Make to stock (MTS) is a strategy where products are bought or manufactured based on forecasted demand rather than customer orders. This approach involves buying/producing goods in large quantities and stocking them in inventory to meet future demand. MTS is commonly used in industries such as consumer goods, electronics, and pharmaceuticals. In this blog post, we will delve into the benefits, disadvantages, and how it can be applied in Viindoo software.
Benefits of Make to Stock Strategy
Improved Production Planning and Efficiency
One of the main advantages of MTS is improved production planning and efficiency. By using forecasted demand to produce goods, companies can plan their production schedules more accurately. This helps to reduce lead times and minimize the risk of stockouts or excess inventory. With MTS, manufacturers can also optimize their production processes by producing goods in larger batches, resulting in cost savings and increased efficiency.
Cost Savings
MTS can also lead to significant cost savings for companies. By producing goods in bulk, manufacturers can take advantage of economies of scale and reduce production costs. This is especially beneficial for companies that produce high-volume, low-variety products. Additionally, with improved production planning and reduced lead times, companies can avoid rush orders and expedited shipping costs, which can be expensive.
Better Inventory Management
Another benefit of MTS is better inventory management. By buying/producing goods based on forecasted demand, companies can maintain optimal inventory levels and avoid overstocking or understocking. This helps to reduce carrying costs and minimize the risk of obsolete inventory. With MTS, companies can also track inventory levels more accurately and make informed decisions about when to replenish stock.
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Disadvantages of implementing Make to Stock
Imbalanced inventory risk
When demand forecasts and predictions are inaccurate, there can be an imbalance in inventory levels. This can lead to dealing with excess or insufficient inventory, impacting the profitability and operational efficiency of the business.
High inventory management costs
Maintaining a sufficient level of inventory to meet customer demand may require significant investment in purchasing and managing inventory. Storage, preservation, and inventory auditing costs can increase, affecting the business's profitability.
Inflexibility in fulfilling customized orders
In the MTS model, goods are bought/produced before specific orders are received. This makes it challenging to fulfill customized orders or special requirements from customers. This could result in missed business opportunities, and customers may switch to more flexible suppliers who can meet their requirements.
Lack of flexibility in adjusting production
When demand forecasts are inaccurate or there are sudden market changes, the MTS model can face difficulties in adjusting production scales. This can lead to shortages or imbalanced inventory levels.
Challenges in managing new products
Applying MTS to new products becomes more challenging due to the lack of historical sales data and customer feedback. This poses the risk of buying/producing unnecessary inventory or facing shortages when there is actual demand.
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Apply Make to Stock in Viindoo Software
Viindoo software is an all-in-one business management solution that offers a range of features to help companies streamline their operations. One of these features is inventory management, which can be used to apply MTS in your business. Here's how you can use Viindoo software to implement MTS:
Forecasting Demand
Viindoo software provides historical data to help you make accurate forecasts. In this way, the company can improve forecast accuracy and make informed decisions about production quantities.
You can then set maximum inventory (demand) and minimum inventory for each product. From there, the system automatically takes appropriate actions to supply enough demand for your warehouse.
Buy goods with enough inventory
Once demand has been forecast, Viindoo software helps suggest the quantity you need to buy to meet that demand. Instead of having to do a daily inventory count to calculate the additional quantity to buy. You can completely adjust this purchase quantity if you want.
Production Planning and Scheduling
Once the demand has been forecasted, Viindoo software can help with production planning and scheduling. The software allows companies to create production schedules based on forecasted demand, taking into account lead times, production capacity, and other factors. This helps to optimize the production process and reduce lead times.
Inventory Management
Viindoo software also offers robust inventory management capabilities that can help companies maintain optimal inventory levels. The software allows companies to track inventory levels in real-time and set reorder points to ensure timely replenishment of stock. With Viindoo, companies can track the age of inventory and expired goods, thereby identifying slow-moving or obsolete items.
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Discover Viindoo Inventory Software
The All-in-one Inventory Software for SMEs. Automate your inventory process leading to increased efficiency, accuracy, and ultimately, cost savings.
FAQs
Companies should review and update their forecasts regularly, ideally on a monthly basis. This helps to ensure that production quantities are aligned with current demand.
Yes, Viindoo software offers integration with other systems such as accounting software, CRM, and e-commerce platforms, allowing for seamless data transfer and streamlined operations.
No, MTS is most suitable for high-volume, low-variety products. For products with high variability in demand, a make to order (MTO) strategy may be more appropriate.
Conclusion
Make to stock is a production strategy that offers several benefits, including improved production planning and efficiency, cost savings, and better inventory management. However, there are also challenges to consider, such as forecasting accuracy, inventory management complexity, and high initial investment. By using Viindoo software, companies can overcome these challenges and successfully implement MTS in their business. With providing historical data, production planning and scheduling capabilities, and robust inventory management features, Viindoo software is an ideal solution for companies looking to adopt MTS and improve their operations.
