What Does Manufacturing Production Mean?
Manufacturing production refers to the methodology of how to most efficiently manufacture and produce goods for sale, beyond just a bill of materials. Three common types of manufacturing production processes are make to stock (MTS), make to order (MTO) and make to assemble (MTA). Such strategies have advantages and disadvantages in labor costs, inventory control, overhead, customization, and the speed of production and filling orders.
Manufacturing Production Explained
Manufacturing is the creation and assembly of components and finished products for sale on a large scale. It can utilize a number of methods, including human and machine labor, and biological and chemical processes, to turn raw materials into finished goods by using tools. Production is similar but broader: It refers to the processes and techniques that are used to convert raw materials or semi-finished goods into finished products or services with or without the use of machinery. Whether it is one or the other, manufacturers need to match their production methods to the needs and desires of the market, the available resources, order volume and size, seasonal shifts in demand, overhead costs (such as labor and inventory), and numerous other variables.
Make to Stock
The make to stock strategy is a traditional production strategy that is based on demand forecasts. It is best utilized when there is predictable demand for a product, such as for toys and apparel at Christmastime. MTS can be problematic when demand it more difficult to predict, however. When used with a business or product that has an unpredictable business cycle, MTS can lead to too much inventory and a dent in profits, or too little and a missed opportunity.
Make to Order
The make to order strategy (also known as "built to order") allows customers to order products built to their specifications, which especially useful with heavily customized products like computers and computer products, automobiles, heavy equipment, and other big-ticket items. Companies can alleviate inventory problems with MTO, but customer wait time is usually significantly longer. This demand-based strategy cannot be used with all product types.
Make to Assemble
The make to assemble strategy is a hybrid of MTS and MTA in that companies stock basic parts based on demand predictions, but do not assemble them until customers place their order. The advantage of such a strategy is that it allows fast customization of products based on customer demand. As such, a good example is found in the restaurant industry, which prepares a number of raw materials in advance and then awaits a customer order to start assembly. One downside to MTA is if a company receives too many orders to handle with the labor and components it has on hand.