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.
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
