Make to Order (MTO) and Make to Stock (MTS)

Make to Order

Make to order production is a process in which a product is individually manufactured for a particular customer. Stock keeping is not usually carried out for products that are made to order. The primary benefits of this process are the ability to track the progress for the sales order and the flexibility to offer to the customer the products to meet their specific requirements. The benefit also lies in tracking the costs incurred in the servicing of the sales order in the manufacturing of the goods and the ability of arrive at a profitability of the sales order.

Make to Stock

In make to stock production scenario stock is produced independently of orders because you want to provide your customers immediately with goods from that stock later on. You might even want to produce goods without having sales orders, if you expect that there might be customer demand in the future. This means

that make to stock strategies can support a very close customer-vendor relationship because your objective here is to provide your customers with goods from your stock as quickly as possible

Major Steps:

  •  Sales activity:  Sales order is created with reference to customer order (customer PO)
  • Planning activity:  Planned orders are generated as output of Material Requirement Planning (MRP) With reference to Sales order
  • Ext. procurement:  Required components procured externally using purchase order (PO)
  • Subcontracting:  Procured components send to the subcontracting vendor & received semi finished product
  • Production:  Semi finished product processed internally and gives output as final product/Assembly
  • Delivery activity:  Delivers final product/Assembly to the customer against Sale order.

Steps in SAP:

  • Create materials with required views – MM01
  • Maintain CIN master data – J1ID Create Bill of Materials (BOM) – CS01
  • Create Routing to Finished material – CA01
  • Create sale order – VA01
  • Run MRP – MD50
  • View the planned orders created – MD04
  • Convert component planned order to PR (PR will show a/c assgn cat as M) – MD04
  • Convert semi finished planned order to PR (PR will show a/c assgt cat “M” & item cat. “L”) – MD04
  • Convert component PR into PO for external procurement – ME21N Goods receipt with reference to sale order – MIGO
  • View the stock (sale order stock) – MMBE
  • Create subcontract PO with reference to semi finished PR – ME21N Maintain storage location to the subcontractor – SPRO
  • Transfer goods to Subcontractor (movement type 311 +E) – MB1B / MIGO
  • Stock will be updated Subcontract storage location under Sale order stock – MMBE Create challan – J1IFQ
  • Receive goods from Subcontractor with movt type 101 (543 will be taken to the component &
  • subcontractor storage location to be entered) – MIGO Reconciliation of challan – J1IFQ
  • Complete challan – J1IF13
  • Convert finished material planned order to production order – MD04
  • Goods issue to the production with movement type 261 – MB1A / MIGO Confirmation of Production order – CO15
  • Goods receipt against Production order with movement type 101 – MB31/MIGO Order settlement for Production order – KO88
  • Delivery of Finished products – VL01N

Also See: SAP Down Payment Process an Overview

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