Make-to-order (MTO) and make-to-stock (MTS) are different manufacturing processes. However, MTO has been gaining popularity in the past years. Still, choosing between the two has serious implications for the entire value chain. We’ll dive into the main differences and learn why make-to-order is often a more appealing and sustainable approach for fashion.
With make-to-order, smaller quantities of products are often produced only once the customer places an order.
Make-To-Order Versus Make-To-Stock
The main difference between make-to-order and make-to-stock is when the products are produced. With make-to-stock, products are produced based on what the business thinks it will be selling over a certain period, often based on a sales forecast. With make-to-order, smaller quantities of products are often produced only once the customer places an order.
An example of MTO is a bag manufacturer producing a relatively small number of customized backpacks for a brand confident of selling them in a relatively short period. With a make-to-stock approach, this same brand could order many bags, stock them, and sell them over a more extended period.
The fashion industry is widely known to overproduce between 30% to 40% each season, which indicates a serious imbalance in matching supply and demand.
Forecast Versus Reality
The make-to-stock approach has advantages worth noting:
- Lower price per piece
- Shorter lead times
The problem is – however – that forecasting is generally wrong. The fashion industry is widely known to overproduce between 30% to 40% each season, which indicates a serious imbalance in matching supply and demand. The COVID-19 pandemic has exposed these imbalances and made many aware of the serious financial and environmental consequences.
Make-to-order lends itself particularly well combined with lower order quantities and high customization, which we think is increasing demand from both businesses and consumers.
Benefits Of Make-To-Order
Though make-to-order generally results in lower efficiency and higher production costs, it can be a more appealing and sustainable option for several reasons:
- Zero waste as the business is producing according to customer needs
- Overall lower shipping costs per unit (when considering the shipment of 30%-40% that ends up unsold)
- Less to no inventory
- Less working capital required
Make-to-order lends itself particularly well combined with lower order quantities and high customization, which we think is increasing demand from both businesses and consumers.
However, it is accompanied by a more complex process, given it puts extra pressure on planning, sourcing, production, and delivery. Close collaborations between brands and manufacturers can be considered even more important when using this method.
Would you like to discuss the benefits of make-to-order further? Perhaps you are interested in learning more about how we can help your brand with producing fashion and lifestyle products? Contact us today.
