Evaluating MTO Order Economic Performance for Parts Processing and Machining Production

Abstract

In a Taiwan metal parts processing company, orders often involve customization, tight deadlines, and small quantities, leading to additional costs that can distort profit assessment during quoting and production. This case study employs Data Envelopment Analysis (DEA) to assess how different types of make-to-order (MTO) orders impact costs and profits. Mass production type benefit from operational experience, enabling efficiency improvements. However, research and development (R&D) orders pose challenges due to unforeseeable factors like production failures and rework processes. We suggest classifying R&D orders based on complexity, customer requirements, and material types. Three key approaches for assessing order benefits include evaluating cost-effectiveness between in-house production and outsourcing, streamlining processes for efficiency, and integrating risk considerations into quotation accuracy and manufacturing cost analysis.