What does 'Make To Order - MTO' mean

Make to order (MTO) is a business production strategy that typically allows consumers to purchase products that are customized to their specifications. The make to order (MTO) strategy 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 compared to purchasing directly from retailers' shelves.


The make to order (MTO) strategy relieves the problems of excessive inventory that is common with the traditional make to stock (MTS) 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.

Traditional production methodologies produce products and stock them as inventory until a customer buys them. This is known as make to stock or MTS. However, this system was prone to wastage and obsolescence. In order to manage inventory levels and provide an increased level of customization, some companies adopted the make to order production system.

Known as Made to Order or Build To Order

Make to order, also referred to as build to order (BTO) or made to order (MTO), is a manufacturing process in which the production of an item begins only after a confirmed customer order is received. This type of manufacturing strategy is referred to as a pull-type supply chain operation because products are only made when there is a firm customer demand. This 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 the production of automobiles, MTO is a production strategy that is demand driven. That is, a product is planned and built in response to a final customer order. A final customer order is from a known, individual owner and excludes orders by the original equipment manufacturer (OEM), dealers or points of sale or bulk orders.

The Advantage

The main advantage of the MTO system is being able to fulfill an order with the exact product specification required by the customer. Sales discounts and finished good inventory is 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.

  1. Manufacturing Production

    Manufacturing production refers to the methodology of how to ...
  2. Make To Assemble - MTA

    When manufacturers assemble the stored parts of products only ...
  3. Order

    An investor's instructions to a broker or brokerage firm to purchase ...
  4. Assemble To Order - ATO

    Assemble to order is a business production strategy where products ...
  5. Customer Service

    Customer service is the process of ensuring customer satisfaction ...
  6. Day Order

    An order to buy or sell a security that automatically expires ...
Related Articles
  1. Investing

    Vital Link: Manufacturing And Economic Recovery

    Manufacturing output is one of the clearest signs that an economy is recovering from a recession.
  2. Investing

    The Basics of Trading a Stock: Know Your Orders

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  3. Investing

    Making The Trade: Understand Order Types

    Buying and selling stock can be a lot like buying or selling a car. Traders should use and understand tools such as market orders, limit orders, day orders, and good-'til-canceled orders to ensure ...
  4. Trading

    How To Place Orders With A Forex Broker

    Learn how to set each type of stop and limit when trading currencies.
  1. How do I place an order to buy or sell shares?

    Read a brief overview of how to open a brokerage account, how to buy and sell stock, and the different kinds of trade orders ... Read Answer >>
  2. How is the economic order quantity model used in inventory management?

    Understand what types of costs make up total inventory costs, and learn how the economic order quantity model is used to ... Read Answer >>
  3. What's the difference between a stop and a limit order?

    A limit order is an order that sets the maximum or minimum at which you are willing to buy or sell a particular stock. With ... Read Answer >>
  4. How does economic order quantity assist a company with maximizing profits?

    Understand how economic order quantity minimizes overall inventory costs to maximize profits. Learn what specific types of ... Read Answer >>
  5. What is the difference between a buy limit and a sell stop order?

    Understand the differences between the two order types, a buy limit order and a sell stop order, and the purposes each one ... Read Answer >>
  6. How do I place a buy limit order if I want to buy a stock during an initial public ...

    Learn how to place a buy limit order to buy a stock during an IPO. IPOs can be full of risks, and buy limit orders are one ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center