Build to order

This approach is considered good for highly configured products, e.g. automobiles, bicycles, computer servers, or for products where holding inventories is very expensive, e.g. aircraft. In general, the BTO approach has become more popular in the last few years ever since high-tech companies such as Dell, BMW, Compaq and Gateway successfully implemented the system into their business operations. ==BTO in the automotive industry==

In an automotive context, BTO is a demand driven production approach where a product is scheduled and built in response to a confirmed order received for it from a final customer. The final customer refers to a known individual owner and excludes all orders by the original equipment manufacturer (OEM), national sales companies (NSC), dealers or point of sales, bulk orders or other intermediaries in the supply chain. BTO excludes the order amendment function, whereby forecast orders in the pipeline are amended to customer requirements, as this is seen as another level of sophistication for a build to stock (BTS) system (also known as build to forecast (BTF)). BTS is the dominant approach used today across many industries and refers to products that are built before a final purchaser has been identified, with production volume driven by historical demand information. ==Advantages==

The main advantages of the BTO approach in environments of high product variety is the ability to supply the customer with the exact product specification required, the reduction in sales discounts and finished good inventory, as well a reduction in stock obsolescence risk. Additionally, flexibility and customer lead time are improved to a match changes in consumer demand. Moreover, a business’ cash flow can be increased with BTO. ==Disadvantages==

The main disadvantage of BTO is manufacturers are susceptible to market demand fluctuations leading to a reduced capacity utilization in manufacturing. Hence, to ensure an effective use of production resources, a BTO approach should be coupled with proactive demand management. Finding the correct and appropriate balance of BTO and BTS to maintain stock levels appropriate to both the market requirement and operational stability is a current area of academic research. In Retail, an occurring problem may be customers choosing an alternative product that is available at that time and place, as they are not willing to wait for the BTO product to arrive. Moreover, compared to mass production, customization of products implies higher costs. Thus, price-conscious customers may be turned away, as they do not feel a strong need for customized products and would therefore choose a more standardized product instead. ==Related approaches==

Related approaches to BTO include the following: Engineer to Order (ETO) approach In ETO, after an order is received, a part of or the whole design starts to be developed. Construction by general contractors and plant construction by engineering companies are categorized as ETO. Assemble to Order (ATO) approach This strategy requires that basic parts of the product are already manufactured, however not yet assembled. Once a customer's order has been received, the parts of the product are quickly being assembled and sent out. Together with the BTS approach, these strategies form the spectrum of order fulfillment strategies a firm can adopt. ==See also==