Definition of MTS
MTS (Make to Stock) is a manufacturing strategy in which products are produced in large quantities and stored as inventory based on forecasted demand. This method anticipates customer orders and aims to keep products readily available for immediate sale, reducing lead times between order placement and delivery.
Key Components of MTS
- Forecasted Demand: Estimation of future customer demand based on historical data, seasonality, and market trends.
- Inventory Level: The target stock level that must be maintained to meet anticipated customer demands.
- Production Planning: Scheduling production activities to ensure stock levels are replenished in a timely manner.
Types of MTS Systems
- Traditional MTS: Utilizes simple demand forecasting models based on historical data and trends.
- Lean MTS: Incorporates lean manufacturing principles to minimize waste and improve efficiency.
- Hybrid MTS: Combines MTS with other production strategies such as Make to Order (MTO) to accommodate customization and reduce excess inventory.
Benefits of MTS
- Reduced Lead Times: With products already in stock, customers receive orders faster.
- Economies of Scale: Producing in bulk minimizes per-unit costs.
- Enhanced Customer Satisfaction: Products are readily available, improving service levels and customer satisfaction.
Challenges of MTS
- Forecasting Accuracy: Inaccurate demand forecasts can lead to overproduction or stockouts.
- Inventory Costs: Holding large amounts of inventory can increase storage costs and tie up working capital.
- Obsolescence Risk: Unsold inventory may become obsolete, particularly in fast-changing markets.
MTS in Historical Context
The MTS model dates back to the early days of mass production, epitomized by Henry Ford’s assembly line for automobile manufacturing. It became particularly prominent during the industrial revolution and remains a cornerstone of modern manufacturing.
Economic and Industry Applicability
MTS is ideal for industries where demand is predictable and consistent, such as:
- Consumer Goods: Household items, consumer electronics, etc.
- Automotive: Standard vehicle models and parts.
- Retail: Clothing, packaged goods, and other fast-moving consumer goods (FMCG).
Comparison with Other Production Strategies
- MTO (Make to Order): Products are manufactured upon receiving a customer’s order, reducing inventory but increasing lead time.
- ATO (Assemble to Order): Hybrid of MTS and MTO where components are assembled upon order, combining inventory benefits with customization flexibility.
Related Terms
- Inventory Management: The process of overseeing the ordering, storage, and use of inventory.
- Demand Planning: The process of forecasting the demand for products to ensure that supply meets customer needs.
- Just-in-Time (JIT): A strategy where materials and products are produced or acquired only as needed for use, reducing inventory levels.
FAQs
How is demand forecasted in an MTS system?
What industries benefit most from an MTS strategy?
Can MTS be combined with other production strategies?
References
- Stevenson, W. J. (2018). Operations Management. McGraw-Hill Education.
- Chopra, S., & Meindl, P. (2019). Supply Chain Management: Strategy, Planning, and Operation. Pearson.
Summary
MTS is a proactive production strategy designed to meet forecasted customer demand by maintaining optimal inventory levels. While it offers significant advantages in reducing lead times and economies of scale, it also poses challenges in demand forecasting and inventory costs. Understanding the intricacies of MTS can enable businesses to enhance customer satisfaction and operational efficiency.
