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3.6 ASSEMBLE-TO-ORDER DEMAND RESPONSE STRATEGY AND LEAD TIME

In the CTO demand response strategy, all subassemblies or modules are forecast, built, and
A/CTO stocked as inventory before the customer order is received. The customer configures and
Manufacturing
allows firms to
orders the product, and the producer quickly assembles the modules and ships the final
realize many of the product. Thus, CTO companies can respond to customer demand much more effectively
advantages of pull- by forecasting and stocking the modules, and then assembling the final product upon
based systems, while receipt of the customer order. The planning of standard modules is done by master
at the same time production scheduling (MPS), which is driven by the forecast. The planning of the end
allowing for the
items is done by final assembly scheduling (FAS) based on the actual customer orders.
economies of scale
inherent in push- Customer Order Decoupling Point, CODP (also called, Push-Pull Boundary, or
based systems. If Order Penetration Point, OPP). It is the point at which production changes from forecast-
there is a possibility
of locating the push-
driven standard production to customer-order-driven (that is, backlog-driven, customized,
pull boundary, or the or customer-specific) production. Upstream of CODP, no customized items need to be
CODP, at more than produced and logistics focuses on stocks while information systems are primarily based on
one place, an effort anonymous items (that is, items produced for an unknown customer). Downstream of
should be made to CODP, logistics focuses more on time, that is, producing customized items and
accomplish a balance
undertaking customer-specific assembly or finishing as fast as possible. Downstream
between the
advantages of the information processing is based on both customer orders and anonymous items.
push- and the pull- Anonymous items are the popular configurations which the producer has decided to
based systems. assemble and keep in stock as MTS products.
MRP-II The CODP is the point within the product structure that a product takes on a customer-
(Manufacturing specific configuration. By establishing CODP strategically within the product structure and
Resource Planning within the total lead-time, manufacturer can achieve both a high level of customization and
Systems) are also a reasonable lead time for which the customer is ready to wait. The needs of the
software applications
that help in planning
forecast-driven systems are well addressed by MRP-II-type systems while the backlog-
all the resources driven systems require a project management system. The criticalities in the systems are
(material, labor, also different, for example, failure to produce on time in a forecast-driven system would
equipment, and mean failure to exploit a business opportunity; whereas failure to deliver in a backlog-
money) required driven system would mean failure to honor a business commitment. However, these two
to manufacture systems must work together, particularly in a CTO type of environment, and their point of
the items specified in
a master production
interface is the CODP. CODP varies depending upon the nature of the product and the
schedule (MPS). current position of the product in its life cycle.

FIGURE 3.6
Assemble-to-Order Manufacturing Strategy and Lead Time

Configured Demand-/Backlog-Driven
Forecast-Driven Standard Design and Manufacturing Customer Order Customer-Specific Production
(Push or Speculative Segment) (Pull or Reactive Segment)

EFFICIENT/LEAN SUPPLY CHAIN AGILE/ADAPTIVE SC

Procure (Raw Final Assemble

Design Stock
Materials and Sub- the Customer- Pack &
(Modular Fabricate Standard
Purchased assemble Selected Test Ship
Product) Modules as
Components) Modules
Inventory

Push-Pull Boundary Customer Lead Time

CODP

CTO demand response strategy has contact with the customer only at a sales level.
Customer involvement in the design of the product is limited to selecting the standard
modules (variants and add-ons). The delivery time is medium to low and customer delivery
time is based on the availability of major subassemblies (modules). Demand uncertainty is
1.5.2 Supply Chain Design & Sourcing (SCDS) by Khalid Sheikh

handled by safety stock of the umbrella item and also by overplanning of components and
subassemblies. Assembly only takes place on receipt of a customer order and buffers of
modules or options may exist. The product routing in the factory is typically fixed. No final
product inventory buffer exists, and the customer has limited input into the design of the
product.

