Features of MTO production mode

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MTO (make to order), that is, for order production. This production mode is used with MTS (make to stock), Ato (assembly to order, for order assembly) together with ETO (engineering to order, order-oriented design), it is a common production model in enterprises. The MTO production model has the following main features:

1. There are many product categories. Because orders are produced by a single order, and the detailed requirements of customer orders are often different, there are many product types for order-oriented enterprises.

2. Large fluctuations in demand. Such fluctuations include fluctuations in demand time and quantity. For some products, the customer may only place the next order and there will be no more orders. For some products, the lifecycle is far greater than the designed lifecycle. In addition, the number of requests is also unstable and fluctuating due to the impact of the market.

3. A single order requires a relatively small number of products, that is, "a small amount of demand is diverse ". As with MTS, a single production process is far from thousands.

4. Frequent demand changes. The lead time of MTO products is relatively long. As a result, the customer has a great opportunity to change the demand during this period. Such changes include: increase or cancel orders, advance or delay of delivery, increase or decrease of quantity, change of product structure or packaging method, or even change of product, change to product B.

5. There are many urgent orders and many orders are inserted. A long lead time in production often exceeds the customer's expectations. The customer increases the order priority in various ways (such as contacting the company's senior management) to obtain the expected delivery date.

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

Difficulties in Business Management

Because of the above features of the MTO production model, it is determined that there will be many management difficulties in order-oriented enterprise management. The following briefly lists some of the management difficulties of the sales, planning, procurement, engineering and financial cost departments.

I. Sales Management

Customer Order Confirmation

In order-oriented enterprises, the confirmation of customer orders is very important. It directly affects the number of orders that an enterprise can obtain, and thus the business performance of an enterprise. When the current product quality is qualified as the most basic premise, the main content of the customer's order confirmation is: Delivery, price and customer personalized requirements. How can we determine the delivery date to meet the customer's expectations and leave enough time for production? What kind of price will the customer feel reasonable and profitable? How can we satisfy customers' individual needs? These are all considerations of the Sales Department in order for customers, but also the difficulty of sales management.

Sales order change

In the MTO production model, due to frequent order changes, the demand has a great impact on the production plan. We often hear planners in the production department complain that the requirements of the Sales Department have changed, and good things are not shipped, and there is no things to urge the goods. The people in the sales department have difficulties, the customer's demand will change, and the sales and shipment plans will certainly change. Isn't it true that "the customer is always right? In addition, the execution of order changes is also a difficulty in business management. The information of changes, such as order increase, decrease, and cancellation, takes a long delivery period, and it is difficult to achieve consistent steps during the execution process. It is often because the customer has canceled the order and the procurement is still urging the supplier of raw materials. The result is that the customer does not need the goods, and there is a lot of inventory. When tracing responsibility, management personnel often fail to find out who should be responsible for this situation; departments are responsible for each other.

Tracking of sales orders

In order-oriented enterprises, the customer satisfaction is largely dependent on the enterprise's ability to ensure that orders are delivered on time. The customer will pay close attention to the execution status of some urgent orders and often ask the sales staff about the actual progress. This requires the sales personnel of the production enterprise to have a good understanding of the whole process of order execution. In real business, the customer often calls the customer and the sales staff is busy for half a day: confirm with the production plan, confirm with the purchase, and confirm with the workshop supervisor. Many enterprises have set up a "merchandiser" position to track the order execution status and ensure that the order is delivered on time. This usually requires a lot of manpower and energy.

Ø sales order quantity control

Generally, orders for order manufacturers have strict limits on the order quantity: Many or fewer deliveries are not allowed. Due to factors such as loss of production or temporary order changes, one order may have to be delivered multiple times. In this way, sales personnel are required to control the order execution quantity and remaining quantity, and communicate well with the customer to ensure delivery by order.

Sales order unit price/Amount Control

Many order-oriented enterprises have strict product price management and generally require a minimum price control. At the same time, the amount of the sales order must be controlled in segments; orders of Different amount levels should be approved by different levels of persons.

