What is an Assemble to Order in E-commerce?
Assemble-to-order (ATO) is an order fulfillment strategy used in e-commerce in which the customer orders a product which is assembled or customized accordingly after the order is placed. The product is typically assembled from a combination of components stored in inventory.
This process is in contrast to build-to-order, in which the product is built to the customer’s specifications before the order is placed. ATO is often used for products that require assembly but are not highly customized, such as furniture, computers, and electronic devices.
Significance of Assemble to Order in E-commerce
Assemble-to-order is a production and inventory control strategy used in e-commerce that allows customers to customize certain products to their own specifications.
- It is an efficient way for businesses to provide customers with personalized products without having to maintain large amounts of inventory.
- ATO systems can also help reduce the costs associated with production, storage, and shipping, allowing businesses to offer competitive prices.
- Additionally, ATO systems enable businesses to provide faster delivery times, allowing customers to receive their customized products quickly and efficiently.
Prerequisites to Calculate Assemble to Order and How It Works
ATO production occurs only after the order has been confirmed, so it is a kind of middle-ground approach. The prerequisites to take an ATO approach include the following –
- A clearly defined production plan that outlines the parts and labor needed to produce the product
- Accurate inventory records and detailed labor costs to accurately calculate assemble-to-order costs
- An estimate of the demand for its product in order to accurately calculate assemble-to-order costs
- Additional costs of each step, like the cost of materials, overhead, and any other costs associated with the production process
Assemble to order allows customers to customize their orders by selecting individual components or components in certain combinations. The components are then assembled and shipped to the customer.
Use Case With Assemble to Order
Dell Technologies, a tech giant, offers assemble-to-order business models to its customers. Depending on the PC model, customers can choose from a range of monitors, CPUs, processors, and other hardware and software options. PCs are assembled and shipped for delivery once the customer places an order.