Making a CTO Production Plan. The following information is needed to make a

production plan for CTO products:
1. Forecasts for family total and option fractions by period for the planning horizon.
2. Opening backlog of FAS customer orders for each module.
3. Desired ending FAS backlog for each module
4. Desired Change in inventory levels for each module.

Total production of a module in a period

= Sales plan for the module (that is, family forecast  option fraction for the module)
+ Planned reduction in backlog of the module
+ Planned increase in the module inventory
= Sales plan
+ (Opening FAS backlog of the module – Ending FAS backlog of the module)
+ (Ending inventory of the module – Opening inventory of the module)

3.7 PICK-TO-ORDER (PTO) SUPPLY CHAIN STOCKING STRATEGY

Pick-To-Order (PTO) refers to a supply chain stocking strategy under which a variety of
Oracle E-Business shippable components are stocked. These “components” are actually complete end
Suite (R12) of products in themselves, but these might be combined to form a kit, set, or system (Gerald
manufacturing and et al. 2002). For example, a customer might want to order a computer system consisting of
SCM applications a central processing unit (CPU), monitor, keyboard, mouse, printer, uninterruptible power
offers:
supply (UPS), and a number of standard software packages—all as components of one
Two Flavors of ATO
system. Other examples include bedroom and dining sets offered by furniture suppliers or
1. ATO Model, dinner sets offered by crockery sellers. PTO implies that the customer will pick multiple
which is the items based on one line item (and one item number) on a sales order.
product that
can be In Oracle E-Business Suite (R12) of manufacturing and SCM applications, the term
configured by “Configure-To-Order (CTO)” is used to include all manufacturing environments where
the customers the manufacturer allows the customers to configure the finished product. Manufacturer can
to their liking.
potentially follow any one of the following three strategies: Make-To-Order (MTO), ATO,
2. ATO Item, or PTO, depending upon how configurable the products are. On the contrary, the
which is pre- manufacturer can operate with an MTO/ATO/PTO strategy but still choose to offer only
configured and,
preconfigured Items rather than configurable models.
hence, can be
ordered only as Customers order PTO items under a single item number. The kits can be either
it is. predefined or configured by the customer during the order entry process. The components
of the kit are picked from stock using a pick slip (or pick list) and shipped.
➢ PTO is similar to make-to-stock (MTS) in that it also stocks complete end items as
inventory. However, PTO differs from MTS in that the PTO end items are not
ordered separately under different item numbers as many line items on a sales
order but are ordered as a single line item under a single item number.
➢ PTO is similar to configure-to-order (CTO) in that customers can configure the
PTO kit during order entry according to their choice. However, unlike ATO, there
is no additional value addition after the customer order—the items are not
“assembled” to form the end item but are merely picked from stock, put together
to form the required kit, packed, and shipped.

Because there is no manufacturing/assembly involved, PTO models or PTO kits can be

shipped as soon as they are ordered, depending on the availability of required items. When
 SCDS OBT-1.5 Configure-to-Order & Make/Engineer-to-Order Manufacturing 1.5.3

the “Pick List” is generated for these items, the individual items that were selected by the
customer for his PTO model, or the items that form the standard PTO kit are printed on the
pick list which is then used to actually pick and ship the product.

Two Flavors of PTO

Oracle E-Business Suite (11i) of manufacturing and SCM applications offers:

1. PTO Model, which is the product that can be configured

by the customers to their liking during order entry.
2. PTO Item or PTO Kit, which is preconfigured and,
hence, can be ordered only as it is.

PTO is considered as a separate supply chain stocking strategy in Oracle E-Business

Suite. However, most other vendors don’t consider it as a separate strategy because
preconfigured kits can be taken care of by considering it as single make-to-stock (MTS)
item, whereas configurable kits can be ordered by customers by ordering the components
in a single order as different MTS line items. Thus, for all practical purposes, PTO can be
considered as part of the ship-to-order stocking strategy, and, hence, is not treated
separately here.

