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learning type: Growth & Strategy

Streamlining the ETO Manufacturer

Integrators, Panel Shops, and OEMs need full project visibility and real-time information to deal with the design changes they face, as well as an unpredictable supply chain.

Key Takeaways

  • Custom manufacturing software reduces operating costs and promotes growth without additional resources. However, for Integrators, Panel Shops, and OEMs,  that success comes when you work with an ERP/MRP designed for your unique workflow.
  • By having all your product information; drawings, bill of materials, and job costs archived and available to all staff, your whole team will be less busy.
  • To find the right solution, keep in mind that no business information system will immediately solve all your challenges. However, by finding one that gets you 90% there and adding a few ERP customizations, you’ll end up with a system that truly fits with and improves your processes.

Engineer To Order manufacturing is different from traditional manufacturing, including standard made to stock and make to order manufacturers.

Does your company custom design products to client specifications? Is the finished product usually different from the design your engineering team started with? If so, it is one of more than 5,000 Engineer To Order (ETO) manufacturers in North America. And, if your company is typical, it has yet to unify the key parts of the manufacturing process into an integrated business information system. Manufacturing software for small businesses may be challenging to find, but the search is worth it. The benefits of linking your “information islands” using software are substantial. In fact, custom manufacturing software is the best way to reduce operating costs and promote growth without added staff or resources. The trick for ETO manufacturers is to find software designed to meet their specific needs. 

Custom Manufacturing Software is Different

The chaotic business process of the Engineer To Order manufacturer is a manager’s nightmare. Unlike most manufacturing companies, which produce pre-designed products, the ETO manufacturer is faced with a completely different set of challenges. Product development is specific to suit each customer order, requiring significant engineering before production can begin. Coordinating sales, engineering, purchasing, and production efforts is extremely difficult. This is especially true when scope changes are requested by the client, while the order is in progress. The constant last-minute changes are a common struggle for ETO organizations, from Integrators, to Panel Shops, to OEMs. It makes sense that Custom Machine Builders need a custom manufacturing software solution.

Engineering and manufacturing teams that specialize in ETO share some common characteristics. Generally, they are small to mid-size (15-150 staff). Their ability to solve a unique problem for a client with a customized product is the source of their success. Engineering is, therefore, the “engine’ of the company and is a critical part of the production process. Because most orders are unique, accurate estimates are a key to profitability. This data can be hard to find, even with the best manufacturing ERP software. Tracking each project’s costs throughout is essential, though. The typical workflow of the Engineer To Order process follows this sequence: estimate, design, purchase, modify design, repurchase materials, monitor cost and progress, build, modify design, finish, and ship. When you multiply that by dozens of orders flowing through the organization, you have a recipe for confusion.

Designing, purchasing, and building at a very fast pace is complicated by constant design changes. Teams also face the need to parcel out information to procurement and/or manufacturing before the design is complete. Engineer To Order manufacturers need to find a way to minimize the disruption and added costs. As you’ve probably experienced yourself, the resulting bottlenecks delay delivery and escalate costs. Controlling the chaos requires “real-time” information, something you won’t find in spreadsheets or paper-based systems.

Breaking Through the Entrepreneurial Ceiling

Have you ever wondered why some companies in an industry are more successful than others? Surprisingly, it doesn’t have as much to do with building complex products as you might think, nor with the type of manufacturing they specialize in. Look at how they are organized. The teams with a competitive edge leverage their knowledge and use their past experiences to grow.

Most small custom design manufacturers depend on the knowledge of a few key people for success. As the years pass, they become tied to their jobs, and the company’s growth is limited by their capacity.

Breaking through this capacity ceiling is a MUST for Engineer To Order manufacturers. This is done by sharing more knowledge with more people. It reduces the dependency on individuals and unleashes an employee’s potential. The result is improved efficiency, accuracy, and profitability.

Improved Profitability

The value of a business is determined by its ability to reuse historical data to secure future business. Your company’s biggest asset is not machinery or equipment but the information that it can use over and over again. Accessing knowledge that was previously locked away in senior employees’ minds permits new staff to contribute more quickly to the success of the business. Simplifying the complex ensures your ETO business is transferable and, therefore, more valuable. 

You can’t just settle for a warehouse management system or a CRM (customer relationship management system). If you want to pump up the value of your company and secure its future, you need to capture your business process with an integrated, custom manufacturing software solution. You need a business information system designed for Custom Machine Builders. The most efficient and profitable option is an ERP designed for ETO.

You Will Need Some ERP Customizations

There really are thousands of enterprise resource planning (ERP) systems out there, and dozens of them can be used in repetitive manufacturing. Most standard ERPs, however, won’t work for ETO manufacturers. ERP customizations will help, but you need to start with a solution that’s “close enough”. It’s unlikely you’ll find an ERP that will work right out of the box. However, you might find a solution that fits 90% of your business perfectly, with ERP customizations closing the gap.

Some ERP features known for helping Custom Machine Builders include:

  • Integrating directly with CAD to create nested or Dynamic BOMs.
  • A link between engineering and procurement to eliminate this bottleneck and allow purchasers extra time for long-lead components.
  • Real-time job costing, including preliminary and actual costs.
  • Project management with full project visibility.
  • A way to access historical data to improve accuracy, particularly in sales estimates.

Justifying the Effort

Case study: Handling Specialty, Niagara, ON

Handling Specialty, a Niagara, Ontario based Engineer To Order company, was experiencing increased sales but falling profits. Symptoms included redundant data entry and excessive material delays from design changes. They also weren’t able to estimate projects accurately because they had no access to past data. There was no “early warning” job costing information nor reliable inventory and work-in-progress values to produce accurate monthly statements.

To overcome these problems, Handling Specialty decided to streamline its business process. They knew they needed custom manufacturing software, and they chose Total ETO. The result of dynamically integrating sales, estimating, engineering, purchasing, production, and administration into one seamless system was dramatic.

Handling Specialty, a custom manufacturer has had great success with Total ETO as their ERP.

Over the next five years, they doubled their sales. As if that isn’t impressive enough, the sales increased while production costs decreased. Design and shop hours decreased by an average of 10.3%. There was also no increase in inventory. Compared to the previous five-year period, Handling Specialty recorded a six-fold increase in profits. It’s also worth noting that the paper chaos was eliminated, and morale soared. Results like this used to be unheard of for Engineer To Order organizations.

These dramatic gains came as a result of key improvements such as:

  • Shorter order-to-ship times
  • Less redundant paperwork and double-entry
  • Reduced material costs
  • Full project visibility with real-time information
  • Improved lead time

Skeptical? Just imagine a few of these obstacles being eliminated in your organization…

  • If you could shorten your average design time by just one week, how much could be saved annually on materials by having more time to purchase? 
  • Think about freeing your designers from paperwork so all they focus on is product design; how much more business could you handle? 
  • If your organization didn’t have to rely on an unstable supply chain and received all the materials when they needed them, how much would manufacturing costs be reduced?
  • How much more accurate would your estimates be, if you could reference past history to quote similar new jobs?
  • If you could grow without adding staff or manufacturing space, what would your bottom line look like?

To see how other Custom Machine Builders have streamlined their processes, check out more success stories here.

Picking the Right Business Information System

Many Engineer To Order manufacturers regularly spend tens of thousands of dollars on production equipment. Yet, they’re reluctant to make similar investments in software. An ERP designed for your unique workflow will be the most important production tool you will buy. Your teams’ performance will increase from these new efficient processes. Plus, by having all your product information; drawings, bill of materials, and job costs, archived and available to all staff, your whole team will be less busy.

To avoid common pitfalls as you search for the right business information system, develop a plan. Create a project team and make sure the executive team is supportive. Choose a system specifically designed for an Engineer To Order business. No ERP/MRP solution will immediately solve 100% of your challenges. Avoid the quest for perfection while you search for custom manufacturing software. Many manufacturers find that the 90% solution may be far more practical than a system with excess features that aren’t useful. In fact, you’ll find many ERP customizations to be welcomed by your team.

If the ERP is a true ETO solution, chances are there’s a great team of engineers behind it. At least, that’s the case for Total ETO. Our engineers work with Integrators, Panel Shops and OEMs to customize the software to each clients needs.

Discuss Implementation Before Signing

A successful implementation is directly tied to ease of use.  This is true for all ERPs but especially those in an ETO environment. Focus on a system that eliminates the real bottlenecks to productivity. In an Engineer To Order company, the link between design and purchasing usually presents the biggest headaches.

Put everyone on the system. Don’t buy a few copies just for the “important” users. Choose a centralized database system that your staff can support. You will want to access the data on your own for special reports or links to other software.

Think of the ERP vendor as consultants on retainer. Choose them based on their ability to understand your needs and work with you. Discuss possible ERP customizations with them in advance and find out what they would recommend for your team.

