The technical term make-to-stock is usually translated as stock production and is understood as the opposite of make-to-order production. In make-to-stock production, production takes place without specific customer orders. At the end product level, make-to-order is always necessary if the delivery times accepted by the market are shorter than the replenishment times of the upstream warehouse level.
If production at a warehouse level is order-related, this requires forecasts of the expected future market demand and a statement about the desired readiness to deliver (“degree of readiness to deliver”) in order to be able to determine the necessary basic and safety stocks.
Our tip:
The terms make-to-stock and make-to-order can easily lead you down the wrong path, because make-to-stock and make-to-order are not mutually exclusive strategies in a value chain. In a well-organized value chain, not only in manufacturing companies but also in retail companies, both strategies are usually found side by side and one behind the other. For example, while certain end products are produced to stock, others are manufactured or procured to order.
The components, assemblies or individual parts that make up the end products manufactured to customer order are often pre-produced or pre-procured to customer order on the basis of demand forecasts, as otherwise the required delivery times to the market cannot be met. The storage levels in a value stream that are replenished by make-to-stock inventories, but from which make-to-order inventories are withdrawn, are the logistical decoupling points in a company. They are often referred to as customer decoupling points and represent a key strategic element of a logistics business model.
The more variants there are in the end products and the more stochastic their demand, the more advisable it is to manufacture and assemble them to customer order, if possible from the storage stage onwards, from which the variants are split up. Otherwise, finished goods inventories and thus warehousing costs can be very high, even if delivery readiness is poor.