REFERENCES

Baldwin, Carliss Y. and Kim B. Clark. 1997. “Managing in an Age of Modularity,”

Harvard Business Review (75)5, September-October 1997, pp. 84-93.
Bharti, Pratyush and Abhijit Chaudhury. 2004. “Using Choiceboards to Create
Business Value” in Communications of the ACM. December 2004, vol. 47, no. 12, pp.
77-81.
Blumohr, Uwe, Manfred Munch, and Marin Ukalovic. 2010. Variant Configuration
with SAP. Boston: Galileo Press Inc.
Chaudhury, Abhijit, D. N. Mallick, and H. Raghav Rao. 2004. “Web Channel in e-
Commerce” in Communications of the ACM. January 2001, vol. 44, no. 1, pp. 99-104.
Gerald, Bastin, Nigel King, and Dan Natchek. 2002. Oracle E-Business Suite:
Manufacturing & Supply Chain Management. New Delhi: Tata McGraw-Hill
Publishing Company (Originally Published by McGraw-Hill Osborne Media).
Peppers, Don and Martha Rogers. 2004. Managing Customer Relationships: A Strategic
Framework. Hoboken, NJ: John Wiley & Sons, Inc.
Pine II, B. Joseph and James H. Gilmore. 1999. The Experience Economy: Work Is
Theatre & Every Business a Stage. Boston, MA: Harvard Business School Press.
Plossl, George. 1994. Orlicky’s Material Requirements Planning, 2nd ed. New York:
McGraw-Hill, Inc.
Redford, Alan H. and Jan Chal, (1994) Design for Assembly: Principles and Practice.
London: McGraw-Hill Book Company.
Slywotzky, Adrian J. 2000. “The Age of Choiceboard,” Harvard Business Review.
January-February 2000, pp. 40-41.
Slywotzky, Adrian J. and David J. Morrison. 2000. How Digital Is Your Business? New
York: Crown Business.
Taylor, David A. 2004. Supply Chains: A Manager’s Guide. Delhi: Pearson Education
(Singapore) Pte. Ltd.
Ulrich, Karl T. and Steven D. Eppinger. 2000. Product Design and Development,
2nd ed. New York: Irwin McGraw-Hill, Inc.
Virmani, Vijay. 1999. “Custom-Build a Model for Efficiency,” APICS: The
Performance Advantage, May 1999, 12(5); pp. 34-36.
1.5.4 Supply Chain Design & Sourcing (SCDS) by Khalid Sheikh

Chapter 4

Make- and Engineer-to-Order

(M/ETO) Planning Strategies

4.1 MAKE TO ORDER (MTO)

In this environment, manufacturers design standard products and publish the designs in
catalogs but wait until a confirmed order is received from a customer before starting to
make the goods. The manufacturing company has the product design ready with it or the
product design is provided by the customer.

FIGURE 4.1
Make-to-Order Manufacturing Strategy and Lead Time

Customer Order
(CODP)

Stock Component Custom Design

Designs and (If required) Pack &
Design Fabricate Sub- Final
Standard Parts and Test Ship
Procure (Components assemble Assemble
Raw Materials
and Raw Materials)

