Make-to-forecast: customization with fast delivery

Abstract

Purpose – The purpose of this paper is to attempt to achieve customization while maintaining quick delivery to customers by use of a hybrid of make-to-order (MTO) and make-to-stock (MTS) strategies. Design/methodology/approach – The paper reports on various studies based on simulation, optimization, and Markov analysis to respond to some of the unique challenges of the hybrid strategy. Findings – Implementation of the make-to-forecast (MTF) hybrid strategy provides considerable competitive advantage in certain manufacturing situations by achieving as much as 50 percent shorter delivery times for highly customized products than would be possible with a pure MTO strategy. It also has potential to offer competitive advantages to pure MTS and MTO operations. Research limitations/implications – The manufacturing situations, appropriate for MTF paradigm, are fairly complex. The paper reviews only several of the many managerial challenges. For instance, it assumes a given product variety but does not dwell on what the optimum product variety offering should be. Additional research to this and other aspects of the situation is warranted. Practical implications – The paper reports on a real managerial problem. The suggested approaches can be easily implemented by certain manufacturing companies striving to achieve competitive advantage by offering shorter delivery time and substantial customization to their customers. Originality/value – Managing the trade-off between delivery time and degree of customization is not new. Assemble-to-order, mass customization, and postponement strategies have been suggested to soften the trade-off. This paper provides a new paradigm for the same challenge based on pre-release of units into the manufacturing system in anticipation of customer orders.