Make to order and make to stock are the two basic strategies for the timing of production: when do you build, relative to when the customer buys. Many manufacturers use both, for different products. This piece explains the difference, the trade-offs, and how to tell which strategy fits a given product.
The two strategies
Make to stock means producing in advance, against a forecast of demand, so that finished products are ready when orders arrive. The customer buys from stock that already exists. Make to order means producing only after a customer order is confirmed. Nothing is built ahead; the order triggers the production. The single difference is timing: build before the order, or build after it.
What make to stock trades
Make to stock gives the customer immediacy. The product exists; it can ship at once. That fast delivery is a real competitive advantage for products customers expect to buy off the shelf. The price of it is two things. First, inventory: the manufacturer holds finished goods, which ties up cash and warehouse space. Second, forecast risk: because production runs against a forecast, a wrong forecast leaves the manufacturer either short, missing sales, or long, holding goods that may not sell. Make to stock is, in essence, a bet on the forecast in exchange for speed.
What make to order trades
Make to order makes the opposite trade. It carries little or no finished-goods inventory and runs no forecast risk on finished products, because nothing is built until it is sold. That frees cash and removes the danger of unsold stock. The cost is the lead time: the customer waits while the product is manufactured. Make to order trades immediacy for low inventory and no forecast risk.
How to tell which fits a product
The choice is made per product, not per company, and a few honest questions decide it.
How predictable is demand? Steady, predictable demand can be forecast, which makes make to stock viable. Lumpy, uncertain demand forecasts badly, which favours make to order.
How many variants are there? A product with few variants can sensibly be built to stock. A product with many configurations cannot reasonably all be held in stock, which pushes toward make to order.
How costly is the product to hold? A cheap, compact product is cheap to stock. An expensive or bulky one is costly to hold as finished inventory, which favours make to order.
What do customers expect? If customers expect immediate delivery, make to stock may be necessary to compete. If they accept a lead time, or expect the product to be made to their specification, make to order fits.
Most manufacturers do both, and the hybrid
In practice most manufacturers use both strategies across their product range: high-volume, predictable, low-variant lines to stock, and customised, costly, or unpredictable lines to order. There is also a common hybrid, sometimes called assemble to order: components and sub-assemblies are built to stock against forecast, and final assembly waits for the order. That hybrid captures much of make to stock's speed and much of make to order's flexibility, and it suits products with a common base and many final variants.
What it means for the system
Because most manufacturers run both strategies, an ERP needs to handle both, and the hybrid, cleanly, per product. Planning has to drive some products from forecast and others from confirmed orders, and the system has to keep both honest at once. A manufacturer choosing an ERP should confirm it supports the mix the business actually runs, not just one strategy. For how we approach this, see our manufacturing work.