Product Design Customer Lead Time

Provided by the
Customer

▪ Product design might require minor customization. Many times, the product might
not be actually completely specified by the producer to allow the customers to choose
certain characteristics as options. Hence, the end product that is finally offered to the
Intelligence customer may include some custom designed components as well. An example of this
Forecasts. would be machine building.
Forecasts made on
the basis of the ▪ For the manufacturer, each customer order usually means executing a separate
information project to manage the production and delivery schedule—the lack of
collected from the
“listening posts,”
interchangeability complicates documentation and inventory control. The order cycle
who try to get an begins when the customer specifies the product that he or she wants. The producer can
inkling of the future assist the customer to prepare the specifications. Sometimes the design might be
plans of potential provided by the customer himself. The configuration of the product is likely to change
customers. from the initial specification during the course of processing. Generally speaking,
successive versions of the same object produced for different customers are not
identical.
▪ Interaction with the client is extensive, normally involving sales and engineering,
while the delivery time ranges from medium to large. The producer quotes a price and
delivery time based on the customer’s request. The quotation process itself is fairly
complex and time-consuming, although it is less costly and complex compared to the
engineer-to-order system described next.
▪ The customer and producer frequently discuss alternatives to reduce cost, reduce time
to ship, and/or meet the customer’s actual needs more closely.
▪ Processing activities are tailored to each individual customer order even when the
products are standard products that have been made before.
 SCDS OBT-1.5 Configure-to-Order & Make/Engineer-to-Order Manufacturing 1.5.5

Speculative Items ▪ Promise for completion of orders is based on the available capacities in
▪ MTO Items having manufacturing and engineering.
long lead-times are ▪ Minimal or No Material Inventory. Only the product and component designs, some
sometimes
manufactured
standard raw materials & components, and speculative items (planned on the basis of
based on intelligence forecasts) are held in inventory. Examples of this kind of manufacture are
intelligence custom-tailored clothing, machinery, or any product made to customer specifications.
forecasts without Very expensive items are usually made to order.
any confirmed
customer orders ▪ In spite of the excess capacity, CRP and SFC are very critical. In the MTO
▪ This reduces the environment, as customer order changes, production schedule changes significantly
lead time and gives from one period to another. It is entirely possible that some types of products are not
competitive made during a period at all. Production in such environments is very dynamic. At any
advantage albeit at time, several jobs are being worked upon and their priority keeps changing. In the MTO
a high risk
environment, organizations invest in capacity⎯large capacities are built in anticipation
▪ Production of
of business. Capacity is not really expected to be fully utilized. However, in spite of the
Speculative items is
triggered through availability of excess capacity, capacity requirements planning (CRP), and shop floor
an authorization to control (SFC) are very critical because loads on various machines keep changing.
production to go Distribution is not very complex as fewer products flow directly to customer locations
ahead. according to a pre-determined schedule.
▪ These are mostly
produced when
capacity is idle; Generally, firms make to order when:
thus, the marginal
cost includes only 1. Goods are produced to customer specifications.
the material cost. 2. The customer is willing to wait while the order is being made.
▪ If and when the
3. The product is expensive to make and store.
customer order for
the speculative / 4. Several product options are offered.
parent item appears
it replaces the
authorization.

4.2 ENGINEER TO ORDER (ETO)

Each customer order requires unique engineering design or significant customization.

In ETO demand response strategy, nothing is inventoried in the producer’s system, not
even the design. These products have not been made before, at least not by this company.
Generally, the customer defines the specifications in terms of functionality and
performance levels and then the manufacturer designs the product as per the requirements.
In other words, the customer’s specifications require unique engineering design or
significant customization.

FIGURE 4.2
Engineer-to-Order Manufacturing Strategy and Lead Time

Customer
Order

Design Procure
(Unique Engineering (Raw Materials and Sub- Final Pack
Fabricate Test &
Design or Significant Standard assemble Assemble
Customization) Components etc.) Ship

Customer Lead Time

1.5.6 Supply Chain Design & Sourcing (SCDS) by Khalid Sheikh

Characteristics Common to MTO and ETO Environments

Usually, the customer is highly involved in the product design. The customer usually asks
for a quotation of cost and time from the producer. The quotation process itself can be
complex and costly. When the customer places order, the producer first develops the design
for required product, which can involve considerable time and expense, receives customer
approval of the design, and then orders the needed material. Upon receipt of the material,
the producer fabricates components, assembles the product, and ships it to the customer.
Thus, ETO is the extreme case where not only manufacturing but engineering is also
customer specific.
ETO is an extension of the MTO system with the engineering design of the product
based on the customer requirements and specifications. The same characteristics apply
as in case of the MTO, but clearly, customer interaction with the product supplier is even
greater. True one-of-a-kind products are engineered to order (McMahon and Browne
1993).

