Make-to-order

General Description:

Make-to-order is a manufacturing or assembly process geared to satisfy customer-requirements only upon receiving a customer's order. It may require the combination of standard and custom-made parts, if it requires only standard parts it is called assemble-to-order process. (Business  Dictionary)

Make-to-order is also known as individual production or production "on demand". In general, pre-fabricated standardized product variants merely enable customers to choose a product that comes closest to their immediate needs. But individual production only takes place when a customer places an order for a specific product design that meets his exact specifications. This is why make-to-order production is often a very expensive way of production. The manufacturer therefore needs to determine what is valued by the market and whether the offer is profitable or not. (Reichwald, Piller 2009; Poulin et al. 2005)

Make-to-order production often creates additional wait time for the consumer to receive the product, but allows for more flexible customization compared to purchasing from retailers' shelves. The make to order strategy relieves the problems of excessive inventory that is common with the traditional make to stock strategy. Dell Computers is an example of a business that uses the MTO production strategy. At Dell, the customer is able to choose every computer part individually, so that it is adapted to every customer’s preferences (e.g gaming). (Investopedia)

References:

Business  Dictionary 2011, www.businessdictionary.com/definition/make-to-order.html (accessed: 13.04.2011)

Investopedia 2011, http://www.investopedia.com/terms/m/make-to-order.asp (accessed: 13.04.2011)

Poulin et al. 2005

Reichwald, Piller 2009, Interaktive Wertschöpfung, Wiesbaden: Gabler 2009