Configure-to-Order (CTO) represents the ability for a user to define the component make-up (configuration) of a product at the very moment of ordering that product, and a vendor to subsequently build that configuration dynamically upon receipt of the order.
A Configure to Order (CTO) system is a hybrid of make to stock and make to order operations. It is a set of components (subassemblies) that are built to stock whereas the end products are assembled to order. This hybrid model is most suitable in an environment where the time it takes to assemble the end product is negligible, while the production/replenishment lead time for each component is much more substantial. Personal Computer (PC) manufacturing is a good example of such an environment. By keeping inventory at the component level, customer orders can be filled quickly. On the other hand, postponing the final assembly until order arrival provides a high level of flexibility in terms of product variety, and also achieves resource pooling in terms of maximizing the usage of component inventory. Therefore, the CTO system appears to be an ideal business process model that provides both mass customization and a quick response time to order fulfillment.
Dell has operated as a pioneer in the "configure to order" approach to manufacturing, whereby delivering individual PCs configured to customer specifications.