You must have seen a number of unsold vehicles in an automobile showroom and wondered if it’s costing the owner anything.
The truth is, holding inventory, including automobiles, incurs a business a significant amount of carrying costs. This may include showroom fees, taxes, employee costs, and insurance.
Moreover, if a buyer demands some customizations, that can’t be met as the owner deals in finished products. So, what can manufacturers do to minimize costs, hedge against the risk of demand volatility, and deliver goods according to customer requirements?
One way is to adopt an assemble-to-order strategy. In this post, we explore assemble-to-order workflow, including how it works. We’ll also provide some typical examples of assemble-to-order in real life. Let’s dive in!
What Is Assemble to Order (ATO)?
Assemble to order is a manufacturing strategy where products are assembled from components and sub-assemblies once customer orders are received.
As the name suggests, the strategy indicates that the product’s components are stocked up, but it’s yet to be assembled. As soon as the manufacturer receives an order for the products, the assembly work begins, and the goods are delivered quickly.
This is done by producing the key product components and customizing them to customer specifications. Once the customizations are done, the remaining assembly steps are pretty minor, and orders are often shipped within a few days.
Assemble-to-order is a hybrid of two related manufacturing strategies:
- Make-to-order (MTO)
- Make-to-stock (MTS)
Make-to-order is a manufacturing strategy where goods are manufactured once the order has been placed. In MTO, products are manufactured from scratch; hence it takes longer to deliver the final product to the customer.
Make-to-stock is a manufacturing strategy where goods are manufactured prior to a customer’s order, then stored to match supply with demand.
Assemble-to-order combines the benefits of the MTO and MTS strategies into one framework. The goal is to deliver goods quickly, reduce storage costs, and customize the product to customers’ requirements during production.
How Does Assemble-to-Order (ATO) Work?
In an ATO workflow, the manufacturer forecasts orders for the goods based on historical data, current trends, and the prevailing market conditions. Based on the forecasts, the manufacturer orders several sub-assembly parts for the goods.
A customer then places an order and gives instructions on how they want the product customized. Based on the order instructions, the manufacturer assembles the components into a finished product that’s then delivered to the customer.
Examples of Companies Using ATO
Dell is a well-known example of companies using the ATO technique. The company allows its customers to choose among several processors, disk drives, monitors, etc. A customer can choose numerous combinations of the components to be used.
The manufacturer keeps stock of all the components and assembles the product once they receive the order from the customer.
Flint Subsea, a provider of safety solutions to the offshore oil and gas sector, is another example of companies using the ATO technique. The company purchases components and only assembles them once an order is received.
Assemble-to-order (ATO) is a production model that ensures production starts when an order comes in. The process involves the manufacturer stocking up sub-assembly parts and assembling the parts into the final product when an order is placed.
By adopting the ATO strategy, businesses can deliver goods quickly, reduce storage costs, and ensure the goods are customized to the customers’ requirements.
Build-to-order software helps manufacturers save time and eliminate duplication and bottlenecks from the assemble-to-order processes. It also helps the production team track orders from quotations and purchases to assembly, dispatch, and invoicing.