Make-to-Order (MTO) vs Make-to-Stock (MTS)

Choosing the right production strategy can make all the difference in how efficiently a manufacturer meets customer demand. Two of the most common approaches—make-to-order (MTO) and make-to-stock (MTS)—offer distinct advantages and challenges. MTO focuses on customization and minimizing excess inventory, while MTS prioritizes speed and availability through pre-produced stock. Understanding how each model works and when to use them can help manufacturers balance flexibility, cost, and customer satisfaction.

What Is Make-to-Order (MTO)?

Make-to-order (MTO) is a production strategy where manufacturing begins only after a customer order is received. Instead of producing goods in advance, companies using MTO create products tailored to specific customer requirements. This approach helps minimize inventory costs, reduce waste, and ensure that every product meets unique specifications.

MTO is common in industries where customization and flexibility are essential. While this model often results in longer lead times, it allows businesses to better align production with actual demand—reducing the risk of overproduction or unsold stock.

An Example of Make-to-Order

In the food manufacturing industry, a make-to-order model is often used for custom or specialty production runs that require flexibility and precision. For example, a sauce manufacturer might produce private-label recipes for multiple retail brands, each with unique flavor profiles, ingredient lists, packaging sizes, and labeling requirements. Production only begins once a customer order is received, ensuring that each batch is made exactly to specification.

This approach helps manufacturers minimize waste, manage ingredient freshness, and maintain tighter control over costs—key factors in a market where overproduction can quickly lead to spoilage and lost revenue. MTO also enables greater product diversity without overextending inventory or warehouse space.

What Are the Advantages of Make-to-Order?

Reduced Inventory Costs

Because products are only manufactured once an order is placed, make-to-order significantly lowers the need for holding excess inventory. This approach minimizes storage costs, reduces waste, and helps manufacturers avoid tying up capital in unsold goods.

Greater Product Customization

MTO gives manufacturers the flexibility to tailor each product to the customer’s exact specifications—whether that means unique formulations, packaging, or labeling. This customization helps build stronger customer relationships and gives businesses a competitive edge in markets where differentiation matters.

Improved Quality Control

Since each order is produced individually, manufacturers can maintain closer oversight throughout the production process. This results in fewer defects, higher consistency, and greater confidence in meeting customer expectations.

Minimized Waste

By producing only what is needed, manufacturers reduce the risk of product spoilage, expired materials, or obsolete stock. This is especially valuable in industries like food and beverage manufacturing, where shelf life and freshness are critical.

Better Demand Alignment

Make-to-order allows companies to respond directly to actual customer demand instead of relying on forecasts. This agility helps stabilize operations, improve cash flow, and ensure production resources are used efficiently.

What Are the Disadvantages of Make-to-Order?

Longer Lead Times

Because production begins only after an order is received, customers may experience longer wait times before delivery. This can be a challenge in markets where fast turnaround is a key differentiator.

Complex Production Scheduling

Managing multiple customized orders at once requires precise planning and coordination. Without the right production scheduling tools, manufacturers may struggle with bottlenecks, missed deadlines, or inefficient resource allocation.

Higher Production Costs

Smaller, more customized production runs often mean less opportunity for economies of scale. This can lead to higher per-unit costs for labor, materials, and setup compared to standardized, high-volume production.

Dependence on Supplier Reliability

Since materials are ordered in response to demand, any delay or shortage from suppliers can directly impact production timelines. Strong vendor relationships and accurate procurement planning are critical to maintaining workflow.

Demand Volatility Risks

Fluctuating or unpredictable order volumes can make it difficult to forecast workloads and manage staffing effectively. Without real-time visibility and agile systems in place, manufacturers may struggle to adapt quickly to shifting customer demand.

What Is Make-to-Stock (MTS)?

Make-to-stock (MTS) is a production strategy where goods are manufactured in advance based on forecasted demand and stored as inventory until sold. This model focuses on ensuring product availability and quick delivery, making it ideal for standardized, high-volume items.

By producing items ahead of time, manufacturers can fulfill customer orders immediately, improving response times and customer satisfaction. However, MTS also carries the risk of overproduction and excess inventory if demand forecasts are inaccurate. To succeed, manufacturers using MTS rely heavily on accurate data, market trends, and demand planning to balance production efficiency with cost control.

An Example of Make-to-Stock

In the food manufacturing industry, a make-to-stock strategy is often used for high-volume, consistent products that have steady demand. For instance, a bakery producing sandwich bread or cookies may manufacture large quantities in advance based on sales forecasts and distribute them to retailers nationwide. Because these products have predictable turnover, maintaining inventory ensures shelves stay stocked and customers always find what they expect.

This approach allows manufacturers to optimize production runs, reduce changeover times, and take advantage of economies of scale. However, it also requires accurate forecasting and efficient inventory management to avoid overproduction or waste—especially with perishable goods.

What Are the Advantages of Make-to-Stock?

Faster Order Fulfillment

Because products are already manufactured and ready for distribution, Make-to-Stock allows companies to deliver orders almost immediately. This speed improves customer satisfaction and helps meet high-volume demand efficiently.

Lower Production Costs per Unit

Producing in large batches enables manufacturers to take advantage of economies of scale. Standardized processes, bulk material purchases, and streamlined production runs help reduce overall manufacturing costs.

Consistent Product Availability

MTS ensures popular products are always in stock and ready to ship, which is especially important for retail and food manufacturing. Consistent supply helps maintain retailer confidence and brand reliability.

Simplified Production Planning

With stable, forecast-driven schedules, manufacturers can plan production, staffing, and maintenance more effectively. This predictability supports operational stability and reduces scheduling complexity.

