Make-to-Order (MTO)

In the world of manufacturing, Make-to-Order (MTO) has become a popular model for businesses aiming to meet unique customer demands.

But what exactly is MTO, and how does it work?
In this article, we explore how this business model works, along with the challenges it presents.
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What is Make-to-Order (MTO)?

Make-to-Order is a production approach where goods are manufactured only after an order is placed. Unlike Make-to-Stock (MTS), where products are made in advance and stored in inventory, MTO focuses on creating tailored solutions for individual customers.

Key characteristics of MTO include:

• Customization: Each order is unique and designed to meet specific customer requirements.
• Demand-Driven Production: Production only begins after the customer’s order is confirmed, minimizing inventory costs.
• Flexibility: The model allows businesses to adapt to customer needs and market changes.

Industries like construction, machinery, and specialized vehicles often rely on MTO to deliver bespoke products. However, while MTO provides immense customer value, it also introduces significant operational challenges.

What Makes MTO So Challenging?

The MTO model thrives on delivering unique, customer-specific products. But with uniqueness comes complexity:

1. Complex Product Configurations
   Each order requires tailored configurations, often involving thousands of variables. This can overwhelm sales teams and slow down the quoting process.
2. Pricing Intricacies
   Factors like material costs, labor hours, production timelines, and customizations make pricing a time-consuming task.
3. Error-Prone Processes
   With so many moving parts, manual processes often lead to errors - incorrect quotes, incompatible configurations, or production bottlenecks.
4. Customer Expectations
   Customers demand speed and accuracy. In a world of instant gratification, delays or missteps can erode trust.

How CPQ handles these challenges.

CPQ is a software designed to handle the complexities of MTO while maintaining speed, accuracy, and flexibility. Here’s how it supports MTO operations:

1. Streamlined Product Configurations
   CPQ allows sales teams to configure products based on pre-defined rules and options. It eliminates guesswork, ensuring every configuration is accurate and production-ready.
2. Automated Pricing Calculations
   CPQ automates pricing by taking into account all variables, from material costs to custom options. This ensures quotes are both accurate and competitive.
3. Faster Quoting Processes
   What once took days or weeks can now be completed in minutes. With CPQ, sales teams generate detailed, error-free quotes quickly, keeping customers happy and engaged.
4. Error Elimination
   By enforcing rules and constraints during configuration, CPQ prevents incompatible or impossible configurations. This reduces costly mistakes and ensures a seamless handoff to production.
5. Integration with ERP and Production Systems
   CPQ integrates seamlessly with ERP systems, ensuring that every order flows smoothly from sales to production. This end-to-end connectivity is essential for MTO efficiency.

The ROI of CPQ in MTO

Investing in CPQ software doesn’t just simplify processes - it delivers measurable results:

• Reduced Lead Times: Customers receive quotes faster, and production starts sooner.
• Increased Margins: Accurate pricing ensures you’re not leaving money on the table.
• Improved Customer Satisfaction: Faster response times and error-free orders build trust and loyalty.
• Scalability: CPQ grows with your business, handling increased order volumes and complexity without breaking a sweat.

Real-World Success: CPQ in Action

Imagine a company producing modular commercial vehicles under an MTO model. Without CPQ, their sales and engineering teams spent hours manually configuring each order, only to encounter errors when configurations didn’t align with production capabilities.

After implementing CPQ, the company experienced a transformation:

• Sales teams configured products in minutes using guided workflows.
• Quotes were generated instantly, with real-time pricing accuracy.
• Configurations flowed seamlessly into production, eliminating delays and bottlenecks.

This isn’t just a theoretical example - it’s the reality for many companies leveraging CPQ to streamline their MTO operations.

Is CPQ Right for Your MTO Business?

If your company struggles with long lead times, frequent errors, or pricing challenges in your MTO operations, CPQ could be the solution you need. It’s more than just a tool—it’s the foundation for efficiency, profitability, and growth in a competitive marketplace.

Ready to see what CPQ can do for you?
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Contact us today and let's make your MTO process faster, smarter, and simpler!

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