Build to order (BTO) and sometimes referred to as make to order (MTO), is a production approach where products are not

built until a confirmed order for products is received. BTO is the oldest style of order fulfillment and is the most appropriate approach used for highly customized or low volume products.

Contents
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1 Overview 2 See also 3 Notes 4 References

[edit] Overview
This approach is considered good for highly configured products, e.g. automobiles,[1][2] computer servers, or for products where holding inventories is very expensive, e.g. aircraft. In an automotive context, BTO is a demand driven production approach where a product is scheduled and built in response to a confirmed order received for it from a final customer.[3] The final customer refers to a known individual owner and excludes all orders by the original equipment manufacturer (OEM), national sales companies (NSC), dealers or point of sales, bulk orders or other intermediaries in the supply chain. BTO excludes the order amendment function, whereby forecast orders in the pipeline are amended to customer requirements, as this is seen as another level of sophistication for a build to stock (BTS) system (also known as build to forecast (BTF)). BTS is the dominant approach used today across many industries and refers to products that are built before a final purchaser has been identified, with production volume driven by historical demand information.[4] This high stock level, endemic across the auto industry allows some dealers to find an exact or very close match to the customers desired vehicle within the dealer networks and supplier parks. The vehicle can then be delivered as soon as transport can be arranged. This has been used to justify stock levels. Whilst providing a rapid response to customer demand, the approach is expensive, mainly in terms of stock, but also transportation as finished goods are rarely where they are required. Holding stock of such a high cash value as finished goods is a key driver of the current crisis in the automotive industry - a crisis that could be eased by implementation of a BTO system.[5] A BTO system does not mean that all suppliers in the supplier chain should be producing only when a customer order has been confirmed. Clearly, it would not make economic sense for a manufacturer of low value high volume parts to employ BTO. It is appropriate that these should be identified and built to a supplier order, effectively BTS. Part of the challenge in a BTO supplier network is in the identification of which

suppliers should be BTO and which BTS. The point in the supply chain when this change occurs is called the decoupling point. Currently, the majority of automotive supply chains lack a decoupling point and the dominant BTS approach has resulted in billions of dollars of capital being tied up in stock in the supply chain.[6] Some firms build all their products to order while others practice (BTS). Given the widespread proliferation of products, there are a number of manufacturers taking a combined approach, where some items are BTS and others are BTO, which is commonly referred to as "hybrid BTO".[7] The main advantages of the BTO approach in environments of high product variety is the ability to supply the customer with the exact product specification required, the reduction costly sales discounts and finished good inventory, as well a reduction in stock obsolescence risk. The main disadvantage of BTO is manufacturers are susceptible to market demand fluctuations leading to a reduced capacity utilization in manufacturing. Hence, to ensure an effective use of production resources, a BTO approach should be coupled with proactive demand management. Finding the correct and appropriate balance of BTO and BTS to maintain stock levels appropriate to both the market requirement and operational stability is a current area of academic research. Related approaches to BTO include the Engineer to Order (ETO) approach, where after an order is received, a part of or the whole design is done, as well as the Assemble to Order (ATO). Together with the BTS approach, these strategies form the spectrum of order fulfillment strategies a firm can adopt.

Engineer-To-Order
In the engineer-to-order world, companies build unique products designed to customer specifications. Each product is complex with long lead times and requires a unique set of item numbers, bills of material, and routings. Unlike standard products, the customer is heavily involved throughout the entire design and manufacturing process. In most cases, aftermarket services continue throughout the life of the product. That's why generic, off-the-shelf ERP systems will not work for ETO manufacturers. The nature of ETO manufacturing compared to other manufacturing styles presents its own set of challenges which must be addressed effectively if a company is to remain competitive. Some of the key differences between 'standard' manufacturing i.e. make-to-stock (MTS) style manufacturers, and their engineer-toorder manufacturing (ETO) counterparts include: Made to Stock / Just In Time Manufacturing Uses a price list Engineer-to-Order / Make to Order Manufacturing Supplies estimates and quotes / tenders for a project

