Abstract

Following case study UST 1215-050 Coats (A): Responsive Production and Order Fulfillment, Coats (B) examines make-to-stock (MTS) and make-to-order (MTO) strategies in more detail. First, it considers how strategic (especially cash flow) objectives affect MTS and MTO decisions and how decisions on lot sizing affect both fixed and variable production costs. In particular, it highlights the significance of the risk and costs of overstocking when facing a higher premium on cash flow tied up in the inventory of an unsold product. Secondly, on a tactical level, it suggests frameworks for determining aggregate production quantities prior to a sales season with the objective of minimizing the risks of overproduction and also conserving cash flow. Thirdly, it suggests a basic framework to determine minimum lot sizes based on some high level cost and demand data.

Learning Objectives

This case explains the importance and impact of strategic business objectives on operational policies and performance limits, particularly for the objective of conserving cash flows. It compares and contrasts MTS and MTO as operations strategies and policy decisions and describe the advantages and disadvantages of each.
It recognizes the linkage between strategic business directives, and applies simple quantitative frameworks for illustrating key linkages between strategic objectives and operational decision making.