What are MTO and MTS in Oracle E-Business Suite and what are there decision factor?
Make to Order (MTO)
Some manufacturing units manufacture products only against customer orders in other words job is directly associated with Sale order.
This is an example of make to order scenario. In case of make to order products manufacturing lead time need to be low enough to meet the customer requirements. Organizations may stock sub assemblies / Factory made items used in multiple finished products to enable them to satisfy customer demand within a reasonable time.
Make to Stock (MTS)
Some time Products are manufactured in advance expecting future customer orders.
This is the example of make to stock scenario. Organizations making make to stock products are almost totally dependent on planning forecast. In such cases forecast accuracy is a very important factor to maintain cost effective operations.
There are manufacturing units which has both MTO and MTS type of products
MTO & MTS Decision Factors
Depending on different factors like manufacturing lead time, product cost, market demand, competitor’s capability, storage space, change over time, change over cost etc. manufacturing organizations decide to operate the plant as MTO or MTS. The item parameters are to be set accordingly so that the recommendations provided by Advance Supply Chain Planning support MTO or MTS strategy.