MTO or MTS?

[Former Member]

Hi,

What is the Strategy suggested by SAP?

Any specific reason for the SAP suggestion?

Thanks,

Siva.

[tibor_nagy · Accepted solution]

Dear Siva,

SAP has no recommendation between MTO and MTS becasuse the startegy depends fully on your business requirements.

In make-to-order production, a product is produced specifically for an individual sales order. This planning strategy is used when planning of the (parent) product is not required or not possible. Neither Demand Management is involved in this process, nor is there an allocation mechanism. Orders are taken as they come. This strategy represents a production procedure in which each product is only produced once, although over time the same or similar production processes are repeated. Each product is specifically produced for an individual customer so that the finished product is rarely placed in stock.

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).

I hope these informations has helped you.

Regards,

Tibor

[Former Member · Accepted solution]

Hi Tibor,

Thx for ur reply.

So there won't be any forecasting done if we use MTO for a particular product.

Thanks,

Siva.

[Former Member · Accepted solution]

u can forecast MTO if you want to. nothing wrong in that.

Forecasting is a Demand planning function.

You might be manufacturing MTO items which say get orders a month before delivery but need to proocure components or plan resources 6 months in advance. You need to forecast or use some kind of demand planning deoending on the market and the product. The thing about MTO is that your orders consume the forecast. So you are left with the net forecast. You can decide to drop the unconsumed forecast or convert it...