Customer Credit Limit Management

Enterprises that are oriented to order production have both cash and credit sales. Credit sales customers must manage credit lines. To reduce the operational risks of enterprises. The credit limit can be set to the quantity or amount of each product.

Ii. Production and Plan Management

Material/capability plan

The plan for order production is very important. A well-planned plan can not only improve customer satisfaction, but also improve production efficiency, while maintaining inventory at a reasonable level. If the plan is not done well, the inventory will be high, but the production line will be disconnected, and the customer's delivery will fail. MTO's products are generally complex and complex in processing, making it difficult to schedule materials and capabilities manually. In particular, calculating the quantity of shared materials and allocating the capacity of shared equipment or production lines is often the biggest headache for planners. In addition, due to frequent material shortage due to incomplete planning, the production efficiency and profit of enterprises are greatly swallowed up. There is also a different pace of various processing departments, making the final assembly department often "loose and tight": the first half of the week or the first half of the month did not work, I can't finish working overtime in the second half of the week or the second half.

Ø change/restructuring of task orders

Due to the constant changes in customer requirements, the production task list is often changed or restructured, affecting normal production. It is often seen that the materials in the warehouse have been delivered to the production line, and the demand has been canceled; or A has been processed to semi-finished products, and customers have to wait for a and B. In addition, the handling of such changes and restructuring also increases the difficulty of production planning and implementation.

Ø Workshop Management

MTO enterprise's product processing process is generally complicated, so it is difficult to manage the workshop. When dispatching jobs, consider order urgency, whether the materials are complete, whether the equipment load is reasonable, whether the mold condition is good, and whether the skilled personnel are in place. At the same time, we need to do a lot of manual process reports, and even calculate the hourly wage of workers.

Ø Material Substitution

During the production arrangement, the replacement relationship of materials should be considered for the co-use of materials to make rational use of existing inventory. Some material substitution is temporary, while some material substitution relationships are always effective. For special materials belonging to a single customer order, it is more important to consider whether the materials purchased for this order can be applied to other orders. It is necessary to ensure the rational use of existing inventory, and ensure that the special materials corresponding to each customer's order will not be mixed.

Ø Outsourcing Management

Many MTO Enterprises require external association management. Outsourcing methods include outsourced external processing, outsourced processes, and outsourced procurement. For example, some enterprises provide Blank materials to external suppliers, and the External Manufacturers process the workpieces. Some enterprises also entrust special processes such as paint and electroplating to specialized paint and electroplating factories for processing; other enterprises only provide drawings to external manufacturers and then place orders for them. Outsourcing order delivery management, product quality, matching management of the number of processed parts to be processed and received are all important and difficult points in outsourcing processing management. The management of specialized outsourced materials for each customer's order is also the difficulty of Outsourcing Management.

Iii. Procurement Management

Procurement Order Management

In the procurement management, the management of procurement orders is a core. It includes the generation of purchase orders (most of which are from the procurement application of the business department), the licensing system, review, and delivery to the supplier, and the reminder of the order execution progress, notifying the warehouse to receive goods by order, financial invoicing and payment are required based on the order quantity and receipt quantity. How to ensure timely delivery of suppliers at appropriate prices is the focus of procurement management. In actual business, production line shutdown is also very common due to delayed delivery of purchased materials. In addition, pay attention to the different requirements for materials for different orders. A common example is the customer's logo printed on the product, and the opening head printed on the outer packing box. Each detail of the requirements for each order should be followed and met.

Procurement Price Control

In the MTO mode, because the special materials for the corresponding order adopt the "lot for lot (batch to batch)" procurement strategy, there will be more purchases in batches. As the supply market changes, the price of the same product will fluctuate. In the procurement process, many enterprises pay great attention to the control of procurement prices. Some enterprise procurement departments even set up a position such as "Nuclear price". Each supplier needs to audit the price of each material to reduce the enterprise's procurement costs.

