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Redefining Supply Chain Environments with Pack to Order

By V.G. Venkatesh, CSCP, and Rameshwar Dubey PhD |   2014 | 9 | 1
Traditionally, the four production focuses have been make to stock, make to order, assemble to order, and engineer to order (also known as design to order). However, in recent years, production environments have evolved along with the complexities of today’s supply chain, with product handling concepts and frameworks likewise evolving.

The impact of this shift is especially visible in the areas of inventory, packaging, and logistics management. Customized delivery is becoming more prominent, which has initiated a new thought process in the classification of production environments. Two relatively new subclasses making their way in the industry are ready to dispatch (RTD) and pack to order (PTO).

RTD involves a product, in its completely packed form, being moved to the end customer without any change in quality and format. The customer packaging requirements are shared with the manufacturer in the early phases of order handling, and the items are kept ready with the defined product formats. This methodology can work the other way also; meaning, at the distribution center or manufacturer’s location, items are packed in a predefined format based on the manufacturer’s specifications, which are then accepted by the customers. The manufacturer’s supply chain is highly dominant here, and product packaging market trends are followed closely and adopted. RTD, which acts as a push process in the material chain, does not allow for flexibility in terms of quantity.

With PTO, on the other hand, packaging is defined at the distribution centers, taking into account customer desires. When products are received from the manufacturer, they undergo repacking according to customer quality and quantity requirements. PTO environments are becoming more common with the emergence of e-commerce and last-mile delivery operations.

The future of PTO

PTO environments benefit from advances in packaging, which enable more streamlined handling, less volume, and reduced weight—all of which lower the logistics cost associated with delivering a product. Several big e-retailers such as Amazon are deeply focused on achieving leaner packaging without compromising quality. The aim is to cut customs and local taxes that are based on the volume and weight of the materials.

It would be wise for these companies to closely collaborate with packaging material suppliers and third-party logistics providers in order to fine-tune material handling and packaging processes. In certain distribution centers, packaging consultants are even called upon to enhance PTO supply chains. This is common with export-based order management, as the work there affects duty calculations. Also, as the PTO supply chain is in direct contact with end consumers as it always assesses their needs, the information should be shared with all partners.

With customized and last-mile delivery business growing on all retail fronts, a major focus today is on product handling and material packing. PTO should be given significant consideration. It is a noteworthy development for supply chain practitioners and industry researchers.

V.G. Venkatesh, CSCP, is a faculty member at the Institute of Operations Management of Symbiosis International University in India specializing in supply chain strategy and logistics management. He may be contacted at vgv1976@gmail.com.

Rameshwar Dubey PhD is a faculty member at the Institute of Operations Management of Symbiosis International University in India specializing in supply chain strategy and logistics management. He may be contacted at rameshwardubey@gmail.com.

2 Comments

  1. 1 MDPG 15 Jul
    RTD and PTO are not manufacturing strategies like MTO, MTS, ETO and ATO. They are more like Packaging strategies to deliver to customer. Very relevant when we look at the penetration of e-commerce in today's business world. However I am not totally convinced that they could be included along with the earlier 4 statregies.
  2. 2 Hazem Labib 01 May
    thanks for the nice article and valuable information. But I feel like RTD is very similar to MTS environment. Could I have more clarification on the differences between them ? 

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