If you’re an eCommerce business owner looking to stay competitive in one of the most dynamic industries, leveraging the make-to-order (MTO) process may be essential.
This approach to manufacturing is increasingly accessible, and it’s essential for digital entrepreneurs to understand how the process works and its benefits compared with traditional production models.
In today’s blog post, we’ll explore precisely that — and examine why more businesses are turning towards make-to-order systems as they scale their operations.
Let’s jump in.
What is make-to-order?
Unlike a traditional production strategy, make-to-order (sometimes called “engineer-to-order” or confused with “assemble-to-order”) is a type of manufacturing process where businesses make products based on customer orders.
Make-to-order (MTO) differs from “make-to-stock” (MTS) manufacturing, which produces items in bulk without specific orders.
In the make-to-order approach, customers place their order, and then a manufacturer creates the product according to those specifications (and actual consumer demand).
Manufacturers can tailor each product to the exact needs of the buyer, resulting in a more personalized shopping experience, higher customer satisfaction rates, and repeat customers.
For example, the company Shure sells a line of microphones popular with podcasters that are available primarily in black and silver. These microphones are sold at a wide variety of eCommerce stores. But Colorware makes-to-order those same microphones at a premium price for customers who want green, hot pink, or even vivid purple microphones. They also offer a number of other customizable products, including gaming controllers, as well.
Make-to-order vs. assembly-to-order
Make-to-order and assembly-to-order are two different types of production methods that share some similarities but are ultimately distinct.
Make-to-order involves creating a product that’s custom made to suit the individual needs of an order, whereas assembly-to-order takes pre-made components and assembles them on demand according to customizable options.
Generally, make-to-order requires a longer lead time since a manufacturer creates the entire product from scratch while assembly-to-order permits more flexibility and a quicker turnaround.
With pros and cons for each method, it’s vital for businesses to weigh the cost-benefit analysis when planning out their production strategy.
The make-to-order manufacturing process
One of the most common examples of make-to-order manufacturing is customization.
For example, a customer may order a shirt with their own design or text on it, and this shirt would be made-to-order according to their requirements.
Similarly, many businesses now offer customized furniture pieces, musical instruments, and sports equipment that can be tailored according to customers’ needs instead of buying off the shelf.
Here’s an overview of how this effective manufacturing strategy works:
1. Receive the customer’s order
The customer places an order, which specifies their needs and requirements.
2. Design product
The manufacturer creates a design for the product that meets the customer’s needs and specifications.
3. Source materials
The manufacturer then identifies raw and finished materials needed for production and sources these products from suppliers or vendors.
4. Manufacture product
They create the product according to the customer order, using the sourced raw materials.
5. Test and inspect
The manufacturer runs quality assurance tests to ensure the product meets the customer’s standards.
6. Deliver product
They ship the finished product to the customer’s location or deliver the order in person.
5 key advantages of make-to-order manufacturing
1. Reduced inventory costs
Make-to-order manufacturing enables companies to produce only what is needed. This reduces inventory costs because MTO requires fewer items in stock than other manufacturing models. With MTO, manufacturers don’t have to worry about overstocking or storing excess materials, which can save significant costs.
2. Lower lead times
Make-to-order manufacturing helps reduce the amount of time from order placement to delivery since less product needs to be produced.
3. Increased product customization
Make-to-order production offers greater flexibility in terms of design — customers can customize their orders with unique colors or patterns that may not be available from pre-made stocks.
This can help manufacturers stand out in the competitive eCommerce landscape and capture a larger market share. Businesses can make products based on customers’ specific needs, leading to greater customer satisfaction and loyalty.
4. Responsiveness to customer demand
Make-to-order also helps businesses be more responsive to customer demand. By creating items as customers place orders, manufacturers can adjust quickly and efficiently to changes in the market. This enables them to better meet customer needs – improving satisfaction and loyalty.
5. Reduced waste
Make-to-order manufacturing helps reduce the amount of material wasted since it only produces what is needed for a specific order. It’s also well-suited for businesses that produce small quantities of products rather than large batches.
Overall, make-to-order manufacturing offers many advantages to businesses of all sizes. By taking advantage of this approach, entrepreneurs can ensure their operations are efficient and cost-effective, helping them stay ahead in an ever-changing industry.
Disadvantages of make-to-order manufacturing
Make-to-order manufacturing is an efficient way for companies to produce goods according to the specific needs of their customers. However, it does come with some challenges.
1. Increased cost of production
Make-to-order manufacturing can be more expensive to produce since it requires more resources for each order.
Supply chains may also become more complicated because goods and components often come from multiple sources during custom production.
2. Longer development cycles
Make-to-order manufacturing requires longer product development cycles because of the resource-intensive customization and testing of new products.
Lead times can be longer than traditional manufacturing methods because manufacturers must plan and uniquely execute every customer order. Complexity also increases when they must bring together different components to fulfill an individual customer’s order.
3. Increased risk of product defects
Make-to-order manufacturing often requires more testing and quality control, which leads to higher costs for defect prevention and repair.
4. Limited scalability
Make-to-order manufacturing is not designed for large-scale production because each product must be customized for individual orders. This limits the scalability of make-to-order processes when there’s higher demand.
By understanding the challenges involved in make-to-order, organizations are better able to proactively adapt and mitigate issues in a cost-effective manner.
What industries use make-to-order?
A variety of industries rely on make-to-order processes to fulfill customer needs.
For example, apparel companies can create custom pieces tailored to individual orders. Homebuilders also rely on this ordering system since they design houses with customer input. Likewise, food producers often use make-to-order principles when catering large events.
Because of its versatility, make-to-order continues to be a popular choice for many businesses across diverse industries, including:
- Aerospace engineering
- Food and beverage
- Medical device fabrication
- Precision metalworking
Make-to-order manufacturing is a process where businesses make a product after the customer places an order. Manufacturers can shape products to suit shifting customer demand without the commitment of mass production.
This manufacturing process can increase customer satisfaction and lower inventory costs.
However, it’s crucial to weigh the disadvantages of make-to-order, like longer lead times, before deciding if this production method is suitable for your business.