Manufacturing Principles

Manufacturing environments fit into different categories. Having a good understanding of each and a shared lexicon can be very helpful in the process of initiating software to meet the needs of a certain type of environment.

icon-ETOEngineer to Order (ETO):

Covers complex structures and customer-specified projects that were never before built, making it impossible to be handled with standard variations. Because the finished product and many components and subassemblies have never been built before, they require new product codes. In most cases, ETO projects organize many tasks and follow a long timeline.

icon-CTOConfigure to Order (CTO):

In CTO, products are assembled and configured based on customer requirements. Once customer requirements are known, no further engineering is needed. The finished product and components can be made to stock using a forecast based on probability factors maintained for options and features.

icon-MTOMade to Order (MTO):

In MTO environments, products are made entirely after the customer order is received. The final product is usually a combination of standardized and custom items to meet specific needs. The wait time is usually longer as clients await custom or highly engineered products with unique features.

icon-MTSMade to Stock (MTS):

MTS is a system that matches production with consumer demand forecasts to determine how much stock should be produced. In MTS environments, products are created before receipt of a customer order. When orders come in, they’re filled from existing stock, and then those stocks are replenished through production orders.

icon-processProcess (batch):

With process or batch operations, goods or components are produced in batches and not in a continuous stream. Comparable to Discrete and Job Shop, it may take only one batch to meet demand, or it may take several batches. The equipment is typically cleaned between product runs.

icon-process-continuousProcess (continuous):

Comparable to Repetitive, continuous processes run 24/7, without interruption, except for infrequent maintenance shutdowns. The materials are continuously in motion, undergoing chemical reactions or subject to mechanical or heat treatment.

icon-mixed modeMixed Mode:

In mixed mode, different goods are produced according to daily anticipated demand to avoid inventory accumulation. This type of production requires the ability to manufacture in small batches and changes quickly from one item to another. It delivers best results when shipment dates are linked to production schedules.

icon-cap-equipmentCapital Equipment/Industrial Machinery:

This is the manufacturing of items not permanently attached to buildings or grounds with an individual cost of $5,000+ and a useful life of one year or more. Engineering requirements are complex and the market competitive with customers demanding high quality, low cost, and fast delivery.


Has dedicated production lines that turn out the same item (or a closely related item), 24/7, all year long. There is little set-up and changeover activity. If the peak line speed can’t keep up with demand, a second line is added. If demand isn’t enough for a dedicated second line, a second line operates in discrete mode.


A highly diverse environment that covers a range from few to frequent set-ups and changeovers. The products being made may be similar or very different. The more unlike the products are, the longer and more unproductive the process of set-up and teardown.

icon-jobshopJob Shop:

Job shops rarely have production lines; instead, they have production areas. The area may assemble only one version of a product, or several versions. If demand grows, the operation is turned into a discrete line and selected labor operations are replaced by automated equipment.


The process of making a product or service available for use or consumption by a consumer or business user, using direct or indirect means with intermediaries. The other three parts of the marketing mix are product, pricing, and promotion.


A systematic method for the elimination of waste within a manufacturing system. Lean also takes into account waste created through overburden and waste created through unevenness in workloads. Essentially, lean is centered on making obvious what adds value by reducing everything else.

Many companies use more than one of these environments to get a single product out the door. To read about the way some companies have approached their manufacturing processes and maximized productivity with smart use of their software, see our Case Study section.