Make-to-Order or Build-to-Order implies quite well its fundamental meaning. It describes a certain way of planning your production and processes according to customer orders.
Make-to-Stock vs. Make-to-Order
Quite often products are produced on stock ahead of an order causing overproduction and unnecessary inventory. Even though your customer will give you money for buying those products somewhere in the future – and not right now. This approach linked to a high degree of waste is the so called Make-to-Stock approach and is the opposite of a lean Make-to-Order process.
Make to Order at McDonald’s – What do we see?
To see the benefits of a MTO let us look at McDonald’s. McDonald’s already split its products to Make to Order burgers (low runners, such like the BigMac or custom made) and Make to Stock burgers (high runners, such like hamburgers and cheeseburgers). The overall target is to produce all products Just-in-Time (JIS) within 90 seconds after the customer placed his order. As high runners like cheeseburger are sold quite frequently a batch of them are produced ahead and marked with a small lable (also visible in the picture below). This label makes sure to keep no burgers for longer than 20 minutes prepared. If 20 minutes are passed and still burgers are in the pipe they have to be removed and must not be sold.
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All custom made burgers are Make-to-Order. Once a customer orders for instance a BigMac the production order is forwarded behind the counter to the cooks visualized on a monitor. They have to prepare the order within the given 90 seconds. No stock of MTO burgers occur as they are already sold to the customer. McDonald’s even receive the money before the customer receives his goods. You see?
How to implement Make-to-Order?
So the question remains: How do we switch from Make-to-Stock to Make to Order production? First of we have to cluster our products i. e. by doing an ABC/XYZ-analysis (high runners/low runners). Let’s see what McDonald’s did.
Once ordering a product the order is visualised on the screen ahead of the operator. In cases several open orders are in place the worker can prepare them in a row and tap on the screen once it’s finished. The final operation at the head of the line (bottom left in the picture) is the picking and packing station.
All components of the order like prepared burgers come on a belt and are packed according to the customers order. With a lead time of 90 seconds. Made according to order.