Finally, Focus on the Benefits of an ETO System, Then the Cost

What would you want from your ERP if cost wasn’t a factor? According to TechReport, 28% of organizations achieve an ROI in less than one year. With that in mind, focus on eliminating the major obstacles in your business process.  Life will get a lot easier and more profitable when you integrate the “information islands” in your company. The payoff will be substantial and easily justifiable, sooner than you think.

Until recently, business systems software providers have largely ignored Engineer To Order manufacturers. While the rest of the manufacturing industry is swamped with options, ETO faces fewer choices. Fortunately, you don’t need a lot of solutions, you just need the right solution.

One of the only platforms specifically developed for small—to mid-sized Engineer-to-Order manufacturers is Total ETO. Not only will this solution match your workflow more than any other option, but the engineers and designers who created the software are talented and happy to help with any ERP customizations.

It doesn’t take much to recognize there are significant economies in streamlining your business process. Quantifying a few of the benefits will show you that investing in the right ERP solution can yield substantial profits.

Written by Taylor Dykstra

Improving Your ETO Workflow

Without an ERP designed for ETO, there will always be bottlenecks between engineering and procurement. Dynamic BOMs are necessary to improve efficiency.

Key Takeaways

  • ETO manufacturers struggle without manufacturing ERP software. Challenges include change orders, accurate estimates, part tracking, and production planning.
  • Custom Machine Builders thrive when their ETO workflow is dynamic. Using an ERP that integrates with CAD improves efficiency throughout your organization, especially in engineering and procurement.
  • More than just BOM software, an ERP designed for OEMs will capture change order info. Sales will have access to essential estimating details. Additionally, full project visibility makes it easy to track changes to the BOM, ensuring information is shared across departments, including procurement, so they can get an early start on long-lead requirements.

Engineer To Order (ETO) manufacturers have the pressure of dealing with constant changes during a project.

It can be frustrating for an ETO company as they try to manage the bill of materials (BOM). Their customers don’t just make changes during the design phase, but all stages of a project. With the BOM in constant flux, procurement and engineering need to work closely together, especially when it comes to long-lead components. This synergy is necessary to improve your ETO workflow.

This isn’t the only challenge Engineer To Order companies face. We’ll explore a few of the top problems that are unique to ETO manufacturing.

ETO Workflow Challenges

Change Orders

As we mentioned, Custom Machine Builders face change orders on almost every project. That’s because the machine likely has never been built before and may never be built again. This means the customer must work closely with the engineering department during the design and build. Every change, however, can delay the completion of the project and increase its expense.

If an Integrator, Panel Shop, or OEM is working with static (traditional) BOMs, there’s usually a struggle between engineering not wanting to release the bill of materials, and procurement needing early access. Without the right manufacturing ERP software, these struggles compound.

Without an ERP designed for ETO, there will always be bottlenecks between engineering and procurement... at least, until, you improve your ETO workflow.

Sales

Without having previously made a similar project, it’s difficult to estimate the manpower and parts required to complete it. Additionally, even if there has been a similar machine built, Engineer To Order manufacturers struggle to collect accurate and complete data. This makes estimating and quoting projects difficult, often resulting in wrong information for the client.

Production Planning

At best, production planning is difficult for ETO companies. The numerous uncertainties faced are known for adding costs and time to most projects. Every new build comes with varying components, complexities, and customization.

Additionally, allocating resources, including materials and labor, is a struggle without a flexible ETO workflow. It’s easy for a Custom Machine Builder to over or under-estimate resources. Unfortunately, having too much and/or too little can both end up costing the company. Without a reliable system in place, you also face a greater risk of supply chain disruptions.

Manufacturing

Whether fabricated internally or externally, Custom Machine Builders have difficulty tracking parts. The process is tedious and error-prone. Furthermore, ensuring proper inspections and following up on quality issues is an overly complicated process, despite their importance.

Improving Your ETO Workflow

ETO manufacturers, including Integrators, Panel Shops, and OEMs, thrive when the engineering environment is dynamic (sometimes referred to as “concurrent engineering”). This is only achieved when they’ve integrated an ERP directly with CAD. By making the BOM dynamic, Custom Machine Builders can eliminate the struggles discussed here, as well as additional problems in accounting, engineering, and manufacturing.

Unfortunately, Engineer To Order manufacturers can’t settle for any ERP. They need a software solution that integrates with CAD and accounting while also providing complete project visibility. When investing in manufacturing ERP software, ETO organization should consider the following:

  1. Is the system “interfacing,” or is it “integrating” with the CAD package?
  2. Can the designer create a graphically presented structured BOM with unlimited levels?
  3. After the entire BOM is released to purchasing how does the system handle design changes?
  4. Does the system automatically present the net effect of item changes to purchasing (resolving quantity changes)?
  5. Can the designer quickly find and copy BOM assemblies from other projects?
  6. Does the system free the designer from any other work other than producing the structured BOM?

As you can see from this list of questions, many elements of an Engineer To Order business require an ERP designed to meet their ETO workflow. In fact, a dynamic interface between engineering and purchasing is key to speeding up the order-to-shipment cycle.

Why Total ETO; a Manufacturing ERP Software Solution

A comprehensive manufacturing ERP software is a necessity for your Engineer To Order company. The right system will help your organization scale; taking on more projects without needing more staff. Some favorite features among Custom Machine Builders include:

  • Capture change order information, including labor, material, and sales price changes, so they aren’t omitted or forgotten.
  • Provide sales essential estimating information to secure and quote future projects.
  • Track changes to the BOM at any stage of the project and ensure the information is shared across departments.
  • Release parts to procurement in stages, including initial long lead requirements.
  • Issue and revise RFQs and POs with just a few clicks.
  • Allow buyers to cost out the BOM before purchases are made.
  • Know where your parts are in their fabrication process at all times.
  • Record and follow up on quality issues on the shop floor, from engineering, or for purchased parts with embedded non-conformance reports.
  • Create simple views of WIP and use existing details for percentage complete revenue recognition.

The Total ETO Solutions page has a more thorough list of features that benefit your organization; from sales to engineering, procurement, accounting, and more. You may also find inspiration from these success stories with other Integrators, Panel Shops, and OEMs.  However, if you really want to see the kind of impact Total ETO will have on your organization, book a demo and experience it for yourself.  

Written by Taylor Dykstra

Improve the Success of Your ERP Implementation

Manufacturers experience a remarkable ROI when implementing an ERP. It’s trickier for Custom Machine Builders, though; they need to find an ERP that matches their workflow.

Key Takeaways

  • A successful ERP implementation starts with choosing a system that complements your unique workflow. It will provide full project visibility and show reporting metrics at all stages of a project. It should also help improve the quality of your parts and machines while minimizing project completion time.
  • Tips for implementing an ERP include staying within budget (including any implementation and training costs). An ERP consultant may provide helpful info and connections, but it’s vital to work with someone who understands your ETO needs. Including key staff while researching and comparing ERP systems is also important. 
  • Define success and schedule regular approvals with all departments at the beginning. This helps ensure everyone is on track and has no confusion or concerns.
Man frustrated at computer, trying to implement an ERP system

Have you heard any of those scary stories about ERP implementations gone wrong?

We have… a lot. Many Custom Machine Builders come to Total ETO after trying to implement an enterprise resource planning system that’s built for standard manufacturers. But you’re not standard, are you? Engineer To Order manufacturers are as unique as the machines they build, that’s why we love them.

ERP Systems are Valuable

There’s no shortage of evidence proving the value of an ERP system. However, hearing the stories of implementations gone wrong can cause an organization to ditch the idea altogether. Yet, you still need to streamline your business processes! Such opposing views make it difficult for a custom manufacturer to pull the trigger on finding an ERP solution, and rightly so.

Nevertheless, giving up is not the answer. Data from Nucleus Research found that for every dollar invested in an ERP solution, manufacturers received an average of $7.23 in return. Instead, custom manufacturers, especially Integrators, Panel Shops, and OEMs benefit from a little extra research in the beginning.

With the right ERP, a Custom Machine Builder can:

  • Track project workflow and see reporting metrics at all stages of a project. This empowers management with real-time information, significantly improving processes in sales and accounting.
  • Improve the quality of their parts and machines. It’s easy to ensure parts are inspected as well as record & follow up on quality issues for purchased parts with embedded non-conformance reports.
  • Improve project completion time by releasing the BOM to procurement in stages. Purchasing gets a head start with long-lead components. They can also issue and revise RFQs and POs with just a few clicks, based on changing BOM demand.

Tips for ERP Implementation Success

Good things come to those who wait… and you might need to wait for a few months. Typical ERP implementations are around three months long. We’ve had clients complete the setup in one month and others take several. Many factors play a part in the implementation time, including company size, the amount of time you dedicate each week, and even the software you’re integrating with, such as CAD or accounting.

