Businesses across the world are developing new methods of performing their activities in a bid to remain competitive. The use of different approaches in production and marketing is aimed at ensuring that a business leverages itself against competition. One of the approaches used in production is the built to order approach which ensures that products with low volume are highly customized. This paper addresses issues related to the built to order approach and how it differs from the traditional approaches in the car business. The paper also focuses on product life cycle, process design, and the superiority of build to order approach in relation to other approaches.
Build to order (BTO) is a business approach that provides several systems of response and offers the business flexibility of analyzing the location and timing for prospective buyers. The approach helps the business to produce products that are specific to the needs of the buyers. BTO is based on the principle that the numerous needs of the buyers keeps on changing. This can make production expensive. However, BTO ensures that the business is leaned towards producing quality products that will meet the changing needs of the customers, and in the right quantity to avoid wastage. As such, the business leverages on the needs of the customers by aligning the products to the orders made by the customers (Holweg & Pil 2004, p. 4).
The mainstay of BTO is the production of goods that are aligned to the likes and needs of individual customers. This, therefore, means that a company that intends to take advantage of the BTO is to produce goods only after the order has been made by the customer. Production can, thus, only follow the order and specifications from the customer. The implication of BTO is that it presents a number of challenges to the businesses with huge production as economies of scale may not be achieved efficiently (Holweg & Pil 2004, p. 5). This results in the need to utilize machines maximally, especially with those of high capacity. The expensive and heavy machines will, therefore, be put under specialized productions in an effort to avoid long productivity that can interfere with introducing change over times.
Built to order, as a business approach, is supported by the use of technological tools that enable planning and execution of each step involved in the production of specific and specialized goods. This ensures that the businesses focus on the demand from the customers and plan the production in a manner to meet the demands. BTO, therefore, enables a business to optimize the sequence of production that delivers maximum productivity while at the same time giving customers goods that are aligned to their needs.
BTO differs from the traditional methods of production in car industry in that it bases the production on the already known needs as revealed in the orders from the customers. Furthermore, BTO utilizes technology tools in planning and execution of the production processes, thus, enabling the company to have a glance of each production detail and help change areas that might be problematic to the process of production. Unlike the traditional production in car industry that was based on the advertisement of already manufactured cars, BTO ensures that the produced vehicles are already ordered for by the customer, and this, therefore, means that at the moment every good is delivered to the customer the production is terminated; eliminating the need to put the products on display or advertisement. Moreover, BTO requires short lead time between the time the order is made by the customer and the time when the actual end product is delivered to the customer. Thus, BTO helps in reducing the response time besides increasing the production flexibility to the effects of meeting the needs of the customers (Holweg & Pil 2004, p. 6).
Product life cycle framework works to help the company to predict how sales are going to be affected based on the level of production that a company is going to make in a given time. Through product life cycle, businesses are able to predict the expected sales increase, analyze customers’ behaviors, and determine the competition in the market. These factors are important in coming up with strategies that will cushion the company against adverse effects on sales and sales reduction by aligning of production in relation to the needs of the customers. It also enables companies to come up with measures to counteract completion in the market (Holweg & Pil 2004, p. 8).
The product life cycle framework ,therefore, contributes to the emergence of built to order practices in many of car manufacturing companies as it is based on the principles of understanding the needs of the customers as related to the product in question. It also utilizes the analysis tools in trying to understand the possible changes that may occur in customers’ preferences so that the production is made in line with those needs. Product life cycle framework, therefore, contributes to the understanding of how the competition is likely going to be in future with a view of coming up with tenable and flexible products to match the future competition in the industry.
The product life cycle framework divides production process into four stages that are important in analyzing the process of production. These stages include; the introduction, growth, maturity, and decline. In each of these stages, the company needs to understand how BTO approach is going to be effected in terms of the needs of the customer. Understanding of the introduction stage in the production, thus, implies that the producer or manufacturer has the details that the customer desires, hence, the initial stages of the production must be aligned with customer needs. This prompts the producer to seek for the needs of the customer as an outline in the built to order approach (Holweg & Pil 2004, p. 8).
