Lean manufacturing, MTS and MTO
Among manufacturing concepts there are two very important terms to understand. They are Make To Stock and Make To Order scenarios or operating models. To understand lean manufacturing in different contexts we will have to understand the basics of these concepts.
In simple terms Make To Stock scenario occurs when manufacturers carryout their manufacturing of goods without having an actual order from a customer. For an example most of the consumer goods manufacturers operate in this manufacturing model. Soap manufacturers manufacture their soap and stock them and then deliver based on the requirement of the market.
Make To Order scenario occurs when the manufacturer start manufacturing only when there is a order for a particular product. Manufacturer will produce only to complete the requirement of that particular order. Some people refer this type of manufacturing as contract manufacturing.
If we look at these two operating models from a lean perspective, MTO provides ideal ground for a lean implementation. MTO is purely a demand driven system externally. That is customer order drives the manufacturing. Manufacturer will have to align himself internally and with suppliers to create a lean operating model in this scenario.
MTS by its nature is working on a push strategy. Manufacturers will produce goods without an actual demand from the customer. Then he has to get read of these stocks to earn money. MTS manufacturers will use advance tools to forecast their demands and will try to predict the future of the markets and trends of these markets. Needless to say this is in the opposite end of lean manufacturing. Lean believes in pull, not in push when it comes to manufacturing.
But interestingly automobile manufacturers are not pure MTO manufacturers. Their industry is tilted more towards MTS by its very nature. Car manufacturer won’t wait until you place an order to manufacture. But obviously the leader of lean, Toyota is an automobile manufacturer. It is very interesting to find out how these demand driven concepts originated in a company which is more towards make to stock manufacturing.
In the macro picture demand can be interpreted in many ways. You are welcome to add your ideas on this. Leave a comment with your ideas on lean manufacturing, MTS or MTO and your interpretation of demand.
In simple terms Make To Stock scenario occurs when manufacturers carryout their manufacturing of goods without having an actual order from a customer. For an example most of the consumer goods manufacturers operate in this manufacturing model. Soap manufacturers manufacture their soap and stock them and then deliver based on the requirement of the market.
Make To Order scenario occurs when the manufacturer start manufacturing only when there is a order for a particular product. Manufacturer will produce only to complete the requirement of that particular order. Some people refer this type of manufacturing as contract manufacturing.
If we look at these two operating models from a lean perspective, MTO provides ideal ground for a lean implementation. MTO is purely a demand driven system externally. That is customer order drives the manufacturing. Manufacturer will have to align himself internally and with suppliers to create a lean operating model in this scenario.
MTS by its nature is working on a push strategy. Manufacturers will produce goods without an actual demand from the customer. Then he has to get read of these stocks to earn money. MTS manufacturers will use advance tools to forecast their demands and will try to predict the future of the markets and trends of these markets. Needless to say this is in the opposite end of lean manufacturing. Lean believes in pull, not in push when it comes to manufacturing.
But interestingly automobile manufacturers are not pure MTO manufacturers. Their industry is tilted more towards MTS by its very nature. Car manufacturer won’t wait until you place an order to manufacture. But obviously the leader of lean, Toyota is an automobile manufacturer. It is very interesting to find out how these demand driven concepts originated in a company which is more towards make to stock manufacturing.
In the macro picture demand can be interpreted in many ways. You are welcome to add your ideas on this. Leave a comment with your ideas on lean manufacturing, MTS or MTO and your interpretation of demand.
2 comments:
Go back to industrial engineering basics. Terms like 'lean manufacturing' are red herrings.
TOYOTA is a japanese manufacturer and comply all quality programs like tqm ,six sigma and jit systems to be the worlds no 1
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