One thing that all quick implementations have in common is a well-focused and motivated team. Automated Drive Systems, for example, had a speedy implementation.

When asked how they accomplished so much in such little time, President Brenden Fritz attributed it to his employees’ excitement. “When staff saw the improvements and how they’d benefit, everyone was on board”. Learn more about the quick implementation ADS had, including their first major wins with Total ETO, here.

TIP #1 Start with the Right ERP Vendor

This might sound like a given, but one of the most common reasons an ERP implementation fails is because the ERP software didn’t match the organization’s workflow. This is especially true for Engineer To Order (ETO) manufacturers. For those who make standard machines (the same design over and over), a standard ERP can do the trick.

The unique nature of Engineer To Order manufacturing, however, requires ETO manufacturing software as exceptional as their organization. Customizations can be made during most ERP implementations; it’s to be expected. Too much customization, though, is a problem. When an ERP solution isn’t a natural fit for an organization, it increases the time it takes to get the system up and running, as well as the costs required. Research from Panorama revealed that moderate customization in the range of 11%-20% is the sweet spot: anything above that could complicate and extend the implementation process.

TIP #2 Don’t Lose Sight of Your Budget

In the same report, Panorama Consulting found that average implementation costs were 3%-5% of the overall solution. Yet, 57% of ERP implementations still exceeded their budget. Be sure to include training costs in your budget and incorporate the opportunity costs your team may face. On average, the research shows implementation costs an average of 6.5% higher than the estimated budget.

Another way to control the implementation costs is to find an ETO ERP that includes training and implementation. It may sound too good to be true, but Custom Machine Builders do have an option that minimizes the expense and lends to the implementation projects’ success. Total ETO, for example, fits so well with Integrators, Panel Shops, and OEMs that human-guided training and implementation are included in the cost. 

After determining that an ERP is the right system for your organization, address implementation costs as soon as possible. If there’s true synergy between your organization and the ERP, it’s also in the best interest of the ERP to ensure a successful implementation. It’s rare when an ERP system will include the costs of implementation or training as Total ETO does, but they will still want to work with you to keep implementation within budget.

Be sure to include training in your ERP budget and discuss implementation costs before signing a contract.

TIP #3 Consider an ERP Consultant

When it comes to utilizing a different ETO manufacturing software system, knowledge is power. Consultants can be a great source of information and provide tips for implementation as well. The catch… if you’re Engineer To Order, then you need a consultant who specializes in ETO manufacturing. As we mentioned above, one of the trickiest aspects of buying and implementing an ERP for Custom Machine Builders is finding one that matches your unique workflow.

TIP #4 Include Key Staff when Researching ERP Systems

Employee resistance to change can be an obstacle during ERP implementations. A recent study from Deloitte shows 72% of employees resist change due to fear of job loss or increased workload. However, when your procurement manager, for example, is included when your team demos the product, they become excited about how efficient their department will be. Having full support from your team can reduce the time and costs involved in an ERP implementation.

Additionally, implementations are often improved when there’s a project champion. Someone within your organization who’s motivated to keep the project on track. This should be a full-time member of your team and/or an employee who has been with the organization long enough to understand your current challenges and be motivated to overcome them. Not only does this improve your ERP implementation, it ensures you’ve fairly evaluated all features.

TIP #5 Keep Communication Open

Ironically, one of the benefits of an ERP system is improved communication within the organization and with clients. In the meantime, it helps implementation if the manufacturing team communicates clearly and often. Poorly structured communications lead to bottlenecks and we’ve seen momentum can make or break an implementation.  

TIP #6 Schedule Regular Approvals

A common reason for implementation failures is not getting the desired results from the ERP. A great way to avoid this hurdle is by setting milestones throughout the project. During each stage of approval, plan and test functions to confirm everything is performing correctly. Project stakeholders or department managers should sign off after each approval. Every time a milestone is checked and approved, you’re not only improving the implementation timeline, but your team will have renewed motivation for continuing.

TIP #7 Define Success

When you first considered using an ERP to improve your processes, you had a vision, probably several. You knew there were areas within your organization that needed improving. These could include:

  • Providing more accurate sales quotes.
  • Completing more projects in less time.
  • Increasing the quality of your final projects.
  • Improving sustainability while minimizing waste.
  • Reducing costs in procurement while improving your supply chain.

Keep track of your current challenges and your goals. These will be used to measure progress during implementation as well as the overall return on investment. Clearly defining your goals at the beginning sets you up for success. You’re more likely to select the right ERP in the first place and these goals will keep your team motivated during implementation.

Conclusion

Successfully directing ERP implementation challenges requires a strategic approach. Understanding your organization’s goals and aligning them with your team’s needs starts the project off on the right foot. Open communication between your team and regular check-ins help to keep the project moving forward. Specifying a realistic budget and time commitment keeps the project and the implementation team on track.

Need help navigating all the manufacturing software options? We can help! Book a demo today to get your team excited about the growth ahead.

Written by Jay Boychuk

How to Increase Production Capacity

The most effective way to improve production capacity is to reduce clerical work in engineering so your designers have more time to design.

Key Takeaways

  • Thanks to frequent change orders, difficulty tracking parts, and no effective way to collect and learn from data, efficient manufacturing is difficult for Custom Machine Builders.
  • Adding new staff should be the last option to increase production capacity. New staff increase operating costs and require resources such as office space, equipment, training, etc. Instead, reduce repetitive data entry and redundant paperwork to free up your current staff’s time.
  • Using an ERP designed for ETO manufacturing can increase your production capacity by creating more efficient manufacturing processes and speeding up the order-to-ship timeline.

How to Increase Production Capacity

Success in our competitive market is forcing every manufacturer to make their business more responsive to client demands. The pressure is on for better, faster, and cheaper solutions.  Efficient manufacturing, however, is particularly difficult for Engineer To Order companies, for several reasons:

  • Customers frequently request changes to the order during or even after the design process. This can extend the length of a project and procurement efforts.
  • Sales representatives need to quote projects as quickly and accurately as possible. This is problematic though, without tracking past projects and estimates to completion.
  • To meet delivery deadlines, engineering needs to “pre-release” components to procurement. This, however, requires special effort to manage the bill of materials interaction with purchasing.
  • The team often identifies areas where the design requires changes. Engineers then need to modify drawings as well as the Bill of Materials (BOM). Procurement will then need to adjust material orders.
  • Accounting, engineering, and purchasing departments are often weighed down by unnecessary clerical work.

These are just a few of the quirks that make Custom Machine Builders so valuable but so busy. While it may seem impossible, you can improve the level of service to your customers while increasing your production capacity. Furthermore, you can do so without adding staff!

With the right ERP, Custom Machine Builders can improve production capacity without adding staff. Such an ERP will be your most valued manufacturing software.

More Efficient Manufacturing

By streamlining your business processes, you’ll free up critical staff from clerical tasks to focus on income-generating work. Inherently, Engineer To Order companies have talented staff, often creative and passionate. Unfortunately, as most managers know, their key staff are burdened with significant clerical responsibilities. It’s common for Custom Machine Builders to see the potential to expand their sales but not have the resources to do so.

We know from our own experience as machine builders and see confirmation from Automation.com that “Engineers are highly paid professionals who suffer when performing repetitive functions, such as back-and-forth massaging and frequent manual design adjustments. Only with a good marriage of engineering and sales automation can ETO (Engineer To Order) manufacturers provide rapid responses and compelling quotes to customers”.

Usually, creating more efficient processes in your manufacturing requires additional staff or workspace. However, you can make improvements without these resources.

Would Hiring Additional Staff Help an ETO Manufacturer Grow

Increasing capacity by adding new staff should be the last option for a manager. New staff will immediately increase operating costs through hiring expenses, fees, and salaries. Additional staff will also require resources such as office space, equipment, training, and supervision.

Moreover, employees that don’t stick around can be costly. Even a successful new employee, particularly in key technical departments such as engineering and manufacturing, still requires many months of experience before they can be 100% productive. That’s why it’s recommended you improve and maximize your current resources before adding to them.

How to Improve Production Capacity

Freeing up existing staff from clerical duties is the most profitable option. Consider your engineering department. Designers typically spend 50% of their time reissuing drawings and rewriting BOMs. They need to communicate with purchasing, process change orders, issue lists, and reports. Meeting with sales and manufacturing adds to their day as well. Finding a way to free up even 25% of their time has the effect of increasing your engineering capacity. Your four designers now have the capacity of five experienced designers.

The impact of freeing up design capacity has a multiplying effect on your manufacturing capacity. For example, for many Custom Machine Builders, their shop staff is four times the number of designers. Increased engineering capacity results in more shop hours sold. This chain reaction increases company profits with a minimal increase in fixed costs.

