Manufacturing & Production Orders
Manufacturing is the process of making finished products from raw materials through the use of labor and machinery. In general, there are three different types of production orders you can make with factories – made to stock(MTS), made to order(MTO), and made to assemble(MTA).
Learn more about the different production orders that can be made to manufacturers and some of the strategies behind each option.
Made to Stock (MTS)
Orders made to stock use data to predict how much of an item will be needed in the future. The data usually comes from looking at past years of inventory and noting trends in times of the year where demand is higher and lower to draw patterns to work off of. Given enough time, the data can also be used to predict whether demand for a product will be higher and lower in the following years as well.
The data can also come from consumer and market trends. By using accurate data, ordering for stock purposes allows for ordering larger bulk orders, since you can get a good idea of when you will run out of a part from those patterns. Ordering in larger bulk orders allows you to save money and keeping accurate data will protect you from going out of stock. It is the most efficient way to reduce waste.
Companies that sell seasonal or holiday products will need to order at certain times of the year to ensure they have the supply to sell to their customers at the times of the year when demand will be highest and will benefit from ordering for stock. The holidays or seasonal products will be hot items during specific times of the year, and pretty much a waste of space that can be used for other items on the off time of the year.
Also, any company that orders or uses a part regularly will want to order based on their inventory data to make sure they don’t order too many or too little of a product and keep a consistent stock.
Made to Order (MTO)
This production process is often used for custom orders, orders placed irregularly, or for new products just launching. Products made to order are made to fulfil precise needs.
Companies that want to be made to order will often be new companies just starting out, or companies that are launching a new product line that are wanting to see how it performs. For some parts that are either non-crucial or in medium-to-low demand, companies may wait until they run out or run low and order made to order instead of taking the time to keep inventory.
Made To Assemble
Orders made to assemble are a slight combination of both made to order and made to stock.
For assembled products, a factory or group of factories may have to work on all the components and ship them to a central factory where all the parts get assembled into a single unit. Or the parts may be assembled and then shipped to the next factory where they will be part of a larger assembly.
The supplier will need to keep track of where the parts are and how many of each part each factory has and will need to make to successfully assemble the parts.