Make to Stock (MTS)

Make to Stock (MTS) is a production strategy in which a company manufactures products in advance of customer orders. This is in contrast to a make-to-order (MTO) strategy, in which products are only manufactured after a customer order has been received.

There are several advantages to using an MTS strategy. First, it can help to improve a company's efficiency and productivity. By manufacturing products in advance, a company can avoid the need to wait for customer orders to be received before starting production. This can lead to shorter lead times and faster delivery times for customers.

Second, an MTS strategy can help to reduce a company's costs. By manufacturing products in advance, a company can take advantage of economies of scale. This can lead to lower unit costs for products.

Third, an MTS strategy can help to improve a company's cash flow. By manufacturing products in advance, a company can generate revenue before it has to pay for the raw materials and labor used to produce the products. This can help to improve a company's working capital position.

However, there are also some disadvantages to using an MTS strategy. First, it can increase a company's inventory levels. This can lead to higher carrying costs and the risk of obsolescence.

Second, an MTS strategy can make it more difficult for a company to respond to changes in customer demand. If customer demand changes, a company that uses an MTS strategy may have to sell products at a discount or even write off products that it cannot sell.

Third, an MTS strategy can increase a company's risk of stockouts. If a company does not accurately forecast demand, it may not have enough products on hand to meet customer demand. This can lead to lost sales and customer dissatisfaction.

Overall, an MTS strategy can be a good option for companies that have stable demand for their products and that are able to manage the risks associated with this strategy. However, companies should carefully consider the advantages and disadvantages of an MTS strategy before making a decision about whether or not to use this strategy.