Definition
Make to Stock (MTS) is a traditional production strategy where businesses produce goods based on anticipated consumer demand. Essentially, it’s like a chef who prepares a meal (produces stock) based on a simple menu forecast of customer orders – except when the customers may suddenly all want “sushi” instead of “spaghetti” (which wasn’t on the forecast).
Comparison: Make to Stock (MTS) vs Make to Order (MTO)
| Concept | Make to Stock (MTS) | Make to Order (MTO) |
|---|---|---|
| Production Basis | Anticipated demand | Actual customer orders |
| Inventory Level | Stock on hand before sale | No stock kept; produced on order |
| Flexibility | Less flexible, may lead to over/understock | More flexible to customer demands |
| Lead Time | Shorter as stock is already available | Longer as production starts post-order |
| Risk Factor | Risk of excess or shortage of inventory | Risk of missed sales opportunities |
How Make to Stock (MTS) Works
- Demand Forecasting: Businesses estimate consumer demand based on historical data, market trends, and perhaps a crystal ball.
- Production Planning: After forecasts, production schedules are created to manufacture enough stock.
- Inventory Management: Stock is kept on hand, ready to be shipped whenever a customer shows up (or logs in) hoping for their desired goodies.
- Sales & Reordering: When sales occur, inventory levels are adjusted, and positions are validated for future production runs based on updated forecasts.
Illustrated Example
graph TD;
A[Forecast Demand] --> B[Plan Production];
B --> C[Produce Stock];
C --> D[Inventory Manage];
D --> E[Customer Sales];
E --> |Insufficient Stock| F[Adjust Forecast and Production];
E --> |Sufficient Stock| G[Maintain Inventory Levels];
Related Terms
- Lead Time: The time it takes from placing an order to receiving it. Think of it as the waiting period to get your Netflix binge fix.
- Just in Time (JIT): A strategy where products are ordered and produced in response to actual, rather than predicted, demand – a kind of spontaneity in this meticulously planned carnival.
Fun Facts & Humorous Insights
- Did you know? The concept of MTS is as old as “Why did the chicken cross the road?” – to get to the market before their stock ran out!
- Quote: “Inventory in excess is like playing with a time bomb – you never know when your profits will explode!”
Frequently Asked Questions
1. What happens if the forecast is wrong?
Incorrect forecasts can lead to overproduction (too many chicken dinners left uneaten) or underproduction (not enough sales to cover the restaurant’s rent).
2. How does MTS impact cash flow?
With MTS, businesses have cash tied up in unsold inventory which can make budgeting trickier than a tightrope walker with hiccups!
3. What industries use MTS?
Common in retail and consumer packaged goods, MTS is like the dependable friend who shows up at every party—sometimes a little too early!
Suggested Books for Further Study
- “Inventory Optimization: Models, Algorithms, and Performance Evaluation” by Zubin H. Dshvets
- “Production and Operations Management: An Applied Modern Approach” by Joseph S. Martinich.
Online Resources
Test Your Knowledge: Make to Stock (MTS) Quiz!
## What does MTS primarily depend on?
- [x] Anticipated demand
- [ ] Actual sales data
- [ ] Nostradamus-style predictions
- [ ] Last minute Hail Mary guesses
> **Explanation:** MTS is all about predicting demand like a risk-taking fortune teller.
## If a company overestimates demand, what could happen?
- [ ] Happy customers with lots of options
- [x] Excess inventory and storage costs
- [ ] Extra money for fancy marketing
- [ ] Birdhouse inventory inflation
> **Explanation:** Overproduction leads to a hefty warehouse bill and potentially sellable items just gathering dust!
## How often should forecasts be revised in an MTS strategy?
- [x] Regularly, to stay accurate
- [ ] Once a year during happy hour
- [ ] Only when the office is too quiet
- [ ] Whenever someone suggests frozen yogurt in a meeting
> **Explanation:** Regular revisions keep MTS as accurate as your déjà vu during stock adjustments!
## Operating on MTS with an inaccurate forecast could cause:
- [ ] Fortune-teller envy
- [x] Increased carrying costs or stockouts
- [ ] Unicorn sightings during stock checks
- [ ] A mid-life crisis for the manager
> **Explanation:** A false forecast is like believing a four-leaf clover is a guarantee for wealth—totally not reliable!
## The primary advantage of MTS as compared to MTO is:
- [x] Quicker sales fulfillment
- [ ] More personalized products
- [ ] Lower marketing costs
- [ ] Fewer employees on the payroll
> **Explanation:** MTS can fulfill orders faster than you can decide between coffee or tea in the morning!
## What is a major downside of MTS?
- [ ] Creating unnecessary holiday cheer
- [x] Risk of overstock or stockout
- [ ] Boosting morale among sales staff
- [ ] Contributing to long-lasting friendships among suppliers
> **Explanation:** Having too much or too little stock is akin to bad hair days – it affects everyone's mood!
## In MTS stocks, excessive inventory may result in:
- [x] Increased holding costs
- [ ] Fewer dance parties at work
- [ ] Unexpected family reunions
- [ ] Celebrity endorsements
> **Explanation:** Holding too much product can cost a business more than hiring a karaoke machine for every Friday night!
## What approach is the opposite of MTS?
- [x] Make to Order (MTO)
- [ ] Build to Last (BTL)
- [ ] Just-in-Time (JIT)
- [ ] Cook to Impress (CTI)
> **Explanation:** MTO waits for orders before making products, unlike MTS which jumps the gun!
## "Just because you build it, they will come," mostly applies to:
- [ ] JIT strategies
- [ ] MTO strategies
- [ ] MTS strategies
- [x] Overly optimistic predictions
> **Explanation:** Just because you have the stock doesn’t mean the customers will arrive—at least not for your seasonal holiday turkey!
Thank you for taking the time to understand Make to Stock (MTS)! Remember, forecasting may not be magic, but it sure can feel like it when things go right! ✨
