Updated: Nov 1, 2020
What is Configure To Order (CTO)?
A Configure to Order (CTO) system is a hybrid of make to stock and make to order operations. It is a set of components (sub-assemblies) that are built to stock whereas the end products are assembled to order. ... By keeping inventory at the component level, customer orders can be filled quickly. Note that the sub-assemblies are made to stock, and are already available when the sales order (CTO) comes in.
This means that only the end product (finished good) will need a BIll Of Material (BOM).
A PC-maker that receives orders and then assembles customizable computers using components like keyboards, monitors, and motherboards is using an Configure To Order or Assemble-To-Order strategy.
What does that mean for the manufacturing management and the inventory management?
For only the assembly, a BIll Of Material (BOM) will be created, and production orders will be planned. Materials Requirements Planning (MRP) that determines which components are short and need to be ordered, and when to order them to be on time with the final assembly, will be needed.
Regarding inventory management, the determination of the ReOrder Point (ROP) and the Order Quantity will be done for the components and sub-assemblies based on the history of sales orders and forecasts for those components and sub-assemblies.
References: Configure To Order and Assemble to Order are basically the same.