Producing to Order

One way in which a business can better match supply to demand is to produce to order.

PRODUCING TO ORDER

Produce to order is an approach to production where the production of an item begins only after a confirmed customer order is received.

By using mass customisation techniques, it is possible to include a customer's specific requirements into the product.

As a simple example, most restaurants match demand with supply by using produce to order. You order what you'd like from the menu and the production process begins! As a restaurant customer you might make some specific requests about your food which can be incorporated into production. Alternatively, in a fast-food environment, you pick a standard product from the menu.

The key benefits of using production to order include:

• Lower levels of finished goods in inventory = lower inventory holding costs & less risk of obsolescence
• Greater customer satisfaction = customers get what they want

Some potential downsides are:

• Capacity to produce to order may be limited; although mass customisation is automated, it doesn't work for all products
• It may be difficult to handle sudden or unexpected increases in demand