Developing a Make-to-Order Production Plan

 Developing Make-to-Order Production Plan

In make-to-order environment, manufactures will wait until an order is received from a customer before starting to make the goods. The example for this kind of manufacture are custom-tailored clothing, machinery, or any product made to customer specification. For very expensive items are usually made to order. Generally, firms make to order when:

• Goods are produced to customer specification.
• The customer is willing to wait while the order is being made.
• The product is expensive to make and to store.
• Several product option are offered.

Assemble to order

Where several product options are exist, such as in automobiles and where the customer is not willing to wait until the product is made, manufactures produce and stock standard component parts. When manufactures receive order for customer, they will assemble the component parts from inventory according to the order. Since the components are stocked, the firm needs only time to assemble before delivering to the customer. The examples are like computers and automobiles. Assemble to order is a subset of make to order.

The following information is needed to make a production plan for make-to-order products:

• Forecast by period for the planning horizon.
• Opening backlog of customer orders.
• Desired ending backlog.

Backlog

In make-to-order environment, a company does not build an inventory of finished goods. Instead, it has a backlog of unfilled customer orders. The backlog normally will be for delivery in the future and does not represent orders that are late or past due. A custom woodwork shop might have orders from customers that will keep it busy for several weeks. That will be its backlog. If individuals want some work done, the order will join the queue or backlog. Manufactures like to to control the backlog. So, that they can provide a good level of customer service.