▪ In both MTO and ETO companies, forecasting is still required to plan the
manufacturing and engineering capacity.
▪ Technologically advanced sectors to whom long lead times are acceptable usually go
for MTO/ETO products. It is usually the technologically advanced sectors that are
organized along these lines. The aeronautical, defense, and machine-tool industries all
produce goods with a high unit value, which can be neither standardized nor kept in
stock. Actually, each customer needs them for a different application and buys them on
the basis of a fully-fledged long-term plan. For these customers, delivery time, even
measured in months, is no problem.
▪ Commercial and the engineering aspects are more important than cost. For the
manufacturer, a large component of risk is removed because all resources used in the
factory have a precise economic justification, and inventory carrying charges are also
reduced. It is difficult to achieve economies of scale in purchasing or to set up
manufacturing operations in the most effective way. However, the resulting additional
costs can be passed on to the customer and are swallowed up in the high unit price. The
main issues for firms that engineer or manufacture “to order” are in the commercial and
the engineering areas. First of all, they have to get the order in competition with rival
suppliers⎯this phase often takes the form of a tender⎯and then they have to find the
technically best solution to make the special parts.
▪ Fast design process rather than investment planning is critical to the success. New
products are the rule, not the exception, and the firm’s catalog exists only in a partial
form as a list of products made in the past. A single order is sufficient to cover the costs
of research and development. Investment planning is therefore less crucial than a fast
design process allowing accurate cost forecasts. To offer a competitive price, it is
necessary to evaluate all the direct costs and ensure an acceptable profit margin. Long-
term investments are often made in acquiring and increasing the firm’s expertise in a
specific sector and thus gaining a competitive edge. A manufacturer of earth-moving
machines can, for example, convert the drive and transmission components from
mechanical to hydraulic. A missile manufacturer can likewise decide to introduce on a
large scale either analog or digital control devices. However, if subsequent
developments in the industry demonstrate that wrong choices have been made, the
company can find itself in a serious economic plight (Sartori 1988).

4.3 PROJECT EXECUTION

Project execution is the classical ETO type of manufacturing. Project execution involves
large-scale, highly complex, non-repetitive operations that have to be finished in finite
duration. These operations consist of multiple, and often simultaneous, tasks that are
highly interdependent. However, the primary characteristics of the tasks are their limited
duration and their immobility during processing.
 SCDS OBT-1.5 Configure-to-Order & Make/Engineer-to-Order Manufacturing 1.5.7

Projects are completed in a “phased-completion” program, where each phase of

completion, or activity, is distinct and separated from other subsequent, or parallel stages.
Project planning is done using
(a) Gantt charts for simple projects; and project network planning tools, such as
(b) Program Evaluation and Review Techniques (PERT), which was Developed for
scheduling maintenance shutdowns at Du Pont chemical plants where reasonably
accurate activity time estimates were available; or
(c) Critical Path Method (CPM), which was developed for the US Navy’s Polaris
missile project to handle uncertain activity time estimates.

