Make to Order (MTO)

Introduction

Make to Order (MTO), also known as Build to Order (BTO), is a production strategy wherein the manufacturing process begins only after receiving a customer’s order. Unlike traditional manufacturing models that rely on anticipatory production and mass inventory, MTO focuses on customization and production based on specific client demands. This method allows companies to produce goods that closely match the individual requirements of their customers, ensuring a high level of satisfaction and reducing inventory costs.

Key Components and Workflows

Customer Order Administration

The process starts with receiving and processing a customer’s order. This involves detailed specification of the product features, materials, and any customization options. Effective customer order administration systems allow for seamless communication between the customer, sales team, and production units.

Production Planning and Scheduling

Once the order is confirmed, detailed production planning and scheduling are crucial. This stage includes ordering raw materials, allocating resources, scheduling work shifts, and setting timelines to ensure timely completion of the order.

Procurement and Inventory Management

Given that manufacturing starts post-order, precise procurement and inventory management become essential. Unlike Make to Stock (MTS) systems, where raw materials are held in anticipation of future demand, MTO systems order materials specific to each order, helping to minimize excess inventory and holding costs.

Manufacturing Process

The actual manufacturing or assembly takes place once materials are procured. This process can range from simple assembly to complex fabrication, often involving sophisticated machinery and skilled labor. Given the bespoke nature of the production, different orders might require different workflows, thus demanding high flexibility in operations.

Quality Control

Quality control in an MTO environment is often more stringent compared to mass production. Since the goods are customized, each order undergoes detailed inspections and tests to ensure it meets the customer’s specifications and quality standards.

Delivery and Logistics

Efficient delivery and logistics are key to the success of the MTO model. Ensuring timely delivery while maintaining product integrity is critical. Advanced logistics planning and coordination are required to synchronize the various stages of production and delivery.

Advantages of Make to Order

Customization and Flexibility

One of the foremost benefits of MTO is its ability to provide high levels of customization, catering to individual customer preferences. This flexibility can be a significant competitive advantage in markets where customization is in demand.

Reduced Inventory Costs

Since production begins only after an order is received, MTO significantly reduces the need for large inventories, minimizing both storage costs and the risk of obsolescence.

Better Cash Flow Management

Due to the alignment of production with actual orders and associated payments, cash flow management is more straightforward. Companies are less likely to face the financial strain of tied-up capital in unsold inventory.

High Quality and Customer Satisfaction

Uniform attention to each order ensures high product quality and better alignment with customer expectations, thereby improving customer satisfaction and loyalty.

Disadvantages and Challenges

Longer Lead Times

One of the major drawbacks of the MTO model is longer lead times compared to pre-manufactured stock models. The additional time required for order processing, procurement, and production can be a significant disadvantage in time-sensitive markets.

Complex Planning and Coordination

The MTO process demands precise and coordinated planning across various departments. Any hiccups in procurement, production, or quality control can lead to delays and increased costs.

Higher Costs

Customization often comes at a higher price point due to the lack of economies of scale, specialized labor, and the use of bespoke materials. This can make MTO products more expensive compared to their mass-produced counterparts.

Industries and Applications

Automotive Industry

The automotive sector extensively uses MTO to offer a variety of customizable options for customers. Companies like Rolls-Royce and Tesla have capitalized on MTO to provide bespoke cars tailored to individual specifications.

Aerospace and Defense

Given the unique specifications and stringent quality standards, the aerospace and defense industries often rely on MTO. Customized aircraft components, defense equipment, and specialized machinery are commonly produced using this model.

Construction and Engineering

In construction and heavy engineering, projects are often built to specific client requirements. This includes customized building materials, machinery, and infrastructural components.

Technology and Electronics

Companies like Dell have pioneered the MTO model in technology and electronics, offering customizable computers and devices that meet specific customer needs.

Technological Advancements in MTO

ERP Systems

Enterprise Resource Planning (ERP) systems play a crucial role in managing MTO processes. These integrated systems help in tracking orders, resource planning, procurement, inventory management, and scheduling, providing end-to-end visibility into the production process.

CAD/CAM Software

Computer-Aided Design (CAD) and Computer-Aided Manufacturing (CAM) software are vital in designing custom products and streamlining manufacturing processes. These tools enhance accuracy and reduce the time required for product development.

Additive Manufacturing (3D Printing)

3D printing technology is revolutionizing the MTO model by enabling more rapid and cost-effective manufacturing of customized products. This technology reduces lead times and allows for intricate designs that are challenging to achieve through traditional manufacturing methods.

Case Studies

Dell Computers

Dell is a prime example of successful MTO implementation. Traditionally, computers were sold off-the-shelf with standard configurations. Dell revolutionized this by offering customers the option to configure their PCs and laptops with specific components and features. This approach not only reduced inventory costs but also enhanced customer satisfaction by providing exactly what they needed.

Rolls-Royce Motor Cars

Rolls-Royce is another excellent example of MTO. Each car produced by Rolls-Royce is built to the specific requirements of its buyer, offering a high degree of customization in color, interior materials, and features. This bespoke approach supports the luxury brand image and customer expectations.

Boeing

Boeing operates predominantly on an MTO basis, especially for its commercial aircraft. Each plane is built to the detailed specifications of airline customers, covering a range of configurations, features, and customizations.

Rise of Digital Manufacturing

Digital manufacturing technologies, including IoT, AI, and big data analytics, are enhancing the MTO model by increasing efficiency, reducing errors, and improving coordination across the supply chain.

Sustainability Considerations

With rising environmental concerns, the MTO model supports sustainability by reducing waste from overproduction and minimizing inventory that could potentially become obsolete.

Increased Adoption in Various Sectors

More industries are likely to adopt the MTO model as consumer demand for personalized products continues to grow. Utilizing advanced technologies will help companies manage the complexity and costs associated with customization.

Conclusion

The Make to Order production strategy offers a range of advantages, including high customization, reduced inventory costs, and improved customer satisfaction. However, it also comes with challenges such as longer lead times and higher costs. Companies leveraging advanced technologies, efficient planning, and robust logistics can successfully overcome these challenges and benefit from the tailored solutions MTO provides. The future of MTO looks promising with the integration of digital technologies and a growing emphasis on sustainable manufacturing practices.

For more information about specifics of a company implementing MTO, you might visit their official pages. For example, you can see Dell’s Customization and Build-to-Order services on their official site.