Assemble-to-Order (ATO): What Is It?
Customers can purchase quickly produced items with some degree of customization through the corporate manufacturing strategy known as “assemble-to-order” (ATO). Typically, the product’s fundamental components must be made but unassembled. After receiving an order, the components are rapidly assembled, and the finished item is sent to the client.
Getting to Know Assemble-to-Order (ATO)
Assemble-to-order manufacturing is a cross between the make-to-stock and make-to-order manufacturing strategies. When using a make-to-stock technique, all of the product is made upfront. The goal is to create an inventory corresponding to projected or guessed consumer demand. The steps in this process would be to set a production level, accumulate inventory, and then sell as many completed goods as possible. It is mostly used for high-volume products, consumables, and commodities that may be purchased individually or in large quantities.
Making things when customers order them is known as a “make-to-order” technique. Demand drives production, and products are only made after verified orders. In other words, supply chain activity doesn’t start until there is adequate proof of client demand. This tactic is frequently used for high-end products or commodities produced in small batches or individually.
The ATO approach combines the advantages of make-to-order and make-to-stock by delivering goods to consumers promptly while enabling the product to be customized or updated in specific ways in response to client requests. Most of the time and money required to assemble the product from its constituent parts is very little. However, it might take a long time and cost a lot of money to produce the components, often obtained from a supplier.
Assemble-to-order tactics are now a reality because of improvements in manufacturing methods and inventory management systems, which technology has made possible. The concept has been a boon for prospects for product customization, especially when combined with less expensive delivery options.
Pros and Cons Assemble-to-Order (ATO)
Like many methods that chart a middle course, assembly-to-order has advantages and disadvantages.
- There is no need to invest in materials, supplies, and storage for them
- Orders made to customer specifications
- There is less risk of having unsold units on hand
- Risk of lost sales due to low supply
- Potentially longer lead times to produce goods
Assemble-to-Order (ATO) example
Think of a company that produces personal computers. It may already have all of the necessary components of a computer, including motherboards, graphic cards, CPUs, monitors, and keyboards, in stock. For these components, the organization relies on several vendors.
It is simple for the business to combine and configure new PC orders utilizing the different components. However, until the order arrives, the components remain on the shelves since the process is driven by client demand.
- When an order is verified, items are promptly assembled from component components under the business approach known as “assemble-to-order” (ATO).
- Make-to-order and make-to-stock are combined in assemble-to-order.
- In a conventional ATO method, the costs of creating the many components might be higher than the price of assembling the product from its parts.
- A PC manufacturer that accepts orders and assembles customizable PCs from parts like keyboards, displays, and motherboards uses the assemble-to-order technique.