Supplier Management

Another important responsibility of the procurement department is supplier management. This includes initial supplier development, supplier audits, supplier supply ratio settings, and supplier reviews. Many enterprises establish AVL (approved vendor list, qualified supplier list) for each item. Only suppliers that meet the requirements after the audit can become AVL suppliers. AVL suppliers are qualified to provide materials or services. The same item is generally not only one AVL supplier. Therefore, when purchasing the next purchase order, the proportion of the purchased item should be allocated based on the supplier's previous supply performance and price. Suppliers are evaluated quarterly or even every month in terms of on-time delivery, price, service, willingness to cooperate, and other aspects to help suppliers improve and improve their supply performance. How to objectively and fairly evaluate suppliers and make future procurement easier through evaluation is a difficulty in supplier management.

Iv. Project Management

Engineering Data Integrity

Engineering materials include material code, engineering drawings, BOM (bill of material, bill of materials) and process routes. Integrity and correctness are included. The basic management of many enterprises is relatively weak, and the problem handling and feedback processes are not perfect. It is often found that the material drawings, BOM and production line products of the Engineering Department are inconsistent. When engineering data errors are found in the production line, the engineer is not required to modify the data, but to directly use the materials or processing technology that he deems reasonable in production based on experience. This results in incomplete engineering materials.

Project change management

In MTO Enterprises, especially OEM and ODM enterprises, engineering changes are very frequent. Engineering Change methods include: Natural switch, immediate switch, supporting switch, and key component switch. If the project change is not properly managed, the new product's cut-in time may be delayed, the stock of materials to be switched is sluggish, and the switch is not properly implemented. I have encountered this situation: the Engineering Department has changed two versions, and the production department is still producing the old version of the product. The management of engineering changes is a difficult point for MTO Enterprises, especially some supporting enterprises.

V. Cost Management

Ø cost prediction

For enterprises that produce by order, the customer will provide drawings or other relevant information and request a quotation. Enterprises need to simulate the calculation of materials, work, and fees based on the product structure and the latest market supply, and then make a quotation for the customer with reasonable profits. The simulated quotation and cost prediction of customer orders are a difficult task for sales personnel or cost accounting.

Ø cost control, accounting and Analysis

During the order execution process, the actual cost of each sales order should be calculated and controlled to ensure the reasonable profit of the order. In actual business, due to difficult data collection and complicated accounting methods, cost accounting for each sales order is often not possible; cost control and profit analysis for each sales order cannot be achieved.

In the actual business management of enterprises, these business management problems often occur at the same time and affect production. If these factors cannot be distinguished, managers cannot find the key points of the problem and formulate corresponding strategies. For example, I have encountered a situation where the company's sales volume has not increased, and the inventory level has remained high, or even gradually increased. Enterprise Managers have been unable to find the root cause of the problem. Later, I helped the company analyze the problem from several aspects and found that there are many causes:

1. when the customer increases the order, the salesperson will confirm with the scheduler or the purchaser whether the delivery date can be reached. However, when the customer cancels the order, we did not investigate the material delay caused by order cancellation (mainly some special materials) and reported it to the customer for co-solution.

2. the product quality is unstable due to unreasonable production process and process. The waste rate and safety stock based on this setting are too high, which leads to the increase of the raw material procurement quantity and the production quantity of self-made parts, which leads to the increase of inventory.

3. The engineering change management process is incomplete. When setting the effective date of the engineering change, the inventory of the existing and on-going materials to be switched is not taken into account. After the change, all the new materials will be used, and all the materials to be switched will become dull materials.

4. The inventory data is not accurate, and the warehouse's items are not consistent in a timely manner. There is no account, but there are a lot of physical objects; as a result, the production department repeats production, and the procurement department places orders repeatedly.

5. Procurement Order review problems some purchasers do not determine the number of purchase orders based on the purchase application, but modify the order quantity at will. The raw material inventory is high.