Why the Best Food Manufacturers Don't Choose Between Make-to-Stock and Make-to-Order

Make-to-stock (MTS) and make-to-order (MTO) are often presented as competing production strategies. Manufacturers are encouraged to decide which products should be forecast-driven and which should be customer-order driven, as though the decision were permanent.

In reality, successful food and beverage manufacturers rarely choose one strategy over the other. They operate both simultaneously, often on the same production lines, using the same equipment, labour, materials and capacity.
The real challenge is not deciding between MTS and MTO. It is continuously determining where every product should sit between those two extremes.

Planning is no longer about selecting a production strategy. It is about optimising the balance between efficiency and responsiveness as market conditions, customer expectations and operational constraints change.
That balance is never static.

Every Production Schedule Is a Negotiation

Every manufacturing schedule reflects a series of trade-offs.
Long production campaigns improve equipment utilisation, reduce changeovers and lower manufacturing costs. At the same time, they reduce flexibility and make it harder to respond to changing customer demand.

Conversely, producing only against confirmed orders minimises inventory, improves freshness and reduces forecast risk. However, it also fragments production, increases setup activity and often leaves capacity underutilised.

Every additional hour reserved for responsiveness reduces manufacturing efficiency.
Every additional campaign scheduled for efficiency reduces responsiveness.

Planning therefore becomes less about scheduling production and more about negotiating these competing objectives.

The best production schedule is rarely the one that maximises either efficiency or responsiveness. It is the one that minimises the overall cost of imbalance.

MTS and MTO Are Opposing Forces Acting on the Same Factory

Make-to-stock and make-to-order are often described as separate operating models. Operationally, they are better understood as opposing forces acting on the same manufacturing system.

MTS seeks stability. It rewards longer campaigns, larger batch sizes, predictable schedules and high equipment utilisation.

MTO seeks flexibility. It rewards shorter lead times, rapid changeovers, smaller batches and the ability to respond quickly to customer demand.

Neither objective is wrong. The difficulty is that both compete for exactly the same finite resources.

Every factory has limited production capacity, limited labour, limited material availability and limited scheduling flexibility. Every decision that favours one objective inevitably constrains the other.

The role of planning is therefore not to eliminate this tension but to optimise it.

The Balance Is Determined by Five Variables

The optimal position between MTS and MTO depends on several interacting factors.

Demand variability influences forecast reliability. Stable demand supports inventory-based production, while highly variable demand benefits from greater responsiveness.

Shelf life determines how much inventory can realistically be held before waste becomes unacceptable.
Customer lead-time expectations influence whether products can be manufactured after orders are received or must already exist in inventory.

Production flexibility, including changeover performance, equipment capability and material availability, determines how economically smaller production runs can be executed.

Finally, capacity utilisation influences how much operational flexibility the factory can absorb without significantly increasing manufacturing costs.

These variables constantly change.

A product that justified make-to-stock planning last year may no longer do so following promotional activity, customer consolidation or increased demand volatility.

Likewise, improvements in changeover performance or production lead times may allow products previously manufactured to stock to move progressively towards make-to-order production.

The correct planning strategy is therefore not a fixed classification. It is a continuously moving target.

The Cost of Imbalance

Manufacturers often recognise the costs of inventory or poor customer service. They are less likely to recognise the cost of imbalance itself.

Excessive emphasis on MTS typically creates higher inventory, greater forecast dependence, increased obsolescence and unnecessary working capital.

Excessive emphasis on MTO creates smaller production runs, increased changeovers, reduced utilisation, scheduling instability and higher manufacturing costs.

Neither extreme is optimal. The objective is not to eliminate inventory or maximise responsiveness. The objective is to minimise the combined cost created by both. This is a fundamentally different way of viewing production planning.

Instead of asking whether a product should be MTS or MTO, planners should ask whether moving it slightly in either direction would improve overall operational performance.

Planning Becomes Continuous Optimisation

Finding the right balance is not something that happens during an annual planning review.

It is an ongoing optimisation process, forecast accuracy changes, customer ordering patterns evolve, raw material availability fluctuates, capacity constraints move between production lines, new products are introduced, seasonality shifts.

Each change alters the appropriate balance between efficiency and responsiveness.

Planning therefore becomes a continuous optimisation exercise rather than a one-time classification exercise.

The manufacturers that perform best are not those with the most accurate forecasts or the fastest production lines. They are those that adapt their planning decisions most effectively as operating conditions change.

Why Traditional Planning Struggles

Many traditional planning systems continue to treat MTS and MTO as distinct planning categories with relatively static parameters.

Products are classified, planning rules are assigned and those rules often remain unchanged for extended periods.
This works reasonably well in stable environments.

It becomes increasingly ineffective as product portfolios expand, customer expectations shorten and demand becomes more volatile.

The challenge is no longer creating an acceptable production plan.

It is continuously identifying where each product should sit along the planning spectrum as conditions evolve.
That requires optimisation rather than classification.

Where APS and AI Change the Conversation

This is where modern planning technology delivers its greatest value.

Advanced Planning and Scheduling (APS) systems are capable of evaluating capacity, inventory, customer demand, changeover costs, material availability, shelf life and production constraints simultaneously.

Rather than simply producing schedules, APS systems optimise the trade-offs between competing objectives across the entire manufacturing operation.

Artificial intelligence extends this capability even further.

AI can identify changing demand behaviour before planners recognise it, detect products drifting away from their optimal planning strategy and recommend adjustments to inventory targets, batch sizes, production frequency and scheduling rules.

Instead of asking planners to choose between MTS and MTO, these systems continuously calculate where the balance should move.

Technology does not remove the complexity of planning.

It enables manufacturers to manage that complexity more intelligently.

Conclusion

The question facing manufacturers is no longer whether a product should be make-to-stock or make-to-order.

The more important question is whether today’s answer will still be correct next month. Demand patterns change, customer expectations evolve, production capability improves, capacity constraints shift.The optimal balance between efficiency and responsiveness moves continuously with them.

Manufacturers that continue treating MTS and MTO as fixed production strategies gradually drift away from optimal performance.

Those that view planning as a continuous optimisation problem, constantly adjusting the position of every product along the spectrum between make-to-stock and make-to-order, gain a significant competitive advantage.

In modern food and beverage manufacturing, planning excellence is no longer defined by choosing the right strategy.
It is defined by continuously finding the right balance.