The most effective way to improve production capacity is to reduce clerical work in engineering, so your designers have more time to design.

How to Reduce Material Costs

Speeding up the design process helps reduce material costs. Engineer To Order (ETO) businesses usually define the materials required after they get the client’s order. Because this is a creative process… and changes from the client do occur, it is not unusual for engineering to need more time than what was scheduled. This means that procurement has less time to buy the materials to meet promised deliveries.

Time constraints reduce or eliminate the possibility of price shopping. The procurement department could save significant amounts of money if it had access to the BOM sooner (and had time to solicit competitive bids). In a $10 million / year sales firm, spending $4 million in materials, a 3% gain (with competitive bidding) alone represents $120,000 annually. Here, you can start to see how valuable enterprise resource planning software or manufacturing software can be for Custom Machine Builders. It connects engineering to purchasing and the shop floor.

As Nate Hinks, former Director of Sales at Farason said: “Total ETO has streamlined our purchasing process and saved us the cost of one full-time purchasing agent”. Learn more about the improvements Farason experienced when integrating Total ETO with SolidWorks.

Another major consideration in efficient manufacturing is using your history to reduce new engineering. Implementing a system that allows staff to reuse information from prior projects can not be over-emphasized. The ability to quote clients based on similar past projects not only improves the accuracy of estimates but also reduces the time spent quoting and qualifying clients.

Simply said, estimating is the act of determining how much time and money is needed to complete a project. Recognizing that estimating is ultimately an attempt to predict the future helps you see that the more info you have, the better. Like any projection, the accuracy of the estimate improves with the availability of more data.

Metform are Engineer To Order and have benefitted from our ERP designed for Custom Machine Builders

Metform International has been providing roll-forming machines and coil-processing equipment for over 45 years. Purchasing & Logistics Manager Tom Hirschler started seeing the benefits of their sales team using an Engineer To Order ERP right away; “Total ETO has given us the tools to win bids successfully and become a worldwide competitor”. More details about the benefits Metform is still experiencing, including streamlined data and fast-tracked spare parts orders, are available in this success story.

A Bright Future for ETO Manufacturers

Many manufacturers are currently struggling and as we’ve learned, Custom Machine Builders are all too familiar with this battle. We can see though, that the right ERP (one that is designed for Custom Machine Builders) can be counted on to save time and money throughout an organization. The right ERP really can increase production capacity by creating more efficient processes in manufacturing. Additionally, this kind of manufacturing software can reduce the engineering work required and speed up the order-to-ship timeline.

Written by Taylor Dykstra

Building an ETO BOM

Due to its unique nature, an ETO bill of materials requires more documentation, customizations & adaptations than a standard BOM.

Key Takeaways

  • The first step to creating a BOM is a complete understanding of what the customer is looking for. In ETO manufacturing, customers are likely to make changes to the design and, therefore, the BOM, but paying close attention in the beginning can save changes in the end.
  • BOM creation in ETO manufacturing is more efficient when you have a good system in place for tracking parts. Don’t forget, though, your BOM should also include descriptions for each part.
  • BOM management is easier when working with Dynamic BOMs. They simplify the design, procurement, and manufacturing of each project and help ensure you’re able to ship on time and within budget.

A bill of materials (BOM) is to an engineer like a recipe is to a chef; it needs to be just right to create that perfect, unique final product.

Creating a BOM organizes the materials and subassemblies needed to manufacture a product. Thanks to details such as quantity, lead time, waste factors, etc, the BOM also improves project management.

The tasks involved are complex, and some best practices are necessary to ensure accuracy, efficiency, and a successful outcome. It’s also interesting to note that a bill of materials can vary greatly, from one organization to the next. In this article, we’ll explore creating and working with a BOM, particularly in the Engineer To Order sector.

Types of BOMs

Like most manufacturers, Custom Machine Builders face several types of BOMs, based on their function, structure, or configurability.

BOMs BY STRUCTURE

  • Single-level BOMs are a high-level view of the parts needed to assemble the project. Any subassemblies or blends are left out, as it’s just the finished components listed here. These BOMs are meant as a guide or where no additional processes are required downstream.
  • Multi-level BOMs are necessary for projects with multiple levels of assembly. In these BOMs, the first level is the parent item, with levels below, often known as “sub-assemblies” or “child-assemblies,” reserved for items that require additional work.

BOMs BY CONFIGURABILITY

  • A standard BOM is a fixed or static list; intended for use when the product being manufactured doesn’t change. There are no variations or options to customize. It is common for manufacturers to use such BOMs when their products don’t change.
  • A configurable or “matrix” BOM is typically used when there are modifications in a project. These variations may include a different size, color, or features. Most Engineer To Order manufacturers face changes like this regularly.

BOMs BY FUNCTION

  • Engineering (EBOMs) focus a lot on the product’s design requirements. Generated during the design process, they include a lot of detail. It’s a comprehensive list of assemblies and sub-assemblies which helps clarify the engineering/design team’s vision. For Custom Machine Builders, EBOMs can change a lot. ETO clients typically deal with a lot of change orders since they’re building original equipment. Working with an ERP that integrates directly with your CAD simplifies this process.
  • Manufacturing (MBOMs) focus more on specifying and supporting how a project will be built. Manufacturers assembling a project can find details on assemblies and components here. Some organizations also include the machinery needed throughout this process, including packaging requirements.

Why Engineer To Order BOMs are Different

ETO manufacturing is growing. Fast. The demand for customized products has never been higher. Concurrently, the need for better BOM management also continues to rise.

Several key aspects make ETO BOMs more unique and a little more difficult to work with.

  • Customization and Variability: When you make standard products, your BOMs are consistently standard. ETO projects require customization and adaptation. Not only are the BOMs different from one project to the next, but you’ll likely finish the project with a different BOM than you started with. This makes BOM management extremely difficult.
  • Engineering’s Involvement: Engineering is at the heart of ETO manufacturing. Their unique designs bring the client’s vision to life. Together, the client and the engineering department work with continuous back and forth, at every stage of the project. Without the right software or tools in place, this process takes a big toll on engineering.
  • Documentation and Traceability: When it comes to a standard BOM, documentation and traceability are pretty straightforward. ETO projects, however, require extensive documentation due to the rareness of each project. This is where BOM creation and BOM management can get tricky The Project Management Institute (PMI) has shown that more than 80% of ETO manufacturers struggle to maintain traceability in Engineer To Order projects.

Steps to Build and Manage an ETO BOM

Many organizations think the first step in creating an ETO BOM is the part name and number. That’s jumping the gun a little bit, though. The best first step to creating a BOM is a complete understanding of what the customer is looking for.

Product Understanding

Proper communication with your customers about their needs is an essential first step. According to McKinsey, when a product strategy fails, 70% of the time is due to not understanding the customers’ needs. Paying close attention to the entire customer journey makes it much more likely that your customer will return.

In Engineer To Order manufacturing, the customer is likely to change the design, even after releasing the BOM. These last-minute changes can cost time and money. The engineering team can minimize them, however, if they have a clear understanding of the desired outcome.

Plan a System for Part Numbers

Better BOM management means a TOTALLY better system to track parts. To improve identification, tracking, and even communication with your vendors, you need a part number. Giving a unique identifier to each component in the BOM is important. There are 2 approaches to numbering your parts.

  • A BASIC SEQUENTIAL SYSTEM: This approach works best for smaller projects. Some manufacturers unintentionally overcomplicate it, though, with too many digits. Think about all your different screws in the project being numbered like this – “000285”, “000286”… etc. If using a sequential system, shorten them by eliminating the zero’s at the front. This is not only more efficient, it also reduces the likelihood of errors.
  • AN INTELLIGENT SYSTEM: For larger assemblies, it helps teams to use letters representing the component. With this system, those same screws, for example, would label them as “SCRW285”.

Whatever system you choose, remember that the best bill of materials also includes descriptions for each part. This makes it much easier for humans to scan and helps distinguish between similar components.

Enter Data Early and Plan for Changes

Ideally, teams prefer to fully construct and approve a BOM at the beginning of a project. Engineering would be able to release it to procurement, who can order parts that all arrive on time, allowing manufacturing to assemble the project, in plenty of time to test and ship. That’s a big ask for any manufacturer, but especially difficult for ETO organizations.  

For Custom Machine Builders, clients typically request multiple design changes, even after releasing the bill of materials. These changes could include anything from drawing revisions to different or additional parts. By having standard procedures for change management, your team can keep a project on track.

Integrators, Panel Shops, and OEMs easily manage these changes in an ERP/MRP system designed for ETO manufacturing. The software should integrate smoothly with your computer-aided design (CAD) system. Doing so allows your team to track changes to the BOM, in real-time.

