In the past, the production logic for many LVL factories was "produce first, sell later." Consequently, warehouses were often piled high with specifications assumed to be popular, while the items customers actually wanted were frequently out of stock. A group of Chinese factories is now shifting this model by adopting a "production-to-order" approach-confirming customer needs before scheduling production. This has led to reduced inventory, faster turnover, and higher customer satisfaction.
1. The Cost of "Produce First, Sell Later"
"This specification should sell well; let's produce 500 cubic meters and stock it." This was once the standard production logic for many factories.
However, this approach came at a high price:
- Inventory backlog: If market trends shifted, specifications once considered "hot sellers" suddenly found no buyers.
- Capital tie-up: Goods worth hundreds of thousands or even millions sat in warehouses, locking up vital capital.
- Product degradation: Prolonged storage exposed wood to moisture, warping, and mold, compromising quality.
- Stockouts of actual demand: The specifications customers wanted weren't in stock, while the stocked items went unsold.
"We once had a batch of goods sitting in the warehouse for nearly a year," recalled a factory manager. "We eventually had to clear it out at a discount and took a significant loss. That whole year of work was essentially for nothing."
2. The Shift to "Production-to-Order"
- Some factories began changing their mindset: confirm orders first, then schedule production.
- Scheduling production after order confirmation: Factories only plan production after the customer has confirmed specifications, quantities, and delivery dates.
- Small-batch stocking for "evergreen" items only: For the most consistently selling specifications (e.g., 50×100mm, 38×89mm), factories maintain a small safety stock specifically for urgent, small-volume orders.
- Making "ask before making" a habit: Sales teams ask customers "When do you need it? How much?" before quoting prices, then schedule production based on the customer's timeline.
"Our logic now is 'produce only when there's an order,'" said a production supervisor. "Unless it's a highly stable 'evergreen' item, we don't stock up in advance. The warehouse is empty, but we have peace of mind."
3. Changes Brought by "Production-to-Order"
Implementing "production-to-order" has significantly improved factory operations:
- Faster inventory turnover: Inventory turnover rates have risen from four times a year to six to eight times. The same capital can be turned over two additional times per year.
- Reduced risk of overstocking: Instead of "betting" on which specifications will sell best, production is driven by actual orders. This drastically lowers the risk of excess inventory.
- Improved cash flow: Lower inventory levels mean less capital is tied up, resulting in healthier cash flow.
- Higher customer satisfaction: Although some specifications require a production lead time, customers appreciate that the product is being made to their specific requirements, leading to more realistic expectations regarding delivery dates.
"In the past, the warehouse was packed with stock, yet I felt anxious," said a factory manager. "Now the warehouse is empty, but the order book is full. Which situation is healthier? Clearly, the latter."
4. Key operational aspects of "production based on sales"
"Production based on sales" does not mean "passively waiting for orders"; it requires more sophisticated operational capabilities:
- Accurate delivery commitments: The factory must provide precise delivery dates after an order is placed. Rash promises made solely to secure an order-only to fail on delivery later-must be avoided.
- Flexible production planning: With an increase in orders involving small batches and diverse specifications, production lines require greater scheduling flexibility.
- Rational raw material reserves: Adopting a "production based on sales" model does not mean eliminating raw material stockpiles. Reasonable inventory levels for frequently used materials must be maintained to ensure production can start quickly once an order is received.
- Proactive customer communication: After an order is placed, the factory should proactively provide updates on production progress, reassuring the customer that the goods are being manufactured and thereby reducing anxiety.
"Production based on sales doesn't mean 'waiting for a customer order before buying raw materials,'" a production manager explained. "We still stock raw materials, but we don't blindly stockpile finished goods. This allows for rapid response while avoiding inventory backlogs."
5. Customer Feedback
"In the past, when I placed an order, the supplier would say, 'We have it in stock; we'll ship it tomorrow.' Now, they say, 'Order received; 15 days for production, then shipped on schedule,'" said a customer from the Philippines. "Although I have to wait a few extra days, I know the goods are freshly made to my specifications, not old stock sitting in a warehouse."
"At first, I wasn't used to the idea of 'waiting for production,' but I later discovered that the quality of products made-to-order is actually more consistent," noted a customer from Malaysia. "Plus, the factory proactively updates me on production progress, so I always know where things stand."
"I now place orders 20 days in advance to allow the factory enough time for production," said an Indonesian customer. "They are very reliable with their delivery commitments; if they say 15 days, it takes exactly 15 days."
"Make-then-sell" is a gamble; "sell-then-make" is sound business management. As Chinese LVL factories shift from "betting on the market" to "following orders," they are reducing not only inventory pressure but also operational uncertainty. This pragmatic approach-aligning production with sales-is a crucial step in the evolution of Chinese manufacturing from extensive growth to refined, precision-based operations.
