Introduction

In manufacturing industry, there are three main production strategies: Make-to-Stock (MtS), Make-to-Order (MtO), and Engineer to Oder (EtO). MtS involves producing goods in anticipation of customer demand, while MtO involves producing goods only after a customer order has been placed. Configure-to-order (CtO) is a variation of MTO in which the customer can customize the product to their specific needs.

Scope Item Overview (55E Lot Size-of-One)

This scope item focuses on a MtO / CtO scenario (Lot Size of One) that integrates with production planning and execution, procurement, sales, and logistics execution up to invoicing and incoming and outgoing payments, covering multilevel configurable materials. The configurable material is defined as a bill of material (BOM). This scope item 55E is explained with Industrial Robot (AVC_E2E_ROBOT) as a configured finished Product with subassemblies (Configured) / subcomponents.

Material BOM

Process Flow

Sales Order Creation: A sales order is created with an individual configuration for a robot (In the example with name AVC_E2E_ROBOT). This is captured by defining the different component characteristics desired by the customers and considering the constraints and dependencies of the components. The sales price calculation is then based on the individually chosen characteristics of the components.

Materials Requirements Planning (MRP): The sales order is considered for production planning when doing the MRP. Configured subassemblies (namely AVC_E2E_CONTROL) are procured externally based on the procurement proposal generated during MRP. Another configured subassembly (AVC_E2E_DRIVE_ARM) is transferred to production plant from another plant (Stock Transfer Order – STO) belonging to the same company code. Special procurement indicators are used to define stock transfer locations.

Procurement: Subassemblies are procured either externally or internally. Externally procured subassemblies are purchased from vendors. Internally transferred subassemblies are moved from one plant to another within the same company code.

Production: The production execution for the individual robot takes place after one subassembly (AVC_E2E_CONTROL) is procured externally (including configuration information), while another subassembly (AVC_E2E_LINK_ARM) is internally produced.

Quality Inspection: The finished good (AVC_E2E_ROBOT) is subject to quality inspection at the end of production and is checked against generic master inspection characteristics.

Delivery and Invoicing: Once production is complete, the goods are delivered to the customer and invoiced.

Payment Processing: The process finishes with posting of incoming payments from the customer as well as outgoing payments to the vendor for purchased subassemblies.

Benefits of MTO/CTO

Reduced Inventory Costs: MTO/CTO reduces the need to hold large amounts of inventory, as goods are only produced after a customer order has been placed.

Increased Customer Satisfaction: MTO/CTO allows customers to customize products to their specific needs, which can lead to increased customer satisfaction.

Improved Agility: MTO/CTO can help companies to be more agile and responsive to changing customer demand.

Challenges of MTO/CTO

Increased Complexity: MTO/CTO can be more complex than MTS, as it requires more coordination between different departments within the company.

Longer Lead Times: MTO/CTO can lead to longer lead times, as goods cannot be produced until after a customer order has been placed.

Increased Risk of Errors: MTO/CTO can increase the risk of errors, as there is more opportunity for mistakes to be made during the production process.

Conclusion

MTO/CTO is a viable production strategy for companies that manufacture complex products with high customization requirements. However, it is important to carefully consider the challenges of MTO/CTO before implementing this strategy.