Question

Dell Computer has excelled with a fast-paced build-to-order approach that involves taking customer orders online, orchestrating production tailored to each customer, and forging a one-to-one relationship with the customer after the sale. Some auto industry executives have turned to Michael Dell, the company founder, for advice concerning how to make their businesses look like his. Senior executives at Ford, for example, envision a future where customers will order online and factories will build to order, eliminating billions of dollars of inventory costs (for example, large stocks of vehicles on hand). All of those mass-produced cars sitting for weeks on dealer lots represent a massive investment that yields no return until a buyer comes along. How would a build-to-order system alter the way in which suppliers (business marketers) would serve Ford as a customer?

Answer 1

Build to Order (BTO: also referred to as Make to Order or Made to Order (MTO)) is a manufacturing method where before a verified order for products is issued, products are not produced. The time and number of items delivered is then decided by the end consumer.The ordered product is tailored to meet the design requirements of a person, agency or company.These production orders may be created manually or through inventory / production management programs.BTO is the oldest order fulfilment form and is the most suitable method used for highly custodial goods. This manufacturing strategy is used by companies with costly inventory. In addition, "Made to order" items are popular in the food service industry, such as in restaurants.

In order to minimise wasted time and improve performance, BTO can be called a Just in Time ( JIT ) production system, as components or goods are produced just in time when needed.

Implementation of BTO
For highly configured goods, such as vehicles , motorcycles, computer servers, or for goods where maintaining inventories is very costly, such as aircraft, this approach is considered fine. In general, since high-tech companies such as Dell, BMW, Compaq and Gateway have successfully introduced the method in their business operations, the BTO approach has become more common in recent years.

BTO for Ford in the automotive industry
BTO is a demand-driven development strategy in an automotive sense, where a product is planned and installed in response to a reported order obtained from a final customer for it. The final customer of ford shall apply to Ford and shall exclude all orders from the supply chain by the original equipment manufacturer ( OEM), the national sales company (NSC), the distributor or point of sale, the bulk order or any other intermediary. BTO removes the feature of order adjustment, whereby Ford can forecast orders in the pipeline are changed to customer requirements, as this is seen as another level of complexity (also known as build to forecast (BTF)) for a build to stock system (BTS).

BTS is can be used in Ford as a  dominant approach in in Ford automobile industries and refers to goods designed before a final buyer has been established, with production volume driven by historical demand knowledge.This high stock level, endemic in the automotive industry, helps certain dealers throughout the dealer networks and supplier parks to discover an exact or very near match to the desired vehicle of the customer. As soon as transport can be arranged, the ford car can then be shipped. To explain stock levels, this has been used. The approach is costly, mainly in terms of stock, but also transportation, as finished goods are rarely where they are needed, while providing a fast response to customer demand. Holding stocks of such high cash value as finished vehicles is a crucial cause of the automotive industry's current problem-a problem that could be alleviated by the introduction of the BTO system.

The BTO method does not mean that only after a customer order has been confirmed can Ford in the supply chain deliver. Clearly, it would not make economic sense to hire BTO as a manufacturer of low-value, high-volume pieces. It is fitting that these, essentially BTS, should be identified and installed to a supplier order. In a BTO supplier network, part of the challenge is the recognition of which Ford should be BTO and which BTS. The point in the supply chain is called the 'decoupling point' when this transition happens. Currently Ford lack a decoupling point.

The business sales order department and inventory management department must also be properly connected. Inventory managers need to know which parts are in high demand and when to order more, because orders are designed for customization. This is particularly important during peak demand periods, when the lack of components can stop production and harm the turnaround times of the order. This connexion can also help inventory managers minimise inventory on components with low demand on the flip side, which can also keep costs down.

In environments of high product variety, the key benefits of the BTO approach are the ability to provide the consumer with the exact product specification required, hence Ford can the reduce  in sales discounts and finished good inventory, as well as a reduction in the risk of stock obsolescence. Furthermore, versatility and customer lead time are increased to comply with shifts in market demand. In addition, with the BTO, the cash flow of a Ford can be improved.

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