Advantages and Disadvantages of Make to Stock

5/5/20 10:30 AM

In the last blog, we discussed the advantages and disadvantages of make to order. While there are a substantial amount of benefits to utilizing that form of production and inventory methodology, make to stock also includes some advantages of its own that can greatly benefit your operation. 

Advantages and Disadvantages of Make to Stock

As mentioned previously, it is essential to ask yourself the questions about your operation when it comes to choosing the form of production and inventory control that you are seeking. Are you able to generate high volumes of inventory and sell it within a certain timeframe? Are you seeking to be customizable or offer low variations of product but in mass quantities? Are you seeking to have a warehousing operation as well? All of these questions are prevalent when attempting to choose a manufacturing method. Make to stock is great for manufacturing facilities that are able to sell in high volumes and generate inventory that is held for small periods of time. Warehousing the product and having a steady in and out flow of product is by far the most advantageous form of this method, in which customer orders are fulfilled within the timeframe requested. Therefore, within this blog, we are going to discuss what exactly make to stock is and how it can benefit your operation. 

What is Make to Stock and How Can it Benefit Your Operation? 

Make to stock methodology is pretty self explanatory - you produce enough product to be stocked. Make to stock orders are products that are manufactured for inventory, based on sale forecasts and expectations on customer demand. This is a traditional production strategy that is to match business production and inventory with customer demand forecasts. While this is exceedingly beneficial in the aspect that it covers any customer order with ease, it can be tricky in the sense that the slightest calculation may lead to either excess stock or a shortage. Having said that, there are various benefits associated with the methodology. 

The advantages of make to stock include the following: 

  • Spread Resources and Production: Since you are manufacturing products that are ready for the customers demand, you are able to properly and carefully organize your resources and production which will be carried to maximize efficiency. Spreading resources and production is by far one of the most substantial advantages pertaining to your operation. 
  • Make to Stock Scheduling: Utilizing this method correlates with make to stock scheduling, which means that you will be able to design a master production schedule to ensure that workflow is as smooth as it can possible be. It also allows you and your employees to know where they need to be and what is left to do. 
  • Minimize Customer Wait Times: By far another one of the largest components pertaining to make to stock and where it really sets itself apart from make to order, MTS will be able to fulfill customer orders and demand with ease. As soon as a customer places an order, their products can be shipped out to them, thus reducing the customers waiting time by a substantial amount. This is incredibly beneficial when compared to make to order, considering that the lead time is also factored into the amount of time it will take to get to the customer. 

The disadvantages of make to stock include the following: 

  • Unpredictable Consumer Trends: While make to order will struggle with this as well, unpredictable consumer trends are a component to consider within make to stock as well. You are able to forecast based off of past sales and seasonal spikes, but there will always be some variation in demand year-to-year that isn’t accounted for. This could potentially lead to shortages or excess inventory every year. 
  • Inventory Levels: Obviously with make to stock, you are going to have a large amount of inventory at all times. Holding inventory in general is looked at as losing money - which isn’t beneficial to your operation. Also, there could potentially be excess left over after the year is over, leaving you with stacks of burning cash as they sit in a warehouse and need to be sold. 
  • Combatting Sales Forecasts: The industry can be complex and affected by a ton of variables, which is why it is so difficult to forecast your sales. Having said that, one little mistake or miscalculation means you could end up with too little or an excess of stock, which is going to cost your business in the long run. 

Demand and inventory forecasting is far by one of the most substantial components within a make to stock operation. This is why utilizing adequate inventory and demand planning software is a must and can greatly enhance your operation in terms of combatting excess inventory or any potential shortages. A software that is able to fulfill these obligations and aid with these requirements includes PlanetTogether’s Advanced Planning and Scheduling (APS) Software. Advanced Planning and Scheduling (APS) Software is a must for manufacturing operations that are seeking to enhance their overall production effectiveness and ultimately reduce waste, increase profitability, and maintain a competitive edge within their industry. 

Advanced Planning and Scheduling Software 

Advanced Planning and Scheduling (APS) software has become a must for modern-day manufacturing operations due to customer demand for increased product mix and fast delivery combined with downward cost pressures. APS can be quickly integrated with a ERP/MRP software to fill gaps where these system lack planning and scheduling flexibility and accuracy. Advanced Planning and Scheduling (APS) helps planners save time while providing greater agility in updating ever-changing priorities, production schedules, and inventory plans.

  • Create optimized schedules balancing production efficiency and delivery performance
  • Maximize output on bottleneck resources to increase revenue
  • Synchronize supply with demand to reduce inventories
  • Provide company-wide visibility to capacity
  • Enable scenario data-driven decision making

Implementation of Advanced Planning and Scheduling (APS) software will take your manufacturing operations to the next level of production efficiency, taking advantage of the operational data you already have in your ERP.

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Topics: Make to Stock

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