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Make-to-order (MTO) and assemble-to-order (ATO) are manufacturing workflows that use the pull system, that means that manufacturing begins when an order is available in. As such, they’re largely utilized by firms that manufacture customizable merchandise. On this publish, we go over their variations, execs and cons, and manufacturing administration concerns.
What’s Make-to-Order?
Make-to-order, or MTO, is a producing technique through which items are produced from scratch as soon as an order is acquired. It’s a “pull” kind provide chain administration system, that means that manufacturing is at all times triggered by precise demand for items within the type of buyer orders. The primary benefit of MTO is having the ability to produce items to the shopper’s specs and ordered portions, thus decreasing stock and simplifying demand planning.
MTO is contrasted with Make-to-stock, or MTS – a “push” kind manufacturing technique whereby items are produced into completed items stock in keeping with demand forecasts. Not like in make-to-stock, order portions in MTO manufacturing are normally a lot smaller and vary from one to a couple. Most of the elements for these merchandise might require sub-assembly earlier than discovering their manner into the ultimate product. Per unit prices for made-to-order items are thus normally greater and lead instances are longer, as a result of custom-made nature of the merchandise. This makes firms using MTO extra specialised and in want of bigger capital investments in comparison with most small to medium MTS operations, although not on the extent of huge mass-producing MTS enterprises.
What’s Assemble-to-Order?
Assemble-to-Order, or ATO, is a producing technique through which merchandise are assembled from beforehand accomplished sub-assemblies as soon as an order is available in. The ATO workflow is used for items that also have some customizability however the sub-assemblies are made to inventory earlier than orders are available in. Assemble-to-order is thus intently associated to MTO and will be considered as a crossway between MTO and MTS. As a result of it combines some customizability with aggressive pricing and shorter lead instances than MTO, assemble-to-order is gaining recognition in lots of industries.
Assemble-to-order normally requires considerably much less capital funding than MTO. This is because of not having to maintain the entire manufacturing operation and provide chain in fixed anticipation of incoming buyer orders, as is the case with the make-to-order course of. In ATO, some and even a lot of the sub-assemblies and elements that an finish product consists of, will be made to inventory to await ultimate meeting as soon as orders arrive.
Manufacturing Administration Issues
As a result of manufacturing is triggered with an incoming buyer order, each MTO and ATO normally have longer lead instances than make-to-stock operations. To counter this, producers using these manufacturing methods normally have a lot nearer coordination with suppliers. Since manufacturing volumes are smaller, in addition they preserve much less elements and uncooked supplies in inventory. This makes diligent provide chain administration a should as procurements and manufacturing scheduling should be completely deliberate.
Whereas firms using MTS can depend on an present inventory of completed items to fulfill demand shortly, MTO and ATO producers normally don’t preserve completed items stock in any respect. A modest security inventory could be stored solely in choose circumstances, for instance to anticipate sudden will increase in demand for extra well-liked SKUs. Make-to-order and assemble-to-order are glorious routes to go for when completed items have totally different customer-defined configurations or when elements and uncooked supplies are extremely segregated, that means they may solely be utilized in particular SKUs, for a particular variety of models, or per particular person buyer.
The trade-off between MTO and MTS has historically been shorter lead instances vs greater customization. With rising buyer demand for each greater customization and shorter lead instances in quite a lot of markets, some producers are transitioning into hybrid MTS/MTO options. That is changing into a actuality because of the onset of recent manufacturing applied sciences that pace up customization, similar to industrial scale 3D-printing and robotics, strategically positioned decoupling factors within the manufacturing line, and many others. It’s doubtless that increasingly industries will see an emergence of those hybrid setups within the close to future.
Video tutorial on easy methods to handle Make-to-Order Manufacturing with MRPeasy:
Markets Related to MTO and ATO
Most firms using MTO belong within the meeting trade like development or industrial tools and equipment. Along with its shut relative engineer-to-order, or ETO, MTO can be the go-to answer for producing extremely specialised, custom-designed or custom-engineered items which can be normally manufactured from scratch per unit or just a few models. That is largely the case for producers in high-tech, industrial tools, vessels, aerospace, and comparable industries.
ATO, however, is commonest for firms that produce a base product which will be modified to a extra modest extent. A very good instance can be the automotive sector or a private pc, laptop computer, or server producer. With the latter, prospects can select between many various elements for a base product when making the order. Computer systems can have a variety of various modules, cooling options, energy provide models, and many others., to select from, whereas the motherboard and chassis are the identical in all situations. The particular modules will be in inventory awaiting ultimate meeting after the order with the consumer’s {custom} specs is confirmed.
Benefits and Disadvantages of MTO and ATO
Essential benefits of MTO and ATO embrace:
- Extra customization – In MTO and ATO, orders are made particularly to buyer necessities and requests. Satisfying the shopper’s specific wants is normally the primary worth provide of MTO and ATO firms.
- Elevated effectivity – Since manufacturing is optimized to fulfill demand as exactly as potential in MTO and ATO, all processes that don’t add worth to prospects are typically discarded. MTO and ATO emphasize optimizing effectivity by means of exact manufacturing scheduling and a streamlined work course of to maintain lead instances and the prices per unit in test.
- Much less waste – In manufacturing, waste discount encompasses excess of recycling scrap. Waste can be misplaced time, assets, and alternatives. MTO and ATO each prioritize minimizing waste by eliminating pointless processes, work stoppages, prices from conserving standing inventories, and many others.
Essential disadvantages of MTO and ATO embrace:
- Longer lead instances, greater price – Though not at all times the case, MTS operations normally have completed items inventories, whereas firms using MTO or ATO begin manufacturing solely as soon as an order is available in. This inevitably signifies that supply instances for the shopper’s purchases are longer. Customized merchandise are additionally dearer than items made to inventory, as economies of scale and different manufacturing optimizations don’t apply.
- Complexities within the provide chain – The lead instances of MTO merchandise can stretch not solely attributable to manufacturing per {custom} specification, but in addition due to a fancy procurement course of. Uncooked materials inventories are normally stored to a minimal, elements could also be segregated or made to order themselves by subcontractors. MTO and ATO fashions want managers to have a radical understanding and management over the availability chain to sort out this.
- Irregular gross sales – Whereas make-to-stock operations normally depend on demand forecasting to find out manufacturing volumes, demand for {custom} made merchandise is normally tougher to anticipate and plan for. As well as, if an MTO or ATO operation is optimized to deal with a sure workload, sudden and even anticipated will increase in demand (similar to from a vacation season or an upcoming Olympic Video games) could also be tough to accommodate as a result of the manufacturing setup is just not optimized for mass manufacturing.
Key Takeaways
- Make-to-order and assemble-to-order are manufacturing workflow modes that use the pull kind provide chain administration system, that means that manufacturing is initiated by precise demand for items.
- In make-to-order, merchandise are comprised of scratch and customised to the shopper’s particular necessities.
- In assemble-to-order, merchandise are assembled from beforehand accomplished sub-assemblies as soon as an order is available in.
- Most MTO and ATO producers are discovered within the meeting trade, the place product customization performs an vital position.
- In comparison with the make-to-stock manufacturing mode, lead instances for MTO and ATO are normally longer, per unit worth is greater, and order portions are smaller.
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