Make-to-Stock
MTSMake-to-Stock (MTS) is a production strategy where items are manufactured based on demand forecasts to maintain a stock of finished goods.
Make-to-Stock (MTS) is a traditional production method. Manufacturers produce goods in anticipation of future customer demand. This approach relies on historical sales data and market analysis to create demand forecasts. The goal is to have products ready to ship as soon as a customer places an order, minimizing delivery lead time.
On the shop floor, MTS works through a master production schedule (MPS). The MPS dictates what to produce, how much to produce, and when. Production runs are often long and continuous to create large batches of standardized products. This helps achieve economies of scale and reduces the cost per unit. The finished products are then stored in a warehouse as inventory until they are sold.
MTS is common for products with high volume and predictable demand. Examples include consumer packaged goods, standard electronic components, and common fasteners. The main benefit is immediate product availability. The primary risk is inaccurate forecasting. Overestimating demand leads to high inventory holding costs and potential obsolescence. Underestimating demand results in stockouts and lost sales.
A beverage company uses an MTS strategy for its most popular soda. Based on forecasts, it schedules a continuous production run to produce 50,000 cans per day. This ensures that distributors and retailers always have enough stock on hand to meet consumer demand.
What is the main difference between Make-to-Stock and Make-to-Order?
Make-to-Stock produces goods based on a forecast before any orders are received. Make-to-Order begins production only after a specific customer order is confirmed.
Which industries typically use a Make-to-Stock strategy?
Industries with high-volume, standardized products and predictable demand use MTS. This includes food and beverage, consumer electronics, and automotive parts manufacturing.
What are the biggest risks associated with Make-to-Stock?
The main risks are overproduction and stockouts caused by inaccurate demand forecasting. Overproduction increases inventory costs, while stockouts lead to lost revenue.
How does MTS affect production scheduling?
MTS allows for more stable production schedules with longer runs and fewer changeovers. This can increase machine utilization and overall plant efficiency.
What systems help manage an MTS environment?
Effective MTS operations use Enterprise Resource Planning (ERP), Material Requirements Planning (MRP), and Warehouse Management Systems (WMS) for demand planning and inventory control.
Make to Order
MTOMake to Order (MTO) is a production strategy where manufacturing starts only after a confirmed customer order is received.
Assemble-to-Order
ATOAssemble-to-Order is a production strategy where products are built from pre-made components after a customer places an order.
Demand Planning
Demand planning is the process of forecasting future customer demand for products to guide production and inventory decisions.
Finished Goods
Finished goods are products that have completed all manufacturing processes and are ready to be sold to customers.
Master Production Schedule
MPSA detailed plan that specifies what end products to build, how many are needed, and when they are needed.
Safety Stock
Safety stock is extra inventory kept on hand to reduce the risk of a stockout caused by supply and demand volatility.