Question

Explain the MTO (Custom, or make-to-order) and MTS (Option, or assemble-to-order) manufacturing processes with examples.

Answer 1

MTO (Custom, or make-to-order):

In this production model, the customer at first places their order and then the company starts manufacturing the product. This is ideal for the customers who want highly customized product in low volume. Usually these products are expensive. In this method, customers need to wait longer for the final product. This method doesn’t need any extra inventory.

Example: An aircraft manufacturer produces an airplane according to their customer’s choice and requirements. Airplanes are expensive.

MTS (Option, or assemble-to-order):

In this production model, goods are produced quickly once the producer gets the order from the customer. In short time, the customer receives the customized product. Also, in this model, for the producer, the cost for the inventory decreases. This method is beneficial when the number of customers is huge asking for customized products.   

Example: In a company that manufactures computers, customers can select a processor from among several processors. Customers can choose different combination of components and get a customized computer in almost no time.