This approach is the opposite of MTO, where products are manufactured based on actual customer demand. One of the main shortcomings of MTS is its reliance on the accuracy of sales forecast data. Forecast inaccuracy can lead to inventory surplus, and in turn, increase the probability of lost revenue due to storage costs, material spoilage, theft, and product damage.
Based on its forecast, the company determines that it should triple its production rate. Since the flower shop is building an inventory based on prediction and not actual demand, they are adopting a make-to-stock approach.
While make-to-order and make-to-stock may seem similar at first glance, they are distinct production methods that can produce very different results. In a nutshell, make-to-order production rates are based on actual orders, while make-to-stock production rates are dependent on sales forecasts or predictions. Technical Articles Ann Hustis.
September 7, 4 minute read. Definition 2 from SAP Glossary Make-to-order Production: A type of production in which a product is manufactured for a particular customer. Nothing in this graphic tells us whether this is make-to-order or make-to-stock production! Alert Moderator. Alerting is not available for unauthorized users. Assigned Tags. Similar Blog Posts. Related Questions. You must be Logged on to comment or reply to a post.
Thiago Leite. Great article Ann Like 1 Share. Right click and copy the link to share this comment. Arkadiusz Grzanka. Great article. SAP concept is more oriented to special products, so it make sense to treat such orders and produced stock specially like Your example with logo. It is completely standard, anonymous stock. But they want to have a better control who they produce the product for.
Make-to-stock is definitely the idea form of production for items that have rather long lead times and take a substantial amount of resources to produce, such as an automobile. While make-to-stock is by far one of the most common forms of production, it has drawbacks as well. The main shortcoming pertaining to MTS is relying on forecasting and building up substantial amounts of inventory. Advanced Planning and Scheduling Software Advanced Planning and Scheduling APS software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures.
Create optimized schedules balancing production efficiency and delivery performance Maximize output on bottleneck resources to increase revenue Synchronize supply with demand to reduce inventories Provide company-wide visibility to capacity Enable scenario data-driven decision making Implementation of Advanced Planning and Scheduling APS software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.
Related What If Video. Case Studies. White Papers. Recent Posts. Unlike MTS for a speculative market where an item is repeatedly manufactured, MTO production is typically one-time production though it could be repeated in theory, identically or with minor modifications. This kind of production requires that your system provide the ability to pull reports on the status of one or multiple orders at any given time, to keep customers updated.
With MTS, all costs, revenues and margins are linked directly to the order so it must be possible to easily generate profitability analyses. This is where planning comes in. Often, production lines are under pressure to be optimally utilized. That can only be done when producing to a forecast. In an MTO environment purchasing for production can be planned to some extent based on historical information and prediction of patterns but for the most part, flexibility is your friend.
Your ERP system must respect that. It needs to give you the ability to take an overview of things so you can make on-the-go decisions like prioritizing orders, combining similar ones and purchasing ahead to stock a few vital components.
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