What is Make To Stock (Manufacture To Stock)?
What is Make to Stock (manufacture to stock)?
Make in stock or manufacture in stock is a traditional or conventional manufacturing strategy that businesses use to produce inventory or commodities to match the anticipated consumer demand. Instead of producing a set number of products and attempting to sell them, businesses estimate how many orders their product can generate and then manufacture only to meet those orders. Make to stock manufacturing strategy provides faster response times as customers can purchase and receive delivery of orders at the same time.
What is the Make to Stock planning process?
Make to stock planning requires a complex web of considerations that include various factors such as;
- Manufacturing capacity
- Raw material inventory
- Availability and utilization of labour
- Storage and warehousing
- On-hand and future inventory of finished goods
- Consumer demand forecasting
Make to stock planning begins with the generation of an accurate and achievable master production schedule based on the above factors. To have an effective and efficient make to stock planning process, it is important to take into account intermediate stock levels and optimize these levels.
What are the advantages of make to stock?
There are many benefits and advantages of Make to stock, such as;
1. Efficient use of resources- In make to stock manufacturing, production is pre-planned in accordance with the expected demand. Thus the resources are used accordingly and there is less wastage.
2. Economies of scale- Since a fixed number of products are manufactured, the costs of production are divided evenly among the number of products produced. This lowers the average cost of production and lets businesses avail the benefits of economies of scale.
3. Scheduling- The whole manufacturing is smooth as everything is done according to a schedule.
4. Quick response time- Make to stock enables quick response time as the products are already available for the customer to buy and get delivered.
What are the disadvantages of make to stock?
1. Inaccuracy of forecast- One of the biggest disadvantages of make to stock manufacturing can be the inaccuracy of forecasts. Make to stock usually depends on the estimation of consumer demands to produce inventory. In case this prediction is wrong then it might lead to loss of sale.
2. Inventory levels- Despite manufacturing inventory according to the predicted consumer demand, there is a chance that there may be a shortage of inventory or excess inventory.
3. Unpredictable consumer preferences- Make to stock exclusively depends on the consumer demand to produce inventory. However, there is always a risk of changing consumer preferences and market trends which may lead to waste of inventories.
What is the difference between make to stock and make to order?
Make to Order (MTO) is a production strategy in which the business starts manufacturing a product only after the consumer places its order for it. That means the business starts producing a product only after it receives orders for it. Unlike Make to Stock(MTS), MTO does not maintain an inventory of goods they sell, however, it has a delay in delivering finished goods as it takes time to manufacture goods.