learning type: Growth & Strategy

Key Takeaways

• A configurable enterprise resource planning solution creates greater transparency and accountability. Yet few ETO manufacturers are taking advantage of this tech.
• If a Custom Machine Builder plans to scale, an ERP designed for their workflow helps staff handle the changes ahead.
• If eliminating spreadsheets and redundant clerical work sounds like something your organization may benefit from, then an ERP system should be the first option you explore.

 

Running a custom design manufacturing business requires executives and managers to effectively and properly allocate the company’s resources in an efficient and timely manner. Failure to do so may result in lost revenue and client cancellations.

 

Implementing a configurable ERP system combats misallocation of capital, time, and materials. ERPs provide transparency and accountability tools. However, a recent study found only a quarter of respondents used ERP systems. Jim Wagner from Sikich expressed concern about low ERP adoption in manufacturing.

 

“The persistence of manual processes in the industry is troubling. Technology can help companies grow more efficient, lower costs and better serve customers. It has the potential to transform the industry and drive success, but companies need to make full use of it to realize gains” explained Wagner.

 

As global competition continues to increase, Engineer To Order manufacturers should not discount the many benefits an ERP system provides for these companies. The following examples are a starting point for manufacturers to determine whether they need an ERP system.

Scaling Opportunities

An Engineer To Order manufacturer that has no plans to rapidly scale up production might be content with its current resourcing situation. On the other hand, a company poised to quickly expand operations needs to have the tools in place to handle the drastic change it may experience during this scaling process.

 

New workflows will need to be introduced for employees; the company’s supply chain may need to be expanded, with additional vendors brought into service and a greater volume of goods being built; but more importantly, the organization’s resource allocation will need to be overhauled – in some cases significantly – to cover an increase in revenue, overhead and orders that accompanies a major expansion. As noted by TGO Consulting, an ERP system brings an organizational value to a company that is extremely worthwhile.

 

However, even without an immediate plan to scale operations, it doesn’t mean the company won’t benefit from an ERP system. Often, the biggest obstacle to business expansion is the lack of available resources necessary for scaling, whether that includes purchasing more material to build a greater number of products, hiring additional employees, or dedicating money to a marketing campaign, among numerous other routes. However, having a robust ERP system in place can potentially allow the ETO company to ensure current projects are on schedule and within scope. With this ability to drill down and get granular data about the status of projects, there’s a greater chance of finding ways to cut costs and turn a profit, thus allowing the company to grow and succeed.

 

 

Too Many Spreadsheets Being Used

A company that needs to use several different spreadsheets to manage various aspects of operations may find itself having to use different stop-gap measures and other workarounds to conduct business. Do you use one spreadsheet to track items ordered and another to track receiving? Having to open one spreadsheet to read data, then convert the data to a different format to put it into a different spreadsheet and email it to a coworker, who then uploads it to his or her manager, not only wastes time but also opens the possibility for information corruption, mishandling or loss. A configurable ERP saves plenty of time and frustrations here.

 

Custom design manufacturers facing any of these problems can benefit from implementing Total ETO, the only enterprise resource planning solution specifically designed for the Engineer To Order sector.

 

Learn more about Total ETO by requesting a demo today.

 

Written by RJ Ahuja

 

 

Key Takeaways

• Data that was previously inaccessible or untraceable for ETO manufacturers is now readily available.
• Incorporating additional tech such as RFID tags into materials during shipping can help collect even more data.
• A configurable ERP gives Cusotm Machine Builders more agility and flexibility. This is important to maintain stability in the ever-changing industry landscape. 

A constant state of disruption characterizes the manufacturing industry. As more disruptors continue to enter the market, Engineer To Order manufacturers must pivot quickly to deal with the shifting industrial landscape to stay ahead in this competitive environment.

 

The Global Manufacturing Competitiveness Ranking  anticipates the U.S. will surpass China, for No. 1 spot, within the decade. The survey’s authors cited U.S. manufacturers investing more in technology and innovation, driving this increase in competitiveness.

