What is the general procedure for developing a level production plan in a make to order environment?

Make to order (MTO), or made to order, is a business production strategy that typically allows consumers to purchase products that are customized to their specifications. It is a manufacturing process in which the production of an item begins only after a confirmed customer order is received. It is also known as mass customization.

• Make to order (MTO), or made to order, is a business production strategy that typically allows consumers to purchase products that are customized to their specifications.
• The manufacturing process of an MTO item begins only after a confirmed customer order is received.
• Advantages to MTO include customization for customers, reduction in stock obsolescence and finished goods inventory, and overall waste.
• Disadvantages to MTO include increased costs and increased wait times for a finished product.
• MTO can be contrasted with make to stock (MTS) manufacturing, whereby inventories are produced in advance of consumers buying them off the shelf.

The make-to-order (MTO) strategy means that a firm only manufactures the end product once the customer places the order, creating additional wait time for the consumer to receive the product, but allowing for more flexible customization when compared to purchasing directly from retailers' shelves.

This type of manufacturing strategy is referred to as a pull-type supply chain operation because products are only made when there is firm customer demand. The pull-type production model is employed by the assembly industry where the quantity needed to be produced per product specification is one or only a few. This includes specialized industries such as construction, aircraft and vessel production, bridges, and so on. MTO is also appropriate for highly configured products such as computer servers, automobiles, bicycles, or products that are very expensive to keep inventory.

In order to manage inventory levels and provide an increased level of customization, some companies adopt the make to order production system. The MTO strategy relieves the problems of excess inventory that is common with the traditional make-to-stock strategy. Dell Computers is an example of a business that uses the MTO production strategy, wherein customers can order a fully customized computer online and receive it in a couple of weeks.

The main advantage of the MTO system is the ability to fulfill an order with the exact product specification required by the customer. Sales discounts and finished goods inventory are also reduced, and stock obsolescence is managed. However, for an MTO system to succeed, it should be coupled with proactive demand management. It should also be considered that the MTO system is not appropriate for all types of products.

Related to MTO is assemble to order (ATO), which is a business production strategy where products ordered by customers are produced quickly and are customizable to a certain extent. The assemble-to-order (ATO) strategy requires that the basic parts of the product are already manufactured but not yet assembled. Once an order is received, the parts are assembled quickly and sent to the customer.

Traditional production methodologies produce products and stock them as inventory until a customer buys them. This is known as make to stock (MTS). However, this system may be prone to wastage and obsolescence, as inventory sits on shelves awaiting purchase. This problem is particularly acute in an industry like technology, where the pace of advancement is quick and the problem of obsolete inventory could quickly arise.

In theory, the MTS method is a great way for a company to prepare for increases and decreases in demand. However, inventory numbers and, therefore, production, are derived by creating future demand forecasts based on past data.

There is a high likelihood that the forecasts will be off, even if by just slightly, meaning that a company might be stuck with too much inventory and too little liquidity. This is the main drawback of the MTS method of production. Inaccurate forecasts will lead to losses, stemming from excess inventory or stockouts, and in fast-paced sectors, such as electronics or computer tech, excess inventory can quickly become obsolete.

The two main drawbacks of make-to-order management are timeliness and cost of customization. If products are already on the shelf as with MTS, then a customer need not wait until the product is made, assembled, and delivered to spec. Cost is also a factor; pre-made and available products are all alike and so manufacturing costs are lowered due to economies of scale. Make to order will tend to be more expensive for the consumer since it involves customizable parts and finishes.

If any part of your production is off, then delays happen. Manufacturing process optimization means making sure dead stock and disappointed customers are non-existent. In general, good production planning involves:

1. Producing goods in the most logical and straightforward way possible
2. Thinking ahead — anticipating situations like high demand, shortfall, and bottlenecks
3. Identifying inefficient spots in the production chain
4. Finding the optimal way to complete orders on time

When scheduling production of products what are the key factors to consider? 

Production planning is vital for any manufacturing or craft business.

Even basic products need a clear and defined flow to turn them from raw materials into quality goods. If this is not followed, your products are sure to drop in quality. Without a proper process, your standardized practices are sure to be forgotten.

So, when scheduling production of products what are the key factors to consider?

Crew management

Use your team well.

Your people are a valuable asset to your business. They play a key part in manufacturing process optimization. Make it your business to know your people, including their strengths and weaknesses.

This way, you can assign each team member to the most suitable tasks and machines.

If someone is sick or goes on holiday, you have the additional capacity to make up for the temporary loss.

Effective production planning allows you to get the most out of your people and machines. Every team member knows the tasks assigned to them and what their expected output is. Keeping tabs on how this process lets you compensate for shortfalls and keep up with high demand.

Running at capacity

Is your workshop constantly running at 100% of its output?

It only takes a minor bump to bring things to a grinding halt. A good rule of thumb is always to make sure your maximum output is a little higher than what you are now by calculating your capacity planning. If you do receive an unusually large order or two, you will be glad you prepared.

The same goes for your team as they have enough resources to do their job on time.

Raw materials

Frequent stalls in production planning mean paying team members and machines to stand-by waiting.

Nowadays, manufacturing process planning software can integrate MRP. This means you can have the required raw materials available at all times. You never have to push back production because of supply order delays or stockouts.

Priority deadlines do not have to be set back due to undersupply.

There’s no need to be always stepping over excess raw materials on your shop floor.

If done right, warehousing and transport costs won’t skyrocket due to oversupply. As a bonus, every team member always has something to do as they work with the materials that you do have available.

Workshop logistics

The logistical flow of each part of your manufacturing process also requires consideration.

This may not seem so important, but you would be surprised. Many production lines have come grinding to a halt as one weak link has been placed on the wrong stage. Pushing machines and people to unsuitable locations can harm efficiency.

Sometimes, what seems like common sense could be harmful to your flow.

It takes careful analysis to determine how materials, resources, people, and supplies travel around your shop floor.

It may be that a more efficient layout or order exists for your business. Sometimes making a small change can make a world of difference to your production schedule.

Problem solving

Trial-and-error problem solving costs your business money through each failed attempt.

Over ordering or overproducing is a band-aid solution, as this leads to extra costs or staff burnout. You need effective production planning software to track your flow and find production scheduling issues to get to the root of a problem.

Know your manufacturing processes

Understanding production planning and scheduling allow you to oversee your manufacturing methodically to overcome production issues easily.

Track and manage everything effectively, and everything should work like clockwork. Effective production scheduling makes it easier to do everything by the book — it is set out clearly for your whole team and is available 24/7.

Using excel causes inefficiencies in production planning and scheduling

A lack of or expensive production planning software for enterprises has led many manufacturers to use spreadsheets to get by.

There are three main problems with this approach:

1. Spreadsheets are slow — it may be better than doing it with a pen and paper, but Excel is still too labor-intensive
2. Spreadsheets are error-prone — they are vulnerable to mistakes that cause confusion, production delays, and business disrupting problems
3. Spreadsheets are static — they do not update automatically. This can lead to delays as changes are not communicated

Many modern manufacturers are stuck with Excel because they can’t see any better options.

This is understandable. Most manufacturers do not need the gargantuan flow diagrams and Gantt charts seen in large enterprise software. Shop-bought software like Excel seems like a quick and easy option.

But it is not powerful enough for using production management effectively.