The quality and efficiency of the final product are market preferences. Manufacturers seek to minimize the cost of production and increase the quality of products. The final customers have demands that need to be met. The current paper discusses the gap in the market between customer’s requirements and the systems that attempt to supply the corresponding products. The discussion about customization and the designed systems of production will follow. Additionally, details on how the changes broadened the market will be put forth; and the pros and cons faced by the manufacturers will be stated. Furthermore, the definition of the role of the product-process matrix, how it relates to build-to-order and the effect on the manufacturing industry are of particular interest for the current project.
Built to Order vs. Built to Stock/Forecast
The process of built to order (BTO) is a context whereby the process of production only occurs after demand from a final customer arises. The consumer issues the order with specifications in design (Holweg & Pil 2001). The customer places the order, and the manufacturer proceeds with the production of the product. The strategy is the pull-type supply that explains that the product is only being manufactured after a customer demands it. In sectors, where the manufacturing of highly configured products is expensive, such as the automobile and computers, the pull-type of supply is very efficient.
On the other hand, there is the built to the stock process of production, whereby the manufacturer produces items to stock as per the direction of the Enterprise Resource Planning (ERP). The administration uses ERP in forecasting the sales of a product within the specified periods (Umble, Haft, & Umble, 2003). The production process is flexible to the changes that might occur in the sales forecast. The balance between the actual and potential is critical. The company should avoid keeping excessive stock, because a potential market may suddenly diminish the demand for the product.
The BTO process of production model has an enormous advantage of the client/customer receiving the exact custom-made product with every specification that meets their needs perfectly. It is a win-win process for both the manufacturer and the client. On the other hand, the BTS process of production is a ready-made inventory; thus, the clients are forced to accept the good as it is (Holweg & Pil 2001). The manufacturer possesses the opportunity to be creative and showcase their original inventory. Therefore, if a company is successful in building customer trust, it will enter the wider market.
The Fordism era created the circumstances for the appearance of the BTO system. It provides lower the cost of production and avails the standardization of manufacturing. Moreover, the process assures decent wages for workers, so they can afford to buy the inventory they produce. Consequently, the manufacturers increase income to run the industries with ease, while the customers receive the products worth their money. On the other hand, the Lean Manufacturing Japanese methodology has significantly aided the manufacturing process in the BTO system of production. The methodology aims to minimize the wastage of resources and decrease the cost of production as much as possible. Moreover, the system attempts to maximize the output with the intent of adding value to the product. It systematically eradicates all the seven Muda, which are defects, inventory, motion, transportation, waiting, over-processing and over-production, commonly referred to as TIM WOOD. Furthermore, the approach keenly focuses only on the features desired by the client contrary to the BTS system.
The vital mode in the lean manufacturing approach that helps the company keep small size inventories while producing high volumes of goods is the Just in Time (JIT) approach. The method has a positive contribution to the industry. The aspect of handling production per order has proved to be a very efficient strategy in the business. On the other hand, disadvantages are present. Firstly, the manufacturing starts only upon request, as there is no free inventory in stock. Secondly, in seasons of demand fluctuation, the manufacturer can encounter short deadlines and no orders coming in at all.
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Implications of BTO
In the built to order production system, the manufacturers are challenged to meet the customer’s expectation through producing the exact custom-made product ordered (Holweg & Pil 2001). It gives the company a push to become as creative as possible and ensure that the quality corresponds to the budget. The creativity motivates inventions that can differentiate the company from the competitive manufacturers in the industry. The product customization strengthens and high-ranks the company’s brand quality through widening the market to their advantage. With the task to deliver nothing but the best, the manufacturers can broaden the client base. It results in increased capital and higher cash flow, which contributes to improved salaries for the workers in this industry.
Moreover, the pressure for creativity helps the manufacturers to discover new skills and lower the cost of production. The changes eliminate wastage of resources by reducing the inventory costs for a high volume of production. In BTO, standardization is a requirement for orders with multiple productions. ERP systems connect the mass production o with the exact equivalent specifics per order. With the compound ERP system of BTO, the manufacturers manage the purchasing of items with flexibility. The strategy has enabled the procurement of materials at an affordable price in time for production. It also defines the alternative suppliers in time of need.
BTO provides flexibility in the system. For instance, the management can speed up one order and slow down another (Umble et al. 2003). The strategy addresses the urgent orders and prevents misunderstanding between the manufacturers and the customers in terms of delivery. Thus, customer care is excellent. The system eliminates the need for customers to visit the store, as it does not allow stocking products.
Without a doubt, BTO manufacturing faces challenges. Some orders may cause issues due to the technicality aspect or unclear specifications. The hindrances cause time wastage resulting in the loss of opportunity to handle new orders. The customer case and clear specification of the order procedure can address the possible problems. Another challenge is scheduling. The manufacturer has to keep track of everything and a little mishap can push the schedule off track. Therefore, the responsibility for planning and control of resources is critical for the technique.
Product Life Cycle and Product-Process Matrix
The product life cycle starts from the inception of the product until it exits the market. It is a crucial phenomenon in the manufacturing process (Cox 1967). Some products go through the rise and fall in the market without reaching the final stage. However, most items undergo the following stages of the life cycle.
