Engineer To Order manufacturers are different from standard made to stock and make to order manufacturers
If your company custom designs products to client specifications, it is one of more than 5,000 Engineer To Order (ETO) firms in North America. And, if your company is typical, it has yet to unify the key parts of the process into an integrated business information system. The benefits of linking your “information islands” using software are substantial, reducing operating costs and allowing growth without added staff or resources. The trick for ETO manufacturers is to find software designed specifically for them.
Engineer To Order manufacturing is different
The chaotic business process of the Engineer To Order firm is a manager’s nightmare. Unlike most manufacturing companies, who produce pre-designed products, the Engineer To Order firm is faced with a completely different set of challenges. It designs and builds its products to suit each client’s order, requiring significant engineering before production can begin. Coordinating sales, engineering, purchasing and production efforts is extremely difficult, especially 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.
Engineer To Order firms have common characteristics. Generally, they are small to mid-size firms. Their ability to solve a unique problem for a client with a custom designed solution 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. Tracking each project’s costs throughout is essential. The typical flow of the Engineer To Order manufacturer 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 and the need to parcel out information to manufacturing before the design is complete. Engineer To Order manufacturers need to a way to minimize the disruption and added costs. The bottlenecks that result affect delivery and escalate costs. Controlling the chaos requires “real time” information, impossible to achieve with a paper system.
Breaking through the entrepreneurial ceiling
Have you ever wondered why some companies in an industry are more successful than others? Look at the way they are organized. They are able to leverage their knowledge and use their past experiences to grow.
Most small custom design firms 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 the biggest factor for the Engineer To Order manufacturer. It marks the transition from an entrepreneurial company to a professional firm. Key to this approach is sharing knowledge with more people, reducing the dependency on individuals, and unleashing employees’ potential. The result is an increase in capacity of the firm and its profits.
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 plant 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.
Want to pump up the value of your company and secure its future? Capture your business process with an integrated information system.
Justifying the effort
Case study: Handling Specialty, Niagara, ON
Handling Specialty, a Niagara, Ontario based Engineer To Order company, experienced increasing sales and falling profits. Symptoms included duplication of effort entering data, excessive material delays caused by design changes, and an inability to access past history to improve estimate accuracy. They had no “early warning” job costing information nor reliable inventory and work-in-progress values to produce accurate monthly statements.
In order to overcome these problems, they decided to streamline their business process. 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. The difference was that they did it with 10.3% fewer design and shop hours, with no increase in inventory. Compared to the previous five-year period, they recorded a six-fold increase in profits. More importantly, 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
- Elimination of duplication
- Freed up staff capacity
- Reduced material costs
- Real time management information
Skeptical? Just imagine a few of the obstacles being eliminated in your firm:
- If you could shorten your average design-purchase 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 they could just design. How much more business could you handle?
- If the plant 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 plant space, what would your bottom line look like?
Picking the right system
Most Engineer To Order firms are accustomed to spending tens of thousands of dollars on production equipment but are reluctant to make similar investments in software. An integrated business system will be the most important production tool you will buy. Your company’s performance will increase through a streamlined process, and by having all your product information; drawings, bill of materials (BOM), and job costs, archived and available to all staff.
In order to avoid common pitfalls as you search for the right system, develop a plan. Create a project team and make sure the executive is supportive. Choose a system that was designed specifically for an Engineer To Order business. Avoid the quest for perfection. The 90% solution may be far more practical than a system with an excess of “features”.
Remember, a successful implementation is directly tied to the 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 firm, it usually is design and purchasing where defining the BOM and obtaining the materials present 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 link to other software.
Think of the vendor as consultants on retainer. Choose them based on their ability to understand your needs and work with you.
Finally, focus on the benefits of an ETO system, then the costs
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 in one year.
Engineer To Order manufacturers have been the ignored stepchildren of business systems software providers. While the rest of the manufacturing industry is swamped with software packages, Engineer To Order firms have had little to choose from. Fortunately, the situation has changed. Engineer To Order software does exist and deserves your attention.
One of the only packages specifically developed for small to mid-sized Engineer To Order manufacturers is Total ETO. It doesn’t take much to recognize there are significant economies in streamlining your business process. By quantifying a few of the benefits, you will see that there are substantial profits to be gained by investing in improving your business process.
How Total ETO can help
Comprehensive software for managing your material resource planning (MRP) is one of the best investments you can make for your Engineer to Order company. With the right team in place, you are sure to see a return in no time at all. Read one of our success stories or set up a personalized demonstration to find out more about how Total ETO can help you streamline your engineer-to-order business.
