When exploring various manufacturing models, it’s crucial to choose one that aligns with your business needs. You may have encountered terms like Custom or Make-to-Order (MTO) manufacturing, both referring to creating products tailored to a customer’s unique specifications.
What is Make-to-Order (MTO)?
Make-to-Order (MTO), also known as Built-to-Order (BTO) manufacturing, is a process where production starts only after receiving a customer’s order. This pull supply chain strategy is driven by actual customer demand rather than projected demand. MTO is closely aligned with lean manufacturing, which aims to minimize waste and maximize productivity.
Variations on MTO Manufacturing
In MTO manufacturing, products are customized once an order is received. There are several variations within this model:
- Assemble-to-Order (ATO) or Build-to-Order (BTO): Basic parts or assemblies are stocked to fulfill customer orders.
- Configure-to-Order (CTO): Similar to ATO and BTO, but the customer specifies the components of the product.
- Engineer-to-Order (ETO): Custom designs and manufacturing for specific customer requirements.
- Custom Manufacturing: Standard or custom products are produced just in time to meet shipping deadlines.
Advantages of Make-to-Order
Adopting an MTO strategy offers several advantages:
- Increased Product Variety and Competitor Differentiation: Customization allows businesses to offer a wider variety of products without holding excess inventory. Partnering with a supplier offering diverse, high-quality products can make your business stand out from competitors using traditional Make-to-Stock (MTS) strategies, creating a high-value customer shopping experience.
- Reduced Inventory Costs: Unlike MTS, where products are made in anticipation of demand, MTO ensures that you only produce what customers order, significantly reducing inventory costs. Finished goods are shipped directly to customers, eliminating storage needs.
- Improved Cash Flow: The MTO model enhances cash flow by producing only what is purchased. This avoids tying up capital in unsold stock and saves on production and distribution costs.
- Reduced Waste: MTO minimizes waste by producing only what is needed. This approach improves the company’s bottom line and addresses environmental concerns, satisfying the demand for greener consumption.
- Enhanced Quality: MTO allows a greater focus on quality control since production is tailored to specific customer orders. This results in higher-quality products and more stringent quality checks.
- Greater Customer Satisfaction: Custom orders lead to increased customer satisfaction and loyalty. Customers appreciate the personalized shopping experience, which is curated to meet their specific needs and preferences.
Overcoming key MTO challenges with Epicor Solutions
MTO manufacturers face the challenge of producing customized products profitably in a competitive landscape. Here are five key challenges and how to address them:
- Mass Customization: Efficiently offering customer choice and flexibility without excess inventory requires real-time visibility into production data. Epicor Solutions can help manufacturers forecast demand, manage inventory, and optimize machine use.
- Lean Manufacturing for Waste Control: Lean processes can reduce waste and improve margins. Epicor provides visibility tools, automated conformance checks, and accurate demand planning to avoid overproduction.
- The ‘Amazon Effect’: Online retailers like Amazon have permanently transformed buying expectations, and business buyers are no exception. Customers expect the ability to research, order, and track purchases online. Epicor helps meet these expectations with solutions for product configuration, real-time communication with shipping carriers, and automated shipment notifications.
- Globalization: Expanding internationally introduces complexities in warehousing, logistics, and compliance. Epicor’s software and expertise help manage global supply chains, integrate data, and support multiple languages and currencies.
- Digital Transformation: Advancements like drones for inventory counts and machine learning for trend analysis are reshaping manufacturing. Epicor offers business intelligence solutions that enhance efficiency and visibility across business processes.
The role of ERP: Boosting productivity to meet customer demands
In the dynamic MTO landscape, trends are constantly evolving. Success depends on having visibility and insight across your business and value chain; capabilities provided by an ERP system.
This eBook will guide MTO manufacturers in selecting an ERP solution that enhances customer experience, operational efficiency, and business growth.
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