 

“While manufacturing may be slightly down in the U.S, the long-term trends are positive.”   Deborah Wince-Smith, president and CEO of the Council on Competitiveness continued; “We predict that the U.S. will overtake China and become the number one manufacturing nation within five years.”

 

 

 

Big Data gets Bigger

 

According to a recent report from SCM World titled “The Digital Factory: Game-Changing Technologies That Will Transform Manufacturing Industry,” one of the main factors to impact manufacturing in the immediate future will the usage of big data. The report noted 57% of respondents think real-time factory performance analysis will be a main driver of big data. Meanwhile, 53% of respondents cite real-time re-planning, including materials requirement planning and factory scheduling.

 

A lot of big data analytics relies on the continued growth and adoption of systems across all industries. One way companies can collect and use this big data is by incorporating RFID tags into materials during shipping. They can also utilize intelligent equipment with networked sensors and software. With access to this crucial information, manufacturers can make more accurate purchases, boost productivity, trim waste, and ultimately increase revenues.

 

More ETO manufacturers are anticipating using big data analytics to streamline operations and boost productivity. Companies that fail to take advantage of this information might find themselves falling behind competitors who do.

 

 

 

Three-Dimensional Disruptions

One of the trends currently impacting every sector in the manufacturing industry is the adoption of 3-D printing. According to the report “3D Printing comes of age in US industrial manufacturing” recently published by PricewaterhouseCoopers, 71.1% of manufacturers have implemented some form of 3-D printing.

 

According to the source, only 17.4% of manufacturers are experimenting with 3-D technology for integration into regular operations. This is down from 28.9% two years ago. 31.4% of respondents are using this method for prototyping, while 6.6% employ 3-D printing for producing end-products.

 

Shifting to 3-D printing should only continue to increase among companies that build uniquely designed, Engineer To Order products. Printers are becoming more accessible and easier to use. Additionally, prices are falling, making this method increasingly attractive to manufacturers. Furthermore, it’s noted that most manufacturing executives anticipate significant growth of 3-D printing in this sector in the coming years.

 

The print-on-demand feature may be especially compelling for engineer-to-order companies that want to reduce inventory and streamline their supply chains. Further, due to the nature of the specially tailored product designs offered by Engineer To Order manufacturers, the virtually limitless possibilities afforded by 3-D printing options open the door for a whole host of new product offerings. However, it’s important that these companies keep pace with their peers and other competition. Not all ETO manufacturers will be able to make use of 3-D printing. This makes it particularly important for these companies to find other ways to boost their competitiveness.

 

 

 

Configurable ERPs

New technologies and innovations intensify manufacturing competition. Engineer To Order manufacturers need the right tools to stay successful. Implementing a configurable ERP system ensures agility and flexibility, which your team needs to compete.

 

According to Industrial Distribution, due to the nuanced complexity of manufacturing companies that consist of hundreds of unique processes, from warehouse management to production, having an ERP system that conforms to the company rather than forcing manufacturers to alter their operations to fit the ERP system creates more long-term benefits and increases the chances for success. This keeps the ETO manufacturer competitive and allows the company to remain flexible enough to rapidly pivot to address a changing industry landscape, or quickly scale operations to meet higher demands.

Other ERPs and MRPs claim to tackle ETO challenges, but in truth, they are built for the traditional manufacturing organization.  Total ETO is the only ERP | MRP system built by and exclusively for Engineer To Order organizations. An affordable and configurable ERP and MRP system that’s intuitive and easy to use for small to mid-sized custom design manufacturers. Total ETO allows ETO companies to stay competitive in an industry constantly undergoing disruptions.

 

Learn more about Total ETO by requesting a demo today.

