Make to Order (MTO) and Make to Stock (MTS)

The difference between MTO and MTS is

MTO--> Make to Order
Production is the process where the production order is triggered from a Sales Order. Ex The Prod
process will start onl! after recei"ing the sales order from the customer. #n this case the product could
be customer specific onl! ($ariant)
MTS--> Make to Stock
MTS scenario can be accomplished b! the following settings
%eed to use strateg! group &' in material master M(P "iew)Stretg! group &' is assigned to strateg! &'
Strateg! &' is assigned to (e*uirement t!pe +E (#ndi"idual customer re*uirement)
(e*uirement t!pe +E is assigned to re*uirement class ',' (#ndi".cust.w-o cons.)
(e*uirement class has all the parameters where we can define Production order t!pe that will be used to
create the prod order. The abo"e link needs to be established.
.lso the MTS can be achie"ed using Sales Order schedule line categor! which will be assigned to
(e*uirement t!pe-class. #tem categor! is assigned to (e*t!pe-class and the #tem categor! is maintained
in the material master.
/ou can use an! of the abo"e configuration settings.
0or MTO ))1 !ou 2ust need to ha"e all PP c!cle settings in place nothing special needed as it is a plain PP
c!cle.
3. Make)to)order production is a process in which a product is indi"iduall! manufactured for a particular
customer. #n contrast to mass production for an unspecified market where a material is manufactured
man! times4 in make)to)order production a material is created onl! once though the same or a similar
production process might be repeated at a later time.
&. /ou can use make)to)order production in two scenarios )
(a) 0or branches of industr! or products where a small *uantit! of products with a large number of
different characteristics are manufactured ($ariant 5onfiguration).
(b) 6hen a product has to be assembled particularl! for a sales order (#ndi"idual 5ustomer (e*uirement).
7. Stock keeping is not usuall! carried out for products that are made to order. #n companies using make)
to)order production4 the demand program onl! determines the production area4 in which "arious "ariant
t!pes are produced. 8epending on how !ou track the costs associated with make)to)order production4
there are two wa!s to process make)to)order items during sales order processing.
(a) Make to order using sales order
(b) Make to order using pro2ect s!stem (not rele"ant for S8 application)
,. 0or make to order production using the sales order4 all costs and re"enues in"ol"ed for an order item
are held collecti"el! at that item. . particular rule is used that can be changed manuall! to transfer costs
to profitabilit! anal!sis.
9. Make to order production is largel! a production planning configuration. #t is also controlled b! the
re*uirements t!pe4 which is determined b! three things
the strateg! group (M(P 7) in MM(
the M(P group (M(P3) in MM(
the item categor! and M(P t!pe (M(P 3)
:. Make)to)order production is controlled b! the re*uirements t!pe. The re*uirements t!pe is determined
on the basis of the M(P group (M(P3) and the strateg! group (M(P7) in the material master record. #n
addition4 a plant must be assigned for make)to)order items in the sales order.
Resource related Billing
(esource related billing is used for Make)to)order production4 external plant maintenance in Ser"ice
5ompan! and specific ser"ices as consulting
#n case of consulting compan!) The total "alue of the pro2ect depends on se"eral factors and are pulled
from di"erse sources such as
; %umber of resources used on the pro2ect
; %umber of man hours spent
; Expenses incurred during the pro2ect
To calculate prices and cost incurred we can use 8P<3) 8!namic item processor profile functionalit! on
S.P Eas! access menu.
5onfiguration of profile for ((=
#M>)S8)Sales)Sales documents)5ustomer ser"ice)ser"ice *uotation-((=)Profiles for ((=-*uotation
creation (T)code) O8P3).Standard profile is gi"en. #t is recommended to cop! and change it to !our needs.
3) Profile) %ame of the profile.
&) Select the profile and double click)0or ((= ) select =illing and results anal!sis
Enter desired document t!pe for debit and credit. Tick mark the field) process d!namic item onl!.
7) Select usage and double click on characteristics)This is the most important part of 8#P. /ou can add
!our own characteristics. Select rele"anc! of characteristics4 material determination4 %o summari?ation4
structuring and set #8.
,) Select characteristics and double click source)select the appropriate settings
9) Select source and double click on selection criteria)Select source for each characteristics to speed
up data transfer from data base to application ser"er.
:) >o to characteristics folder select characteristics and double click on material determination)
select appropriate setting from transfer *uantit! - and other columns
@) Select material and double click on criteria) Make appropriate setting in set and "alue for each
characteristics
To configure this !ou need help from 0#5O and PS consultant as the case ma! be.
5heck the correctness of the profile in O8P&(Menu path)#M>)S8)Sales)Sales documents)customer
ser"ice)check profile settings
A& and >& Sales documents t!pes are used for ((=.
/ou can define new document t!pes as !our re*uirement b! cop!ing abo"e.
)Maintain 8#P in appropriate item categor! (5ontract item categor!) in T)code $O$@.
).ssign item categor! group and usage in T)code $O$, as SE#%) rele"ant for billing and SE%#) not
rele"ant for billing.
Transaction flow for ((= is $.,3 (5reate contract))5B'3 (5reate Pro2ect-6=S element))5B'& ((elease
6=S element))8P<3 (5reate =illing re*uest))$0,, (Post re"enue recognition) ) $0'3 (5reate #n"oice).
Menu path) 8P<3)S.P Eas! access menu)Aogistics)S8)Sales)Order)Subse*uent function)8P<3
$0,,) S.P Eas! access menu)Aogistics)S8)=illing)(e"enue recognition) Maintain re"enue list.
#t is assumed that normal S8 configuration is in place. #ntegration with C( and 0#5O in place The
procedure is explained for professional ser"ices without using ph!sical material (i.e. onl! ser"ices).