Advantages and disadvantages of order production and inventory production

A. advantages and disadvantages of the order:

Advantages:

Manufacturers produce according to the orders of their distributors and customers, that is, they accept reservations according to the needs of consumers. The advantage of making to order is that consumers can choose a wide range of products to meet their needs;

Dealers avoid taking up funds by inventory and reduce business risks; Manufacturers reduce or avoid inventory, thus reducing costs and the risk of backlog.

In addition, it can also reduce the occupation of funds and ease the pressure on funds.

But its shortcomings are also obvious:

1. There are many kinds of products. Because it is customized according to the order, the detailed requirements of customer orders are often different, so there are many kinds of products in order-based enterprises.

2. The demand fluctuates greatly. This fluctuation includes the fluctuation of demand in time and quantity. For some products, customers may only place an order once, and there will be no order later; However, the life cycle of some products is much longer than that of design. In addition, the demand is also very unstable and fluctuates greatly under the influence of the market.

3. The demand for products in a single order is relatively small, that is, "the demand is small and diverse". Unlike MTS products, thousands of products are produced at one time.

4. Demand changes frequently. The lead time of MTO products is relatively long. Therefore, in the so-called "big sleep", customers are more likely to change their demands during this period. Such changes include: the increase or cancellation of orders, the advance or delay of delivery, the increase or decrease of quantity, the change of product structure or packaging method, and even the change of A product into B product.

5. More orders are rushed and more inserts are made; Long production lead times often exceed customers' expectations. Customers can increase the priority of orders in various ways (such as contacting the company's top management) to obtain the expected delivery date.

6. The production process of 6.MTO products is complex, and key materials with long procurement lead time and complex production process are often used in production.

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B. advantages and disadvantages of inventory production:

Inventory production means that the final product is delivered directly from the finished product warehouse, so it is ready before the customer's order arrives. Also known as hoarding goods to produce products.

Its advantage is that the delivery time is shortened, and customers can get the products without waiting.

Disadvantages: the demand for production comes from dealers and customers, and manufacturers don't know who the customers are. This generally belongs to mass consumer goods. Management focuses on forecasting and inventory control. Otherwise, it will easily lead to inventory backlog, which will directly lead to the possession and loss of funds.

In addition, if you don't grasp the market changes well, the inventory products are likely to have no selling points.