Material Specifications and Substitutes

You need detailed documentation for every component, including material specifications, dimensions, and other relevant information. While this is the best way to ensure consistency and quality, you’ll want a backup plan, too. It’s wise to account for potential alternates for as many items as possible. Being able to adapt quickly to shortages and supply chain disruptions can make or break a project.

Additionally, when considering the components required for each project, it’s recommended you consider their lead times too.  This is where working with a Dynamic BOM really comes in handy. They allow you the flexibility to release parts to procurement in stages. It saves each project time and money.

Test, Validate, and Assemble

Before signing off on the BOM, you may want to test and validate your design/BOM with a prototype. This is a good opportunity to ensure all the parts fit together and work as planned. This step can help ensure the manufacturing process will be executed without issues.

There are also times when detailed assembly instructions may be necessary. Those include instructions on the assembly prints that will help guide the manufacturing team through the build.

BOM Management

BOM creation, whether it’s an engineering BOM or a manufacturing BOM, a single-level or multi-level BOM; requires dedication and attention to detail. Thought and time are always needed to improve BOM management. It’s true, that working with Dynamic BOMs can simplify the design and manufacturing of custom machines. Dedicated BOM management is still necessary, though.

An ERP built for ETO companies will help many departments in your organization. Those working directly with the BOM, including engineering and procurement, see the most improvement.  To learn more, or to see Dynamic BOMs in action, book a demo. You’ll be glad you did.

Written by Stan McLean

Manufacturers are Increasing Profits by Reducing Waste

Key Takeaways

  • Production planning for ETO manufacturers is difficult because the design and BOM are in constant flux. That means engineering and procurement must deal with change orders at any stage of production.
  • Manufacturing waste typically comes from defects and rework, from a product not meeting quality standards. Unnecessary transportation also creates waste, including fuel consumption, labor, and more.
  • The best ways to reduce waste in ETO manufacturing include decreasing manufacturing downtime, making use of leftover parts, and adopting Lean Manufacturing principles.

 

 

Improving Manufacturing Downtime and Other Challenges with an ERP Business System

Manufacturers, particularly Engineer To Order (ETO) organizations, must constantly look for ways to reduce waste and increase productivity. It can be time-consuming, but when done properly, such changes mean increased customer satisfaction as well as increased profits.

 

Custom Machine Builders face some of the same challenges as repetitive manufacturers, including manufacturing downtime. However, they also have unique challenges, such as needing to release the BOM in stages. That’s why they need to consider an ERP business system to help. This article will explore ways for an ETO manufacturer to reduce waste and, therefore, boost profits.

 

 

 

What is Engineer To Order and Why is Production Planning More Complicated

Custom Machine Builders who typically manufacture new designs fall under the Engineer To Order title. These often include Integrators, Panel Shops, and OEMs. Many ETO organizations would like to have materials ready when manufacturing needs them. Unfortunately, production planning in ETO is not as easy as make to order (MTO) manufacturing.

 

In MTO, the manufacturer knows what they’re building in advance. Production planning and procurement are simple because the design and BOM are set. For Custom Machine Builders, though, the client comes to them with an idea and works closely with engineering to design a solution. Throughout this process, it’s common to spot areas where the design needs to be changed. It can, of course, be frustrating for engineering to modify the drawings and the BOM. It also means that procurement is tasked with canceling, changing, or creating new purchase orders.

 

It’s fair to say that Engineer To Order facilities have an erratic workflow. The team usually needs to source additional materials at any stage of a project. This typically causes bottlenecks, especially if you don’t have a proper ETO enterprise resource planning (ERP) system. Downtime in manufacturing is wasteful for both standard and Custom Machine Builders. Whether it’s due to maintenance or waiting for parts to arrive, the most evident consequence of manufacturing downtime is the decrease in production output. The Aberdeen Group released a report that shows standard manufacturers lose an average of $260,000 / per hour when they fall behind.

 

ETO manufacturers face a lot of change requests; one of the reasons production planning is more complicated for them. It's important to reduce manufacturing downtime.

 

 

 

ETO Challenges Need an ETO Solution

Many engineers, designers, machinists, and purchasers don’t realize that an ERP business system designed for ETO prevents most bottlenecks. There are hundreds of ERPs on the market, but unfortunately, most of them can’t help because they aren’t designed for custom manufacturing. An ETO solution, however, integrates with CAD, eliminating all double entry and redundant paperwork. Plus, when your team starts working with Dynamic BOMs, the bottlenecks that inevitably appear between engineering and procurement are prevented, saving both departments time and money.

 

Engineer To Order is also a relatively new production process. There are hundreds of manufacturers who don’t know yet that ETO exists. If you’re not sure whether you qualify or not, this free online quiz can help you determine if you are Engineer To Order.

 

 

 

How is Manufacturing Waste Created

There are a variety of processes and practices within a factory that lead to waste. Many are common among MTO manufacturers, such as overproduction. Producing more goods than needed, or earlier than needed, leads to excess inventory, which affects storage space and capital. Engineer To Order organizations don’t struggle with this, as they typically don’t build the same machine twice. ETO, however, does have other areas in its processes that can be wasteful.

  • Defects and Rework: When a product doesn’t meet quality standards, material and labor are wasted.
  • Transportation: Excessive movement of materials between production stages or warehouses comes with a risk of damage, fuel consumption, emissions, labor, and other logistics costs.

 

 

 

Waste Reduction for ETO Manufacturers

Recycling is awesome, but there’s a lot more to reducing manufacturing waste than the three R’s. The creativity and flexibility that ETO manufacturers offer make them unique and in demand. To thrive in such an environment, many Custom Machine Builders are learning they need to reduce waste. The following are a few good ways to get started.

1. Decrease ETO Manufacturing Downtime

When a plant stops wasting time, it significantly increases throughput and profitability. You likely already have an idea of how costly downtime is in your current manufacturing processes. A key factor in reducing downtime is ensuring materials are available when manufacturing needs them. However, ETO organizations face two obstacles here.

 

–        Long Lead Items: The earlier procurement can order materials, the better. An important factor in reducing downtime is ensuring purchasers can begin acquiring supplies and raw materials as early as possible. Engineers understandably want to wait until the entire design is finished before releasing the BOM. Ordering long-lead items early, however, is crucial to preventing delays in shipment.

 

–        Vendor and Supply Chain Disruptions: The supply chain has always been somewhat unreliable, but these days, “volatile” is putting it nicely. There are ways to help reduce the impact of the supply chain on your business, but without the help of a reliable business system to keep track of and manage priorities, it’s easy to fall behind. It’s also important to track your history with vendors. Knowing who you can count on or where to turn when you need a part expedited, could help prevent downtime in the first place.

 

A strong but time-intensive solution to the problem is shopping around. Long-lead items aren’t the only rationale for getting items through procurement quickly. The more time your purchasing department has, the more savings you can find by shopping around. You’ll also avoid rush delivery fees and scrambling to meet a deadline.

 

These bottlenecks between engineering and procurement are common for Integrators, Panel Shops, and OEMs. In fact, Total ETO built the original Engineer To Order ERP because of this specific struggle. We know exactly how frustrating it can be.

 

For custom manufacturers, bottlenecks between engineering and procurement can be their biggest struggle.

 

 

2. Make Use of Leftover Parts

Production planning and inventory management are complex in the ETO.. Engineer To Order manufacturers tend not to stock inventory, however, there always seems to be a collection of leftover parts from past jobs. Many organizations can see the value in tracking spare parts but aren’t sure how to do so efficiently. Without taking such steps to improve production, though, a manufacturer can end up with diminishing profits. With the amount of competition growing in our industry, Engineer To Order manufacturers need to do everything they can to trim waste, stimulate growth, and boost profits.

 

Additionally, it’s worth considering how much annual revenue your organization could realize by selling leftover parts to clients. That’s what Brenden Fritz, President of Automated Drive Systems discovered while implementing Total ETO. Learn how they reduced waste and increased profits in this case study.

 

3. Modular and Standardized Components

The terms “standard” and “Engineer To Order” are rarely used in the same sentence. However, there is potential to standardize components. By using standardized parts or subassemblies, ETO manufacturers can decrease lead times and inventory complexity. Research from the Massachusetts Institute of Technology (MIT) demonstrates the benefits of modular product architectures in reducing waste in ETO manufacturing.

 

4. Lean Manufacturing Principals

A valuable and proven method of reducing the amount of waste in manufacturing is Lean Manufacturing. A popular practice since the 1980’s, the principles of Lean Manufacturing transfer to ETO manufacturing as well. There are five principles including value, value streams, flow, pull, and perfection. Applying Lean concepts puts an ETO organization is a position to continually improve. Every project leads to greater efficiency, waste reduction, and increased profits.

