SCM Terminology

MTO (Make To Order)


MTO (Make to Order) is a manufacturing process in which manufacturing starts only after a customer's order is received. Forms of MTO vary, for example, an assembly process starts when demand actually occurs or manufacturing starts with development planning.

Manufacturing after receiving customer's orders means to start a pull-type supply chain operation because manufacturing is performed when demand is confirmed, i.e. being pulled by demand. The opposite business model is to manufacture products for stock MTS (Make to Stock), which is push-type production. There are also BTO (Build to Order) and ATO (Assemble To Order) in which assembly starts according to demand.

There are various models for Make To Order. For example, in some cases, the process of assembling prepared parts starts when actual demand occurs. Or, in other cases, the production process starts with the obtaining of materials and parts, or further back from development designing (engineering).

Assembling after receiving a customer's orders is "ATO (Assemble To Order)" and starting with development designing is "ETO (Engineer To Order)". Construction by general contractors and plant construction by engineering companies are categorized as ETO.

Pull-type production, such as MTO, BTO, ATO, and ETO, is a business model of the assembly industry in which the quantity to produce per product specification is one or only a few. For example, construction, plant construction, aircraft, vessels, bridges, and so on. From the viewpoint of supply chain management, it has been proven that those who can satisfy due dates promised with customers and can shorten lead times will have an competitive advantage. Even if the production quantity increases, if push-type products that are manufactured by MTS can be manufactured by pull-type production such as MTO and ATO models using SCM software or information technology, then there will be greater business opportunities.

ATO (Assemble To Order) of computers by Dell Inc. and production of sports bicycle by National Bicycle Industrial Co., Ltd. are examples of creating a new business model by matching the diversification of products with ATO, BTO, ETO, and with new-style marketing.
National Bicycle Industrial Co., Ltd. says
"We can deliver a custom-made bicycle to you within two weeks."
Solectron Corporation says
"We can assemble the computer you requested and deliver it within a week."
These are examples of business models in which new supply chain models are created as marketing models.