Build to order

In a manufacturing process where the build to order method is used, a confirmed order for a specific number of products must be received before any products are built.Built to order or BTO is a production style that aims to reduce the amount of inventory and create custom products for the consumer.The manufacturer benefits from knowing that they have a guaranteed sale and the customer benefits by being involved in the production of their specific product.This manufacturing style is good for products that involve a great deal of configuration.One example of such a product is a high-end sports car.Other products that are appropriate for a build to order manufacturing process include highly specific computer servers or other larger products such as aircrafts.

In build to order manufacturing, the manufacturer knows, even before the fabrication process begins, who the end consumer is going to be.BTO manufacturing is very much a demand driven strategy (perhaps the best example of optimal supply and demand manufacturing because the supply always exactly matches the demand).BTO manufacturing is thus a type of lean manufacturing because its main objective is to reduce waste in the sense that there is no overproduction or holding of inventory.

An example of the benefit of build to order manufacturing can be seen in the current automotive crisis.Automotive companies had moved away from BTO manufacturing and had begun what is called build to stock manufacturing.In build to stock manufacturing, as you may have guessed, the automobiles were built and put on car lots (or stocked) with the hopes that there would be a buyer willing to purchase that automobile.The recession lessened the likelihood of this occurring and therefore the automotive industry found themselves suffering because of their over production.They had spent large amounts of money manufacturing automobiles that they could then not recover their costs on because no one was buying cars.Built to order manufacturing would have prevented such a crisis and even now this crisis can be eased by a switch to the built to order manufacturing strategy.

To clarify, a BTO system does not necessarily dictate that all members of the manufacturing process remain idle until there is an order made by the consumer.And BTO systems are not for manufacturers of high volume items.For example, manufacturers of household products do not employ a build to order system, because it would not make economic sense to the customer or the manufacturer to have to place an order and wait for the completion of a product that is bought on a regular basis.Build to stock manufacturing is more appropriate for businesses like Wal-Mart who have a high turn around and demand for the products that they sell on a daily basis.

The main advantages of the BTO approach in environments of high product variety is the ability to supply the customer with the exact product specification required, the reduction costly sales discounts and finished goods inventory. The main disadvantage of BTO is manufacturers are susceptible to market demand fluctuations leading to a reduced capacity utilization in manufacturing. Hence, to ensure an effective use of production resources, a BTO approach should be coupled with proactive demand management.The BTO approach is not meant to be a stand-alone approach to manufacturing.Rather it is meant to be coupled with other similar approaches (such as build to stock) as well as management strategies that are tailored to the specific market being targeted by the manufacturer.The demands of the customer should be the driving force behind what type of building strategy is employed in any given manufacturing scenario.