Configure to order is a manufacturing process where products are assembled and configured according to customer requirements. In today’s competitive market, consumers are demanding products that are tailored according to their own unique requirements.
The configure-to-order process is based on the concept of configure to order. This means that the design selection is done after the order has been received. It uses customer requirements, picked from a specified set of product features with predefined values. Based on that a combination of parts and assemblies is made to make a specific, predefined, modification or variant of a product.
You can also say the process is a hybrid between make to stock and made to order. It is a set of components that made to stock and the final products are assembled to order.
By maintaining inventory at the component level, inventory is limited only to that much which is needed. Also, delaying the final product assembly until the order arrives provides some flexibility in terms of product variations and also helps to use up current component inventory to its fullest. It helps businesses reduce inventory carrying costs, facilitates better inventory management as products are limited while minimizing the time to market.
Thus, configure-to-order is an excellent business model that provides mass customization and quicker order fulfillment.
The configure-to-order manufacturing model is used by enterprises to create custom-made products according to exact specifications of clients.
It brings some definite advantages to your supply chain. Here are a few of them-
Specialization is a key benefit of configure-to-order. The customer provides a set of specifications which the manufacturer uses to make products or source its components, in order to fulfill the customer’s requirements.
The made-to-order strategy eliminates stocking extra inventory that does not sell. This model only sells inventory which is needed by the customer. Maintaining and sourcing inventory only when an order comes, keeps manufacturers tension-free on account of cash tied up in excess inventory. Instead, they can focus on bringing more customizations to the table.
Time is equivalent to money in supply chain and inventory management. By providing customizable configure-to-order solutions, companies will have reduced cycle time to revenue and a shorter order to cash cycle as well.
Since the configure to order process is fully customizable, it creates products that are tailored exactly to customer requirements. This satisfies customers more as products are delivered faster since the criteria are already known to manufacturers and there are fewer delays.
Some of the disadvantages of configure-to-order manufacturing include:
While configure-to-order allows for some degree of product customization, it may not be suitable for products that require a high level of individual tailoring or unique features. Customers’ choices are often limited to predefined configurations, which may not fully meet their specific needs.
Managing a wide range of product configurations and options can be complex and challenging. Companies must maintain accurate product data, bill of materials (BOM), and inventory management for all possible variants, which can increase administrative and operational overhead.
The lead times for CTO products may still exhibit some variability, especially when certain components or options are in high demand or face supply chain disruptions. This can impact on-time delivery and customer satisfaction.
Processing and managing orders for configurable products can be more complex than handling standard, off-the-shelf products. This can increase the risk of errors in order fulfillment.
The main difference between make-to-order and configure-to-order products lies in the level of customization and when the production process begins. Make-to-order products are highly customizable and are only produced in response to specific customer orders, which may lead to longer lead times. Configure-to-order products, on the other hand, offer a certain degree of customization but are assembled from predefined components and options, allowing for more efficient and predictable production processes with shorter lead times. The choice between MTO and CTO depends on the nature of the product, customer demands, and the desired balance between customization and efficiency.
Supply chain management success is every company’s aim. With a fully customized configure-to-order approach instead of a one-size-fits-all policy, enterprises can save a lot of money and time. And provide the best possible customer service.