The Real-Time Supply Chain
Demonstration model 2: Make to stock vs. make to order

For the second demonstration, the same model of a computer supply chain is used as for the first demonstration. But now the model includes two copies of the computer supply chain. One is make to stock, the other is make to order. With make-to-stock all products are pushed through the chain. All actors keep inventory to fulfill demand. With make-to-order actors do not keep inventory, but order products from their supplier when a customer places an order.

One of the most famous examples of make-to order supply chains is computer manufacturer Dell. Through a portal, customers can customize their computer and directly place an order. Dell produces the computer based on the order and ships it directly to the customer.

There are many variations possible to this scenario, and this model shows one of them. In this case the customer still places orders at a retailer, whom then redirects the order to the manufacturer. In real life, this is comparable to the Gateway Country Stores, where people can get advice from experience salesmen.

On the basis of the customer order, the manufacturer produces the computer and ships it to the retailer, which then redirects it to the customer. This is just one of many possibilities: the manufacturer can directly ship it to the customer or the customer can directly place an order at the manufacturer which then ships the computer to the retailer where it can be pick up by the customer. Speed and costs influence the scenario: shipping directly to the customer is faster but also more expensive.

Another important notion is where the push-pull boundary lies. A push-pull boundary is the point in the manufacturing-and-distribution process at which production control changes from push to pull. In the make to stock version, the boundary lies at the retailer, while with make to order it lies at the at the manufacturer. Again, many variations are possible here: the boundary could also lie at the suppliers or at the distribution center.

Model: demo2.jar. Click here to start the Java-based model from your browser

Tips:

• Use the "play" button to start the simulation
• There are two animations, one of the "make to stock" supply chain, and one of the "make to order" supply chain.
  You can get access via the menu of the main window.
• Press F2 to get access to the graphs, select one of the graphs in the left window by clicking on the "+", and drag the graph into one of the cells of the viewer.

Questions:

1. What are factors that influence whether a supply chain will move to make to order or make to stock?
2. Compare the two supply chains for a number of key performance indicators over a run of around 6 months.