Build to Order or Build to Forecast Essay Example
‘Build to Order’
OR
‘Build to Forecast’?
Prepared by: Shivali Bhargava Table of Content:
• Introduction
• Build to Forecast Model
• Build to Order Model
• Transformation of Manufacturing
• Industry examples
• Cost Benefit Analysis
• Trend
• Exhibits
Introduction:
The evolution of modern manufacturing began with the assembly line era wherein inventories sourced from varied suppliers and manufactured products at their shop floor purely on the basis of demand forecasting based on prior years sales and emerging market trends. The industry has long worked upon this model and has achieved a fair bit of precision in estimating demand. However, in the last decade and half, the manufacturing has been slightly tweaked to produce goods as and when and as and how the customers want it. As of today, most of operations management research characterizes production on system as either Build to Order (BTO) or Build to Forecast (BTF). The former typically offers customer-specific and more expensive products, wherein the focus is on order execution. The main performance measures are average response time, average order delay etc and the priority is shorter delivery lead-time. Operationally speaking, the issues primarily are capacity planning, order acceptance/rejection, and high due date adherence.
On the other hand BTF systems have been traditionally offered a low variety of producer-specified and typically, less expensive products. The main operations issues for the system are inventory planning, lot size determination and demand forecasting. The performance measures basically line item fill rate, average inventory levels.
There is consistent buzz in the industry about the relative pie of the market that each of the models will be able to carve out. The current situation is heavily biased towards the BTF model which has traditionally been followed. However, the mindset of manufacturers is slowly
OR
‘Build to Forecast’?
Prepared by: Shivali Bhargava Table of Content:
• Introduction
• Build to Forecast Model
• Build to Order Model
• Transformation of Manufacturing
• Industry examples
• Cost Benefit Analysis
• Trend
• Exhibits
Introduction:
The evolution of modern manufacturing began with the assembly line era wherein inventories sourced from varied suppliers and manufactured products at their shop floor purely on the basis of demand forecasting based on prior years sales and emerging market trends. The industry has long worked upon this model and has achieved a fair bit of precision in estimating demand. However, in the last decade and half, the manufacturing has been slightly tweaked to produce goods as and when and as and how the customers want it. As of today, most of operations management research characterizes production on system as either Build to Order (BTO) or Build to Forecast (BTF). The former typically offers customer-specific and more expensive products, wherein the focus is on order execution. The main performance measures are average response time, average order delay etc and the priority is shorter delivery lead-time. Operationally speaking, the issues primarily are capacity planning, order acceptance/rejection, and high due date adherence.
On the other hand BTF systems have been traditionally offered a low variety of producer-specified and typically, less expensive products. The main operations issues for the system are inventory planning, lot size determination and demand forecasting. The performance measures basically line item fill rate, average inventory levels.
There is consistent buzz in the industry about the relative pie of the market that each of the models will be able to carve out. The current situation is heavily biased towards the BTF model which has traditionally been followed. However, the mindset of manufacturers is slowly