• Admin

Discrete Manufacturing: Make To Order (MTO)

Updated: Nov 1, 2020

What is Make To Order?


Make to Order is when an assembly project has to be done of parts and sub-assemblies according to the specific requirements of a specific customer/sales order. Such an assembly may or may not be used again for sales orders from other customers. It is possible that many sales orders might by placed by the same customer to achieve that project.

For instance a vendor of commercial light fixtures may be asked by a general contractor to set up a specific set up of light fixtures in the lobby of a large office building. This set up will be specific for this large office building. Components may be common across many sales orders, but the final assembly will be specific to this specific large office building.

The components and sub-assemblies are already engineered. They may need some configuration.


What does that mean for the manufacturing management and the inventory management?

For the assembly and for each sub-assembly, a BIll Of Material (BOM) will be created, and production orders will be planned. A sub-assembly may have to be manufactured.


Regarding inventory management, the determination of the ReOrder Point (ROP) and the Order Quantity can not be done based on the history of sales orders and plain forecasts since exact same sales orders don't exist. Neither do forecasts exist . The determination will be done based on insights of new sales orders that use some common components, current stock and purchase orders in transit. The inventory is just-in-time inventory. Components and maybe sub-assemblies will be made just-in-time.

References: http://www.softwareshortlist.com/erp/articles/erp-applications/make-to-order-vs-make-to-stock-implications-for-your-erp-system/


The Challenges with Make To Order


The two main dra