In the second stage, the company strives to develop systems that continually satisfy the customer. This will help in realizing further growth of the company, on condition that the products that are manufactured meet the needs of the individual customer. As such, the product life cycle places a responsibility on the manufacturer to be able to refer to the needs expressed by the customers. The other important consideration is the dynamic nature of those needs. Therefore, the manufacturing company must ensure that growth of the business entails meeting the dynamic needs of the customers The maturity and decline stages are also instrumental in helping the manufacturer to perpetually identify the needs and dynamism is customer specifications in order to determine the process of production. The product life cycle framework, therefore, outlines vital steps on which the built to order approach bases the continued production of goods in a company (Holweg & Pil 2004, p. 8).
The process design is the application of different standards to meet the given needs. The manufacturing company makes changes in the process of designing a particular product to suit the needs of the customer. The built to order approach, thus, requires that the process design reflects the specifications that are outlined in the order that the customer makes. It is a way of ensuring that production is aimed at satisfying individual customer while maintaining the high standards. Having a well executed process design aims at reducing the costs related to the inventory in the manufacturing process. The measure of inventory is a representation of the level of changes occurring in the inventory as it accounts for changes in costs and sales. Detecting changes in the process design through the variables of the inventory is founded on the built to order approach that is important in analyzing the changes. Ultimately, the process design must follow the built to order specifications that will give the manufacturing company ability to analyze and follow the specifications given by the customer.
In executing built to order, the company must, therefore, align its process design to meet those specifications. Design process on the other hand is aimed at reducing the costs related to the design and ensuring that the product is not only delivered at the right time, but also meets the customer’s specificity in terms of the design and functionality. The built to order gives the details while the process design ensures that the details are followed efficiently at the right cost and time. This will enable the company to have a clearly defined process design procedures that will help it deliver on the specifications of the customer while ensuring that the company does not incur losses in meeting those specifications.
Moreover, BTO entails procedures that ensure the process design is not overwhelmed by the specifications that the customers make with regard to their individual products. Ultimately, the use of process design tools ensures that the BTO requests are aligned with the capacity of the designer to meet those requests and specification in the right time. It also ensures that the company producing the products is able to have a fair design procedure that delivers a better return on the cost of each unit.
Another important aspect of BTO design process is that it enables the designer to be more effective in the delivery of products according to the specifications from the customer. As such, built to order must seek to enable easier configuration of products and give agility and robust support to the process of design. This will allow the process design to adapt processes that will be important in keeping the specifications in the manufacture of cars and monitor the details of production to ensure that they conform to the specifications from individual customers. Consequently, built to order principles outline the operations that will be undertaken in the design process, and act as a guide to the processes involved in the manufacturing of products (Froud et al 2000, p. 5).
Different approaches including total quality management and BTO have been used for a long time to control the production goods in manufacturing companies. Each approach presents its inherent challenges and opportunities to the user. Several companies that have implemented the built to order approach have recorded an improvement in their financial performance, which makes the approach to stand out as superior approach in the management of production in car industry.
The return on investment is one of the indicators that help to reveal the financial performance of a company. Higher return on capital means that a company is employing better business management strategies that give it leverage in the market over its competitors. The data increasing return on capital as given by Froud et al (2000, p. 5), indicates that BTO approach can deliver good return on capital that will enable the company to take advantage of the production procedures. This means such a company will be able to realize higher returns on capital investments while at the same time satisfy its customer. Customer satisfaction can be measured through the rate of return that customers make in view of the orders made in the subsequent years.
The data presented in the study indicates a steady increase in the subsequent years, and outlines the role that built to order procedures provide to the company to utilize the requests and specifications that the customers make in order to have a production chain that aligns with the ability of the company to produce particular products. The tailor made products also ensure that the company utilizes the economies of scale that are available by planning on how to utilize the machines and make products that are finally sold to the customers. The data also supports the fact that BTO approach eliminates the possibilities of making unpopular with the consumers production. Since the process of manufacturing is initiated by the order that the customer makes, and therefore, when the production is finished, the customer will be ready to take his ordered car without delay, thus, maximizing the company the rate of sales. The approach assures the manufacturing company that the products they are making will be sold, and therefore, eliminates the possibilities of having unsold products which can be costly to the company.
Additionally, the data indicates that BTO approach is popular with the customers as it gives them confidence in the final products, as they know that the product is going to serve their individual needs. The data presented also shows that BTO assists the car industry management to align their processes of production the right quantity of cars that are sold as soon as they are manufactured, eliminating the need for storage and other costs associated with the handling of manufactured products.