Easier Demand Forecasting & Reporting

Historical sales data helps manufacturers predict future demand with greater accuracy. When paired with integrated ERP and MES tools, Make-to-Stock operations gain better visibility into trends, inventory levels, and performance metrics.

What Are the Disadvantages of Make-to-Stock?

Higher Inventory Costs

Because products are produced in advance, manufacturers must invest in storage and inventory management. Excess stock ties up capital, increases warehousing expenses, and may require additional handling or tracking systems.

Risk of Overproduction

If demand forecasts are inaccurate, companies may produce more than is needed. This can lead to excess inventory, waste, or the need for discounted sales to clear unsold goods.

Limited Product Customization

MTS focuses on standard products and large-scale production, leaving little room for individual customization. Customers seeking personalized or unique options may have to wait or go elsewhere.

Obsolescence & Waste

Products stored for long periods risk becoming outdated or expiring, particularly in industries like food, beverage, or technology. Unsold stock may need to be discarded, creating both financial loss and environmental impact.

Forecasting Dependency

Success relies heavily on accurate sales predictions. Sudden market shifts or changes in customer preferences can disrupt production plans, leading to either stockouts or surplus inventory.

A Summary of the Key Differences Between Make-to-Order & Make-to-Stock

Understanding the differences between MTO and MTS is critical for manufacturers deciding which approach best fits their operations.

• Production Timing: MTO begins only after a customer order is received, while MTS produces in advance based on forecasts. This impacts lead times, inventory levels, and the ability to respond to demand changes.
• Customization vs. Standardization: MTO excels at delivering tailored products for individual customers. MTS focuses on standardized, high-volume items that prioritize availability and speed.
• Inventory Management: MTO minimizes inventory by producing on demand, reducing storage costs and waste. MTS requires maintaining stock, which can lead to higher carrying costs and potential obsolescence.
• Cost Structure: MTO may have higher per-unit costs due to smaller, customized runs, whereas MTS benefits from economies of scale and lower production costs per unit.
• Demand Sensitivity: MTO aligns production closely with actual demand, offering flexibility to adapt to changes. MTS depends on accurate forecasting and may struggle with sudden shifts in customer needs.

By understanding these differences, manufacturers can identify which strategy—or combination—best supports operational goals, customer expectations, and profitability.

How to Find the Right ERP to Support MTO & MTS Operations

Choosing the right ERP system can make the difference between smooth operations and costly inefficiencies, whether you operate MTO, MTS, or a hybrid model.

• For Make-to-Order: Look for ERP features that support real-time order tracking, flexible production scheduling, and dynamic resource allocation. Tools that enable precise material planning, lot tracking, and quality control help ensure each custom order is delivered accurately and on time.
• For Make-to-Stock: Prioritize ERP solutions with robust demand forecasting, inventory management, and batch production capabilities. Accurate reporting, automated replenishment, and predictive analytics help manufacturers reduce overproduction, maintain stock levels, and optimize warehouse space.
• Scalability and Integration: The right ERP should grow with your business and integrate seamlessly with existing tools, including MES, CRM, and inventory management systems. This ensures visibility across operations, from procurement to delivery, supporting both MTO and MTS strategies.
• Data-Driven Decision Making: ERP dashboards and reporting tools allow manufacturers to monitor performance metrics, track production costs, and identify trends. Leveraging this data supports smarter planning, reduces waste, and enhances customer satisfaction, no matter which production 

model you use.

By aligning your ERP capabilities with your production strategy, you can improve efficiency, maintain flexibility, and meet customer demand more effectively.

Make-to-Order vs Make-to-Stock FAQ

How does MTO work?

MTO begins production only after a customer order is received to ensure products are customized to specific requirements and minimize excess inventory.

How does MTS work?

MTS produces goods in advance based on forecasts, keeping inventory ready to fulfill customer orders quickly and maintain consistent product availability.

What is the difference between MTO and MTS?

MTO focuses on customization and producing on demand, while MTS emphasizes standardization and maintaining inventory for immediate fulfillment.

Which production strategy is faster, MTO or MTS?

MTS is generally faster because products are pre-produced and ready to ship, while MTO requires production after an order is received.

Which industries use MTO?

Industries that require customization or low-volume production, such as specialty foods, custom products, or luxury goods, often use MTO.

Which industries use MTS?

Industries with high-volume, standardized products like baked goods, consumer packaged goods, or electronics typically rely on MTS.

Is MTO more expensive than MTS?

Generally, yes. MTO can have higher per-unit costs due to smaller batch sizes, customization, and more complex production scheduling.

Does MTS reduce lead times?

Yes, because products are pre-produced and stocked, MTS allows for immediate order fulfillment and faster delivery to customers.

What role does forecasting play in MTS?

Accurate demand forecasting is critical for MTS to avoid overproduction, stockouts, and inventory waste.

Can a company use both MTO and MTS?

Absolutely! Many manufacturers adopt a hybrid approach, using MTS for high-demand standard items and MTO for customized or seasonal products.

What factors should be considered when choosing MTO or MTS?

Consider product customization, demand predictability, lead time expectations, production costs, and inventory management capabilities when selecting a strategy.

How does ERP software help with MTO and MTS?

ERP systems provide tools for production scheduling, inventory management, and demand forecasting, helping manufacturers optimize efficiency and respond to customer needs.

Optimize Your Manufacturing Strategy ERP Solutions from CAI Software

In today’s fast-paced manufacturing environment, having the right ERP system is essential for efficiency, visibility, and control. Whether you operate make-to-order, make-to-stock, or a combination of both, ERP software helps manage production, inventory, and demand forecasting in real time.

CAI’s ERP solutions give manufacturers the tools to optimize production workflows, reduce waste, and ensure consistent product availability. Learn more about our ERP software solutions and get in touch with us today to see how we can help you enhance efficiency, accuracy, and profitability across your operations.