A brief journey of what functionality ERP engineer-to-order systems must support.
Just like the mythical character in the film E.T., who was far from home in an unfamiliar environment, companies that have years of experience working with a discrete ERP system sometimes feel that they are out of this world in trying to adapt the system to the unique elements in the engineer-to-order (ETO) world.
In many respects, this is related to the complexities of the products and the manufacturing process in an ETO company. The requirements of an ETO environment primarily consist of organizations whose products have custom specifications and require unique engineering design. Other aspects of ETO can include customer orders that require a cost estimate, and may involve a unique set of components, bills of materials (BOMs), and production routings for a unique, one-time build or assembly.
ETO companies may not carry inventory of assemblies or raw materials until a confirmed customer order is placed. Generally speaking, requirements are not based on large production volumes because typically, products are made as single units, with long lead times from both the supplier and production area .These products are usually multilevel BOMs, and customers are heavily involved throughout the entire design and manufacturing cycle. Some examples of ETO products include aircraft, railway cars, and industrial machinery, such as printing presses; machine tools; die tools and molds; etc.
Due to the complex nature of the production, the ETO system has to be able to support integration to a computer-aided design (CAD) system in order to support the specific engineering tolerances and changes in both confuguration and design capabilities. One of the challenges inherent in the ETO environment is that standard discrete ERP systems cannot adequately plan for the fluctuations in market demand and, by extension, the reduced capacity use in manufacturing. From a procurement perspective, the customized nature of the raw materials or the processing of materials by a subcontractor may result in long lead times, as well as make negotiating for reduced costs based on volume difficult.
The emphasis of an ETO environment at the procurement stage is to treat each job as a project, with product specifications linked to quality, and the arrival of raw materials and subassemblies to coincide with the requirement for the stage of the build schedule. Typically in the ETO environment, we are speaking about products that are for the original equipment manufacturer (OEM) market, where support for after-sales service (in the form of field service or engineering service) as well as scheduled and unscheduled maintenance may be a requirement.
One other factor that limits conventional discrete ERP systems in the ETO environment is the frequency of changes in design engineering, as additional functionality and features are built into subsequent versions of the final end product. Managing configuration control and versions having links to a CAD system becomes a primary consideration for an ETO system.
Just as E.T. had to “phone home” to receive direction and guidance for his journey back from another world, you need vendor information on product offerings that will bring your ETO business back to its own world, where it belongs. Here is an excellent place to obtain further information on ETO software products and vendors.
Very informative article about ETO companies involved in specialised deliveries given a manufacturing environment. A similar environment is also perceived as a priority in the energy vertical with contractors who build oil/energy based infrastructure. Also owner/operators in the same vertical have a similar requirement from a maintainence standpoint to manage vendors & specialised materials/vendor parts for continuos operation.
Ability to integrate these sectorial priorities into a ERP solution definately adds value.
Thank You for your feedback about my blog post. The activity that your describing in the oil/energy industry sounds a lot like EAM/CMMS
whereby specific pieces of equipment are managed by vendor. Certainly there are elements of ETO which align themselves in this area as well.Have you experienced working inthe oil and gas industry and if so how did they manage the schedules when the customized parts had a long lead time from the vendor.