Resources are brought to the project site. Generally, staff, materials, and equipment
are brought to the output and located in a nearby staging area until needed. Projects have
Staging is the term particularly limited lives. Resources are brought together for the duration of the project;
used to describe some are consumed, and others, such as equipment and personnel, are deployed to other
the act of pulling uses at the conclusion of the project (Shafer and Meredith 1998). Examples in
components and manufacturing include civil engineering work such as bridges, buildings, tunnels, etc.,
raw materials aerospace, major high-tech projects such as flight simulator manufacture, erection and
needed for an
order from
commissioning of plants, and shipbuilding. In services, all types of consulting come under
inventory in project category.
advance, that is,
before they are
Often the manufacturer is required to deliver the product on a turnkey (complete
really required; this and ready-to-use) basis. For example, an oil exploration client may ask an engineering
is often done to company to supply an oil production unit, complete with pipelines, platforms, metering
have a look at the device and refining unit. While the number of such orders are few and a company may get
inventory to no more than one order a year, yet each order can fetch large amount of money.
identify defectives
and/or shortages. Customer interaction is very high in ETO, and technical complications are immense.
Staging is a means Because delivery schedules are short, it is often necessary to carry out both design and
to ensure that all manufacturing activities in parallel. In such cases, the entire project is divided into major
required materials
are and will be
sub-activities, with the basic engineering being done first. These sub-activities are planned
available for use at on the network, using techniques like critical path method (CPM). This method helps to
time of assembly. identify critical processes. It allocates time and resources to every sub-activity, and each
The downside to sub-activity is further divided into tasks and sub-tasks. This kind of network planning
staging is that it replaces classical material requirements planning (MRP I) and capacity requirements
creates additional
planning (CRP) to calculate manufacturing and fabrication schedules. Those schedules are
WIP inventory and
reduces flexibility. integrated with various shop floors, fabrication units, and even vendor’s operations.
There is an Increasing trend to use an ERP solution integrated with project
management tools. Traditionally only project management techniques have been used in
ETO environments, but now there is an increasing trend to use an ERP solution integrated
with networking tools to take advantage of other ERP modules, such as Sales and
Distribution, Financial Accounting, HR, etc.
Table 4.1 compares and contrasts the various categories of manufacturing system. In
reality, very few firms belong specifically to a particular category. Many firms would be
classified as hybrids of the above. A firm may be hybrid of STO and ATO. This implies
that it holds assembled products, for which there is a steady demand, in stock, but also has
a facility whereby products can be configured according to customer needs.

4.4 EVOLUTION OF MANUFACTURING

Following are the major determinants of the product positioning strategy:

i) The manufacturing lead time
ii) The time a customer is willing to wait for product delivery
iii) The degree of customization desired by the customer
1.5.8 Supply Chain Design & Sourcing (SCDS) by Khalid Sheikh

Table 4.1 Comparison of MTS (STO), CTO, and MTO/ETO Environments

[Adapted from Wemmerlov (1984), and Sari (1997)]

Make-To-Stock/ Configure-/Assemble-To-Order Make-/Engineer-To-Order

Aspect
Ship-to-Order (STO) (C/ATO) (M/ETO)

Interface between
Low/Distant Primarily at sales level Engineering and sales level
Mfg. and Customer

Delivery Time Short Medium Long

Production Volume of
High Medium Low
Each Sales Unit

Product Variety Narrow Medium/Wide Very Wide

Option forecasts for master Backlog

Basis of Production Forecasts of
scheduling, and backlog for final Customer Intelligence
Planning and Control sales units (end items)
assembly scheduling Forecasts*

Order Promising Availability of finished Availability of standard modules Availability of manufacturing

(based on . . .) goods inventory and common parts and engineering capacity

Little uncertainty exists about

materials
Handling of Demand Safety stocks of sales Overplanning of standard modules
Uncertainty units and common parts For uncertainty in capacity
requirements, excess capacity is
usually planned

Customer Orders; Management

Standard Modules⎯ Add-ons, authorizations of long lead time
Master Scheduling
End Items/Sales units Attachments, Accessories, and components and speculative
Unit
Intermediates; Common Parts items**; Standard raw materials
and components;

Finished Products Major modules/ Subassemblies, Product Designs and Some Raw
Items Held in
(Very high inventory Common Parts (Lower inventory Materials (Lowest inventory
Inventory
carrying costs) carrying costs for the total variety) carrying costs)

Final Assembly Determined by customer orders Covers most of the assembly

MPS itself is the FAS.
Schedule (FAS) received by order entry operations

Bill of Material (BOM) Standard BOMs for Planning BOMs + Standard BOMs
Unique BOMs for each order
Structuring each sales item for Level-1 Assemblies

Critical/Important Distribution Resource Product Configurator, MPS,

FAS, CRP, SFC
MRP II/ERP Modules Planning MRP-I, and FAS

*Intelligence forecasts are based on the information collected from the “listening posts,” which a manufacturer might
maintain near potential customers to get an inkling of their future plans in advance.