 

Written by RJ Ahuja

 

 

Key Takeaways

• The budget for many ETO manufacturers is currently stagnant or even shrinking. This is understandable, considering some Custom Machine Builders expect their revenue to shrink over the next couple of years.
• An ERP solution is recommended for any manufacturer looking to scale, especially in the ETO space.
• Trying to force a specialized business into a standard ERP doesn’t work. ETO manufacturers need an ETO solution.

 

 

ETO Manufacturers Still Face Many of the Same Challenges They’ve been Battling for Years.

For starters, the IT budgets for Engineer To Order manufacturers are not growing and are, in some cases, actually shrinking: The Gartner forecast for IT spending in 2016 predicted a 4.5 percent drop in IT spending among firms devoted to manufacturing and natural resources.

 

Similarly, the Spiceworks 2017 State of IT report projected that IT allocations would barely move between 2016 and 2017. Instead, it will rise from an average of  $293,000 to $294,000 per company. There were a few other important constraints revealed about ETO manufacturer’s survey:

• 64% of respondents expected to hire no additional technical staff in 2017. Compared to only 30% who were planning on taking on more employees. This trend will put more pressure on ETO manufacturers and others to do more with less.
• Budgets for both software and hardware have been decreasing with some of the funds being redirected to managed services.
• 60% of the companies surveyed expected to see increases in revenue in 2017. A moderate 20% predicted no change and 10% even stated their revenues would likely decline in the new year.

 

For ETO manufacturers in particular, this current trend of stagnant IT budgets is at odds with the technical investments they’ll need to make. Specifically, advanced analytics, robotics,  and augmented reality are just a few of the ongoing developments many manufacturers will have to address.

 

 

Finding the right tools

An enterprise resource planning system has to be the focus when modernizing how ETO manufacturers do business. The ideal ERP system is easy to implement, integrate and pay for. This includes small and medium-sized Engineer To Order manufacturers. Unfortunately, many standard ERP solutions fall short on these counts.

 

Panorama Consulting demonstrated the shortcomings of the average ERP implementation in a recent report on enterprise resource planning. Almost 70% of ERP initiatives in the manufacturing sector went over budget in 2015. The two biggest drivers of these overruns are the expansion of project scope and the need for additional technology.  While lower than the average for all industries, the typical manufacturing ERP system costs $2 million to set up, or 7.5 percent of the company’s yearly revenue.

 

The challenge and costs can be summed up neatly. Trying to shoehorn a specialized business into a general purpose ERP requires incredible effort.  There’s also the time and cost to configure, customize, implement, and train.  With this in mind, it is crucial that Engineer To Order manufacturers have other options available. They need a system built for them, not a traditional manufacturer or even a make to order manufacturer.

 

These Custom Machine Builders need something that is not only cost-effective and well-integrated but also built from the ground up for real-time insights and automation. Then, they will be able to avoid the errors and missed opportunities that often accompany old-fashioned methods of organizing, such as Microsoft Excel-based processes or general manufacturing ERP systems.

 

 

 

Total ETO: An ERP Designed for Custom Machine Builders

As many IT budgets reallocate resources to new services and look to trim ongoing maintenance costs, it is important for teams to have access to a modern ERP solution. An ERP that provides an excellent return on investment works well with other applications and replaces error-prone manual processes is necessary. Total ETO fulfills all of these key requirements.

 

Built by custom design manufacturers, Total ETO is very flexible and affordable for Engineer To Order manufacturers of all sizes. It offers an industry-specific platform that reduces manual liabilities and clerical errors. Moreover, it can be connected to any accounting system, such as QuickBooks or Sage, and CAD systems such as Inventor and SolidWorks.

 

IT budget growth may not move the needle much these days. however, with Total ETO, manufacturers can ensure they get the most out of their tools, reduce legacy liabilities, and remain competitive.

 

 

Learn more about Total ETO by requesting a demo today!

 

 

Written by RJ Ahuja

Key Takeaways

• To craft a workable financial plan, take your time, consider categorizing costs, and remember that precision is not necessary.
• Implementing an ERP solution is an easy way to track financial information. The right ERP will also help eliminate errors and miscommunication.