 

 

 

One Simple Solution

Engineering and purchasing departments can see great results from an MRP or ERP business system that streamlines their processes. Total ETO is known for providing Totally Better efficiency, accuracy, and profitability to Custom Machine Builders.

 

Engineers prefer Total ETO because it seamlessly brings design work into a project. The software can integrate with popular CAD systems such as SOLIDWORKS and Autodesk Inventor. It can also bring the BOM in without leaving CAD and with no double entry. Other characteristics appreciated by many ETO engineering departments include:

  • Copying parts from a past project’s BOM to a new BOM.
  • Providing designers with the ability to calculate the BOM before making purchases.
  •  Eliminating bottlenecks by releasing parts to procurement in stages, including initial long lead requirements.

 

Total ETO also helps the purchasing department run more efficiently by making procurement simple through interconnected information with engineering, receiving, and the shop floor. Purchasing will also enjoy:

  • Saving time by grouping common parts or suppliers across multiple projects.
  • Adding POs and making revisions as changes occur, including revised delivery dates.
  • Reserving inventory by project and seeing remaining availabilities

 

It’s easy to see now why Custom Machine Builders have started reducing waste and saving money with Total ETO. The software is easy to implement and use, affordable, and backed by a team of industry experts with a passion for the success of every client. Learn more about the Total ETO solution here.

 

 

Written by Taylor Dykstra

How to Increase Throughput

Key Takeaways

  • To increase throughput, Custom Machine Builders need to take the entire production process into consideration. This includes acquiring raw materials to delivering the final product; and for ETO manufacturers, every change order that happens in between.
  • Common mistakes that affect throughput include inadequate planning, poor inventory management, quality issues, underutilized tech, inadequate performance monitoring, and inefficient communication/collaboration.
  • To improve your throughput, consider being more proactive with manufacturing software. Leveraging data is a great place to start. Then you’ll want to evaluate your current processes that will help show you areas where you can reduce downtime. If finding reliable data is difficult, consider an ERP software solution.

 

Improve Throughput

“How to increase throughput” is a question a lot of manufacturers ask every day.

 

For Custom Machine Builders, flexibility and precision are of utmost importance. Integrators, Panel Shops, and OEMs face the same struggles that standard manufacturers deal with, as well as a few that are unique to them. That’s why every moment matters for Engineer To Order (ETO) manufacturers. The organization must maintain consistent throughput despite needing to adapt to fluctuating demand, supply chain issues, and other bottlenecks.

 

Throughput directly affects the success of each project and the company as a whole. So, we’ll discuss some of the biggest mistakes ETO manufacturers make that impact throughput. Then, we’ll explore some tips to help improve your processes. First, let’s examine why throughput is especially important for original equipment manufacturers.

 

 

 

Understanding Throughput in Custom Manufacturing

Technically, the concept of throughput is the same for manufacturers, regardless of building custom or standard machines. It’s the rate at which a company produces units within a specified time frame. Throughput takes the entire production process into consideration. From acquiring raw materials to delivering the final product, throughput measures the output achieved.

 

Custom Machine Builders, however, need to work a little bit harder to reach and maintain ideal throughput. Each project involves diverse product specifications and fluctuating orders. There’s also usually design changes that happen throughout the process, even after the BOM has been released to procurement. Each of these factors has the potential to negatively impact throughput.

 

 

 

 

Common Mistakes That Affect Throughput

There are a few common mistakes that ETO manufacturers make that impede throughput time. Consider each one and whether or not you can relate.

 

Inadequate Planning: Projects without a comprehensive production plan and schedule are often delayed. Without the ability to forecast demand accurately, or allocate resources effectively, bottlenecks don’t just happen, they compound.

 

Poor Inventory Management: It’s understandable why stock shortages would slow down a project, but excess stock can also cause problems. ETO manufacturers need to find a balance to prevent disruption. Many Integrators, Panel Shops, and OEMs struggle without the right data to plan with or learn from.

 

Quality Issues: Poor product quality often creates rework, or scrap. Either way, throughput time and production costs go up. Quality can also include inadequate production line maintenance. When machines or components fail, you’re no longer running at full capacity. Remember, scheduled maintenance creates less downtime than a breakdown.

 

Inefficient Communication and Collaboration: Effective communication throughout the organization is essential. For Custom Machine Builders though, engineering and procurement are the priority. Without the right tools to properly communicate and collaborate your throughput is negatively affected. This of course includes communication within your team but also with your clients and suppliers.

 

Underutilized Tech: Software and hardware are advancing so quickly these days, it’s understandable that organizations can’t keep up. However, failing to leverage these opportunities can limit throughput improvement. Investing in shop software, such as ERPs designed for ETO manufacturers or hardware, such as IoT-enabled sensors, will enhance overall performance.

 

Inadequate Performance Monitoring: For organizations that strive for continuous improvement, it’s necessary to continuously evaluate your processes. Collecting and utilizing data is much easier for standard manufacturers. Integrators, Panel Shops, and OEMs struggle to pull together reliable data. Being able to track project workflow, though, and learn from past projects will improve your efficiency, accuracy, and profitability.

 

Common mistakes Custom Machine Builders face with throughput include inventory management, quality, and poor communication.

 

 

 

How to Increase Throughput

Addressing these common mistakes and taking a proactive approach to increasing throughput presents your team with opportunities to improve. And you’ll be glad you did! Your efforts to increase throughput will make your organization more reliable and competitive. Below are a few great ways to start.

 

 

TIP #1 Make Informed Decisions by Leveraging Data

Every manufacturer generates vast amounts of data, but most teams aren’t utilizing it. Some don’t know how to access the information they need; others don’t even know it’s there. Custom Machine Builders struggle the most to find, organize, and utilize data.

 

However, a study by McKinsey & Company shows when manufacturers tweak their processes based on data, they experience productivity gains of up to 50%. The transformative potential of data-driven decision-making is truly inspiring.

 

In many cases, the applications you’re already using are collecting valuable data. This could include your accounting software such as QuickBooks and Sage, as well as manufacturing software including CAD systems such as SOLIDWORKS or Inventor. Connecting an enterprise resource planning (ERP) system to your current shop software helps you find this information. It also helps you to translate, or fully understand the analytics. It’s a big bonus too, when this data is available in real-time, increasing the accuracy and relevancy of each decision.

 

TIP #2 Evaluate Your Current Processes and Manufacturing Software

Collecting data gives your team the ability to make informed decisions. Combining that information with your current processes gives you a road map to success. When examining your current workflow, there are four specific areas to focus on:

  • Equipment: How are your machines performing? Are they regularly inspected and maintained? Is your manufacturing software up to date?
  • Labor: Are all your staff sufficiently trained? Do you have enough people in place? Are they motivated to continuously improve?
  • Processes: Do you have a system that supports meaningful communication? Are there steps that can be automated? Do you see any bottlenecks?
  • Engineering: Does your team experience bottlenecks anywhere? Can you relate to other ETO manufacturers with the slowdown between engineering and procurement?

 

TIP #3 Reduce Downtime

Nothing hurts your throughput quite like downtime. You’ve learned from your own experience as well as this article that downtime is unavoidable, but its effect can be mitigated. Downtime like this typically hurts standard machine builders more than custom, but both types of manufacturing can benefit from the following:

  • Maintain your equipment: When you suffer a surprise breakdown, it’s likely to last longer than scheduled maintenance. Another perk to scheduling maintenance is that you can preplan and make better use of your staff’s time. Research from Deloitte shows that predictive maintenance increases productivity by 25%, reduces breakdowns by 70%, and lowers maintenance costs by 25%.
  • Use Real-Time Analytics: Real-time monitoring systems can capture data on production processes, equipment performance, and more. There’s a variety of manufacturing software that can help you in different areas of your business. It’s more efficient (and often less expensive), however, to find an ERP that matches your workflow. This means Integrators, Panel Shops, and OEMs need an ERP as dynamic as they are. Take time regularly throughout the year to study the data to find inefficiencies or abnormalities. That’s a great place to start when reducing downtime.
  • Employee Empowerment: Your equipment is only as good as the people operating it. Investing in your staff is one of the best things a manufacturer can do to improve productivity, safety, and quality. Additionally, proper training reduces maintenance costs along with downtime.
  • Improvement-Based Culture: Establish a working environment of continuous improvement. A study published by the International Journal of Production Research shows over the course of one year, downtime is reduced by an average of 25%, for manufacturers that reward continuous improvement. Start by using data collected by your ERP software solution to analyze performance. Employees should also feel comfortable reporting bottlenecks and other issues. Your frontline workers are usually in the best position to identify potential sources of downtime.

