We will discuss in brief the different types of order management :
1. Make to Order
2. Make to Stock
3. Assemble to Order
4. Engineer to Order
5. Configure to Order
1. MAKE TO ORDER (MTO)
Manufacturing of the actual product starts only after the order is placed by the customer. This method is used in customer designer products where product is made as per the customer's requirement from start to finish. Such products are expensive and it will be a combination of the base product and the customisation needed by customer. Demand fulfilment is slow in this case compared to regular demand fulfilment rate. The advantage with make to order is that there is no excess storage cost involved after completion of the manufacturing because a customer order is already available in advance.
2. MAKE TO STOCK (MTS)
In this scenario, the products are manufactured well in advance as per the forecasted market demand.
The products once manufactured are partially stocked in warehouse and the rest is made readily available to the customer at the shop floor. The sold products are then replenished form the stocked inventory. Demand fulfilment is immediate but this also involves storage cost and also the risk of over manufacturing because we don't have a firm customer order prior to manufacturing unlike MTO. Manufacturing cost of such products are low as they are standardised with very minimal to no change in the product line.
3. ASSEMBLE TO ORDER (ATO)
This is a hybrid of MTS and MTO process. In this model product components are manufactured and kept ready. Only the assembling of the final product is done as per the customer's requirement after the customer's order is placed. This strategy can be used by manufacturers when there is a variety of finished products made available from the relatively same set of components. Manufacturers will have a subassembly line to cater to such orders upon customer's requirement, such that both the manufacturing and storage cost is reduced for the manufacturer without compromising highly on demand fulfilment rate unlike the case of MTO
4. ENGINEER TO ORDER (ETO)
This is a highly customised process as per the customer requirement. There is no defined based product unlike MTO. The product will require reengineering of the existing product or engineering a new product all together as per the customer's requirement. Fulfilment rate is very slow due to complications in the process. Usually such scenario are used to manufacture a reengineered product of an existing product or a working prototype for new product. Cost of manufacturing in very high and highly skilled manpower would be required for the process as this will involve more of human skill and not a regular assembly line setup
5. CONFIGURE TO ORDER (CTO)
This is a hybrid of ATO process wherein customer is given more flexibility and the visibility is given to the component level for the customer to choose from. Based on the configuration chosen by the customer the final product costing is calculated and assembly begins. In this way high customer satisfaction and productivity is achieved, its a win-win situation for both manufacturer and the customer. A simple example will be a computer where in customer can choose this RAM , ROM and Chipset configurations before purchasing the product and the quote for the final product is given by the manufacturer based on the configuration setup. Once the final product is agreed upon, the retailer or the manufacturer will have the product assembled as per the chosen configuration
1. Make to Order
2. Make to Stock
3. Assemble to Order
4. Engineer to Order
5. Configure to Order
1. MAKE TO ORDER (MTO)
Manufacturing of the actual product starts only after the order is placed by the customer. This method is used in customer designer products where product is made as per the customer's requirement from start to finish. Such products are expensive and it will be a combination of the base product and the customisation needed by customer. Demand fulfilment is slow in this case compared to regular demand fulfilment rate. The advantage with make to order is that there is no excess storage cost involved after completion of the manufacturing because a customer order is already available in advance.
2. MAKE TO STOCK (MTS)
In this scenario, the products are manufactured well in advance as per the forecasted market demand.
The products once manufactured are partially stocked in warehouse and the rest is made readily available to the customer at the shop floor. The sold products are then replenished form the stocked inventory. Demand fulfilment is immediate but this also involves storage cost and also the risk of over manufacturing because we don't have a firm customer order prior to manufacturing unlike MTO. Manufacturing cost of such products are low as they are standardised with very minimal to no change in the product line.
3. ASSEMBLE TO ORDER (ATO)
This is a hybrid of MTS and MTO process. In this model product components are manufactured and kept ready. Only the assembling of the final product is done as per the customer's requirement after the customer's order is placed. This strategy can be used by manufacturers when there is a variety of finished products made available from the relatively same set of components. Manufacturers will have a subassembly line to cater to such orders upon customer's requirement, such that both the manufacturing and storage cost is reduced for the manufacturer without compromising highly on demand fulfilment rate unlike the case of MTO
4. ENGINEER TO ORDER (ETO)
This is a highly customised process as per the customer requirement. There is no defined based product unlike MTO. The product will require reengineering of the existing product or engineering a new product all together as per the customer's requirement. Fulfilment rate is very slow due to complications in the process. Usually such scenario are used to manufacture a reengineered product of an existing product or a working prototype for new product. Cost of manufacturing in very high and highly skilled manpower would be required for the process as this will involve more of human skill and not a regular assembly line setup
5. CONFIGURE TO ORDER (CTO)
This is a hybrid of ATO process wherein customer is given more flexibility and the visibility is given to the component level for the customer to choose from. Based on the configuration chosen by the customer the final product costing is calculated and assembly begins. In this way high customer satisfaction and productivity is achieved, its a win-win situation for both manufacturer and the customer. A simple example will be a computer where in customer can choose this RAM , ROM and Chipset configurations before purchasing the product and the quote for the final product is given by the manufacturer based on the configuration setup. Once the final product is agreed upon, the retailer or the manufacturer will have the product assembled as per the chosen configuration
