Issues with Using Make-to-Stock Methods to Manage Make-to-Order Manufacturing Operations

In this white paper we look at why manufacturers often end up drowning in paperwork and Excel spreadsheets when attempting to manage their make-to-order operations and how to solve this problem.

In make-to-stock manufacturing, the primary objective is to produce the products at a minimum cost for labor and raw materials. Here, inventory has to be tightly controlled, with long-term delivery contracts with established suppliers and often long and complicated supply chains. Also, processes are highly automated to minimize labor. Production is typically scheduled on a weekly or monthly basis, based on projected sales forecasts for products.

In make-to-order manufacturing, by contrast, there is a continual flow of customer orders, for different products, and the primary objective is to get the customer orders made and delivered when promised, typically on a quick-turnaround basis.

Here raw materials inventory has to be managed on a just-in-time basis, with materials ordered as needed, based on by the incoming customer order flow. Also, there may be a large number of different SKUs involved, with some being specific to each individual customer order.

In make-to-order manufacturing, use of automation is limited because the setup time and cost are simply not worth the resultant cost savings in production time. As a result, more people may be involved in production and it is important to dynamically schedule the operations that shop floor personnel are working on, at any one time, to ensure that customer orders are made and shipped by their required delivery date.

Due to the unpredictability of the incoming customer order flow and the variability in time to perform custom operations, it is not possible to do production planning on a weekly or even daily basis. Instead, people need to be assigned to perform tasks, in real-time, based on the current status of work-in-process, versus customer-order delivery dates, as well as the availability of needed materials and equipment.

This makes make-to-order manufacturing much more challenging to manage than make-to-stock manufacturing.

Please click here to learn more about possible alternatives to drowning in paper forms and Excel when managing your make-to-order operations, whether or not you have an ERP system.
Issues with Using Make-to-Stock Methods to Manage Make-to-Order Manufacturing Operations