What is Make to Stock (MTS) Planning? Explanation, Drawbacks, and Examples

5/20/19 10:00 AM

Make to Stock (MTS) Planning is a commonly utilized production strategy that manufacturing facilities use in order to match the inventory of future/anticipated consumer demand. This differs from other production methods that usually consist of producing a specified amount of goods and then incorporating sales through having to attempt to sell the goods. Make to Stock (MTS) estimates how many orders its products could generate, then simply supplies enough stock in order to sufficiently meet those orders.

WHAT IS MAKE TO STOCK (MTS) PLANNING? EXPLANATION, DRAWBACKS, AND EXAMPLES

Utilizing a Make to Stock (MTS) method requires an accurate forecast of demand in order to properly determine the amount of product that must be produced. If your demand is able to be estimated with accuracy, the MTS strategy may be an advantageous option for you. Make to Stock (MTS) can easily reduce inventory cost, increase profits, and aid in utilizing your materials in a much more efficient manner. Having said that, there are some drawbacks pertaining to the production strategy.

Drawbacks Pertaining to Make to Stock (MTS) Planning  

The Make to Stock (MTS) Planning method, in theory, is a method pertaining to how a company can prepare itself for a varying demand. As much as we would like to be able to be able to crank out an order in seconds for a customer - production simply does not work that way. Inventory numbers and production are all obtained through the creation of future demand forecasts that are generated based off of historical data and current demand. If the forecast finds itself to be even the slightest bit off, the manufacturing facility may well end up with either too much or too little inventory. These errors are by far the primary disadvantages of utilizing the Make to Stock (MTS) planning method. Any form of incorrect information pertaining to demand forecast may lead to excess inventory, stockouts, or worse - revenue loss.

The overall effectiveness of MTS is completely and entirely reliant on its ability to be able to predict future demand for consumers. This unreliability can be extremely costly for manufacturing operations. Although this is one of the most substantial drawbacks, if your production facility has a consistent demand year to year, MTS may be a beneficial option for you.

Examples of Make to Stock (MTS) Planning 

Some of the most popular Make to Stock (MTS) examples include the following:

  • Fast Moving Consumer Goods - Make to Stock’s (MTS) primary benefit and goal is efficiency. An example of this would be fast moving consumer goods, in which the manufacturing facility can produce items in large batches that allow for economies of scale and a low cost per unit.
  • Fashion - Once again, Make to Stock (MTS) relies on reliable demand forecasts. Fashion companies may require demand forecasts for a particular shoe design, which is broken down by factors such as size, color, and style variation. If the forecast is off, the color or size ends up overstocked, even becoming waste if no one ends up wanting the product.
  • Food - Food is by far one of the most challenging items to stock. With expiration dates being a factor, it is important to have it ready to go and be purchased within a timely manner. For example, a grocery store chain may plan production of fresh fruit assortments according to any factors such as holidays, climate, weather, or others. You also may see these items become aggressively discounted when their expiration date approaches or when a particular holiday passes.
  • Original Equipment Manufacturers - Original equipment manufacturers are firms that produce parts for other firms products. In many cases, such parts are produced on a make to stock basis and then exported to warehouses that serve different regions, which ultimately reduces turnaround time.

A software that can aid with Make to Stock (MTS) Planning is PlanetTogether’s Advanced Planning and Scheduling software (APS). Advanced Planning and Scheduling (APS) specializes in generating production schedules that lead to optimized efficiency within your manufacturing operation as well as reduced cost, increased profits, and waste elimination. APS software has become a necessity for manufacturing operations around the globe that are seeking to take production to the next level.

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.

Related Lean Manufacturing Video

 APS Resources

Topics: Make to Stock

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