best for their business.

What is make-to-order in SAP?

In SAP, the Make-To-Order function is used when products are not in stock and need to be made for a customer. This is done using the MRP (Material Requirements Planning) function in SAP. MTO is beneficial because it allows businesses to create products specifically tailored to customer needs, resulting in increased sales and customer satisfaction. In addition, it can help businesses to avoid the high costs associated with inventory carrying and storage. However, it can also be complex and time-consuming, so it is essential to carefully consider whether it is the best option for your business before implementing it.

Conclusion

Make-to-Order is a manufacturing process where production starts only after receiving an order from a customer. This allows for more customization and variety since the products are not produced in bulk ahead of time.

It can be beneficial for both customers and businesses because it results in shorter lead times, less waste, and lower inventory costs. Hoping this reading was helpful for you!