The debate between build-to-order and build-to-stock has been around for years. So which method is best for your business?
It depends on several factors, including your production process, inventory management strategy, and customer base.
In this guide, we’ll take a closer look at both methods and explore the pros and cons of each.
What Is Build-To-Order (BTO) & Build-To-Stock (BTS)?
Build-to-order (BTO) is a system of producing products based on customer orders instead of anticipating the market’s needs.
In BTO, companies create the product after receiving an order from a customer and only manufacture what they’ve sold. This strategy allows the company to reduce the risk associated with having too much or too little inventory and helps them save money in terms of manufacturing, labor, and storage costs.
As such, BTO provides tailored solutions that are more likely to meet customer expectations.
On the other hand, build-to-stock (BTS) production involves anticipating customer demand and providing inventory for sale upfront. The goal is to have products available for purchase when customers are ready to consume them without waiting for custom production.
Financial institutions often use BTS because it’s more efficient for high-demand items like computers and cars.
BTS can help streamline capital expenditures and maximize inventory turnover rate by providing pre-manufactured stock simultaneously across different markets.
Ultimately, while both strategies have their advantages and disadvantages, they each serve a purpose in different industries and help businesses keep up with changing customer needs.
Advantages Of Built-To-Order & Built-To-Stock
An effective inventory management system is essential for businesses that produce goods and products for consumers.
Depending on the industry and desired customer service goals, some business owners may employ a Built-To-Order (BTO) or Built-To-Stock (BTS) strategy.
With BTO, orders are fulfilled based on customer specifications as they come in, allowing for personalization and customization of services. The advantage of this approach is that it can offer exceptional customer service due to its ability to meet individual needs.
On the other hand, BTS takes the opposite approach by having an ongoing inventory of pre-made products on hand. This can be beneficial in cases where things such as seasonal items need to be ready before customers need them.
While this method results in fewer customization options than BTO, it can sometimes be more cost-effective due to the lack of production costs associated with individual orders.
Ultimately, each strategy has its advantages and disadvantages depending on a company’s goals and market forces; however, understanding each method will help businesses determine which is best for their situation.
Comparing BTO and BTS
Bulk and transactional ordering (BTO and BTS) are popular inventory management systems that have been around for some time.
Both systems offer advantages and disadvantages regarding the production process, inventory management, customer satisfaction, and cost.
When it comes to the production process, BTS, which focuses on large production runs, makes it easier to produce large batches at once. This helps reduce costs related to labor and materials.
On the other hand, BTO offers greater flexibility but requires more frequent changes in the production process. This can be costly for small businesses with limited paid workers on staff.
Regarding inventory management, BTO allows businesses to manage better stock levels and forecast needs on a larger timeline, while BTS will enable them to respond quickly to customer demand.
Additionally, customers tend to prefer the BTS option as they can receive quicker deliveries due to shorter lead times resulting from smaller batch sizes.
Furthermore, while either system may result in cost savings depending on production volumes and frequency, BTO tends to require higher upfront investments in equipment, making it more expensive upfront than traditional transaction-based options like BTS.
Ultimately both have advantages and disadvantages that need careful consideration before deciding which is best for your business requirements.
Recommendations For When To Use BTO Or BTS
When choosing between BTO (Build-to-Order) and BTS (Build-to-Stock) strategies, business owners should first consider their overall goals and objectives.
For smaller companies with limited resources, a BTS strategy may be more efficient in terms of time and cost savings. This allows them to build up inventory and quickly meet customer demand without waiting for long production times or incurring high costs associated with custom orders.
On the other hand, larger businesses that require higher efficiency and flexibility may benefit from using a BTO approach. With this strategy, each item can be customized according to specific customer requirements, which allows for greater accuracy in meeting customer needs.
Additionally, lead times and customer service levels can also be significantly improved by using a BTO approach.
Ultimately, the best strategy depends on the specific needs of the business – understanding operations, financials, and market conditions are critical when deciding whether BTO or BTS is suitable for the business.
How Apple Uses BTO & BTS Effectively
In recent years, companies have increasingly been looking for more cost-effective ways to produce and deliver products, leading to the emergence of build-to-order (BTO) and build-to-stock (BTS) models. These models allow companies to reduce costs while still meeting customer demand.
Apple is a great example of a company that has successfully implemented BTO or BTS. Apple has long been known for its high-end electronics and uses an effective combination of build-to-order and build-to-stock strategies.
By stocking certain popular items in advance, they can quickly meet customer demand without incurring additional costs.
However, for items such as their latest iPhones and MacBook Pros, Apple offers a unique build-to-order service that lets customers design and customizes their devices without waiting weeks for production and delivery. This approach allows them to keep more control over the quality of their product while still providing customers with precisely what they want.
Ultimately, this strategy has helped Apple remain competitive despite the increasing costs associated with producing high-end electronics products.
In short, any company looking to maximize efficiency while minimizing costs can learn a lot from Apple’s successful use of build-to order/build-to-stock techniques.
So, what’s the verdict? Well, it depends. Build-to-stock may be a better option if you have a short production process and can easily ramp up production to meet customer demand.
But build-to-order may be a better choice if your production process is lengthy or you can’t produce large quantities quickly.
Whichever method you choose, ensure you have an effective inventory management strategy in place to keep up with customer demand.