This page is for anyone who reads a production order and needs to know why it exists before a single piece is cut: a merchandiser, a production planner, a factory owner, a buyer, or a student learning the trade. Every order a factory receives was triggered one of two ways. Either a specific buyer had already agreed to buy a specific quantity before the factory started, or the factory (or the brand ordering from it) decided to make the goods against its own guess at future sales, before any such buyer existed. The first is called Make to Order. The second is called Make to Stock. Without knowing which one you are looking at, you cannot tell who is carrying the risk if the goods do not sell, or why two orders for the same T-shirt, on the same day, from the same factory, can be treated completely differently by the people planning them. This lesson gives you the three questions that classify any order, and applies them to two real orders side by side.
You need: the idea of a confirmed purchase order and a letter of credit, both covered in Course 1.
By the end of this lesson you can:
Not covered here: Make to Order's lead time and cash flow (lesson 4.2), a Make to Stock brand's forecast, warehousing and markdown risk (lesson 4.3), and the hybrid model in detail (lesson 4.4).
| Term | Meaning |
|---|---|
| Make to Order (MTO) | Production starts only after a specific buyer has confirmed a specific order, with quantity, price and delivery date agreed. |
| Make to Stock (MTS) | Producing against the seller's own sales forecast, rather than a single confirmed buyer order. |
| Purchase order | A document from a buyer confirming quantity, price and delivery date, which commits the buyer to pay for the goods it orders. |
| Forecast | A company's own estimate of what it expects to sell, used to decide how much to produce before any specific sale exists. |
| Forecast risk | The risk that a sales forecast turns out to be wrong, carried by whichever company committed to that forecast. |
| Buffer stock | A small stock of fast-moving components a mainly Make to Order factory keeps on hand to shorten lead time on repeat orders. |
| Hybrid production model | A company that runs Make to Order and Make to Stock lines side by side, usually split by customer, product line or channel. |
| Open account | A payment method where the buyer pays the factory an agreed number of days after delivery, with no bank guarantee in between. |
A factory either starts making a product only after a specific buyer has confirmed a specific order, or it makes the product against its own sales forecast, before any specific buyer or shop sale exists, and holds the result as stock. The first is Make to Order. The second is Make to Stock. The difference is never the product itself, and it is never the factory: the very same factory, on the very same day, can run both patterns for different customers. What decides the classification is a single question: does a confirmed, agreed sale exist before production starts, or not?
| What can differ | The shapes you will meet | Why it matters to you |
|---|---|---|
| Pure Make to Order | Production starts only on a confirmed purchase order with agreed quantity, price and delivery date. Nothing is cut before that order exists. | The factory carries almost no forecast risk; its main risk is the buyer cancelling after cutting has started. |
| Pure Make to Stock | Production runs to a rolling forecast; goods are finished and held in the seller's own stock before any specific sale exists. | The company building the stock, not a single buyer, carries the risk that the forecast is wrong. |
| Make to Order with buffer stock | Mostly Make to Order, but the factory keeps a small buffer of fast-moving components, such as undyed greige fabric, to shorten lead time on repeat orders. | The finished garment is still Make to Order; only a small, low-risk input is held in advance, not the finished goods. |
| Make to Stock with a minimum order quantity | A brand's Make to Stock line still asks its factory for a minimum production batch per style, so the factory's own commitment still starts at a threshold, even though the brand itself is building stock, not filling one buyer's order. | The factory's order is just as firm as any Make to Order batch; only the brand behind it is working from its own forecast, not from a single confirmed shop sale. |
| Hybrid company | One company runs a Make to Order export line for one customer and a Make to Stock domestic line for another, at the same time, in the same factory. | Assuming a whole company is "an MTO factory" or "an MTS brand" misses that the classification applies to the order, or the line, not the whole business. |
None of these shapes is more correct than another. What decides the classification, in every shape, is the same single question from the rule above: does a confirmed sale exist before production starts, and if not, who is committing to the forecast behind it.
The case we followDelta Garments, the garment factory, receives two production orders on the same day for a similar basic T-shirt. Order A is from Northline Apparel: 15,000 pieces, referencing purchase order NA-2291, confirmed quantity and price, with the letter of credit already opened. Delta Garments does not cut a single piece of fabric until Northline Apparel's order is confirmed and that letter of credit is in place. This is pure Make to Order.
The second order, for 4,000 pieces of a similar T-shirt style, comes from Cedar & Co., the local brand with 12 shops that already appears in Course 1. Cedar & Co.'s order references its own internal stock code, not one specific shop's already-agreed sale. Cedar & Co. makes to its own rolling forecast for its 12 shops, buying from Delta Garments on 60-day open account, and holds the finished T-shirts as its own stock until a shop needs them. This is Make to Stock, but the risk sits with Cedar & Co., the brand building the forecast, not with Delta Garments, the factory filling a firm production order either way.
| Fact | Order A (Northline Apparel) | Cedar & Co.'s line |
|---|---|---|
| Trigger for production | Confirmed purchase order NA-2291 | Cedar & Co.'s own sales forecast |
| Quantity | 15,000 pieces | 4,000 pieces |
| Who carries forecast risk | Nobody; the sale is already agreed | Cedar & Co. |
| Payment terms | Letter of credit, opened before cutting | 60-day open account |
| Classification | Make to Order | Make to Stock |
This case is a comparison, not a calculation, because the point is qualitative: what changes between Make to Order and Make to Stock is who commits to the forecast, not whether the factory's own production order is firm.
A common mistake is assuming Make to Order is always slower to the shop floor than Make to Stock. Order A's Make to Order lead time is 16 weeks, and it is not shortened by holding any advance stock, because nothing was cut before the order existed. A well-run Make to Stock operation can put goods on a shop floor faster than that, because the goods already exist when the shop asks for them, but only if the forecast behind them was right; if it was wrong, the goods sit unsold, which is slower than never having made them at all.
