Assemble to Order (ATO)

MoneyBestPal Team
A strategy where products are assembled from pre-manufactured components only after an order is confirmed.

Assemble to Order (ATO) is a method of company manufacturing where products that are ordered by clients are swiftly manufactured and to some extent customizable. Typically, it is necessary for the product's fundamental components to be made but unassembled. After receiving an order, the components are rapidly put together, and the finished item is then sent to the client.

ATO combines the make-to-stock (MTS) and make-to-order (MTO) business models. Products are entirely produced in advance and kept in inventory until they are sold in an MTS. MTO is a process in which goods are created entirely from scratch only when an order is received. By keeping the parts on hand and assembling them as needed, ATO attempts to strike a compromise between the positives and negatives of both strategies.

The costs of putting the product together from its parts are typically insignificant in an ATO scenario, but the costs of producing the various parts can be significant. As a result, ATO necessitates meticulous planning and forecasting of client demand and component availability. Moreover, ATO needs effective inventory management systems and production procedures that can handle order customization and prompt shipping.

How does ATO work?

The basic steps of an ATO process are as follows:
  • Based on historical data, trends, macroeconomic variables, and market circumstances, the manufacturer calculates the client demand.
  • The producer purchases and stores the parts from vendors or internal resources that are required to generate the products.
  • Customer orders a product and specifies the features or options they want, which is sent to the manufacturer.
  • The product is put together by the manufacturer using the available parts in accordance with the customer's specifications.
  • The manufacturer ships the item as soon as it is ready to the purchaser.
The main distinction between ATO and MTS or MTO is that with ATO, the product's final assembly is delayed until an order is verified. This decreases inventory levels and lead times while also allowing for greater flexibility and customization in fulfilling customer needs.

What are the benefits of ATO?

Some of the benefits of using an ATO strategy are:
  • Customer satisfaction: Customers' pleasure and loyalty may grow when ATO gives them the choice to select from a wide range of features or alternatives for their products. Also, customers value getting their purchases sooner than if they were manufactured from scratch.
  • Inventory optimization: ATO can cut storage costs, inventory hazards, and obsolescence problems by reducing the amount of completed goods inventory that must be maintained and held. ATO also lessens the requirement for safety stock because components are easier to refill than finished goods.
  • Production efficiency: By removing pointless procedures and cutting waste, ATO streamlines the production process. By coordinating them with consumer demand, ATO also promotes greater usage of resources including personnel, machinery, and materials.
  • Competitive advantage: Because they can provide more customization and quicker delivery at lower costs than competitors that use MTS or MTO tactics, ATO can give a manufacturer a competitive edge over those who don't.

What are the challenges of ATO?

Some of the challenges of using an ATO strategy are:
  • Demand uncertainty: In volatile or unpredictable marketplaces, it can be challenging to forecast client demand and component supply accurately. ATO can lead to missed sales or surplus inventory if supply is insufficient to meet demand or vice versa.
  • Component complexity: ATO necessitates managing a sizable number of components that must work together and with various client requirements. Finding, storing, tracking, and assembling parts may become more difficult and expensive as a result.
  • Quality control: All components must adhere to quality standards and be correctly constructed in accordance with customer specifications in order to comply with ATO. As a result, there may be a greater chance of production flaws, faults, or delays.

What are some examples of businesses that use ATO?

Many businesses use ATO as their production strategy, especially in industries where customization and speed are important. Some examples are:
  • PC-makers: Customers can customize their laptops with different parts, such as keyboards, displays, processors, memory, and hard drives, thanks to PC manufacturers like Dell and Lenovo that employ ATO. Consumers can order computers online, and they will get them in a few days or weeks.
  • Furniture-makers: Manufacturers of furniture use ATO to provide buyers the opportunity to select their furniture's color, style, size, and material. Examples of these manufacturers include IKEA and Wayfair. After a few days or weeks, customers who order furniture online or in-store will receive it.
  • Automobile-makers: ATO is a tool used by automakers like Toyota and Ford to give buyers the choice of a variety of features or choices for their vehicles, including engines, gearboxes, colors, extras, and packages. Online or through dealers, customers can order cars, which they will get in a few weeks or months.