(2 of 2) Decoupling Point | Make To Stock | Assemble To Order | Make To Order | Engineer To Order

Summary

This transcript covers various supply chain strategies such as Make to Stock (MTS), Assemble to Order (ATO), Make to Order (MTO), and Engineer to Order (ETO), focusing on how customer orders drive or influence production processes. It explains the concept of decoupling points, where the flow of orders either follows or dictates the manufacturing process. The video also highlights key factors like inventory levels, waiting times, and production flexibility, demonstrating how these strategies impact supply chain efficiency, responsiveness, and customer satisfaction. Each strategy aligns with different product characteristics and customer demands.

Takeaways

• 😀 MTS (Make to Stock) involves producing goods in advance based on demand forecasts and stocking them before receiving customer orders.
• 😀 MTS results in high inventory levels and shorter waiting times, but comes with higher inventory costs.
• 😀 ATO (Assembly to Order) requires assembling products only after receiving customer orders, leading to flexible production and relatively low inventory levels.
• 😀 MTO (Make to Order) produces goods only after a customer order, leading to longer waiting times but lower inventory and more customization.
• 😀 ETO (Engineer to Order) involves custom-designed products made according to customer specifications, often resulting in the longest waiting times.
• 😀 The decoupling point in MTS is far from the customer, whereas in ETO, it is very close, as the customer’s order drives production decisions.
• 😀 Waiting time varies significantly across strategies, with MTS having the shortest waiting times and ETO the longest.
• 😀 The production system flexibility needed increases as you move from MTS to ETO, with ETO requiring the highest flexibility for custom products.
• 😀 Product characteristics play a role in strategy choice: functional products generally align with MTS, while innovative products are linked to MTO and ETO.
• 😀 The coupling strategy of a supply chain should be aligned with product characteristics, inventory management, and production flexibility to optimize efficiency and customer satisfaction.

Q & A

What is the main difference between Make to Stock (MTS) and Make to Order (MTO)?

The main difference is that in MTS, products are manufactured based on forecasted demand and stocked in advance, while in MTO, products are made only after the customer places an order, often leading to longer waiting times.

What impact does the decoupling point have in supply chain management?

The decoupling point is where the customer order influences production. In strategies like MTS, the supply chain is driven by forecasts and decoupled from customer orders. In MTO and ATO, customer orders directly drive production or assembly, which impacts inventory management and waiting times.

How does the 'waiting time' differ across supply chain strategies?

In MTS, waiting time is minimal because products are pre-made. In ATO, waiting time is moderate as the product needs to be assembled. In MTO and ETO, waiting times are longer as products are manufactured or designed after the order is placed.

What is the role of customer orders in the supply chain for strategies like ATO and MTO?

In ATO and MTO, customer orders play a crucial role in driving production or assembly. In ATO, orders determine how products are assembled from pre-made components, while in MTO, orders initiate the creation of the product from raw materials.

What are the characteristics of products handled under the MTS strategy?

Products under MTS are typically functional with predictable demand. Examples include bottled water or other mass-produced items where forecasting can accurately determine production levels.

Why is flexibility important in strategies like MTO and ETO?

Flexibility is crucial because these strategies involve a high level of customization and low-volume production. Products are often unique and need adaptable production processes to meet specific customer requirements.

How does inventory management differ across the four strategies discussed?

MTS requires high inventory levels as products are produced and stocked in advance. ATO and MTO require less inventory as products are assembled or made to order. ETO requires minimal inventory, often only raw materials, since products are customized from the ground up.

What kind of products are best suited for an Engineer to Order (ETO) strategy?

ETO is best suited for complex, highly customized products like military equipment, luxury ships, or bespoke machinery, where customer specifications directly drive the design and production process.

What is the relationship between product characteristics and supply chain strategy?

Product characteristics influence the choice of supply chain strategy. Functional products with predictable demand align with MTS and efficiency-focused strategies, while innovative, high-variability products align with MTO and ETO strategies, which focus on responsiveness and customization.

How do product types, such as functional versus innovative, impact supply chain strategy choices?

Functional products typically use MTS strategies for efficiency and cost reduction, while innovative products require MTO or ETO strategies for flexibility and responsiveness, accommodating higher variability and customization needs.