Make To Stock (MTS): Definition, Example, And How It Works

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Understanding Make To Stock (MTS)

When it comes to managing finances in the business world, understanding different production strategies is crucial. One such strategy is Make To Stock (MTS), which is commonly used in various industries. In this blog post, we will delve into the definition, provide an example, and explain how MTS works, offering valuable insights for those looking to optimize their business operations.

What is Make To Stock (MTS)?

Make To Stock (MTS) is a production strategy in which products are manufactured based on anticipated customer demand. Unlike other production strategies that focus on fulfilling orders on an individual basis, MTS involves mass production of inventory in advance. This inventory is stored in warehouses, ready for immediate delivery once an order is received.

Example:

Let’s consider an example to better understand how Make To Stock works. Imagine a company that manufactures smartphone cases. Based on market research and sales forecasting, the company predicts that they will sell 10,000 cases per month. Instead of waiting for individual orders and manufacturing each case on-demand, the company decides to utilize MTS.

Using the MTS strategy, the company manufactures 10,000 smartphone cases in advance. These cases are then stored in their warehouse, ready to be shipped out as soon as a customer places an order. By doing so, the company can meet customer demand immediately without the need for time-consuming production processes.

How Does Make To Stock (MTS) Work?

To implement Make To Stock, careful planning and accurate forecasting are essential. Here’s a step-by-step breakdown of how MTS works:

1. Market Research and Sales Forecasting: Evaluate market demand, conduct sales forecasting, and determine the expected sales volume.
2. Pre-production Planning: Plan the necessary inventory to meet the anticipated demand. Determine lead times for manufacturing and consider factors like raw material availability, production capacity, and storage space.
3. Mass Production: Begin production of the predetermined inventory quantity based on sales forecast and market demand.
4. Storage and Warehouse Management: Store the finished goods in a warehouse facility, ensuring appropriate inventory management and control to avoid stockouts and excess inventory.
5. Order Processing and Delivery: When an order is received, retrieve the corresponding product from the warehouse and initiate the shipment process, ensuring timely delivery to the customer.

Benefits of Make To Stock (MTS)

The Make To Stock strategy offers several benefits for businesses:

• Improved Efficiency: By mass producing products in advance, MTS eliminates the need for time-consuming manufacturing processes every time an order is received. This leads to increased overall efficiency in production.
• Reduced Lead Times: Since there is inventory readily available, order fulfillment and delivery times are significantly reduced, resulting in improved customer satisfaction.
• Better Cost Management: With MTS, businesses can take advantage of economies of scale by producing large quantities of inventory. This often leads to lower overall production costs.
• Accurate Demand Forecasting: MTS requires careful analysis of market demand and sales forecasting, resulting in improved accuracy in predicting customer needs.

Make To Stock (MTS) is a production strategy that can significantly streamline operations for businesses, particularly those facing high demand and wanting to reduce lead times. By implementing this strategy and utilizing accurate sales forecasts, businesses can meet customer demand swiftly and efficiently.

If you’re looking to optimize your production processes and efficiently manage inventory, considering the implementation of Make To Stock (MTS) could be a smart move for your business.