Make to order (MTO): Benefits and challenges of manufacturing on demand

Make to order — often referred to as made to order or build to order — is gaining traction as consumers increasingly seek products tailored to their needs. People are placing more value on exclusivity, often willing to wait a bit longer if it means receiving exactly what they want. Across various industries, traditional mass production models are being enhanced with more flexible, customer-centric approaches like make to order.

In this post, we’ll dive into what make to order means, how it works, its advantages and challenges, and which industries are embracing this production strategy.

What is make to order?

The make-to-order (MTO) model is a strategy where products are manufactured only after a customer places an order. This approach allows companies to offer a high level of customization, optimize resources, and minimize waste, since they produce only what has been sold or will certainly be sold.

Unlike make to stock (MTS) — the traditional method of manufacturing for inventory — MTO enables greater product personalization and lowers the risk of stock becoming obsolete in the warehouse. Because the merchandise is delivered shortly after production, make to order also reduces the costs associated with long-term storage.

This strategy is especially useful in industries where demand is difficult to predict or where customers place a high value on customization. For instance, some furniture manufacturers receive orders that vary in materials, dimensions, or styles according to client preferences. Another typical example is in the automotive industry, where certain carmakers allow buyers to tailor their vehicle (choosing engine type, color, finishes, or features) before production begins.

What are the advantages of make to order?

Adopting a make-to-order model aligns businesses with specific customer expectations. Below are the key operational and strategic benefits organizations can gain from this approach:

• Customization. Companies can tailor each product to meet individual customer preferences or requirements. This personalized experience enhances satisfaction and strengthens loyalty.
• Greater flexibility. Businesses can pivot more easily to shifts in demand or new market trends, as they aren’t tied down by large quantities of pre-manufactured inventory.
• Inventory optimization. By producing only what has been sold, businesses avoid unnecessary overstock, reducing storage costs and the risk of obsolescence.
• Sustainability. Minimizing excess inventory and manufacturing only what’s needed streamlines resources and trims waste, helping companies move toward a more environmentally friendly supply chain.
• Improved financial control. When each product is linked to a confirmed order, there’s an assured buyer. This eases commercial uncertainty while enhancing financial planning.
• Operational efficiency. While MTO requires precise coordination, it can increase overall supply chain efficiency: by focusing efforts solely on actual orders, it eliminates wasted resources on unsold products.

What are the challenges of make-to-order production?

While make to order (aka manufacture to order) offers numerous benefits, it also presents hurdles that businesses must overcome to fully capitalize on its potential. One is lead time: since production only begins after an order is placed, delivery times can be longer compared to other manufacturing methods. This requires organizations to maintain a well-coordinated supply chain to avoid delays and meet customer expectations.

Cost control is another significant challenge. Without mass manufacturing, companies lose the advantages of economies of scale, which can drive up the cost per unit. Additionally, this model demands greater flexibility in materials, processes, and production capacity, complicating planning and tightening profit margins.

Lastly, customization increases the complexity of order management. When customers select from multiple options — e.g., dimensions, materials, or finishes — businesses must guarantee that specifications are accurately interpreted to prevent errors, returns, or rework. With clear communication and the right systems in place, organizations can effectively minimize these risks.

Make to order vs. make to stock

In contrast to the make-to-order (MTO) model, which only produces what has been sold, make to stock (MTS) involves manufacturing products in advance and storing them until they are purchased. Commonly used by businesses with predictable demand, this system allows them to prepare for potential spikes in consumption. However, to avoid overstocking items that may become obsolete, MTS requires highly accurate demand forecasting based on historical data and market trends.

Make to order vs. engineer to order and assemble to order

Make to order is often complemented by other models such as engineer to order (ETO) and assemble to order (ATO). In the ETO model, products are designed from scratch after an order is received, entailing a customized engineering phase before manufacturing begins. This approach is used in industries like construction or industrial machinery, where orders call for tailor-made solutions.

Meanwhile, the ATO model employs standard components kept in stock, which are assembled once a customer places an order. This method offers a certain level of personalization with shorter lead times, as it eliminates the need for design and full-scale manufacturing from the ground up

Examples of companies using make-to-order manufacturing

Make to order is an ideal strategy for organizations where customization adds significant value. Below are some industries that leverage this model:

• Automotive. Certain brands allow customers to customize their vehicles by selecting the color, engine type, interior finishes, assistance systems, and other features. Manufacturing only begins once the chosen configuration is confirmed.
• Healthcare. For medical devices like orthopedic insoles, prosthetics, and hearing aids, production can be tailored to the specific measurements and needs of each patient, ensuring greater effectiveness and comfort.
• Furniture. Furniture companies design pieces according to specific dimensions, materials, colors, and styles. Once the order is placed, they manufacture the product to match the client’s space and preferences.
• Hardware. The MTO model is common among businesses that build custom-configured computers. It allows customers to choose the processor, RAM, storage capacity, or graphics card.
• Jewelry and fashion. Many jewelers create personalized pieces (e.g., engraved rings or pendants with initials) that are produced only after the order is received. In fashion, brands and stores also offer made-to-measure garments and exclusive designs that are manufactured on request.
• Industrial systems. In logistics environments, many technical solutions are developed under the MTO model. For example, automation systems and specialized machinery require specific adaptations for each client. These setups may include particular features depending on the industry type, available space, production volume, or integration with other solutions.

Implementing an MTO strategy in the warehouse

The MTO model represents a significant shift in warehouse management. Instead of handling large volumes of finished goods, companies maintain very low inventory levels, consisting mainly of raw materials and basic components for manufacturing.

In some cases, this approach is complemented by systems like just-in-time (JIT), which guarantees that materials or products arrive in the exact quantity needed, at the precise location, and at the right time. The advantage of JIT is that it eliminates unnecessary processes while minimizing waste.

For MTO to work efficiently, it’s essential to have a warehouse management system (WMS) that tracks inventory in real time, coordinates inbound and outbound material flows, and synchronizes operations with production orders. This tool ensures that each component reaches the production lines exactly when needed. Additionally, it enables full traceability and more effective planning of logistics operations.

Make to order: Responding to a changing market

The make-to-order model allows companies to adapt to a dynamic environment where products are tailored to meet each client’s needs. This approach reduces inventory costs and mitigates the risks of overstock and stockouts. Beyond optimizing resources in certain scenarios, it supports a more quality-driven manufacturing process. MTO enhances the customer experience, especially in industries where personalization is a key differentiator.