Made to Stock (MTS) is a production strategy used by retail businesses to match their inventory levels with projected consumer demand. Rather than establishing a production level and then attempting to sell those goods, a brand using an MTS approach would estimate how many orders its products could generate, and then provide enough available stock to effectively meet those orders. It’s worth noting the MTS method requires accurate demand forecasting to determine how much stock it produces; when future demand can be adequately estimated, then the MTS strategy will be an efficient option for the manufacturing process.
While the Made to Stock production technique involves manufacturing goods based on anticipated consumer demand, the Made to Order (MTO) strategy allows shoppers to purchase goods that are assembled to order and have been customized to their specifications. In that way, MTO goods are made based on actual demand, with the final product created especially for the customer who purchased it.
Made to Stock is a conventional approach to the production process, where goods are manufactured on a large scale in accordance with forecasted demand. The advantages of using MTS production include streamlined scheduling, more efficient use of resources, greater economies of sales, and faster response times.
Companies who implement MTS make decisions on when and how much to produce well in advance of the actual production. A master production schedule is created to help facilitate production planning and workflow, which means manufacturing is more likely to run on time, and the quantity of goods left to make can be correctly determined at any point.
Since Made to Stock means you’re manufacturing products to prepare for customer demand, you have the ability to organize your resources and ensure production is carried out to maximum efficiency. From another angle, because production is planned out ahead of time, your company will only use the resources it truly needs, helping to cut waste (and costs).
Make to Stock goods are generally produced on a much larger scale than Make to Order items, which means the fixed costs of production are divided equally over a greater number of units being produced. This will drive down the average cost of production per unit, and allows companies to enjoy all the benefits of economies of scale, as well.
One of the most important ways MTS products set themselves apart from MTO goods, is that Made to Stock items are ready to fulfill customer orders as soon as they come in. Whenever a customer places an order, their products can be shipped almost immediately, thus reducing wait times by a substantial amount (which cannot be said for Made to Order purchases).