2. Classification by Type of Customer
Order
• Make to Stock (MTS)
• Make to Order (MTO)
• Assemble to Order (ATO)
4-2
3. Make to Stock (MTS)
• Produce finished goods; customer buys
from inventory
• Advantage: smooth production
• Disadvantage: inventory
• Key performance measures (next slide)
4-3
4. MTS Performance Measures
• Service level (orders filled when requested)
• Inventory turnover (sales/avg. inventory)
• Back order fill rate
• Inventory accuracy
• Time to replenish
• Others, such as shrinkage rate
4-4
5. Make to Order (MTO)
• Start production when customer orders.
• Advantage: no finished goods inventory
• Disadvantage: intermittent production
• Key performance measures
– Lead time
– Orders completed on time (or late)
– Quality measures
4-5
6. Assemble to Order (ATO)
• Make parts and subassemblies; finish when
customer places order.
• Advantages: less inventory, faster service
• Disadvantage: some WIP inventory
• Key performance measures
– speed of service
– inventory levels
– quality of product and service
4-6
7. Ma e o ok(Fig r 4 )
k-t-Stc ue -3
Forecast orders
customer Production
Customer Order
Product
Product
Finished Goods
Inventory
4-7
8. Ma e o de (Fig r 4 )
k-t-Or r ue -3
customer
Customer Order
Product
Production
4-8
9. Ase be o de (Figur 4-3)
sml-t-Or r e
Forecast orders
customer Production of
Subassemblies
Customer order
Subassembly
Product
Assembly of the Inventory
Order of Subassemblies
4-9
10. Cutm aio Po (Figure4-4)
so izt n int
MTO MTO ATO MTS
∇------------------∇ ∇ ∇
Supplier Fabrication Assembly Distribution
4-10
