Make to Stock (MTS)

Make to Stock (MTS)

Make to Stock (MTS) is a traditional production strategy in which manufacturers produce goods in advance based on forecasts of customer demand. Inventory is held ready for sale so that products can be delivered quickly when orders arrive.

How MTS works

• Demand forecasts—usually derived from historical sales and market analysis—drive production volumes and timing.
• Production is scheduled to build inventory ahead of anticipated demand peaks (for example, producing more in summer for holiday season sales).
• Operations may be adjusted periodically (ramping up or down) rather than maintaining a constant production rate year‑round.

Benefits

• Faster fulfillment and shorter lead times because finished goods are already in inventory.
• Efficient for high‑volume, stable‑demand products where forecasting is reliable.
• Can smooth manufacturing runs and improve equipment utilization when demand patterns are predictable.

Drawbacks and risks

• Heavy reliance on forecast accuracy: poor forecasts lead to excess inventory or stockouts.
• Excess inventory ties up working capital, increases storage costs, and risks obsolescence—especially in fast‑moving industries (electronics, fashion, toys).
• Periodic production adjustments can raise operational costs if not managed efficiently.
• Less flexible than demand‑driven approaches when demand is volatile, seasonal, or highly variable.

Alternatives

• Make to Order (MTO): Production begins only after a confirmed customer order, minimizing finished‑goods inventory but increasing lead time.
• Assemble to Order (ATO): Components are produced and stocked in advance; final assembly occurs after an order is placed—balancing responsiveness with lower inventory risk.

Example

A toy manufacturer supplying large retailers may use MTS to prepare for holiday demand. Based on past years, it might increase production in the months before the fourth quarter so retailers have enough stock. Under MTO, the manufacturer would only increase production after receiving larger retailer orders. Under ATO, raw components or basic parts would be made in advance while complete kits are assembled only after orders arrive.

When to use MTS

MTS is best for products with:
* Predictable, stable demand patterns
* High production volumes and low product variability
* Long production lead times that require advance planning

Avoid MTS for highly customized, rapidly changing, or very unpredictable product lines.

Key takeaways

• MTS matches inventory to forecasted demand and enables quick fulfillment.
• Its success depends on accurate forecasting and effective inventory management.
• Consider MTO or ATO when demand is uncertain or customization and flexibility are priorities.