Key Takeaways
- Produces goods in advance based on forecasts.
- Enables faster delivery with ready inventory.
- Best for predictable, high-volume products.
- Requires accurate demand forecasting to avoid waste.
What is Make to Stock (MTS)?
Make to Stock (MTS) is a manufacturing strategy where products are produced in advance based on demand forecasts and stored as inventory to fulfill future customer orders. This push-based approach relies heavily on data analytics to anticipate demand and optimize production schedules.
Unlike pull systems such as Make-to-Order, MTS focuses on maintaining ready stock to enable faster delivery and meet steady market demand efficiently.
Key Characteristics
MTS is defined by proactive production and inventory management. Key traits include:
- Forecast-Driven Production: Uses historical sales and market trends to predict demand and plan manufacturing runs.
- Inventory Build-Up: Finished goods are stocked to enable immediate fulfillment, reducing customer wait times.
- Economies of Scale: Bulk production lowers per-unit costs by spreading fixed costs across large volumes.
- Standardized Products: Ideal for high-volume, stable-demand items with predictable sales patterns.
- Risk of Obsolete Inventory: Excess stock can become outdated if forecasts are inaccurate, tying up capital.
How It Works
MTS begins with accurate demand forecasting that informs production schedules to maintain an optimal inventory level. Manufacturers produce goods in advance, often in large batches, to prepare for anticipated orders.
Effective MTS implementation uses advanced data analytics to refine forecasts and avoid costly overproduction or stockouts. Coordination with supply chain and inventory management systems, sometimes incorporating Kanban methods, streamlines workflow and replenishment.
Examples and Use Cases
MTS suits industries where demand is relatively stable and products are standardized. Common examples include:
- Consumer Goods: Companies like Hormel Foods manufacture packaged foods in bulk to stock retail shelves globally.
- Electronics: Apple produces popular devices ahead of launches and maintains stock to meet ongoing consumer demand.
- Household Products: Costco stocks everyday essentials using MTS to ensure consistent product availability.
Important Considerations
While MTS can reduce lead times and costs, it requires reliable demand forecasting to minimize risks like excess inventory or stock obsolescence. Monitoring macroeconomic trends through macroeconomics insights can improve forecast accuracy and inventory planning.
Balancing production with real-time sales data and adjusting forecasts regularly are crucial steps to optimize your MTS strategy and maintain efficient cash flow.
Final Words
Make-to-Stock (MTS) excels in environments with predictable demand by enabling faster delivery and cost efficiencies through bulk production. Review your demand forecasts carefully and consider integrating advanced inventory management tools to optimize your MTS strategy.
Frequently Asked Questions
Make to Stock (MTS) is a manufacturing strategy where products are produced in advance based on demand forecasts and stored as inventory to fulfill future customer orders quickly.
Unlike Make to Order, which produces items only after receiving customer orders, Make to Stock pushes production based on predicted demand, enabling faster delivery by holding finished goods in inventory.
MTS offers faster delivery times, lower per-unit costs through economies of scale, streamlined production scheduling, reduced stockouts, and improved cash flow by efficiently managing inventory.
MTS works well for high-volume, predictable products like consumer goods, electronics, seasonal items, and commodities that have stable demand patterns.
Accurate demand forecasting is crucial in MTS to align production with actual customer needs, helping prevent excess inventory costs or stock shortages.
Yes, if forecasts are inaccurate, MTS can result in overstocking, which ties up capital and increases storage or spoilage costs, making robust forecasting essential.
Companies use manufacturing software for inventory control, supply chain visibility, and workflow optimization to efficiently plan and execute production schedules.
They produce large quantities of standardized products in advance to ensure availability, meet predictable demand, and benefit from cost efficiencies and quick order fulfillment.
