What is Make To Stock?
Make To Stock (MTS) is a manufacturing practice where companies produce products based on trends, historical data, and/or forecasts instead of actual demand in the market.
Make To Stock (Manufacture To Stock): Technical Definition
ClickPost defines Make To Stock (Manufacture To Stock) as a manufacturing strategy used by companies to produce and store goods in advance based on historical demand and/or forecasts.
What are the advantages of Make To Stock?
Here are some of the advantages of Make To Stock.
Since companies produce goods in advance based on expected demand, resource planning is also done ahead of time. This allows companies to efficiently use company funds and make production cost-effective.
2. Economies of Scale
When goods are produced in advance they can often be manufactured in large quantities based on demand speculation during different periods. This allows companies to leverage economies of scale and reduce the average cost of manufacturing products.
When companies produce goods in advance it allows them to stay prepared for sudden demand. Since goods are already produced, the company remains stocked with items and maintains the usual course of business without altering production cycles.
Who uses Make To Stock?
Make To Stock is generally used by Direct to Consumer (D2C) and Business to Consumer (B2C) companies. These enterprises use behavioral analytics, market trends, historical demand data, and predictive analytics to anticipate future demand and produce goods ahead of time.
Why do companies use Make To Stock?
Companies use the MTS strategy to match future demand without making last-minute changes to production cycles and to avoid stress on manufacturing facilities. Since companies use forecasts to produce goods in advance, they are able to prepare for demand without having to deal with a sudden surge in order quantities. Furthermore, MTS also allows companies to keep a buffer in case demand surpasses forecasts, preventing loss of clientele and inefficient production.
What is the difference between Make To Stock and Make To Order?
Make To Stock is a strategy where companies use demand forecasts to produce goods in advance and keep stock of them for sale at later stages. On the other hand, Make To Order is a strategy where companies produce goods as and when they receive an order, only producing goods when they are purchased by a customer instead of keeping stock of items in advance.
What is Make To Stock examples?
Here are some examples of the Make To Stock strategy:
Grocery and supermarkets plan production and keep stock of items based on holidays where demands of gift items and gourmet food increase. Similarly, they pre-order produce in advance based on changing seasons.
Apparel stores produce and keep inventory in advance based on different seasons of the year.
Electronics and appliances stores produce goods and keep stock in advance of the Black Friday sale.