Make to order / Make to Stock / Make to production. Scenarion.

[Former Member]

Hello..

Please explain Make to order / Make to Stock / Make to production. Scenarion in details with examples.

David.

[Former Member]

Hi All ,

Thanks for ur help..

David..

[Former Member]

Hi David,

I will explain this only through one industry example:

Make to order / Make to Stock / Make to production.

Make to order: Consider Intel. They produce chips. They know most of the PC and laptops use their processors and hence have a forecastable demand. Hence according to expected demand they will produce chips before hand and keep in stock which will be used when order comes in. This is MAKE TO STOCK --> Stock means no demand yet but stock is created.

Make to Order: Now consider HP comes to Intel asking we need 1 million chips and with small change in specifications so that it can fit into new laptop they are launching. Now firstly Intel will not have 1 miillion chips free to be allocated to HP. Secondly cosmetic changes for chips are needed. Hence they will produce 1 million chips once HP places a order. This is MAKE TO ORDER.

Make to Production:

This is very unique process. Now Apple comes to Intel saying. I am launching Mac Book Air and i need to decrease costs and deliver the chips in 1 months. So can we have a better production routine only for Apple as a batch and design production runs and operations for this order. This will be be changing whole assembly lines, making the product flow different etc. This will be make to production.

Furthermore in above example if APple asks for new Chip and design them from Intel then it will be Make to Design or Make to Engineer.

Hope this is clear. Reward if helpful

kind regards

sandeep

[Former Member]

hi,

pl check this :

[MTO|http://www.sap-img.com/production/discrete-manufacturing-the-made-to-order-cycle.htm]

[MTS|http://www.sap-img.com/production/discrete-manufacturing-the-made-to-stock-cycle.htm]

regards

sadhu kishore

[Lakshmipathi]

Dear David

Make-to-order production is a process in which a product is individually manufactured for a particular customer. In contrast to mass production for an unspecified market where a material is manufactured many times, in make-to-order production a material is created only once though the same or a similar production process might be repeated at a later time.

You can use make-to-order production:

• For branches of industry or products where a small quantity of products with a large number of different characteristics are manufactured

• When a product has to be assembled particularly for a sales order

Choose a make-to-stock strategy, if:

• The materials are not segregated. In other words, they are not assigned to specific sales orders.

• Costs need to be tracked at material level, and not at sales order level.

You should always use make-to-stock production if you produce stock independently of orders because you want to provide your customers immediately with goods from that stock later on. You might even want to produce goods without having sales orders, if you expect that there might be customer demand in the future. This means that make-to-stock strategies can support a very close customer-vendor relationship because your objective here is to provide your customers with goods from your stock as quickly as possible. Returns that have passed quality inspection and other unexpected goods receipts can be used for other sales orders.

This does not mean that you have unreasonably high stock levels. You can avoid them by doing one of the following:

• Create a production plan in advance (in Demand Management) to plan your stock.

If you make use of this option, you may also want to decide whether sales orders exceeding your plan are to affect production or not.

• Receive sales orders relatively early on (using scheduling agreements, for example).

thanks

G. Lakshmipathi