How do you optimize production scheduling and capacity planning in MTO vs MTS environments?

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Production scheduling and capacity planning are crucial aspects of production planning that affect the efficiency, quality, and profitability of your operations. However, different production environments require different approaches to optimize these processes. In this article, you will learn how to adapt your production scheduling and capacity planning strategies to the two main types of production environments: make to order (MTO) and make to stock (MTS).

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1 MTO vs MTS: What are they?

MTO and MTS are two common production strategies that determine how you fulfill customer orders. MTO means that you produce goods only after receiving a specific order from a customer, while MTS means that you produce goods in advance and store them in inventory until a customer orders them. Both strategies have their advantages and disadvantages, depending on the nature of your products, demand, and market.

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Ibrahim Alghamdi

CEO
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"The dichotomy between Make-to-Order (MTO) and Make-to-Stock (MTS) production strategies is a nuanced one, devoid of a definitive 'best' choice. The optimal approach is contingent upon a myriad of factors specific to each manufacturing organization, including the nature of its product offerings, customer dynamics, and strategic objectives." "While MTS can be a viable strategy for fast-moving items, its implementation necessitates rigorous governance to mitigate the risk of overproduction and potential financial implications. Conversely, MTO is often more suitable for slow-moving items and specialized orders, allowing for a more tailored and efficient production process."

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2 How to schedule production in MTO vs MTS

Production scheduling is the process of assigning tasks, resources, and time frames to your production activities. In MTO, production scheduling is driven by customer orders, which means that you need to have a flexible and responsive system that can accommodate varying specifications, quantities, and deadlines. You also need to coordinate with your suppliers, subcontractors, and customers to ensure timely delivery and quality. In MTS, production scheduling is driven by forecasts, which means that you need to have a reliable and accurate system that can anticipate demand patterns, seasonality, and trends. You also need to balance your production rate with your inventory level and storage capacity to avoid overproduction or stockouts.

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3 How to plan capacity in MTO vs MTS

Capacity planning is the process of determining the optimal level of resources and output that your production system can achieve. In MTO, capacity planning is influenced by customer orders, which means that you need to have a scalable and adaptable system that can handle fluctuations in demand and order size. You also need to consider the trade-offs between lead time, cost, and quality when deciding how much capacity to use or reserve. In MTS, capacity planning is influenced by forecasts, which means that you need to have a stable and consistent system that can maintain a steady output and inventory level. You also need to consider the trade-offs between inventory holding cost, service level, and customer satisfaction when deciding how much capacity to use or idle.

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4 How to optimize production scheduling and capacity planning in MTO vs MTS

Optimizing production scheduling and capacity planning in MTO vs MTS requires a combination of strategic, tactical, and operational decisions that align with your production goals and market conditions. To do this, you should choose the right production strategy for your products and customers, use appropriate tools and techniques to support your processes, implement lean principles and practices to increase efficiency, and monitor and evaluate your performance regularly. For example, you can use software or algorithms to plan, schedule, monitor, and control your production activities. Additionally, value stream mapping or 5S can be used to streamline workflow and reduce inventory. Furthermore, key performance indicators (KPIs), dashboards, or reports can be used to measure and analyze productivity, quality, delivery, cost, and customer satisfaction.

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Sai Santoshi Praneetha Mukkamala

Actively seeking Full-Time Opportunities from December 2024. Full-Stack Developer. Python | Java | MySQL | SAP MM | SAP PP-QM| JavaScript | React | ML | HTML | CSS | PHP | Git
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Mastering two different art forms is how best to optimize production scheduling and capacity planning in MTO vs. MTS environments. Agility is essential for MTO. Using cutting-edge planning software, a custom furniture company could dynamically shift resources in response to incoming orders, guaranteeing flawless delivery on time. The emphasis moves to accuracy and efficiency in an MTS arrangement, such as a beverage maker. The organization is able to manage ideal inventory levels, accurately predict demand, and prevent overproduction by utilizing predictive analytics. Both environments attain maximum productivity and customer satisfaction when lean methods are integrated and performance is tracked using KPIs.

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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Nathaniel Strausser

Blessed with a wonderful family
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In my experience when you try to use both methods of scheduling for the same customer, you will run into issues unless you separate the two strategies. You may have a customer who orders goods that are MTO and are pulled from an inventory. If you allow a customer to order both without the proper lead times, especially with a perishable product, you will run into logistic issues at your manufacturing location.

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How do you optimize production scheduling and capacity planning in MTO vs MTS environments?

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1 MTO vs MTS: What are they?

2 How to schedule production in MTO vs MTS

3 How to plan capacity in MTO vs MTS

4 How to optimize production scheduling and capacity planning in MTO vs MTS

5 Here’s what else to consider

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