build to order

What is build to order?

Build to order is a methodology and manufacturing practice where a product is created once a confirmed order is received. The build-to-order process is critical to avoid creating expensive products that may not sell and to avoid tying up capital in inventory.

Who creates build-to-order products?

The methodology is primarily used by manufacturing companies when products are highly specialized and have minimal alternative uses, are costly to produce and the costs may not be recovered if a product is not sold or is expensive to maintain in inventory tying up capital.

Examples of build-to-order products include made-to-order automobiles and items costly to maintain in inventory, such as airplanes. In many cases, a build-to-order product is highly customized with unique customer specifications.

Build to order has also become more accessible over the years. Many small business sites like Etsy create products that customers can personalize for themselves or as a gift.

How do build-to-order processes work?

In a build-to-order scenario, the entire product may be made from scratch when the order is received. In some cases, finishing touches can be added to complete the final product if partial inventory is already completed.

A proper amount of risk management should be performed to avoid the loss of potential customers. A risk involved with the build-to-order model is that if a similar product becomes available, a customer may not be willing to wait until the product is created and available for them.

Editor's note: This article was written in 2019. TechTarget editors revised it in 2023 to improve the reader experience.