Make to Order
“Make to Order” (MTO) is a production strategy in which manufacturing starts only after a customer’s order is received. With MTO, products are highly customizable to the individual specifications of each customer.
The main advantage of this approach is that it allows for high levels of customization and reduces the risk of holding obsolete inventory, as products are only made in response to actual demand. However, it can also lead to longer delivery times since production only starts after an order is received. Additionally, it requires a close management of supply chain to ensure that the materials and components needed for production are available when the order is received.
MTO is common in industries where customers expect products to be tailored to their requirements, such as bespoke tailoring, custom furniture manufacturing, and certain high-end automobile manufacturers.
Example of Make to Order
Let’s take an example of a custom furniture manufacturer.
This manufacturer doesn’t start making a piece of furniture until a customer has placed an order. When an order is placed, the customer specifies details such as the type of wood, the style of the piece, the dimensions, the finish, and any other customizations.
Once the order and specifications are received, the manufacturer then procures the necessary materials and begins the production process. After the furniture piece is made, it is delivered to the customer.
This is a “Make to Order” system. The manufacturer does not carry any pre-made inventory of finished furniture pieces. Instead, each piece is uniquely made according to individual customer orders and specifications.
This system allows the manufacturer to offer highly customized products, and also reduces the risk and cost of carrying unsold inventory. However, the trade-off is that customers may have to wait longer for their orders to be fulfilled since production only begins after the order is placed.
