ITPEC IP October 2025 Question 87
When build-to-order production is compared to build-to-stock production, which of the following is the appropriate characteristic of build-to-order production?
Explanation
No immediate shipment, but no risk of excess product inventory — the trade-off of build-to-order production.
Build-to-order production starts making a product only after the customer's order arrives. The customer waits for manufacturing, so the product cannot ship at once, but nothing is made without a buyer, so finished goods never pile up unsold. Build-to-stock production does the reverse: it makes products in advance from a demand forecast and ships from stock.
Answer (a)
Why not others:
- •(b) — raising forecast accuracy and keeping an optimum product inventory are the tasks of build-to-stock, which depends on both
- •(c) — losing sales because stock runs short is the risk of build-to-stock; build-to-order holds no product stock to run out of
- •(d) — producing to a plan based on an order forecast is the definition of build-to-stock
Key rule: Build-to-order swaps delivery lead time for zero finished-goods inventory; build-to-stock swaps inventory risk for immediate delivery.
Business Industry · AI-written, may contain errors
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