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Question 437 - CSCP discussion

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Moving from engineer-to-order (ETO) to assembled-to-order (ATO) usually increases which of the following costs per unit?

A.
Transportation
Answers
A.
Transportation
B.
Inventory
Answers
B.
Inventory
C.
Manufacturing
Answers
C.
Manufacturing
D.
Procurement
Answers
D.
Procurement
Suggested answer: B

Explanation:

Definitions:

Engineer-to-Order (ETO): Products are designed and built to customer specifications after the order is received.

Assemble-to-Order (ATO): Products are assembled from pre-existing components after receiving an order.

Inventory Implications: Moving from ETO to ATO requires maintaining an inventory of components and subassemblies that can be quickly assembled into final products.

Increased Costs:

Inventory Costs: Increased because components need to be stocked to facilitate quick assembly.

Comparison with Other Costs:

Transportation (A): Costs per unit generally remain unaffected by the move from ETO to ATO.

Manufacturing (C): Manufacturing costs per unit typically decrease due to standardized components.

Procurement (D): Procurement costs might be streamlined due to bulk buying of components but do not necessarily increase per unit.

Conclusion: The shift to ATO usually increases inventory costs per unit due to the need for maintaining a stock of components.

'Manufacturing Planning and Control for Supply Chain Management' by Thomas E. Vollmann, William L. Berry, and David C. Whybark.

APICS Dictionary, 16th Edition.

asked 16/09/2024
Arthur Moron
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