Difference Between MTS, ATO, MTO ,PTO ,CTO and ETO in OM

 Make-to-stock (MTS)

In MTS environments, products are created before receipt of a customer order. Customer orders are then filled from existing stock, and then those stocks are replenished through production orders. MTS environments have the advantage of decoupling manufacturing processes from customer orders. Theoretically, this enables customer orders to be filled immediately from readily available stock. It also allows the manufacturer to organize production in ways that minimize costly changeovers and other disruptions.

However, there are risks associated with placing finished goods into inventory without having a firm customer order or an established need. These risks tend to limit MTS environments to simple, low-variety, or commodity products whose demand can be forecasted readily.

 Assemble-to-order (ATO)

In ATO environments, products are assembled from components after the receipt of a customer order. The key components in the assembly or finishing process are planned and stocked in anticipation of a customer order. Receipt of an order initiates assembly of the customized product. This strategy is useful when a large number of end products based on the selection of options and accessories can be assembled from common components.

When products are too complex or customer demand is unpredictable, manufacturers may choose to hold subassemblies or products in a semifinished state. The final assembly operation is then held until a firm customer order is received. In this environment, manufacturers theoretically cannot deliver products to customers as quickly as MTS environments, since some additional time is required to complete the final assembly.

Make-to-order (MTO)

In MTO environments, products are made entirely after the receipt of a customer order. The final product usually is a combination of standardized and custom items to meet the customer's specific needs. MTO environments are more prevalent when customers are prepared to wait in order to get a product with unique features—usually customized or highly engineered products. This is analogous to the difference between a fast-food restaurant and a full-service chain restaurant. MTO environments are slower to fulfill demand than MTS and ATO environments, because time is required to make the products from scratch. There also is less risk involved with building a product when a firm customer order is in hand.

Engineer-to-order (ETO)

In ETO environments, customer specifications require unique engineering design, significant customization, or new purchased materials. Each customer order results in a unique set of part numbers, bills of material, and routings. ETO environments theoretically are the slowest to fulfill: Time is required not only to build the product, but to custom design it to meet the customer's unique requirements.

Assemble to Order (ATO) and Pick to Order (PTO) are stocking strategies that are used by manufacturers, when they can produce a variety of finished products from a relatively small number of subassemblies and components. This stocking strategy is widely known as the “hourglass” strategy, where you maintain your inventory at the narrowest level in your bill structure. This maintains inventory in a more flexible state and helps minimize your inventory investment. An ATO environment is where you wait until you have an actual sales order before you begin manufacturing the finished product. PTO implies that you will pick multiple items based on one line item on a sales order.

Configure To Order Environment

In both ATO and PTO environments you might actually configure products based on the customer order, or simply manufacture or ship standard products or predefined configurations. A configure to order environment is where you allow your customers to configure the finished product that they intend to buy. Typically you will offer a variety of choices to your customer from which they can choose the best options that suit them.

Market Orientation versus Stocking Strategies

Whether you offer configurable products depends on your market orientation; but if you do, you cannot follow a Make to Stock strategy. You will potentially follow one of the three possible stocking strategies—Make to Order (MTO), ATO, or PTO, depending on the complexity of your products (how configurable your products are). On the contrary, you can operate with an MTO/ATO/PTO stocking strategy but still choose not to offer configurable products. The difference between MTO and ATO is the level at which you stock your components. So, from here on, when we mention ATO we really mean both ATO and MTO because the business processes are similar albeit the stocking levels are different.

ATO/PTO Scenarios

In a configuration scenario, a model bill of material is used to represent the list of choices; if there’s no need to offer choices, a standard bill of material is used. The difference between models and items is essentially the ability to configure an item while creating an order. Beyond this creation of the configuration item, the manufacturing and distribution processes are the same for both models and standard items

In an ATO environment, the strategy is to forecast, build, and stock the subassemblies and parts that are used in the model. Oracle offers two flavors of ATO—the first one is the ATO model in which the customers can configure the product to their liking, and the other one is the ATO item that is preconfigured. Once the customer order is received, the subassemblies and components are assembled, according to the instructions in the routing, and shipped.

For configurable models, the subassembly/component list will vary with respect to each order and so will the manufacturing instructions (routing). So, a notional item is created for each unique combination of options using an automatic process. This item can be numbered and named according to your business needs. For example, when a model called MD45890 is ordered with a set of chosen options, the system will create a notional item to represent the chosen options, and numbers the new item as MD45890*99, based on your BOM parameters. This item is referred to as the configuration item in Oracle Applications.

The strategy in PTO is similar, although there is no manufacturing. There are two flavors of PTO as well—PTO models that can be configured by the customers and PTO kits that are ordered as they are. Because there is no manufacturing involved, PTO models or PTO kits can be shipped as soon as they are ordered, depending on the availability of the required items. When the pick list is generated for these items, the individual items that were selected (in the case of a PTO model) or that were part of the standard PTO kit will be printed in the pick list, which can then be picked and shipped.

 Oracle allows you to have hybrid items such as an ATO model within a PTO model. Starting with Release 11i5, Oracle supports multiple levels of configuration within a model; the applications will generate a unique configured item for each ATO model within a structure. Prior to Release 11i5, however, multiple ATO models could be used, but the result was one flat bill of material for all levels of configuration in the structure.