Reducing customers' lead time using Make to Stock and Make to Order approach

Abstract

This paper discusses about a company that adopts make-to-order strategy because the company does not have enough fund to provide raw material. The raw material is ordered when the order is received. It occurs a very long customer lead time due to the production process must wait for the arrival of material. Consequently, the company cannot meet the customer order at the due date, and the company should give a discount of 25 - 30% of the total purchases. This research aims at reducing customer lead time by determining a decoupling point. The result shows that the decoupling point is placed between the procurement of raw materials and the manufacturing process. The decoupling point denotes a boundary between the make-to-stock strategy in the previous process, and the make-to-order strategy for the process afterwards. The lead time customer is then considered start from the decoupling point to the due date.