Make-to-order manufacturing is a manufacturing company that makes products after they have been ordered. This strategy allows the manufacturer to eliminate the risk of excessive inventory. It does, however, come with its own set of challenges:
- Uncertainty: The MTO manufacturer doesn’t know when they will be receiving orders and/or how many orders they will receive. Sure, the company can look at trends from the previous years but from a day-to-day standpoint, the actual amount of work is uncertain.
- Market Demand: Most consumers want their product NOW. As a MTO manufacturer, products may take longer to supply to the customer. Therefore, a MTO manufacturer may lose clientele who are looking for an immediate product.
High-Pressure Timeline: Because the MTO manufacturer does not know when they will receive jobs, they may receive an overload of orders all at once. This leaves workers rushing to meet deadlines and possibly forcing the manufacturing owners to pay overtime which increases company overhead.
While the MTO manufacturer has their challenges, they do eliminate possible overhead of raw materials and labor. Instead of stocking up on orders based on the previous years, the MTO manufacturer produces as needed. The company can potentially save space, materials, and labor.