Make to Order (Manufacture to Order)

Make to order (MTO) is a manufacturing process strategy where the trigger to begin the manufacture of a product is an actual customer order or release rather than a market forecast. For make-to-order products, more than 20 percent of the total value-added time (TVAT) from raw materials to customer delivery elapses after receipt of the customer order. In other words, MTO manufacturing companies do not manufacture and the stock finished goods inventory but instead produce products only after a customer places an order.

This type of production process is common in the:

  • aerospace & defense,
  • capital equipment,
  • and shipbuilding industries but can be found in almost any industry where long lead times or complex customization are required.

In addition to requiring long lead times, MTO products are often complex and customized to customer specifications. As a result, MTO manufacturing companies must carefully manage their engineering, production, and supply chain processes to ensure that they can meet customer demand while also maintaining efficient operations.

The benefits of MTO include:

  • the ability to better meet customer demand ( since there is no inventory of finished goods),
  • improved cash flow ( since there is no need to tie up capital in inventory),
  • reduced obsolescence risk ( since products are only manufactured after an order is received).

The challenges of MTO include the need for long lead times and the need for close coordination between engineering, production, and supply chain processes.

MTO is beneficial in that it allows for the better meeting of customer demand, improved cash flow, and reduced obsolescence risk; however, the challenges associated with MTO include the need for long lead times and close coordination between various processes.

Related Links

Make To Order – MTO
MTO (Make To Order) – Lean Manufacturing
Build to order
What is Make-to-Order? Definition and examples – Market Business News

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