1 PRODUCTION CONTROL MTO, MTS and ATO 16/09/2011

Assembly To Order (ATO) It is a production system where products are assembled after the receipt of customer demand. The receipt initiates the products assembly.ATO is useful where a large number of finished products can be made from common parts. In this case, the parts of the products are already manufactured and stored. The different products are made from these common parts to meet customer needs. The difference between this method and Make To Order is that the components of ATO products are already manufactured but in MTO, everything is manufactured after the receipt of an order. (wiseGeeks 2003-2011) Advantages of ATO Easier to customize orders for customers It reduce errors in delivery of products You can quote a specific delivery time to customers due to the knowledge of the available materials and resources. Helps to maintain an integrity with the customers and ensures more patronization by the customers. Examples Motor productions Hp production system Handcrafted jewelry

Make To Stock (MTS) A production system where products are produced based on demand forecasts. The system supports mass production. Therefore, MTS is demand forecast dependent. To predict an accurate demand forecast, the system considers the demand fluctuation cycle of the past. MTS is like a train schedule (supply schedule) for which the number of passengers (forecast demand) for each schedule can be prospected from past data. To handle the issue of excess inventory, small batch supply through pulltype demand should be employed. Pull-type demand includes QR (Quick Response), ECR (Efficient Consumer Response), CRP (Continuous Replenishment Program), VMI (Vendor Managed Inventory. By doing so, product flow will accelerate and cash flow will increase. Changing push-type MTS to Pulltype supply chain models such as CRP and VMI is the key to successful supply chain management. *MTS is a push-type production system. (Lean-Manufacturing-Japan 2008) Examples Textiles Sundries Processed foods Mobile phones Computer softwares Advantages Accuracy of forecast will prevent excess inventory Prevents opportunity loss due to out of stock

2 Promotes cost reduction due to mass production Disadvantages Problem of accurate demand forecast Inventory increase and cash flow shortages due to inaccuracy in forecast Make To Order (MTO) MTO is a production system where manufacturing starts or products are produced after customers order is received. MTO is a pull-type production system. Manufacturing after receiving customers orders means to start a pull-type supply chain operation because manufacturing is performed when demand is confirmed i.e being pulled by demand. For example, assembly of products starts when demand actually occurs or manufacturing starts with development planning/designing or production actually starts with obtaining of materials and parts. Advantages Eliminate excess inventory Maximizes resources e.g materials Fast material to cash conversion flow rate Customer satisfaction Ensures high quality Disadvantages Customer dissatisfaction and eventual loss if there is a high lead time Might not be cost effective producing only one product Examples Aircrafts Customized machines Artworks e.g pictures

References Supply chain 2011. Assemble To Order. http://logistics.about.com/od/supplychainglossary/g/Assemble.htm. wiseGeek 2008-2011. Assemble To Order. http://www.wisegeek.com/what-is-assemble-to-order.htm Lean-Manufacturing-Japan 2008. Make To Order. http://www.lean-manufacturing-japan.com/scmterminology/mto-make-to-order.html

3 Just-In-Time http://personal.ashland.edu/~rjacobs/m503jit.html An excerpt from a lecture