Make to Stock vs. Make to Order in Microsoft Dynamics 365 Business Central

 

Make to Stock vs. Make to Order in Microsoft Dynamics 365 Business Central

In the world of manufacturing, the way a company manages its production processes can significantly impact its efficiency, costs, and customer satisfaction. Two common production strategies are "Make to Stock" (MTS) and "Make to Order" (MTO). Each has its unique approach to handling inventory and production workflows. Microsoft Dynamics 365 Business Central (BC) provides robust support for both strategies, allowing manufacturers to tailor their operations according to their business model. In this blog, we'll explore the key differences between Make to Stock and Make to Order in the context of Business Central, and how the system supports each approach.

What is Make to Stock (MTS)?

Make to Stock (MTS) is a production strategy where goods are manufactured based on anticipated customer demand. This approach involves producing items and storing them as inventory until they are needed to fulfill customer orders. The primary goal of MTS is to ensure that products are readily available for customers, minimizing lead times and enhancing customer satisfaction.


What is Make to Order (MTO)?

Make to Order (MTO) is a production strategy where goods are manufactured only after receiving a customer order. This approach is ideal for customized products or when customer demand is highly variable. The focus of MTO is on flexibility and reducing the risks associated with holding large amounts of inventory.

Key Characteristics of MTO:

  • Customization: Products are often tailored to specific customer requirements.
  • Minimal Inventory: Since production begins only after an order is placed, there is little to no finished goods inventory.
  • Longer Lead Times: Customers might experience longer lead times because the product is made after the order is received.
  • Reduced Waste: There is less risk of overproduction and waste, as products are made to meet actual demand.

In Business Central, MTO is supported through Sales Order Planning. When a sales order is entered into the system, it can trigger the creation of a production order. This ensures that manufacturing is aligned directly with customer demand. The Order Planning feature in Business Central enables users to review and plan for specific sales orders.


Choosing Between MTS and MTO in Business Central

The choice between Make to Stock and Make to Order depends on several factors, including the nature of your products, customer expectations, and your company’s operational capabilities.

  • Use MTS if: Your business operates in a market with stable demand, and customers expect quick delivery. Products are standardized, and inventory holding costs are manageable.

  • Use MTO if: Your customers require customized products, demand is unpredictable, or your business wants to minimize the risks and costs associated with holding inventory.

Leveraging Business Central for Optimal Production Planning

Microsoft Dynamics 365 Business Central is designed to support both MTS and MTO strategies, offering flexible tools for managing production, inventory, and orders. Whether you choose to implement Make to Stock, Make to Order, or a combination of both, Business Central provides the necessary features to help you optimize your manufacturing processes, reduce costs, and improve customer satisfaction.

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