Production Planning, a Spotlight on Make-To-Stock (MTS)

In Production Planning, Which Strategy is Right for Your Business? I touched on four standard production planning methods: Make-To-Stock, Make-To-Order, Assemble-To-Order, and Engineer-To-Order. Production planning is often more complex than Engineer-To-Order for large custom orders or Make-To-Stock for established product lines. Even though there is a common way of doing things, there are better fits for your business. A mix and match of the above four methods is the best approach. Let’s dig deeper into these production planning methods to understand how they may serve your business better; we’ll start with Make-To-Stock.

Make-To-Stock (MTS) production planning is a widely adopted strategy that involves producing goods based on demand forecasts and maintaining inventory stockpiles. It is well-suited for products with predictable demand patterns. Instead of making items in response to specific customer orders, manufacturers using MTS produce goods in advance. These pre-manufactured products are then stored in inventory until customer orders are received.

When to Use Make-To-Stock Production Planning

Make-To-Stock production planning is ideal for companies with established product offerings and relatively stable demand patterns. Utilizing the MTS strategy can provide numerous advantages if your products experience consistent and predictable demand. Some scenarios where MTS is beneficial include:

Standardized Products: When you have a range of products with well-defined specifications and consistent features, MTS can help maintain a ready supply of inventory. This applies to industries such as consumer electronics, where models and specifications remain relatively unchanged over a certain period.
Seasonal Demand: If your products experience seasonal spikes in demand, MTS allows you to prepare in advance and have sufficient inventory available during peak periods. This helps ensure timely order fulfillment and prevents stockouts, maximizing customer satisfaction.
Stable Demand Forecasts: Make-To-Stock planning is most effective with accurate and reliable demand forecasts. MTS can help you align production levels with expected sales if you have access to historical data, market research, or other forecasting methods that provide high confidence in demand estimates.

Setting Up Make-To-Stock Production Planning

To implement Make-To-Stock production planning successfully, consider the following key factors:

Demand Forecasting: Accurate demand forecasting is crucial for MTS. Utilize historical sales data, market trends, customer insights, and other relevant information to project future demand levels. Collaborate with sales, marketing, and forecasting teams to develop reliable forecasts that guide your production decisions.
Inventory Management: Effective inventory management is essential in Make-To-Stock planning. Implement robust inventory control systems to track stock levels, monitor sales patterns, and determine optimal reorder points. Employ inventory optimization techniques to strike the right balance between maintaining sufficient inventory and avoiding excessive holding costs.
Production Capacity Planning: Evaluate your production capacity in relation to the projected demand. Ensure that your manufacturing facilities, equipment, and resources can meet the planned production volumes. Conduct regular capacity analysis to identify any constraints or bottlenecks and make necessary adjustments to ensure smooth operations.
Supply Chain Collaboration: Collaborate closely with your suppliers to align their delivery schedules with your Make-To-Stock production plan. A timely and reliable supply of raw materials or components is critical to maintain uninterrupted production and promptly meet customer demand.
Quality Control: Implement stringent quality control measures to ensure that products produced under MTS meet the required standards. Consistently monitor and evaluate the quality of incoming materials, in-process production, and finished goods to maintain customer satisfaction and minimize rework or returns.

Make-To-Stock production planning is a solid foundational production planning method for companies with established product offerings and predictable demand patterns. By producing goods based on demand forecasts and maintaining inventory, businesses can optimize efficiency, meet customer expectations, and enhance profitability.

EAF Logistics