Developing a Make-to-Order Production Plan

In a make-to-order environment, manufacturers wait until an order is received from a

customer before starting to make the goods. Examples of this kind of manufacture are
custom-tailored clothing, machinery, or any product made to customer specification.
Very expensive items are usually made to order. Generally, firms make to order when:
Goods are produced to customer specification.
The customer is willing to wait while the order is being made.
The product is expensive to make and to store.
Several product options are offered.
Assemble to order. Where several product options exist, such as in automobiles,
and where the customer is not willing to wait until the product is made, manufacturers
produce and stock standard component parts. When manufacturers receive an
order from a customer, they assemble the component parts from inventory according
to the order. Since the components are stocked, the firm needs only time to assemble
before delivering to the customer. Examples of assemble-to-order products include
automobiles and computers. Assemble to order is a subset of make to order.
The following information is needed to make a production plan for make-toorder
products:
Forecast by period for the planning horizon.
Opening backlog of customer orders.
Desired ending backlog.
Backlog. In a make-to-order environment, a company does not build an inventory
of finished goods. Instead, it has a backlog of unfilled customer orders. The backlog
normally will be for delivery in the future and does not represent orders that are late
or past due. A custom woodwork shop might have orders from customers that will
keep it busy for several weeks. This will be its backlog. If individuals want some work
done, the order will join the queue or backlog. Manufacturers like