Make-To-Stock Vs Make-To-Order (MTS Vs MTO)

Difference Between Make-to-Order and Make-to-Stock: Make to stock is a traditional production strategy that is used by businesses to match production and inventory with consumer demand forecasts. Make to Order is a manufacturing process in which manufacturing starts only after a customer's order is received. Suppose you were moving into a new house and you needed a new closet. You can either buy it from IKEA, where you will get ready-made closet OR you can go to a local carpenter who can customise your closet as per your requirement. IKEA manufactures products as per demand forecast before receiving actual orders from the customers whereas your local carpenter makes furniture as per customer’s order. IKEA enjoys economies of scale and offer shorter lead time whereas your local carpenter gives you a longer lead time but allows customisation. IKEA takes the risk of dead stock whereas the carpenter keeps zero stock. Both the models have their pros and cons. Many companies offer best of both the methods. They keep a limited quantity of stock for customers to choose from, but also offer options of customisation, specially for bulk orders.