2. Describe the three types of processes and the relationships between them.

Ans:
The three types of processes are make to stock, make to order and engineer to order.

Make-to-Stock
In MTS, inventory is manufactured and stocked in warehouses. Since MTS depends on
market demands and forecasting, it’s considered as a push type of manufacturing. Goods
are mass-produced and stored to meet market demand. MTS is the most common
manufacturing method prevalent in fast moving consumer goods (FMCG), garments, and
other similar industries. In MTS, the bill of materials (BOM) remains the same for one type of
product.
These are the important factors to consider when manufacturing items to stock.
- Forecasting
- Seasonality
- Market demand
- Product expiry dates
- Available warehouse space

Make to order
Contrary to MTS, make to order (MTO) is a pull approach where production begins only on
receiving a customer order. It’s used in industries like aircraft, luxury or large vehicles, and
large machine manufacturing where holding inventory is expensive. The BOM and
specifications remain the same for goods produced in MTO. Since items are made only after
receiving a customer order, it’s called ‘make to order’.
Factors to consider for MTO are:
- Cost of holding inventory
- Total production time for an item
- Customer patience with respect to lead time

Engineer to order
Similar to MTO, in engineer to order (ETO) the items are produced only after receiving a
customer order with one key difference—the product specifications are custom for each
item. Items are produced with low frequency or sporadically in ETO. Since the specifications
are custom, every item will also have a different BOM.

Comparable table: