This Logistics Glossary Post is going to focusing on order fulfillment in the supply chain. In the logistics industry, we look at order fulfillment as a way to de-couple the supply chain and is especially important for companies that either offer product customization and/or have a variety of different products to offer. Looking at order fulfillment to minimize the amount of steps take along the supply chain and mitigate the impact of variety both on cost and time to produce.
Order Fulfillment
Hal Mather published a book called Competitive Manufacturing and pioneered the research behind order fulfillment. He was also responsible for defining the order fulfillment strategies that we are defining below:
Engineer-to-Order (ETO)
Definition: Engineer-to-Order refers to products that are designed and built to customer specifications. For example if I wanted a custom car built from scratch, a company that specializes in that service would have an engineer-to-order car. Companies that use this approach usually large construction projects or companies that offer one-off products such as the example above.
Build-to-Order (BTO)
Definition: Build-to-Order, also known as Make-to-Order (MTO), refers to products that have a standardized built. This means that the basic build of the product is the same throughout, but the production of components and the manufacturing of the final product is linked to the order placed by the final customer’s specifications. This is usually seen in the automotive industry, where customers can customize certain aspects of the car model that they have chosen to purchase (i.e. colour, type of interior, etc.).
Assemble-to-Order (ATO)
Definition: Assemble-to-Order products are built to customer specifications based on a list of items (i.e. a stock of existing components). This means that the base product itself has the type of architecture to allow the final product to be configured in such a way that the components can fit. The most common place this is seen is in electronics like laptops where you have the option to choose your hard drive space, the amount of memory, the type of graphics card, etc.).
Make-to-Stock (MTS)
Definition: Make-to-Stock, also known as Build-to-Forecast (BTF), is a production strategy that is most commonly seen in grocery stores and retail. The product is manufactured as is with no customization and its production is built against a sales forecast.
Digital Copy (DC)
Definition: Digital Copies are as they sound, the products are digital assets and inventory is maintained within a single digital master (i.e. source). Copies are created based on the demand and customers can download and save products on their storage devices. A common example is an e-book, where a digital copy is bought and downloaded onto an e-book reader for consumers to use.
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