Make-to-Stock (MTS): Definition and How Does it Work


Key Takeaways:

  • Make To Stock (MTS) is a manufacturing strategy where products are produced in advance based on forecast demand and stored in inventory for sale.
  • Examples of MTS include fast-moving consumer goods like packaged foods and personal care products. MTS is advantageous for manufacturers as it allows for economies of scale, reduced lead times, and increased customer satisfaction due to product availability. However, it can lead to overstocking, waste, and higher carrying costs.
  • The process of MTS involves analyzing demand, planning production schedules, performing quality control checks, and storing finished products in inventory. Common industries that use MTS include retail, food and beverage, and consumer goods.

Are you overwhelmed by the complexity of the Make To Stock (MTS) manufacturing system? Don't worry - this article will provide you with an easy-to-follow definition, example, and explanation of how it works!

Definition of Make To Stock (MTS)

Make to Stock (MTS) is a manufacturing strategy that produces goods based on demand forecasts and stocks them in inventory for customer fulfillment. It is a planning method mainly used by companies that produce high volumes of goods that have stable demand patterns. By carrying inventory of finished products, companies can minimize lead times, increase their product availability, and reduce manufacturing costs.

MTS involves forecasting demand and planning production accordingly to ensure that inventory levels are maintained optimally. This strategy can lead to reduced risks associated with production scheduling errors and potential stockouts. However, it can also result in overproduction, leading to unsold inventory, increased holding costs, and reduced profits.

A key aspect of implementing MTS is to have accurate demand forecasting tools, which can help firms optimize inventory levels and production schedules. It is also important to have a highly efficient production process that can quickly change over from one product to another to avoid excess inventory of slow-moving products.

Overall, MTS can be a useful strategy for firms to maintain their products in-stock and readily available for customers. By keeping a close eye on forecasting tools and adapting production accordingly, companies can minimize inventory costs and maximize profits.

Examples of Make To Stock (MTS)

MTS (Make to Stock) is a manufacturing process where products are produced in advance and kept in stock, awaiting customer demand. In this process, the manufacturer estimates the demand for a product and produces it in large quantities beforehand.

The following table provides some examples of products that are manufactured using the MTS process.

Product Industry Characteristics Mobile phones Electronics Produced in large quantities, standardized design, low variability, consistent quality, and reasonable price Cereal Food High demand, non-perishable, long shelf life, affordable, sufficient inventory, and consistent quality Clothing Fashion Seasonal demand, mass-produced, large batches, identical design, standardized sizes, and consistent quality Toys Toy industry High demand, low variability, mass-produced, affordable, and reasonable quality

It is essential to note that products manufactured using the MTS approach do not cater to specific customer preferences, and thus customization is not possible. However, MTS products can reach customers quickly and usually have a low cost of production.

MTS is ideal for companies with a stable market and predictable demand. Companies in the food, electronics, toy, and apparel industries often use the MTS approach because demand for their products follows predictable patterns. However, the downside of MTS is that there can be a production surplus, resulting in waste and increased production costs.

In the pharmaceutical industry, MTS can be a matter of life and death, as it allows for fast and efficient production of essential medicines in large quantities and helps ensure sufficient supply in emergency situations. During the COVID-19 pandemic, the production of vaccines using the MTS approach was crucial in ensuring a speedy response to the crisis.

How Make To Stock (MTS) Works

In the world of supply chain management, Make To Stock (MTS) refers to a production strategy wherein products are manufactured based on predicted demand. The process starts with the creation of a forecast that predicts the quantity of a product that will be sold during a specific period. The production team then produces that specific number of products and stocks them in a warehouse until they are sold.

MTS helps to streamline production and reduce lead times, but it also carries the risk of overproduction and excess inventory.

MTS is a practical option for products with stable demand patterns that have a low likelihood of significant changes in the near future. It can be challenging to balance stock levels against demand, but with accurate forecasting, it can help to maintain consistent availability of products to customers. It is important to note that MTS is not suited for products that require customization or those that have high demand as the process requires time to produce inventory.

Pro Tip: MTS can be beneficial for businesses that need to predict demand accurately, but beware of the risks of overproduction and the high carrying cost of maintaining excess inventory.

Five Key Facts About Make To Stock (MTS): Definition, Example, and How It Works:

  • ✅ Make To Stock (MTS) is a manufacturing strategy that involves producing goods in anticipation of customer demand. (Source: Investopedia)
  • ✅ MTS is a push-based production system where products are made based on sales forecasts and demand estimates. (Source: The Balance)
  • ✅ The MTS approach is popular in industries where demand for products is stable and predictable, such as consumer goods and fast-moving consumer goods (FMCG). (Source: Cleverism)
  • ✅ When using the MTS strategy, manufacturers maintain a ready stock of finished goods in warehouses, which can be quickly shipped out to customers once orders are received. (Source: TradeGecko)
  • ✅ MTS can help companies reduce lead times, lower costs, and improve inventory management. (Source: SCM Globe)

FAQs about Make To Stock (Mts): Definition, Example, And How It Works

What is Make To Stock (MTS)?

Make To Stock (MTS) is a production strategy where products are manufactured based on anticipated demand, and the finished goods are stocked in inventory until they are sold. This method is also known as push production or build to stock.

What is an Example of Make To Stock (MTS) Production?

An example of MTS production is a company that manufactures smartphones in large quantities without any specific customer orders. The company produces products based on its expected demand and makes them available for purchase in retail stores.

How Does Make To Stock (MTS) Production Work?

MTS production begins with forecasting demand for a product and then producing a predetermined quantity of the product to be stocked in inventory. The finished goods are then sold to customers as orders are received. MTS is a production strategy that emphasizes efficiency and cost-effectiveness by reducing turnaround times.

What are the Advantages of Make To Stock (MTS) Production?

MTS production allows companies to produce goods in high volumes, which increases efficiency and lowers per-unit costs. The method can also help reduce lead times and product turnaround time as products are already in inventory. This strategy is ideal for products with predictable demand and long production lead times.

What are the Disadvantages of Make To Stock (MTS) Production?

A disadvantage of MTS production is the possibility of overproduction and high inventory costs. If demand for a product doesn't meet expectations, companies may be left with excess inventory that can be costly to manage and may require price reductions to sell. Another potential issue is that MTS may not allow for customization or flexibility in production as products are already made and stocked.

What is the difference between Make To Stock (MTS) and Make To Order (MTO) Production?

Make To Stock (MTS) production is a strategy where products are manufactured based on anticipated demand and stocked in inventory until sold, while Make To Order (MTO) production occurs when products are manufactured only after a specific customer order is received. MTO production focuses on customization and can lead to longer lead times and higher per-unit costs.