Discrete Manufacturing: Make To Stock (MTS)
Summary
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What is Make To Stock?
Make to stock (MTS) is a traditional production strategy that is used by businesses to match the inventory with anticipated consumer demand. The MTS method requires an accurate forecast of this demand to determine how much stock it produces as seen in the picture below.
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Example:
A discrete manufacturer which manufactures consumer kitchenware such as food processors, food mixers and coffee makers will use the make to stock manufacturing method to manufacture those products ahead of sales orders and stock them.
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Many sales orders for a specific product and model have the same specifications, and will therefore use the same Bill Of Material (BOM).
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The Materials Requirement Planning (MRP) will always be run to determine the shortage of components, the date of purchasing those components, and the date of starting the production order so that the product will be produced on time.
What does that mean for the manufacturing management and the inventory management?
For the assembly and for each sub-assembly, a BIll Of Material (BOM) will be created, and production orders will be planned via the Material Requirements Planning (MRP). A sub-assembly may have to be manufactured. Materials Requirements Planning (MRP) that determines which components are short and need to be ordered, and when to order them to be on time with the final assembly, will be needed.
Regarding inventory management, the determination of the ReOrder Point (ROP) and the Order Quantity will be done based on the history of sales orders, forecasts, current stock, purchase orders in transit, shipments in transit, and committed sales orders. This is not an easy task since sales patterns in the past may not apply to the nearby future. Seasonal factors, promotions, pandemics, trade tariffs, new products and unforeseen factors may change totally your sales pattern. Advanced inventory optimization applications that are integrated with Acumatica ERP, do exist such as NetStock, EasyStock, and Goods4Cast.
References: https://www.investopedia.com/terms/m/make-to-stock.asp
The Challenges with Make To Stock
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The two main drawbacks of make-to-stock management are difficulty with forecasting and high risk of overstocking or understocking.
What solution does Acumatica have to manage Make To Stock?
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The Acumatica Manufacturing Edition handles the Bill of Material, planned production orders, master production scheduling, MRP and management of the actual production run. Click here to learn more.