Microsoft Dynamics 365 chain management | Manufacturing Strategies

Introduction

Welcome to Nisara Technology! We extend a special welcome to all our subscribers and thank you for your continued support. If you’re new to the channel, don’t forget to subscribe and hit the notification bell to stay updated with our latest videos.

Today, we will dive into the realm of manufacturing strategies within the context of Supply Chain Management (SCM). The journey of production begins by creating a production order, batch order, or Kanban - a system designed to signal the repetitive flow-based processes inherent in lean manufacturing. As the production order progresses, each step builds toward a completed item, ready either for delivery to a customer or as an input for the next stage of manufacturing.

SCM plays a pivotal role in unifying these processes while supporting diverse manufacturing strategies with a flexible mixed-mode approach. Let’s explore how different strategies come into play:

Manufacturing Strategies

Make to Stock

The make-to-stock approach is classic in manufacturing, involving the production of items based on anticipated future demand. Businesses utilize this strategy to produce goods according to forecasted demand or maintain a minimum inventory level, ensuring that products are readily available when customers need them.

Key components to making a make-to-stock system successful include:

Forecasting: Historical sales data, market trends, and seasonal patterns are essential for predicting the amount of product required.
Inventory Management: Products are held in stock until orders are received, facilitating quick fulfillment of customer demand.

This strategy is ideal for products with consistent, predictable demand such as household goods, electronics, and clothing. However, careful planning is necessary to avoid pitfalls like overproduction (leading to excess inventory) or underproduction (resulting in stockouts).

Make to Order

The make-to-order strategy is characterized by the production of items only after a specific customer order is received. Unlike make to stock, this approach focuses on fulfilling individual orders, making it suitable for products that necessitate customization or are expensive to hold in inventory.

Central to the make-to-order system are:

Customization and Flexibility: Production begins after an order is placed, allowing products to be tailored to specific customer requirements.
Resource Optimization: Early-stage preparations may be carried out in advance while costly customized stages are initiated only upon receiving a sales order.

This model is often employed for products with higher customization potential but lower demand variability, such as machinery, custom furniture, and specialty electronics. The downside is that it can lead to longer lead times for customers due to the on-demand nature of production.

Configure to Order

The configure-to-order strategy allows for product customization based on customer selections. Final production stages are executed per order, while the specific product variant is defined at the time of order placement using a configuration model. This approach necessitates a high level of standardization across the product line, ensuring flexibility and efficiency.

Engineer to Order

Engineer-to-order approaches are tailored for complex, project-based items that require custom engineering. This strategy begins with a design phase, where products are created to meet unique specifications. Following the design, production is carried out with tailored production orders, batch orders, or Kanbans.

Throughout these stages, Supply Chain Management tools help modify, copy, or adapt production orders to meet the facility's needs.

By supporting make-to-stock, make-to-order, configure-to-order, and engineer-to-order models, Supply Chain Management equips companies to meet diverse manufacturing requirements and adjust to varying product demands.

In our next video, we will delve into the concept of Bills of Materials (BOM) and operations. Make sure to subscribe to receive notifications about new content!

Keywords

Supply Chain Management
Manufacturing Strategies
Make to Stock
Make to Order
Configure to Order
Engineer to Order
Production Orders
Inventory Management
Customization

FAQ

What is Make to Stock?
Make to Stock is a manufacturing strategy that involves producing items based on forecasted demand to ensure availability for customers.

How does Make to Order differ from Make to Stock?
Make to Order focuses on fulfilling individual customer orders after they are received, while Make to Stock produces items in anticipation of future demand.

What is Configure to Order?
Configure to Order allows customers to customize a product based on their selections, with final production adjustments made when the order is placed.

What type of products is Engineer to Order suitable for?
Engineer to Order is tailored for complex, project-based items that require custom engineering and specifications, beginning with a design phase followed by production.

Why is Supply Chain Management important in manufacturing?
Supply Chain Management integrates various manufacturing strategies, enabling companies to efficiently meet diverse production needs and adapt to fluctuating market demands.