 

TIP #4 Focus on Quality

By reducing your parts rejection rates, you’ll not only increase throughput but also minimize waste. Statistical process control (SPC) can be used to monitor and control your processes in real-time. Data you collect through shop software or your ERP can help you identify deviations from quality standards. The Journal of Quality & Reliability Management published a study that confirms manufacturers utilizing SPC techniques significantly reduce defects and parts rejection rates.

 

Procurement can also help your organization improve quality. Working closely with suppliers can help you ensure consistent quality of raw materials. It’s recommended you perform supplier audits and continuously monitor the quality of goods when they arrive. Research from the Institute for Supply Management shows companies with superior supplier practices see a 25% reduction in parts rejection. A 15% improvement in overall product quality is also realized.

 

How to increase throughput: ETO manufacturers that maintain healthy relationships with vendors have 25% less parts rejected.

 

 

 

Automating the Automator

Engineer To Order manufacturers know the power of automation better than anyone. Automated systems typically outperform most teams. Even your best employees get tired, leading to a reduction in throughput. Exhaustion also increases the risk of injury.

 

When you automate redundant tasks, your talented employees can focus on what they do best. Automating steps along the way also boosts morale and quality, along with throughput.

 

Consider speaking to your team about areas in your process that can be automated. Similar to your frontline staff knowing the best areas to minimize downtime, your team will be happy to help you find additional ways to increase throughput with automation.

 

 

 

Conclusion

Maximizing your throughput is one of the best ways to improve your business. Your team will become more efficient and productive, and feel less stressed throughout the day. When you use data collected through your ERP, you’ll discover new efficiencies, optimize production processes, and create sustainable growth.

 

An ERP software solution might be just what your team needs! See firsthand how using an Engineer To Order ERP will increase your throughput rates, book a demo.

 

 

 

Written by Taylor Dykstra

 

Can Small Manufacturers Benefit From an ERP for ETO

Key Takeaways

  • Small manufacturers have difficulty justifying the purchase of an ERP/MRP. However, after learning the ROI of an ERP is $7.23 for every dollar invested, they speed up efforts to find the right system that complements and improves their processes.
  • An ERP designed for ETO is the most profitable option for small Custom Machine Builders. It will reduce expenses, improve communication, and give full project visibility. It also improves the implementation process because it’s designed to match your unique ETO workflow.
  • Sales, engineering, procurement, manufacturing, and accounting see the most improvements leading to your entire organization increasing efficiency, accuracy, and profitability.

 

 

Can Small Manufacturers Benefit from an ERP

How often have you sat in front of your computer, wondering and searching for ways to make your team more efficient? To increase production capacity, track your parts, or reduce waste? When you Google “Excel templates for manufacturing” are you disappointed by the results?

 

The manufacturing sector has grown quite a bit in the last decade, making it increasingly difficult to remain competitive. Yet, manufacturing software for small businesses is still hard to find. Reducing expenses, improving communication, and real-time data management, all while delivering more projects in less time, are necessary to scale… but how?  Enter ERP systems.

 

On average, enterprise resource planning software:

– increases on-time deliveries by 24%.

– decreases operational expenses by 25%

– improves decision-making accuracy by 21%.

Statistics like this can’t be ignored, especially while growing a business.

 

 

 

 

To date, defense and aerospace have the highest adoption rate of ERPs. While it’s true that many large manufacturing teams, especially those who build standard products have implemented an ERP, we can see that small manufacturers benefit substantially from a similar system. The caveat, however, is that these manufacturers build the same item(s) over and over. For Custom Machine Builders who rarely make the same thing twice, finding and implementing a system is more difficult.

 

So, it’s understandable that small Custom Machine Builders would hesitate and wonder if an ERP can help them in the same way… Yes, it can! Perhaps even more so.

 

Let’s take a quick look at some of the areas within your organization that will improve after implementing an ERP (the best manufacturing software for small businesses).

 

 

 

Small Manufacturers See Big Changes in Sales

Without accurate data, it’s difficult to properly estimate and quote a project. Real-time insights are a primary benefit of an enterprise resource planning solution. Panorama Consulting Solutions revealed that 87% of teams using ERPs in manufacturing reported improved access to critical information.

 

With the right ERP designed for ETO manufacturing, an Integrator, Panel Shop, or OEM can easily capture change order information. They can also record and track estimates to completion for accurate percentage complete revenue recognition.

 

 

 

Engineering is Improved With an ERP Designed for ETO

By integrating your ERP and CAD, it’s easy to bring your BOM in, without leaving CAD and with no double entry. This is one of many ways engineering departments become more efficient with an enterprise resource planning system.

 

For Engineer To Order manufacturers, the right ERP will also:

  • let teams copy parts from a past project’s BOM to a new BOM.
  • allow designers to cost out the BOM before purchases are made.
  • search the system for previously used parts and their complete history.
  • track changes to the BOM at any stage of the project and ensure the information is shared across departments.

Total ETO is a great choice for small, custom manufacturers because it integrates with CAD.

 

 

Time and Money Saved in Procurement

The purchasing department is one of the top departments where manufacturers see improvements.  In fact, the return on investment for an ERP averages 220% in procurement. Success here is partially due to improved efficiency. With an ERP designed for Engineer To Order manufacturers, procurement can issue and revise RFQs and POs with just a few clicks. They can also save time by grouping common parts or suppliers across multiple projects.

 

Improvements in procurement can also be attributed to reducing lead times. When engineering can release the BOM in stages, purchasers get a head start on long-lead components. Timely and dependable procurement helps ensure a reliable flow of materials when needed. This prevents production disruptions. In fact, 72% of manufacturers report supply chain improvements after their ERP implementation.

 

Additionally, Statista research shows us that manufacturing software for small businesses, such as an ERP/MRP, leads to a 23% reduction in excess inventory. Engineer To Order manufacturers are used to dealing with a lot of design changes, even after they’ve started to build.  That means a surplus of parts is common for Custom Machine Builders, but as we’ve seen, it doesn’t have to be.

 

 

 

An ETO ERP Simplifies Manufacturing

While on the subject of parts and materials, it’s important to note the improvements manufacturers see in the quality of parts. With an ERP, Integrators, Panel Shops, and OEMs can route parts between tasks, tracking both internal and external processes. Teams will know where their parts are in the fabrication process at all times. They can ensure parts are inspected, knowing who completed the inspection. It’s also easy to record and follow up on quality issues on the shop floor, from engineering, or for purchased parts with embedded non-conformance reports.

 

 

 

Small Custom Machine Builders can Integrate Their Accounting

Finding an ERP system that can be integrated, seamlessly with your current accounting software is a relief. By keeping your existing accounting system, such as QuickBooks or Sage, the learning curve is significantly improved. Efficiency and reliability also increase:

  • Accounting departments can match AP invoices against received goods by supplier or PO.
  • Payment milestones can be set up in your sales orders, automatically triggering AR for invoicing.
  • Have customized workflows created to streamline T&M invoicing.
  • Report on percentage complete numbers for revenue recognition. By using internal change orders to track material and labor budget changes, your team is able to make more informed decisions.

Small Custom Machine Builders love that Total ETO integrates with all popular accounting systems including Quickbooks, Sage, and Xero

 

 

 

What is the ROI for an ERP

The return on investment for ERP software can be impressive. A study by Nucleus Research found that for every dollar invested in an ERP solution, manufacturers received an average of $7.23 in return. It’s also easy to see why the ROI can increase as a business relies on it more and more. As a small custom manufacturing business transforms into a larger organization, the benefits scale with them.

 

Statistics like this are a testament to the transformative power of an ETO ERP used in manufacturing. It should be noted, however, Custom Machine Builders benefit the most when using an ERP for ETO. Integrators, Panel Shops, and OEMs are part of the Engineered To Order (ETO) marketplace. If using an ERP designed for standard equipment builders, they cannot integrate with CAD or collect the accurate data needed to succeed. Implementation is much more likely to fail. Or, if they are able to rely heavily on customizations and complete implementation, their ROI is drastically reduced.

 

 

 

The Best Option for ETO Manufacturing

The Engineer To Order sector has been growing in recent years. Since Total ETOs inception over 20 years ago, it remains the only ERP, truly designed for ETO, by ETO. Our enterprise resource planning system integrates with all major CAD and accounting platforms. This makes all of the improvements discussed in this article, including those in sales, engineering, procurement, manufacturing, and accounting possible.

 

An ERP for ETO manufacturing is more than just manufacturing software for small businesses though. It goes beyond inventory management and part tracking.  Provides more features than warehouse management systems and a lot more functionality than accounting systems.

 

So, can small manufacturers benefit from an ERP?

Yes!

See the incredible improvements for yourself, book a demo today.

