Custom production

From CEOpedia | Management online
Jump to: navigation, search
Custom production
Primary topic
Related topics
Methods and techniques

Custom production (Make to order production - MTO) is one of the forms of cooperation between the producer and the client. It consists in creating the client the possibility of influencing the final product through the ability to choose different product components and any configuration. At the present time, when we are dealing with a very demanding customer market, this type of cooperation is becoming more and more common. It allows you to customize the product in such a way that it meets the client's expectations. In the case of custom production, the final product is created only when ordered by the customer. Such an order is preceded by a phase of negotiations during which the terms of the order are specified.

Custom production shows how many customers are looking for personalized and unique products. However, this results in the necessity of changes in enterprises - transformations of mass production into a warehouse, in variable production to the customer's direct order. This type of production is carried out in systems that are characterized by a great versatility of equipment.

Characteristics of custom production

Custom production can be defined as the production of a small amount of products from a huge range of goods to choose from. This process is started after the individual ordering of the buyer. In this type of production production stands are characterized primarily by the instability of work, because the production of products occurs individually or in a certain repetition. Nevertheless, this repeatability is irregular, which makes it impossible to effectively anticipate new production.

Characteristics of custom production:

  • diversified production range
  • use of universal production machines suited to various types of tasks
  • employing highly qualified employees
  • using non-complex devices of universal character
  • no fixed working time
  • a wide range of work for individual employees
  • diverse clients
  • constant search for suppliers
  • low stock levels
  • high customer knowledge about the product
  • implementation of new, innovative solutions

Custom production makes the company more likely to make production changes and changes, which results in a low level of stability of the production process, and also generates high costs. An uneven production range also causes difficulties in planning and scheduling tasks.

Types of custom production

  • Engineering to Order - ETO is associated with more customer influence on the final product. The customer participates already in the design phase of the product and its detailed construction. Most often this is done through the customer's internet collaboration with the producer.
  • Assemble to Order - ATO) assumes maintaining stocks of parts, elements and even entire segments to assemble the finished product ordered by the customer faster. Such a production organization not only saves time, but also eliminates the need to buy fragments of the product every time.
  • Finish to Order - FTO is synonymous with custom assembly. It is also characterized by the production and maintenance of universal parts and components, in order to produce the product more quickly in accordance with the client's wishes. However, the difference between these concepts lies in the fact that the FTO does not have to exist only in the area of ​​production activity. Finishing the final product may already appear in the distribution phase.

Advantages and disadvantages of custom production

Advantages:

  • Better satisfaction of customers' requirements
  • Possibility to produce as many products as customers on the market - suction effect
  • In the long term, the consumption of natural resources such as iron ore, energy etc. decreases through their better use, which contributes to environmental protection

Disadvantages:

  • Difficult production planning than in the case of production for storage
  • The necessity of a certain flexibility of devices to be able to execute orders
  • The need for a separate calculation of costs for each product.

Custom production planning

The basis for creating production plans are specific customer orders. Custom production planning usually takes place in three stages:

  • Initial offer - in which the offer inquiry from the customer takes place, the initial cost calculation is performed and the approximate date of order completion is determined, if the client accepts the initial conditions, the second stage is activated
  • Offer appropriate - including during the stage, a detailed calculation of the product's costs in accordance with the client's expectations is carried out, the quality of workmanship and payment conditions are specified. If the customer accepts the arrangements, the final stage takes place.
  • Product production - at this stage, the product is manufactured in accordance with the customer's pre-defined instructions

References