Make to Order Meaning, Definition, Advantages and Examples

Ever wondered why there’s often a waiting period while buying new cars? The answer lies in different variants and options they come in. The showroom may have just one or two variants in most cases for the test drive. Only when you book the car based on the variant and options you need, does the order for a new car go to the manufacturer, as they are making it to your customized order. 

Make to order is a production strategy used by businesses wherein the manufacturing of the product starts after receiving the specifications and confirmation from the customer. Unlike the general practice where businesses maintain an inventory of ready-to-sell products to be delivered to customers, the make-to-order concept is based on receiving customers' demand and then producing the product. This strategy is helpful for businesses that deal with highly customisable products such as cars, jewellery, aircraft, etc. MTO is helpful for manufacturers who deal with items that are costly to produce and store. MTO strategy saves storage and insurance costs for such businesses. 

What is Make to Order?

Make to order or MTO manufacturing is a strategy used by manufacturers or producers wherein the product is manufactured as per the unique requirements of the customer. The MTO process begins with receiving the customer's order and specifications and then producing the product. The final output is unique and is only meant to be delivered to the particular customer from whom the order was received. There is a time lag between the placing of an order by the customer and its final delivery. This time lag varies from product to product and depends on the time required to manufacture the product as per the specifications and unique requirements of the customer.

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The Advantages of MTO

1. Minimum Wastage and No Over-Stocking

 In the conventional practice of estimating the demand for the product and stocking it in advance, there are chances that real demand falls short of the expected demand. In such a case, it results in a wastage of resources. Overstocking of products can also lead to obsolete and outdated inventory. The make to order concept helps in reducing the wastage of resources and over-stocking.

2. Savings in Storage and Insurance Costs

The businesses have to incur a higher storage cost in maintaining the stock of high-cost and low-volume products. Insurance expenses are also to be incurred to mitigate the risk of loss or damage by fire, theft, natural calamity, etc. MTO manufacturing strategy helps in saving the high storage and insurance cost.

3. Unique and Customised Products

The make to order concept enables the manufacturers to produce unique and highly customised products as per the specifications and requirements of a particular customer. This is not possible in the make to stock practice as it involves mass production of identical products meant for general consumer demand.

4. Maximum Consumer Satisfaction

When the customers are allowed to get the product designed and customised as per their unique requirements it gives them maximum satisfaction. The personalised products also stand out in the crowd and enhance the reputation of the business in the market.

5. Provides a Competitive Advantage to the Business

The make to order strategy gives a competitive advantage to the business. The manufacturers can utilise their best skills, resources and production techniques to produce the best quality product as per the order of the customer. This gives a competitive edge to the business and a chance to gain maximum market share by defeating the rivals in the market.

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Is the Make to Order Process Good for All Manufacturers?

Many points are to be considered before implementing MTO. This strategy is not suitable for all types of manufacturers. It is not beneficial for manufacturers that produce a similar type of product in large quantities for general consumers. It is good for seasonal products that have peak demand during a particular month or season. But you also have to ensure adequate and regular availability of resources during the peak season. This strategy can be very advantageous for businesses that deal in highly customisable products like jewellery, cars, eatables, etc.

Make to Order Process

• Receiving specifications for a customised product from the customer.
• Confirmation of the desired designs and manufacturing order.
• Manufacturing or processing of the product as per demand.
• Delivery of the final product to the customer.

Make to Order Example

•  Customised Cars

The leading car manufacturer BMW uses the make to order strategy to attract more customers. BMW allows its customers to customise their cars as per their unique choices, for example, its interiors and wheels. The company also provides a video link to their customers to show the customisation of their cars before the final delivery.

•  Customised Computers

Dell is a leading computer manufacturer that offered its customer a choice to order customised computers as per their requirements. The customers can provide their specifications to the company and order a customised computer from Dell. Dell used this strategy to increase its consumer base by providing them with high-quality, customised and affordable PCs.

•  Cakes and Bakery Business

These businesses are a perfect example of make to order. The wedding and birthday cakes are prepared by bakers as per the specifications given by consumers that depend on the occasion. The orders and specifications are taken and then the unique cakes are produced to be finally delivered to the specific customer.

•  Footwear Business

The Shoe Factory is a shoe-making company that manufactures shoes only on order. Many other startups have also entered the customised shoe-making business.

•  Clothes and Accessories

 The tailoring industry is also an example of make to order wherein the customers get the desired designer clothes stitched by the tailor as per their unique choices. There are many tailoring startups that provide perfect-fit clothes as per the choice and preferences of the customer.

•  Jewellery Making

This is the oldest industry that uses the MTO strategy. The customers can order custom-made jewellery as per their specifications and designs. The jewellers make the jewellery after receiving the confirmation order and details of customisation from the customer. The desired product is delivered to the customer after a short time lag.

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Make to Order vs Make to Stock

Make to stock is a strategy wherein the products are manufactured as per the estimated demand. The production process is completed and the stock is ready for sale when they are offered to the customer. The difference between make to order and make to stock is summarised below:

Conclusion:

The make to order strategy has many advantages but there are many important points that are to be considered before implementing it. To ensure the production as per the desired demand of the customer, the manufacturer should ensure an adequate and timely supply of resources. 

Accurate planning and production schedules are needed for the successful implementation of this strategy. Jewellery, tailored clothes, customised cakes, customised photo frames, etc. are some of the MTO examples that we find in our daily life.  Aircraft, automobiles, and vessels are some of the exclusive make to order product examples that need high-level of customisation and cost.
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