In assemble-to-order production (ATO) customer order triggers assembly from components and subassemblies stocked in production buffers. After assembly there may be testing and checking of the products, and the products are packed and delivered to customer. Products are usually modular, and the modules are produced in an anticipatory way to buffers. In other words, there is a buffer stock containing parts and subassemblies at the order penetration point (OPP) location (assembly).
Assemble-to-order brings most benefits in situations where the product is modular: it contains standardized modules, which can be combined into different end products. Thus the amount of modules is limited, but through combining them differently a high amount of end product combinations can be created. A laptop is a good example of such a product. Through assemble-to-order one can provide a relatively short delivery time for customer (typically from couple of days to couple of weeks) with a high number of different product variants. From the operations point of view the inventory risk and tied capital are lower than in make-to-stock because there are fewer different modules than different end product combinations, and correspondingly the inventory is lower both in pieces and value. Prior (upstream) of OPP the production can be levelled for produced amounts and the mix of items and thus higher efficiency can be achieved.
The modularization related to ATO is often challenging and time-consuming, and requires a lot of effort from R&D (Research and Development). In best case this way of working combines short delivery lead times and large product selection for customer with efficient production. Assemble-to-order is one way to achieve mass customization.