Classification by Type of Customer Order• Make to Stock (MTS)• Make to Order (MTO)• Assemble to Order (ATO)4-2
Make to Stock (MTS) • Produce finished goods; customer buys from inventory • Advantage: smooth production • Disadvantage: inventory • Key performance measures (next slide)4-3
MTS Performance Measures• Service level (orders filled when requested)• Inventory turnover (sales/avg. inventory)• Back order fill rate• Inventory accuracy• Time to replenish• Others, such as shrinkage rate 4-4
Make to Order (MTO) • Start production when customer orders. • Advantage: no finished goods inventory • Disadvantage: intermittent production • Key performance measures – Lead time – Orders completed on time (or late) – Quality measures4-5
Assemble to Order (ATO) • Make parts and subassemblies; finish when customer places order. • Advantages: less inventory, faster service • Disadvantage: some WIP inventory • Key performance measures – speed of service – inventory levels – quality of product and service4-6
Ma e o ok(Fig r 4 ) k-t-Stc ue -3 Forecast orders customer Production Customer Order Product Product Finished Goods Inventory4-7
Ma e o de (Fig r 4 ) k-t-Or r ue -3 customer Customer Order Product Production4-8
Ase be o de (Figur 4-3) sml-t-Or r e Forecast orders customer Production of Subassemblies Customer order Subassembly Product Assembly of the Inventory Order of Subassemblies4-9
Cutm aio Po (Figure4-4) so izt n int MTO MTO ATO MTS ∇------------------∇ ∇ ∇ Supplier Fabrication Assembly Distribution4-10
Process Selection Decisions• Process characteristics matrix• Factors affecting process choice4-11
Process Characteristics Matrix (Table 4.3) Make-to-OrderCharacteristics Make-to-Stock Assemble-to-Order Auto Assembly Line Auto assembly lineContinuous and Oil refinery Dell ComputersAssembly Cannery Motorola PagerLine Flow Cafeteria Machine shop Machine shop Fast food RestaurantBatch and Job Shop Glassware factory Hospital Costume Jewelry Custom jewelry Speculation homes Buildings Commercial painting MoviesProject Ships Portraits 4-12
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