During the process of interacting with customers, I had the opportunity to meet many production managers. They often say specialized terms such as: MTS, MTO, ATO, CTO, ETO. So what are they? What do they mean for manufacturing businesses?
The following article will help you better understand these concepts. Thereby helping you choose an effective production strategy. A well-planned strategy will help keep production and sales smoothly connected, helping to bring your products to the right place, at the right time, and in the right quantity.
Watching: What is Mts
Definitions and classifications
1. MTS: Make To Stock – Produce for inventory
Definition: is a production method with the purpose of keeping goods in stock and then distributing them to customers
Products: products are often cheap, essential products for life, consumer goods. For example: soft drinks, beer, shower gel, confectionery, packaged agricultural products, etc.
Production method based on historical sales or demand forecasts. Purpose: stocking inventory for special occasions, items with spikes in demand, or fast-moving, time-consuming consumer products. High product turnover.MTS has the advantage of decoupling manufacturing processes from customer orders. Theoretically, this allows customer orders to be filled instantly from available stock. It also allows manufacturers to organize production in a way that minimizes costly changes and other disruptions. High risk of placing finished goods in inventory with no demand or orders from customers . These risks tend to limit the MTS environment to simple, diversified or low-commodity products for which demand can be easily forecast.
2. MTO: Make To Order – Make To Order
Definition: is a production method where production starts only after receiving the customer’s order.
Products: Most of the MTO products are of high value, the production time is longer, the product may become obsolete over time. For example, machinery and equipment, furniture. garment products etc.
The products are manufactured after receiving the customer’s order. The final product is often a combination of items standardized and customized to meet a customer’s specific needs. MTO environments are more common when customers are willing to wait to get a product. With unique features, products are often customized or highly engineered. MTO environments are slower to respond to demand than MTS and ATO environments, because of the time it takes to make products from head. There is also less risk involved in building a product when there is a solid customer order.
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3. ATO: Assemble To Order – Assemble To Order
Definition: Pre-production of semi-finished products until an order is placed before assembly.
Products: Products suitable for production according to this model are items such as computers, cars, furniture, etc.
Produce semi-finished products first until a new order is placed and then assemble (this helps businesses optimize inventory costs). In this method, products are assembled from components. after receiving the customer’s order. Key components in the assembly or finishing process are planned and stocked with the customer’s order. Order receipts begin custom product assembly. This strategy is useful when a large number of end products are based on a selection of options and accessories that can be assembled from components. common. When products are too complex or customer needs cannot be predicted, manufacturers may choose to keep by-products or products in a semi-finished state. Final assembly is then held until the customer’s order is received. In this environment, it is theoretically impossible for manufacturers to deliver products to customers as quickly as in an MTS environment. , as it takes more time to complete the final assembly.
4. CTO: Configure To Order
Definition: CTO is a variation of the MTO method for finished products and ATO for semi-finished products. Where the product configuration starts only after receiving the customer’s order. Product standards will be predefined.
Products: Products suitable for production under this model are those that can be customized according to customer requirements with not too high value such as furniture, food, etc.
The CTO allows its customers to configure the finished product they intend to purchase. Usually, a business will offer multiple options to its customers from which they can choose the best options that work for them.
5. ETO: Engineer To Order – Design To Order
Definition: The finished product will be designed, manufactured after that order is received according to the requirements of each individual customer.
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Products: The products suitable for production according to this model are those with specific characteristics and high value such as construction works, bridges and roads, interior design, etc.
This is a production model where the finished product will be designed and manufactured after that order has been received according to the requirements of each individual customer. Customers have their own requirements for their products specified in the contract. Customer specifications require a unique engineering design or substantial customization. Each customer order is made and virtually unique. Theoretically, the ETO environment is the slowest to execute: Not only is the time required to build the product, but it also needs to be set up. Custom design to meet the unique requirements of the customer.
A share from Vietnam ERP Software Company