**Many times, management authorizes the shop to start manufacturing certain items having long lead times based on
intelligence forecasts without receiving any orders for them. This is done to reduce the lead time of executing the anticipated
orders and might provide a competitive advantage to the manufacturer, since in the event of a customer needing that
product, this manufacturer would be able to provide the product in a shorter lead time compared to the competitors.
However, here the risks involved are very high and hence such items are sometimes termed speculative items. Such items
are mostly produced when capacity is idle; thus, the marginal cost includes only the material cost. The production of
speculative items commences not as a response to a customer order but through an authorization given by a senior manager
to the production function to go ahead. If and when the customer order for the speculative item appears it naturally replaces
the authorization.
 SCDS OBT-1.5 Configure-to-Order & Make/Engineer-to-Order Manufacturing 1.5.9

If the manufacturer is able to reduce the manufacturing or assembly lead time to the extent
that the customer is willing to wait that much for the product delivery, the manufacturer
can then change to CTO or MTO product positioning strategy leading to a drastic reduction
in inventory investment with a simultaneous increase in product variety offered. Thus, a
challenge for any STO manufacturer is to reduce manufacturing lead-time to move to CTO
or MTO strategy.
It is not unusual for an organization to have different strategies for different product
lines. A company may even have two strategies for one product. For example, automobile
companies are primarily make-to-stock but do have some configure-to-order business
(Fogarty et al. 1991). In some cases, components and subassemblies may be used on
different end products and so require different strategies than the end products.
Today market pressures are forcing companies previously involved in mass production
to develop more flexible batch-production oriented systems. This is particularly true of the
automotive industry and of manufacturers of consumer goods. Increasingly it seems
customers demand a greater variety of products and are unwilling to accept mass-produced
products. Consumer affluence has led to a desire for wide choice of products and services,
and hence, today’s consumers want a wide range of options they can configure to their
unique needs and likings. Consumers want to actively participate in the design and delivery
of specific products and services. Customization to consumer needs is the emerging trend.
Over the past twenty years or so manufacturing has moved along the continuum in a
direction from “make-to-stock” to “engineer-to-order” as customers increasingly demand
customized products.

FIGURE 4.3 MTS CTO MTO ETO

Evolution of
Manufacturing

Direction of Evolution

The availability of computer-based information systems (such as MRP I and II),

modeling and design support tools [such as computer-aided design (CAD) and computer-
aided process planning (CAPP) systems] and computer-controlled manufacturing
technology [such as computer numerical control (CNC) machine tools and robots] has
certainly facilitated this drift away from STO systems and towards customer-driven
manufacturing system.

REFERENCES

APICS Dictionary. 10th ed. 2002. James F. Cox III, and John H. Blackstone Jr. (eds.)
Alexandria, VA: American Production and Inventory Control Society, Inc.
Sari, F. John. 1997. “Master Production Schedule,” in Production and Inventory Control
Handbook, 3d ed., James H. Greene (ed.). New York: McGraw-Hill Inc.
Sartori, Luca G. 1988. Manufacturing Information Systems. Wokingham, England:
Addison-Wesley Publishing Co.
Shafer, Scott M., and Jack R. Meredith. 1998. Operations Management: A Process
Approach with Spreadsheets. New York: John Wiley & Sons, Inc.
Wemmerlov, U. 1984. “Assemble to Order Manufacturing: Implications for Materials
Management.” Journal of Operations Management. 4(4), pp. 347-368.