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)
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
• 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
firstname.lastname@example.org or (805) 924-0100 or see
the pages on
Copyright © 2017 by Dr. David M.