 

Despite the importance of following an operating plan, some Engineer To Order companies opt not to use it.

 

Further, those who do draft a plan typically either do so incorrectly, or they use it as a suggestion. It’s typically quickly discarded when it becomes a burden or inconvenience. ETO companies should avoid this because financial planning is essential.

 

As noted by The Wall Street Journal, there are many reasons why managers get their plans incorrect. Whether it’s a disjointed process, a failure to account for major expenses or a general indifference to the plan. It’s important to keep in mind that financial plans are more than just numbers on a page or a screen. Instead, think of them as a numerical representation of a company’s priorities, strategic goals, and immediate steps to reach them. This means even the least financially savvy executives have no excuse for not establishing and following a plan.

 

 

Helpful Tips for Crafting a Workable Financial Plan:

 

1. Don’t rush it

These plans can steer operations, so we should consider every aspect. Top management should contribute by providing additional insight. Soliciting input from different departments ensures everyone has a voice in the process.  Furthermore, it assures that critical projects or divisions won’t be underfunded. For ETO companies, such planning can be extra difficult because of the last-minute nature of every project. That doesn’t make it any less important, though.

 

 

 

2. Categorize costs

Divide the company’s expenses into distinct categories and then further break down these into subsections. According to AccountingTools, four of the main categories for manufacturing companies, including ETO organizations, consist of overhead, production, direct materials, and labor.

 

Overhead costs cover items such as administrative salaries, depreciation, rent, supplies, utilities, and other expenses necessary for regular business operations. The source noted that the overhead costs may potentially account for a large proportion of the company’s total amount of expenditures, so it’s important that these expenses are accurate and allocated for.

 

A simple equation derives direct material costs: Add raw materials needed for production to the planned ending inventory balance to get the total raw materials required. Subtracting the beginning raw materials inventory in stock from this number provides the raw materials to be purchased. Of course, this is a simplified version, but it essentially follows the same format.

 

Much like the direct materials, the production budget also includes a simple equation that covers the forecasted unit sales added to the planned finished goods ending inventory balance. The total production required is the product of this equation. Unlike iterative companies, ETO manufacturers typically do not subtract finished goods inventory from the total production required, so they manufacture the total number of products specified.

 

The labor budget involves the total hours of labor required to build the finished product. This helps manufacturing companies estimate how many employees they will need and provides a gauge for determining when layoffs might be necessary.

 

 

3. Precision is not a requirement

It’s not necessary to plan to the very last penny. The goal of the plan is not to accurately predict the exact number of sales or the amount of every expense. However, it is supposed to guide the entire operation, and the plan should provide direction to the company. This is a big relief for all manufacturers, particularly those in the ETO space. Trying to predict precise costs and revenue will only bog down the process and potentially give everyone headaches.

 

 

4. Compromises are key

The funding process does not approve every request, and creating a workable plan typically involves making a series of trade-offs. An Engineer To Order manufacturing operation needs to allocate its limited resources accurately. This means that adding a new, necessary expense to the plan might require removing another line item somewhere else. Compromising between many different factors and trying to find that balance can be tricky, and it requires the discipline to know when to make cuts and when to shift resource allocation for a better chance at reaching strategic goals.

 

 

 

 

5. Implement an ERP solution

Keeping track of all of this critical financial information can be difficult without the right tools. Furthermore, storing all the data in a single location or among several isolated systems can lead to errors, duplicated entries, and miscommunication. Even the smallest mistake or wrong entry can throw off a company’s alignment with its operating strategy.

 

Total ETO, a manufacturing-centric ERP solution, stores all this crucial financial data in a single repository. Managers can ensure that all orders, payments, and costs align properly with the project estimates and that they are meeting the strategic goals set forth, with real-time access to every expense and cost associated.

 

See the difference an ERP designed for Engineer To Order manufacturers can make, request a demo today.

 

 

Written by RJ Ahuja