Design to Order: A Comprehensive Analysis

Design to order (DTO) is a manufacturing approach that requires a customer order to be placed before any products are produced. This methodology was developed to help companies increase efficiency and is often used when products are either highly customized or demand for them is low.

Customization and Flexibility

A key advantage of DTO is its focus on customization. Customers can specify their exact requirements and preferences, resulting in products that are tailored to their unique needs. This flexibility is particularly valuable for complex or specialized products where standard off-the-shelf options may not be suitable.

Pull-Type Supply Chain

DTO follows a pull-type supply chain operation, where products are made based on firm customer demand. This approach minimizes the risk of overproduction and inventory buildup, as products are only manufactured when there is a confirmed order.

Examples and Applications

Dell Computers is a notable example of a company that successfully employs the DTO production strategy. Customers can order fully customized computers online, selecting from a wide range of components and configurations. Other industries that benefit from DTO include manufacturers of medical devices, industrial machinery, and high-end consumer electronics.

Advantages of Design to Order

1. CustomizationAbility to fulfill orders with exact product specifications.
2. Reduced InventoryLower sales discounts and finished goods inventory levels.
3. Stock Obsolescence ManagementEffective management of stock obsolescence.

Disadvantages of Design to Order

1. Increased CostsCustomization may lead to higher production costs.
2. Longer Wait TimesCustomers may experience longer wait times for their products due to the customization process.

Comparison with Other Approaches

DTO can be contrasted with make to stock (MTS) manufacturing, where inventories are produced in advance of consumer demand. MTS is suitable for products with high demand and relatively stable specifications. In contrast, DTO is more appropriate for products with low demand or those requiring significant customization.

Engineer to Order

Engineer to order (ETO) is a similar approach where engineering activities are added to the product lead time. In ETO, the order engineering requirements and specifications are not known in detail, and substantial design and engineering analysis are required. ETO is typically used for highly complex and customized products, such as specialized machinery or industrial equipment.

Conclusion

Design to order is a valuable manufacturing approach that enables companies to fulfill customer-specific requirements and minimize inventory risks. While it may result in increased costs and longer wait times, the benefits of customization and flexibility often outweigh these drawbacks. By carefully evaluating product demand and customer preferences, manufacturers can determine whether DTO is the most suitable production strategy for their products.

References

1. Arena Solutions. (2023). Build to Order Definition. Retrieved from https://www.arenasolutions.com/resources/glossary/build-to-order/
2. Investopedia. (2020). Make to Order (MTO) or Made to Order: Definition and Example. Retrieved from https://www.investopedia.com/terms/m/make-to-order.asp
3. Wikipedia. (2023). Engineer to Order. Retrieved from https://en.wikipedia.org/wiki/Engineer_to_order

FAQs

What is design to order?

• Design to order (DTO) is a manufacturing approach where products are produced only after a confirmed customer order is received. It allows customers to specify their exact requirements and preferences, resulting in customized products that meet their unique needs.

What are the advantages of design to order?

• Advantages of DTO include the ability to fulfill orders with precise product specifications, reduced sales discounts and finished goods inventory, and effective management of stock obsolescence.

What are the disadvantages of design to order?

• Disadvantages of DTO may include increased production costs due to customization and longer wait times for customers as products are made to order.

How does design to order differ from make to stock?

• Design to order differs from make to stock (MTS) in that products are manufactured only when there is a confirmed customer order, while MTS involves producing inventories in advance of consumer demand. DTO is suitable for products with low demand or those requiring significant customization, while MTS is appropriate for products with high demand and relatively stable specifications.

What is engineer to order?

• Engineer to order (ETO) is a similar approach to DTO, but it involves additional engineering activities and design analysis. In ETO, the order engineering requirements and specifications are not known in detail, and substantial engineering effort is required to complete the product. ETO is typically used for highly complex and customized products, such as specialized machinery or industrial equipment.

What industries commonly use design to order?

• Industries that commonly use DTO include manufacturers of medical devices, industrial machinery, high-end consumer electronics, and companies offering customized products or services.

How can companies determine if design to order is the right approach for them?

• Companies can evaluate product demand, customer preferences, and the level of customization required to determine if DTO is the most suitable production strategy for their products.

What are some examples of companies that successfully use design to order?

• Dell Computers is a notable example of a company that effectively employs the DTO production strategy, allowing customers to order fully customized computers online. Other companies that utilize DTO include manufacturers of medical devices, specialized industrial equipment, and high-end consumer electronics.