What is Make-to-stock (MTS) manufacturing about?
The MTS model is typically used by factories that produce commodities that are stocked in warehouses or stored in showrooms. Manufacturers that found success with this business model understand that demand must be somewhat predictable and precisely forecasted. That is because the manufacturer expends capital to produce goods in advance. The capital then ends up becoming bound in the finished goods until they are sold.
In MTS, the Sales Order does not drive the production program, but the predicted demand does. Incoming orders will use existing inventory which is then delivered, which keeps the lead time low. When a manufacturer overproduces goods, they would often apply aggressive discounts that eat into their margins to sell their goods and avoid writing them off.
Underproduction means some market demand remains unserved, which gives competitors a chance to steal market share. In the case of MTS manufacturers, the complexity of sales lies in forecasting demand before production.
Download our Manufacturing Sales Handbook to find out more about the MTS model and how digital can help accelerate sales for businesses using this model.
Risks that affect MTS model sales strategies
Changes are the biggest risk to the made-to-stock manufacturing model
In the chart above, we outlined the four key risks that all manufacturing businesses have to consider during operations. Each model handles risk differently. Some models can bypass certain risks by transferring the risks to other areas of the business. In the following segment, we highlight the primary risks of the MTS model and how it can affect their sales.
Risk 1: Time needed to deliver products
The MTS model turns this risk into a distinct advantage. By manufacturing their products before orders, MTS manufacturers are able to ship them the moment an order comes in. Instead of waiting weeks or months, customers can get their orders in days--depending on how well the manufacturer manages their supply chain.
Risk 2: Agility and the impact of change
Manufacturers using the MTS model are particularly susceptible to change. Their businesses are fine-tuned to create products that are made and sent straight to the warehouse. Any changes in design, material, or specifications could result in finished products becoming obsolete or even worthless.
Risk 3: Cost of engineering incurred and risk of design error
In the MTS manufacturing model, engineering costs are incurred at the initial design phase. It will not occur again till the product reaches end-of-life. In this model, the manufacturer invests in designing and engineering a product before production begins. This allows the design to be perfected and flaws corrected before the product is mass-produced.
Risk 4: Investment needed in development
In the MTS model, investment in building a manufacturing infrastructure is made at the start. Once the business is up and running, manufacturers rarely need to spend more on further development. This enables manufacturers to focus on innovation and keep the costs of production low.
How an MTS manufacturing business can improve sales
On the surface, an MTS manufacturing model seems simple. Manufacture products, keep them in a warehouse, sell. However, for MTS manufacturers, accurate forecasting is critical. Knowing the production quantity is essential for managing material and labor costs. If the forecasting is too far off towards the negative side, manufacturers can end up producing less than the demand and undersupplying their customers. This can cause their customers to fall behind in their own business and lose confidence in the manufacturer.
If the forecasting is too far off towards the high side, manufacturers can produce more products than they can sell. This can cause the manufacturer to incur massive losses from unsold goods that can become obsolete or depreciate in value—in addition to taking up space in the warehouse. To ensure the most accurate forecasts, leading MTS manufacturers rely on digital sales solutions to keep track of their customers' past orders and can forecast future orders. If potential disruptions are anticipated, manufacturers can also easily adjust forecasts within the system to manage future disruptions.
With digital sales and guided selling, MTS manufacturers can also store their engineering knowledge virtually. This allows even the newest of sales employees to access critical sales knowledge, and start selling the moment they come aboard. But its most powerful feature is the manufacturing-focused e-commerce capability. It empowers customers and partners with the ability to access everything your business has to offer, 24/7.
Through this capability, customers are connected to the manufacturer's warehouse and supply chain. They can instantly see sales-relevant information like product design, description, inventory levels, prices, and bulk discounts—which helps them make buying decisions quickly and effectively. They have the option of taking action immediately by buying or generating a quote to initiation a conversation with sales.
This is the true definition of self-serve buying, and your customers appreciate it because it gives them much more control over the buying process. It helps your business match their speed and needs, which means they are more likely to come back to you again—and again.
Explore how the In Mind Cloud Digital Sales Platform can transform the way your business sells. Download the Manufacturing Sales Handbook to find out how our Digital Sales Platform is ready to elevate your manufacturing sales. If you have further questions, you can always book a no-obligation consultation with our manufacturing sales experts to get your answers.