Manufacturing production is the process of developing finished goods from raw materials using human and machine labor in the most cost-effective and efficient manner.
There are three methods of manufacturing production: Make to stock (MTS), Make to Order (MTO), and Make to Assemble (MTA). Let’s have a look at the various manufacturing methods, their strengths, and their drawbacks.
Make To Stock (MTS)
Make to stock is a manufacturing production process where the products are developed in bulk based on the expected demand of customers. The demand is assessed by sophisticated forecasting tools and delivered at the point of consumer purchase.
There are several benefits of make-to-stock manufacturing production. It believes in creating just enough stock to meet customer orders based on accurate forecasts of demand.
Also, undertaking successfully would mean efficiencies at each step in the manufacturing process until the delivery. The forecasting process relies on technology that assesses past demand to feed into an algorithm that evaluates future orders.
It would enable the manufacturer to order raw materials in bulk and produce a high volume of products, ideally matching customer demand.
Accurate forecasting also lets workflow and labor be managed appropriately. Also, orders are fulfilled with ease and efficiency, and there is little to no wastage or lost opportunity.
Who Uses Make to Stock?
Make to stock is a traditional method of manufacturing production and is used by manufacturers. It is used in high turnover industries having relatively predictable consumer patterns like the retail sector.
Make to stock is a useful manufacturing production system for industries influenced by seasonal changes or holidays like Christmas, Easter, and New Year. It is also helpful in industries that evolve at speed, like technology, where the required products can change rapidly.
Make to stock relies on accurate forecasting of consumer demand. If the forecasts are wrong, it may lead to insufficient stock to meet the demands, and the company would lose out on sales.
But, it may lead to an oversupply of materials going into waste. Forecasts can also be used to structure workflow and staffing. If it goes wrong, it can lead to production scheduling issues and financial issues within the workforce.
The main aim of manufacturers looking to improve make to stock processes is to make sure that forecasts are as accurate as possible. The reliability of the estimates is the key as it affects every aspect of the production line efficiency.
If the forecasts predict lesser orders than ultimately placed, the manufacturer scrambles to meet customer needs. Failing to do so leads to lost opportunity and causes reputational damage.
Also, if more orders are forecast than the ones placed, the manufacturer is left with an oversupply of stocks. Some stocks could be perishable and may go to waste. If held, it leads to warehousing and labor costs to manage.
Read more: Three tips for Determining What Kind of Inventory Management Platform you Need
Make To Order (MTO)
Make to order is a production process where the manufacturing is done after the order is received. It lends itself to bespoke manufacturing suiting a particular outlet or customer needs.
On the contrary to make to stock, make to order production starts when an order is received. It has a lower chance of wastage or inefficient production workflow.
Make to order works on specific and detailed customer demand. Manufacturers are aware of the exact order and the material required. It means there is less wastage of inventory or labor in creating the product for sale.
Who Uses Make to Order?
Make-to-order is usually used by large and complex organizations like defense, construction, or airlines. They need precise products and can absorb, to some extent, a longer lead-time in receiving the goods.
The drawbacks of make-to-order are largely around irregular order patterns and if they can manufacture a product within a given time frame and deliver it to the customer.
Make-to-order products are very specific and have little visibility over the orders coming in at any time. The unreliability of orders and their financial stability can be very difficult to manage for a manufacturer.
When an order comes in, making and delivering it may take longer than those made under a make-to-stock system when an order comes in. It’s because the production takes place only after the order is placed.
Various hiccups may come into play due to lack of raw materials, delay in delivering materials or components, and difficulty in managing workflow. It’s all due to the unpredictability of orders being made and the requirement of particular skills.
The process is under constant scrutiny by manufacturers and customers. They always look for ways to streamline the system and ensure better outcomes with the production and delivery process.
- Mistake-proofing: It aims to develop products quickly without costly errors involving correcting past errors and future-proofing against a repeated error. Implementing inventory management software helps you control the flow of goods, assess supplier performance, or upskill staff.
- Load-leveling: It’s a useful tool for make to order manufacturers as it lets small batches of the order develop in a time-effective manner. Plus, letting manufacturers quickly identify and resolve the issues that may affect the next batch of overall orders.
- Iterative Improvements: Continuous improvements in make to order manufacturing are central to the process. It minimizes waste, maximizes resources, and delivers a product specifically designed as per customer needs.
Read about: 8 Key Features to Look for in Manufacturing Inventory Software
Make To Assemble (MTA)
Make to assemble is a mixture of make to stock and make to order processes. Here, the manufacturer stocks the basic requirements of the order but waits for orders to come in before making the final product.
Make to assemble has several advantages and tackles various issues raised by the make to stock and make to order processes. It attempts to resolve them through a hybrid process effectively.
The basic elements of the product are already in stock. So, make to assemble may not face the same supply risks or may need a longer delivery time frame like the make to order method.
Plus, it builds the product based on actual orders and avoids the risks of understocking or overstocking the make-to-stock method. The method may still use forecasting methods used in make-to-stock processes to maintain efficiencies with workflow and inventory.
Make to assembly is comparatively cost-effective for the manufacturer. It has the least amount of stocked materials and goods, allowing for stable warehousing and storage costs.
A make to assemble process still delivers relatively bespoke products and a much shorter time frame than make to order.
Who Uses Make to Assemble?
Make to assemble is used across various sectors like the food assembly or computing sector. Laptops or desktop computers are mostly assembled through this manufacturing process. They are the most cost-effective way to get through a reasonably high number of orders without undue delays in delivery.
It is also used in the consumables sector, keeping non-perishable stock in warehouses and adding perishable ones just before delivery.
Like the make-to-stock method, the make-to-assemble method depends on demand forecasting and faces the same reliability issues.
Forecasting can be tricky. Even by a small margin, getting it wrong may lead to oversupply or oversupply of stock and subsequent wastage or inability to satisfy orders.
Plus, a two-step system to produce the orders may lead to many complications. Make to assemble depends on efficient assembly processes, and the re-ordered basic components and bespoke sub-parts are well put together by trained and skilled staff.
Any lapses in the assembly line processes may lead to wastage or flawed products and cause significant financial losses. The assembly line process must run highly efficiently and effectively to optimize the process.
Skilled staff must manage quality control and order delivery to ensure that the build of every product is done as per the specifications of the customer and delivered promptly.
Read about: What are the features of Manufacturing Software?
DEAR Systems Inventory Management Software
Regardless of the manufacturing production method you choose, they all solely rely on good inventory management. A good inventory management software makes your work easy and efficient.
DEAR Systems proudly offers one of the most advanced and affordable versions of manufacturing control software. It helps you create advanced BOM, define manufacturing processes for a single finished product or multiple finished products simultaneously, and implement parallel and non-parallel operations in a production BOM.
Our team is more than eager to help with any questions or concerns. Book a call with DEAR Systems to know more about our services.