 

 

Written by Stan McLean

Accounting vs Manufacturing Centric ERPs

Key Takeaways

  • ERP’s tend to be (1) accounting-centric, providing robust financial features, or (2) manufacturing-centric with inventory management and similar industrial functions.
  • Don’t compromise on your Engineer To Order needs. A manufacturing ERP with accounting modules might be best for your ETO workflow.
  • It’s also worth investigating an ERP that integrates with QuickBooks or other accounting systems. Some accountants prefer integration, as they are already familiar with it.

 

 

 

Finding an ERP with Accounting and Manufacturing

QuickBooks has become the top accounting system for small and mid-size businesses. According to Investopedia, QuickBooks consistently ranks as the top platform thanks to its active user base and impressive collection of tools and resources. We’ve also seen this appreciation for QuickBooks in the manufacturing sector. As an ETO manufacturer, though, you may be curious if a standard accounting system such as QB, or their rivals Sage and Xero is beneficial for a Custom Machine Builder.

 

Integrators, Panel Shops, and OEMs have such a unique workflow. Their processes and most standard solutions, including enterprise resource planning (ERP) systems, are incompatible. We’ve heard from many Custom Machine Builders who tried implementing a standard  ERP at their ETO facility but couldn’t make it work. The time and money lost are understandably frustrating.

 

 

 

An ERP that Integrates with QuickBooks

If you do a web search for “QuickBooks ERP,” you’ll see plenty of results, making you choose between accounting software and an ERP. Why not have both? If you were to integrate an ERP designed to match your ETO workflow with an accounting system like Quickbooks or Sage, you would have a very powerful combination… a system like that would help your organization become more efficient, accurate, and profitable.

 

In this article, we’ll explore the options so you can move forward and scale with confidence.

 

 

 

Types of ERP Systems

Interestingly, when it comes to ERPs and accounting, systems can be divided into two types of platforms.

  1. Accounting-centric: Many ERPs are built from the accounting perspective first and then have a few manufacturing modules added in after. These accounting ERP solutions are typically big systems from big companies and come with big price tags. Such ERP systems are great for industries like retail or health care. Due to the limited manufacturing features, however, they may not be the best ERP for machine builders.
  2. Manufacturing-centric: The other common ERP structure is a solution built for manufacturing but with accounting features added in; almost the opposite of the above. These structures are similar to MRPs and focus on manufacturing, engineering, and procurement. Manufacturing-centric systems are often a better option for machine building, especially in ETO manufacturing.

For Custom Machine Builders, the choice isn’t always clear. Both options can be valuable! So, let’s explore both and figure out the best ERP for your custom manufacturing team.

 

ERPs were traditionally built with accounting in mind, but manufacturing-centric systems are growing more popular.

 

 

PROs of an Accounting-Centric ERP

  • Financial Management: An accounting-centric ERP can process complicated transactions and reporting requirements. The tools to handle accounts payable and receivable, payroll, and managing the general ledger are impressive. Additionally, thanks to its robust financial management, accounting ERPs provide detailed financial performance your team could benefit from.
  • Cost Control: Such in-depth insight helps Custom Machine Builders focus on costs, identifying inefficiencies and helping you choose the best cost-saving measures.
  • Regulatory Compliance: Typically, you can trust the bigger accounting-based ERP systems to remain updated with current financial regulations. This is a great way to prevent penalties or legal issues.

These features are great, however, the entire system as a whole is often not the best choice for ETO manufacturers. That’s why it’s important to cover the downsides.

 

 

 

CONs of an Accounting-Centric ERP 

  • No ETO: Settling for a standard ERP that focuses on accounting creates a lot of chaos for Engineer To Order organizations. You’re compromising the flexibility and control of the project, which could have ramifications in engineering, procurement, and sales.
  • Limited Functionality: Many accounting based systems lack core features that a Custom Machine Builder can benefit from, including production planning and inventory management.
  • Challenging Customizations: When ERPs become too limiting, such as missing out on inventory management, customizations are required to fill the gap. Unfortunately, perfecting an ERP designed for accounting is a lot more challenging and expensive than making customizations with manufacturing-based ERPs.

If you feel that these cons could compromise your organization’s success, you’re not alone. You may want to consider an ERP that prioritizes manufacturing.

 

 

 

PROs of a Manufacturing-Centric System 

  • Efficiency: When manufacturing is the core focus of your ERP, it’s designed to enhance production. Tools such as inventory management and quality control are often built in to keep your organization running smoothly.
  • Customizations: If you are missing a feature that will benefit your organization, these manufacturing-based ERPs are usually easier and less expensive to customize.
  • Supply Chain Management: When working with procurement and inventory modules, your relationship with the supply chain is improved. You’ll have enhanced visibility, more buying power, and improved coordination with vendors.

A manufacturing ERP with accounting features can be great and benefit many Custom Machine Builders. There is a downside, though.

 

 

 

CONs of a Manufacturing-Centric System 

  • Limited Financial Management: When an ERP or MRP focuses heavily on manufacturing, it limits the system’s financial functionality. An additional financial management module will be needed

As you’re starting to see, there unfortunately seems to be a correlation between accounting and manufacturing… the more accounting features there are, the fewer manufacturing features are provided, and vice versa.

 

It should be noted that manufacturing-centric ERPs are similar and often compared to materials requirement planning (MRP) software. While these platforms are powerful for standard manufacturers, they’re not necessarily a great fit for Custom Machine Builders. Engineer To Order MRP software is out there and can help improve your processes.

 

 

 

The Best of Both

Choosing an ERP/MRP that is truly ETO should be a top priority for all Custom Machine Builders. It has a positive effect on accounting, manufacturing, and the rest of the organization.

 

If you’re able to find a manufacturing-centric ERP that integrates with Quickbooks and other popular accounting systems, then you don’t have to worry about missing out on the ETO features of your ERP.

 

Some additional benefits for working with an ERP that integrates with QuickBooks:

  • Cost-effective: Platforms like Quickbooks are affordable for small and medium-sized businesses. Their pricing is also likely to stay consistent and predictable.
  • Ease of Use: One of the benefits that makes QB so popular is its user-friendly interface. The simplicity makes it accessible for individuals with limited accounting knowledge.
  • Support: Whether you’re an accounting pro or just starting out, there’s a variety of online resources, including tutorials and support forums.
  • Advanced Analytics: Combining an ERP designed for Engineer To Order manufacturing with Quickbooks provides your team with a wealth of knowledge. From this data, you can finish more projects in less time, reduce costs on materials, provide quicker and more accurate estimates, and more.

For Custom Machine Builders, an Engineer To Order ERP/MRP is best.

 

 

 

Don’t Deny your ETO Nature

It’s imperative for an Engineer To Order manufacturer to prioritize their unique ability to make custom machines. Their innovation is, after all, what attracts their customers. It’s also what makes their job so difficult. From estimating and quoting new projects, to building and releasing the bill of materials (BOM), to purchasing and accounts receivable; every step is made easier with an ERP designed for Custom Machine Builders.

 

Compromising efficiency and quality throughout the rest of your organization, simply to have an all-in-one solution is not worth it. This is especially true since you can integrate QuickBooks, Sage, or Xero with an ERP that’s designed for Integrators, Panel Shops, and OEMs.

 

That’s why Total ETO decided to Integrate with highly specialized best-of-breed applications. This allows us to focus on your unique ERP/MRP needs, while QuickBooks or a similar system takes care of your accounting needs, providing you with the best of both worlds.

 

 

 

Accounting + Total ETO

We’ve met a lot of accountants in manufacturing who love and prefer to continue working with their current accounting platform. We’ve also met some who would rather drop their system for one that can do ETO project accounting. Thankfully, with Total ETO, you don’t have to sacrifice to get what’s best for your business. Our ERP is designed to integrate with your current accounting system AND provide all the functions, such as project accounting.

 

From large builds to daily accounting tasks, your organization can accomplish a lot when you integrate your current accounting system with Total ETO. Purchasing, receiving, and payables batching are all detailed and managed within our ERP. Integration or posting of summary data to the payables module is simple. Tracking of all labor is also detailed within the system. Total ETO offers integration or posting to the payroll module or linking to outside service providers such as ADP, Paylocity, and Paychex.

 

Total ETO also includes real-time tracking and managing of your inventory, including work in progress (WIP) and percentage of completion (POC). Integrating this way allows your staff to purchase and sell in various currencies, converting them to your home currency for reporting. Project and job costing are done automatically, virtually eliminating all the effort required in the past.

 

 

 

Conclusion

Finding the right Engineer To Order MRP and ERP software can be challenging. When you find the right system, though, you’ll see it was worth the effort. It can also be nerve-racking to think about integrating an ERP with accounting software such as QuickBooks. The best way to eliminate your concerns is to book a demo.

 

Experience firsthand the efficiency, accuracy, and profitability of working with an ERP designed for your unique ETO processes.

 

We would love to show you the difference Total ETO can make.

 

 

 

Written by RJ Ahuja