Build-to-Order & Mass Customization

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How BTO Can Help in a Recession, Immediately:

The BTO principles presented on this site can immediate help companies:

Build products on-demand would have immediate financial benefits on the cost side by eliminating inventory carrying costs and batch production which keeps building more products for inventory. Build-to-order operations only build products that have been sold.

• Immediately improve profits by identifying and eliminating money-losing products, through Product Line Rationalization. If revenue is headed down anyway, recessions are a good time to get rid of the money-losers to boost profits.   Since most cost systems can't provide meaningful date on profitability on individual products, there are only two ways to identify money-losing products: (1) Total cost measurement, like Activity Based Costing and (2) Product Line Rationalization, which starts with revenue/sales data (which is available) and then scrutinizes the low-volume products.

• Rationalization streamlines operations by eliminating products that have high overhead demands because of difficult setups, endless firedrills, and high ratios of setup to build times.

• Rationalization simplifies supply chain management, since eliminating the most unusual products eliminates the most unusual parts and materials.

Standardization can do these immediate steps to lower materials cost and make factories more flexible:

• Combine multiple grades and tolerances with “better than” substitutions, for instance combining the lower and higher grades into the higher grade. Even if simpler products appear to get “a more expensive part” than they need, there is great potential for a net cost savings from greater economies of scale, better build efficiencies, and less material overhead cost.

• Consolidate duplicate parts in a single part number for less purchasing cost, more economies of scale, better flexibility, less expediting, and reduced material overhead costs.

• Issue lists of current parts to immediately stop the proliferation of parts in product development.

• BTO, standardization, and eliminating the most unusual products (and, thus, the most unusual parts) makes factories more flexible and better able to do build-to-order while freeing up manufacturing and purchasing people be more active earlier on product development teams to bring in revenue from new products sooner.

Mass customize products for niche markets and individual customers, which would improve sales, probably before this recession is over, so this would be a good program to embark on right now.

These strategies can all be done right now for immediate returns with minimal capital investment. 

To read more, see the dozen articles on the articles page or read the 2008 book, Build-to-Order & Mass Customization.

To discuss how these strategies can help your company right away, call or write Dr. David M. Anderson at anderson@build-to-order-consulting.com  or (805) 924-0100 or see the pages on BTO seminars, BTO consulting, and Rationalization Consulting.
 

Copyright © 2017 by Dr. David M. Anderson