Driving Make-to-Stock Process Manufacturing: From Demand Forecasting to Finished Product

This blog is the first in a five-part series by guest blogger Lionel Grealou, consultant and founder of Xlifecycle Ltd. and author of the virtual+digital blog. The series will cover the intersection of PLM and process industries. In this introductory post, we dive into the pivotal role of PLM data in enhancing the reliability and insights of R&D and supply chain decisions.

PLM is the source of R&D and supply chain decisions

Process manufacturing industries transform raw materials and ingredients into finished products through chemical, physical, or biological processes. These industries typically involve continuous or batch production processes. They rely heavily on acute production control to ensure traceability and consistency in the final products—generally subject to stringent regulatory compliance. Product Lifecycle Management (PLM) applied to process manufacturing is crucial for driving innovation and ensuring efficient operations—from managing batches, recipes, ingredients, blends, raw materials, and semi-finished and finished goods to enabling regulatory reporting and ensuring compliance.

In this post, I elaborate on the similarities and differences between process and discrete manufacturing, compare make-to-stock (MTS) and make-to-order (MTO) strategies, and explore the implications from a PLM perspective.

Process versus discrete manufacturing

Process manufacturing produces goods by mixing or combining raw materials in an irreversible manner (e.g., blending, mixing, heating). The output follows a batch production process with a volume of end products rather than individual units. Key characteristics include:

• Predefined formulas or recipes scaled for mass production
• PLM data management principles related to ingredients, formula control, unit conversions, volume, and weight
• Common products: food and beverage, pharmaceuticals, personal care products, paints, drinks, refined oil, rubber and plastics, tires, and metals

Discrete manufacturing assembles components to create individual finished goods that can be disassembled or reassembled (e.g., via assembling, joining, welding). Key characteristics include:

• Sequential production routing turned into workflows for personalization or mass production
• PLM data management principles related to individual parts, bills of materials (BOMs), fixtures, and personalization
• Common products: equipment, appliances, electronics, high-tech products, transportation products, and industrial robots

Some products combine elements of both process and discrete manufacturing, such as pharmaceuticals or consumer electronics, which involve chemical processing for materials and assembly of distinct parts. This hybrid approach requires an integrated PLM ecosystem to manage diverse data types and ensure consistency, quality control, and efficient collaboration.

Make-to-stock versus make-to-order

MTS is a traditional production strategy where goods are produced based on demand forecasts and stocked until sold. This approach relies heavily on accurate demand forecasts to avoid excess or insufficient inventory, which can impact profitability. For instance:

• Consumer electronics: Companies like Apple produce standardized products such as iPhones and iPads in large quantities based on anticipated demand, ensuring availability in retail stores.
• Pharmaceuticals: Companies like Pfizer produce common medications, such as over-the-counter pain relievers and allergy medications, in large batches based on anticipated demand, store them in warehouses and distribute them to pharmacies.
• Food and beverage: Brands like Coca-Cola manufacture beverages in massive quantities to ensure products are readily available on retail shelves.

MTO is a production strategy where manufacturing begins only after a customer order is received, allowing for high levels of customization. This strategy results in smaller order quantities, higher per-unit costs, and longer lead times. For instance:

• Aerospace: Companies like Boeing and Airbus manufacture commercial aircraft to specific customer requirements, with customized configurations such as seating arrangements and technological features.
• Automotive: Companies like Rolls-Royce produce bespoke vehicles tailored to customer preferences, starting production only after the customer places an order, allowing for a high degree of personalization.

While MTS ensures quick availability of products by maintaining inventory, it risks overproduction and not exceeding costs if forecasts are inaccurate. In contrast, MTO minimizes inventory levels and storage costs but requires customers to wait for production and delivery, as seen with custom-built furniture and luxury cars. Both strategies cater to different market demands: MTS is ideal for products with stable and predictable demand, whereas MTO offers flexibility and customization for niche markets. The choice between MTS and MTO depends on product types, market demands, and operational capabilities, with each strategy presenting unique advantages and challenges.

PLM’s role in MTS innovation

PLM integrates all aspects of product development, from initial design to production and distribution, streamlining processes, enhancing collaboration, and ensuring regulatory compliance. This approach improves efficiency, reduces time-to-market, and supports ongoing innovation and adaptability:

• Process manufacturing: Relies on recipes or formulas, measurement conversions, and scalability. Managing BOMs and associated processes ensures consistency and efficiency.
• Hybrid products: Integrate both process and discrete manufacturing, increasing complexity and regulatory compliance, requiring careful coordination.
• High-volume production: Due to mass production requirements, formulation-based products in food, beverage, and pharmaceuticals often use MTS.
• Maximizing return-on-investment: Effective PLM optimizes each stage of the product lifecycle, from initial production to decommissioning, driving profitability.

Furthermore, opportunities for automation are immense in the context of MTS manufacturing, particularly through the integration of PLM systems to enhance demand forecasting, optimize production efficiency, and improve decision-making:

• Advanced demand forecasting: PLM systems enable the analysis of historical data and market trends, providing accurate demand forecasts, maintaining proper inventory levels, and reducing the risk of over- or under-production.
• Process optimization: PLM helps identify production inefficiencies, suggest improvements, and continuously monitor and adjust operations to ensure optimal production levels, reduce waste, and increase efficiency.
• Enhanced decision-making: PLM provides real-time insights and predictive analytics, allowing manufacturers to quickly adapt to market changes, optimize resource use, and make informed decisions.
• Quality control and compliance: PLM systems ensure products meet high standards and regulatory requirements by detecting defects and inconsistencies in real-time, reducing the risk of recalls and compliance issues.
• Customization and personalization: By analyzing customer preferences and feedback, PLM facilitates better customization and personalization of products, boosting customer satisfaction and loyalty.

PLM plays a critical role in managing the complexities of MTS manufacturing. PLM is the source of R&D and supply chain decisions, providing a centralized framework for managing product data, processes, and compliance. PLM ensures that companies can innovate efficiently, maintain high-quality standards, and respond swiftly to market demands. This adaptability is crucial for maintaining a competitive edge in diverse, dynamic manufacturing environments—and a fortiori in highly regulated markets.

I invite you to watch the on-demand recording of the debut episode in the “Pulling the Digital Thread” series, “Exploring the Transformation to the Digital Enterprise.” It was a privilege to be on the guest panel for the inaugural episode.