A second, related mistake is assuming Make to Stock means the factory decides what to make. It is usually the brand's forecast, not the factory's own judgement, that drives a Make to Stock order; the factory still only produces once it receives a production order from the brand, exactly as it does under Make to Order. What is different is what stands behind that order, a confirmed sale or a forecast, not who decided to place it.
A factory either starts making something only after a real buyer has already agreed to buy a set amount, or it makes something first, guessing what it can sell, and keeps the result as stock. The first way is called Make to Order. The second is called Make to Stock. The same factory can do both at once, for different customers. What matters is not the product or the factory; it is whether a real, agreed sale exists before the work starts. If it does not exist yet, the next question is who is doing the guessing, because that company, not the factory making the goods, carries the loss if the guess is wrong. To tell which is which, check whether an agreed sale exists first, then ask who owns the guess behind the order if it does not.
Delta Garments' production manager, Karim, receives two production orders on the same day. One is from Northline Apparel, referencing purchase order NA-2291: 15,000 pieces, confirmed, with the letter of credit already opened. The other is from Cedar & Co., for 4,000 pieces of a similar T-shirt style, referencing Cedar & Co.'s own internal stock code, not a specific shop's sale.
Is the Cedar & Co. order any less "real" or lower-priority than the Northline Apparel order, since it is not tied to one confirmed final sale? Decide before you open the answer.
No, it is not less real or lower-priority. Two facts decide this together.
First, Delta Garments' own commitment is identical in shape. Once Cedar & Co. issues its own purchase order, even though that order is built from Cedar & Co.'s own forecast rather than one shop's confirmed sale, Delta Garments is committed to make it and be paid for it under the agreed terms, here 60-day open account, exactly as it is committed on Order A under a letter of credit.
Second, the difference between Make to Order and Make to Stock is about who carries forecast risk further up the chain, not about whether Delta Garments' own order is firm. Cedar & Co., not Delta Garments, is the one committing to the forecast behind its 4,000-piece order, so Cedar & Co. is the one that carries the loss if that forecast is wrong. Delta Garments' production order is firm the moment Cedar & Co. places it, regardless of what stands behind it.
Treating Cedar & Co.'s order as lower-priority because it lacks one confirmed final sale would be a mistake: Delta Garments has the same obligation to plan capacity, source fabric and deliver on time for both orders.
Framed qualitatively, because the size of the loss depends on how wrong a forecast turns out to be, not on a fixed figure that applies to every case.
The loss from a wrong forecast therefore lands on Cedar & Co.'s balance sheet, in unsold T-shirts and the cash spent making them, not on Delta Garments' order book. This is the practical reason the method's second question, who is committing to the forecast, matters more than whether a factory's own order is confirmed.
Open the "Decide" sheet. It has three short-answer rows and a formula row that calculates the classification. Answer from the order's own documents, not from what kind of company you assume you are dealing with.
| Question | Order A / Cedar & Co. (filled in) | Your order or company |
|---|---|---|
| Does production start only after a specific confirmed sale, or against a forecast? | Confirmed sale (Order A) / Forecast (Cedar & Co.) | |
| If a forecast, who owns that forecast risk? | Not applicable (Order A) / Cedar & Co. itself | |
| Does this company also run the other pattern for a different line? | Yes, Delta Garments runs both | |
| Classification (calculated) | MTO (Order A) / MTS (Cedar & Co.) |
1. What actually decides whether an order is Make to Order or Make to Stock?
2. In Cedar & Co.'s Make to Stock order to Delta Garments, who carries the risk that the sales forecast behind it is wrong?
3. A denim mill supplies 8,000 metres of fabric against its own rolling forecast of demand from several garment factories, before any factory has placed a confirmed order for that fabric. Is this Make to Order or Make to Stock?
| EN | AR | FR | TR | Meaning |
|---|---|---|---|---|
| Make to Order (MTO) | الإنتاج حسب الطلب | Fabrication sur commande (MTO) | Siparişe göre üretim (MTO) | Production starts only after a specific buyer has confirmed a specific order, with quantity, price and delivery date agreed. |
| Make to Stock (MTS) | إنتاج حسب المخزون | Fabrication sur stock | Stoğa üretim | Producing against the seller's own sales forecast, rather than a single confirmed buyer order. |
| Purchase order | أمر الشراء (طلبية الشراء) | Bon de commande | Satın alma siparişi | A document from a buyer confirming quantity, price and delivery date, which commits the buyer to pay for the goods it orders. |
| Forecast | التوقع (توقع المبيعات) | Prévision (prévision des ventes) | Tahmin (satış tahmini) | A company's own estimate of what it expects to sell, used to decide how much to produce before any specific sale exists. |
| Forecast risk | مخاطر التوقع | Risque de prévision | Tahmin riski | The risk that a sales forecast turns out to be wrong, carried by whichever company committed to that forecast. |
| Buffer stock | مخزون احتياطي (وسيط) | Stock tampon | Tampon stok | A small stock of fast-moving components a mainly Make to Order factory keeps on hand to shorten lead time on repeat orders. |
| Hybrid production model | نموذج إنتاج مختلط | Modèle de production hybride | Hibrit üretim modeli | A company that runs Make to Order and Make to Stock lines side by side, usually split by customer, product line or channel. |
| Open account | حساب مفتوح | Compte ouvert | Açık hesap | A payment method where the buyer pays the factory an agreed number of days after delivery, with no bank guarantee in between. |
You can now classify an order as Make to Order or Make to Stock from a few simple facts. The next lesson stays inside the Make to Order side and looks closely at what that classification actually costs a factory in lead time and cash tied up before it is paid. Back to the course map