Before the product is manufactured, a potential market is defined by the marketing strategy. Awareness about the product is established with product branding, trademarks, and patents for its legal protection. In the beginning, the value of the invention in the market is low, but it gradually increases. Promotions create more awareness about the product and stimulate growth in the market. The item protects quality and pricing as demand rises. Eventually, the market widens as the competitors appear and create the need to define competitive advantage. The distribution network intensifies and there is the differentiation of pricing. As the competition exaggerates, the manufacturers try to rejuvenate the product by enhancing features. The prices start to decline. In response to market changes, the manufacturers seek to avail the product to the market as an act of loyalty to their customers. However, they finally stop their production due to its diminishing demand. The decline stage is the time when the product exits the market, and another one enters. The technology determines the obstacles in the market. The failure to consider the technological life cycle can lead to significant loss due to the fast decline of the product. A wise manufacturer seeks in-depth analyses of the correlation between product and technology life cycles. The relationship between the two sequences is known as the product-process matrix.
The product-process matrix is involved in the built to order process, as their orders demand customizations requires creativity to meet certain customer’s needs (Cox 1967). The BTO process of production requires absolute concentration to the developing technology; as the devices ordered have to correspond to certain specifications. The detailed specifications brought about the built to order the process of production. The particular desires of consumers motivated the new designs. In the product-process matrix, the manufacturers are able to control the labor that allocates a good routine that favors the entire team at work. As a result, companies achieve quality input. The method allows controlling flexibility and speed of the product manufacturing by changing the process design.
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The Return on Capital Employed (ROCE)
The Return on Capital Employed (ROCE) was the rebirth of the built-to-order system of production in the 1980s. It measured the returns earned by a company and the efficiency of investment (Froud 2003). It helped in regulating the interest expected from the businesses and assisted in managing the production of a quality product at a low cost with minimum wastage. The ratio was employed in the car manufacturing industry when the production of vehicles proved to be very expensive in the growing market (Nielsen & Nielsen 2008). The motorcycle industry had resulted in difficulties for industry, as their products were expansive.
In the late 1980s, BMW and Honda among few other businesses revived the market after manufacturing cars for prominent executives. The production process included the specifications that increased the model’s quality, which resulted in new demands. Several other products followed the same specifications. Therefore, the manufacturer produced some of the best-performing cars in the area (Froud 2003). The outcome encouraged the new system of production for quality cars under the minimum costs. Thus, the BTO system of production dominated the industry.
Built-to-Order as the New Dominant Approach
In the manufacturing industry, products can face slow acceptance in the market due to varying reasons. One is the affordability of the item and its corresponding applicability and viability. Another element is the mechanical complexity that hinders ease of use. According to Holweg and Pil (2004), BTO is a crucial element of customization in the manufacturing industry.
The evolution of motor cars was taking a dynamic shift in response to customer specifications. The traditional norm of purchasing a vehicle suited a prospective customer preference. However, the manufacturing industry was static in responding to consumer requirements. To some extent, the causes are the slow evolution of operations in the sector as well as the passive adoption of technology. The two elements were crucial in addressing customer specifications that came during the late 1990s and early 2000.
When firms began appreciating the growth of technology, the philosophy of Built-to-Order entered the motor industry (Lanzara & Patriotta 2007). BMW, Honda, Chrysler, and Daimler began registering high sales volumes. The management was able to optimally accrue some of the best advantages of the philosophy. Therefore, the BTO approach dominated the motor manufacturing market significantly. The idea was suitable for customers because it responded to their preferences. The motor industry began taking a new manufacturing direction which defines the modern motor industry. In the approach, no material would go to waste. After vehicles were manufactured to customer’s satisfaction, the remaining materials would be used in spare parts. BTO approach popularised a car model due to the long-term maintenance capability of the vehicle. Thus, it became a significant element in ensuring that the public had a high level of trust that contributed to sales growth.
The BTO approach began spreading its domination to other motor development areas such as motorcycles. For instance, in the time frame of BTO development, BMW began specializing in motorcycles. The approach would have a high response rate in terms of deliveries. More motor-related products took the direction, which became a new way of satisfying consumer needs. The modern market relates to the model based on vehicle selection for purchases.
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The customization approach is spread widely in many production companies, such as computer manufacturing and real estate. It is possible to personalize almost any product thanks to the BTO system of manufacturing. The demand and competition have begun to intensify around the world, especially when the governments collaborate in scrutinizing the entire locomotive value chain with a very keen eye on externalities. With the rate of technology advancing, the evolving systems will entirely change the game in the manufacturing industry globally.
The persistent growth has proved to be very challenging to some parts of the world, where the technology is growing fast, and the population is dense. The high production has also resulted in the infrastructure being severely strained not forgetting the environment. The future car will have the ability to communicate with its holder, trace its way around and detect the security conditions. Reception and transfer of information will be very easy and possible through auto-motives manufacturing. The BTO approach contributed significantly to the changes in the automotive sector, as the responses to individual requests created the new supercars.