Question

What are the four levels of customization and at what place does each occur in the supply chain?

Answer 1

The four levels of customization are Make-to-Stock (MTS), Assemble or finish-to-order (ATO), Make-to-order (MTO) and Engineer-to-order (ETO).

Make-to-stock products do not undergo customization and keeps finished goods inventory. The products are produced at high volume and the customers buy the products as it is. This level of customization happens in the finished inventory or distribution stage where the product is distributed from the finished goods inventory without direct input from the final customer.

Assemble-to-order products are customized at the end of the manufacturing process. Customization is limited and is determined at the last stage based on the customer’s order by adding limited features to the product. This level of customization happens between fabrication and assembly/finishing stage in the supply chain.

Make-to-order products use standard components, but these standard components are configured according to the customer’s order. Customization in MTO happens between material sourcing and fabrication stage in the supply chain.

Engineer-to-order products are designed and produced from the beginning of the manufacturing process according to the customer needs. The product includes both standard and customer specific components. The customization happens before the design stage of supply chain and the product is designed as per the customer requirement. All the other activities are determined only when the customer order arrives.