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

Summary

This video discusses supply chain strategies, focusing on the Strategic Fit Framework and its relation to product characteristics. It explores four main types of production strategies: Make to Stock (MTS), Assembly to Order (ATO), Make to Order (MTO), and Engineer to Order (ETO). The script explains each strategy, using examples like functional products (e.g., bottled water) for MTS, and customized items like cars or furniture for ATO and MTO. It also highlights ETO in contexts such as building houses or designing specialized machinery, emphasizing how companies plan production based on customer demand and forecasts.

Takeaways

• 😀 The Strategic Fit Framework aligns supply chain strategies with the characteristics of products, categorizing them as functional or innovative.
• 😀 Products can be managed through efficient or responsive strategies, depending on their nature and demand variability.
• 😀 The Coupling Point refers to the stage where production either begins based on a forecast (Make to Stock) or after receiving a customer order.
• 😀 Make to Stock (MTS) involves producing goods in advance based on demand forecasts, such as bottled water, soap, and toothpaste.
• 😀 Assembly to Order (ATO) means assembling products from pre-made components once an order is placed, commonly seen in the automotive industry.
• 😀 Make to Order (MTO) produces products from raw materials once an order is placed, allowing for customization, like in the furniture or catering industry.
• 😀 Engineer to Order (ETO) involves creating both the design and the product after receiving an order, with examples like custom homes or airplanes.
• 😀 In MTS, products are made in anticipation of customer demand, minimizing lead time for customers but requiring accurate forecasting.
• 😀 ATO requires a combination of pre-manufactured parts and assembly after the order is placed, offering some customization while keeping production time reasonable.
• 😀 MTO focuses on full production and customization once an order is confirmed, with products being created from scratch based on customer needs.
• 😀 ETO is the most customized production strategy, with both the design and materials chosen after the customer order is placed, making it unique for each project.

Q & A

What is the concept of the 'coupling point' in supply chain strategy?

The coupling point refers to the point at which activities in the supply chain can be performed based on forecasts without waiting for customer orders. It also indicates the point where activities must be postponed until an actual customer order is received.

What are the four types of supply chain strategies mentioned in the script?

The four types of supply chain strategies mentioned are: Make to Stock (MTS), Assembly to Order (ATO), Make to Order (MTO), and Engineer to Order (ETO).

How does 'Make to Stock' (MTS) work in supply chain management?

In the Make to Stock strategy, products are produced in anticipation of customer demand. The company produces goods based on forecasts and stocks them before any orders are received from customers.

Can you give an example of products typically produced under the 'Make to Stock' strategy?

Examples of products produced under the Make to Stock strategy include functional products like bottled water (e.g., Aqua), soap, toothpaste, and other consumables. These items are produced and stocked in advance of customer orders.

What is the 'Assembly to Order' (ATO) strategy in supply chain?

The Assembly to Order strategy involves assembling products only after receiving a customer order. While the components or semi-finished goods are prepared in advance, the final assembly is done when an order is placed.

What is an example of a product or industry that uses the 'Assembly to Order' strategy?

An example of products that use the Assembly to Order strategy is automobiles. A car's assembly begins only after a customer places an order, although components like spare parts are kept ready.

What does 'Make to Order' (MTO) mean in the context of supply chain?

In the Make to Order strategy, production only starts after an order is received. This involves creating the product from raw materials, and the inventory mainly consists of raw materials or semi-finished goods.

What industries typically use the 'Make to Order' strategy?

Industries such as catering, custom furniture production, and certain workshops or factories where products like specific machines or custom-made tools are built upon customer request often follow the Make to Order strategy.

What is the difference between 'Make to Order' and 'Engineer to Order' (ETO)?

The difference lies in the level of customization. In Make to Order, the product is made after an order is placed, but the design is usually predefined. In Engineer to Order, both the design and the product are customized from scratch based on the customer's specifications.

Can you give an example of an 'Engineer to Order' product?

Examples of Engineer to Order products include bespoke buildings (where the design is tailored to the customer's needs), aircraft, and luxury yachts. These products are fully customized based on customer specifications, including the design and choice of materials.