What is MTS and MTO and relation to SD?
MTO - Make To Order
MTS - Make To Stock
The description itself are self-explanatory. In Make To Order cases, ordered material would be manufactured only after the manufacturer receives a confirmed order. This includes all sub-components would either be produced in-house or procured externally. Example Car
In case of Make To Stock, the manufacturer produces and keep buffer stock of fast moving items to supply with short lead time.
From SD point of view, as and when the sale order is created in SAP, based on the MRP parameters maintained in material master, system will determine whether the order is MTO or MTS.