Made to Stock / Just In Time Manufacturing Wins a sale / receives sales order Purchases material to stock Inventory is based on part number Makes no or only a few engineering changes May make products having low value Talks about products Makes standard products Refers to standard cost Product lead times may be days or weeks Ships from finished goods Invoices on delivery Measures cost variance from the standard cost

Engineer-to-Order / Make to Order Manufacturing Wins a contract / receives a job order; Purchases material to a project Inventory is based on contract number / job order (i.e. top level demand) Makes a significant number of engineering changes / variations Products / projects are typically higher in value Talks about projects Products are unique Calculates actual cost Product lead times may be months or years Ships from WIP(work-in-progress) Receives stage payments(and retentions) Measures cost variance from the original estimate

Bridging gaps in the standard Oracle product

GAP 1: Order Management and Projects data must always be synchronized in an ETO environment to provide a consistent view of Bookings, Shipments, Backlog, Invoice and Revenue Recognition. The standard Oracle product does not synchronize data automatically, making it necessary to enter and maintain the same data manually in both Projects and Order Management. GAP 2: Cumbersome and time consuming item creation and administration process in an ETO environment - several item attributes like categories, attachments, and cross references have to be made manually. GAP 3: Manual creation of invoice and revenue events in Projects after shipment of the engineered product makes the process slow and error prone.

GAP 4: Standard Oracle does not consider the total cost of the engineered product including project engineering, miscellaneous and manufacturing costs. Revenue and COGS for projects must be booked in the same period as per the US GAAP matching principle, and corresponding WIP amounts have to be relieved.
Benefits of HCL's ETO Solution Standard

Extensions built to fulfill gaps in the ETO solution are designed and developed using standard Oracle APIs or Interface tables wherever applicable Supports Oracle version upgrades

Scalable

All extensions can be deployed in an ETO implementation with minimal changes Designed on bolt-on components, does not affect standard programs, and can be enabled/ disabled as required

Speed of Implementation

Pre-packaged design & installation documents to accelerate speed of deployment Deployed across multiple locations with less than 10% changes

Engineer to Order (ETO) is a manufacturing mode involving collaboration with a customer on the engineering phase of the product lifecycle in order to arrive at a product design that meets the customers functional requirements. Touted as a common business model in industrial manufacturing, aerospace, defense and the energy industry, Engineer to Order is distinguished from other to-order manufacturing modes including Make to Order and Configure to Order in that engineering or product design are a core part of a manufacturing project that requires specific manufacturing project management processes. The engineering component of the project often overlaps with early stages of manufacturing and ordering of long lead time raw materials, which means that processes must be in place to issue purchase orders and work orders before a finished design is released to manufacturing. ETO requires a management team master not only product lifecycle management (PLM), but also project lifecycle management and customer lifecycle management. < a href="http://bs.servingsys.com/BurstingPipe/adServer.bs?cn=brd&FlightID=6448246&Page=&PluID=0&Pos=8469" target="_blank"><img src="http://bs.serving-

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Todays business software can in fact be used to support ETO, and other modes like Engineer Procure Construct that involve manufacturing or fabrication to meet customer needs. The ideal business software, however, must support the entire business lifecycle from customer or contract acquisition, project planning, execution, manufacturing or fabrication and, when necessary, installation. It also must offer realtime business control and analysis and establish a single version of the truth for all parties involved in work for customers. Unlike standard products, with ETO products the customer is heavily involved throughout the entire design and manufacturing process. In most cases, aftermarket services continue throughout the life of the product. That's why generic, off-the-shelf ERP systems will not work for ETO manufacturers, a recent piece revealed. Some of the key differences between standard manufacturing or Make to stock (MTS (News style manufacturers and their engineer-to-order manufacturing (ETO) counterparts include: - Alert))

MTS uses a price list while ETO supplies estimates and quotes MTS inventory is based on a party number while in comparison ETO inventory is based on a contract order

MTS makes no or only a few engineering changes but ETO makes multiple engineering changes

Edited by Jamie Epstein