Producing to Order (BTO/MTO) vs. Mass Production (BTS)

Flashcards covering the concepts, advantages, disadvantages, and considerations for 'Producing to Order' (Build to Order/Make to Order) compared to 'Mass Production' (Build to Stock).

What is 'Producing to order'?

A strategy where a business only manufactures a product after an order has been received from a customer, also known as build to order (BTO) or make to order (MTO).

How does 'Producing to order' use different methods compared to typical 'mass production'?

Producing to order uses 'pull' methods, responding to customer wishes, while typical mass production uses a 'push' approach, often known as build to stock (BTS).

What approach do build-to-order products often adopt in manufacturing?

Build-to-order products often adopt a modular approach, combining a fixed basic element with customisable elements.

What is a key advantage of producing to order related to customer satisfaction?

It allows a business to supply a product that meets a customer's exact specification, increasing customer satisfaction, brand loyalty, and potentially giving the business a Unique Selling Proposition (USP).

How does producing to order impact inventory costs?

It reduces the costs of holding inventory because there is no need to hold inventory of finished goods, saving on rental payments and potential losses from pilferage or damage.

What is a potential financial advantage of producing to order regarding pricing?

There is a potential for higher prices, as customers expect to pay more for a product exactly suited to their needs, which can improve profit margins if production costs are comparable to mass production.

How does producing to order simplify production planning?

It simplifies production planning by eliminating the need to forecast demand and reduces the risk of losing money on unwanted inventory or goods that need to be discounted.

How can build to order help a business target different markets?

Build to order allows a business to modify basic products, enabling it to target a mass market with the basic product and niche markets through specific modifications.

What is a main disadvantage of producing to order concerning production levels?

It can lead to considerable fluctuations in production levels over time, which can be inefficient and result in higher fixed costs per unit due to inefficient capacity utilisation.

What challenge does producing to order face when there is sudden unexpected demand for a product?

It leads to an inability to take advantage of sudden interest in a product because no inventory is held, meaning unexpected demand cannot be met quickly, potentially losing sales to competitors using BTS.

What planning difficulties are associated with build to order?

Uncertainty about production levels can make planning difficult, and the required flexibility places pressure on suppliers, managers, and employees.

What customer-related factors should be considered when deciding whether to produce to order?

The value to the customer of a customised product (their willingness to pay more) and their willingness to wait for the product to be completed.

How does the nature of the product affect the viability of build to order?

If the product cannot be produced in a modular way, BTO becomes much more expensive and less financially viable; it often requires higher-level skills leading to increased labour costs.

When might producing to order (BTO) be a cheaper option than building to stock (BTS) regarding inventory costs?

BTO may be cheaper for products that require specialized storage (e.g., refrigeration), are prone to damage, or lose their value quickly, making them expensive to hold as inventories.

How do customer expectations about 'stockouts' differ between BTO and BTS?

For BTO, customers do not expect the product to be held as inventory because they are requesting exact specifications, whereas a stockout in BTS often leads to a lost sale and possibly loss of goodwill.