What makes engineer-to-order (ETO) products unique?
When it comes to designing and building a product, the type of product usually determines the approach a company will take. For example, an engineer-to-order (ETO) approach is one in which a company designs and manufacturers a product based on very specific customer requirements. Because the end product tends to be complex, customers engage with the ETO company throughout the entire design and manufacturing phases to ensure their specifications are met.
Some other manufacturing approaches include:
Make-to-order (MTO): This approach is also referred to as build-to-order (BTO) and focuses primarily on production strategy. Some of the required components are stocked whereas more expensive or highly customized parts may need to be produced. Production only starts after an order is received.
Assemble-to-order (ATO): Using this approach, companies will have some sub-assemblies already built, stocked and ready to assemble based on the customers’ requirements. Once an order is received, final assembly begins and the product is delivered with the appropriate specifications. A key advantage to an ATO approach is minimal inventory is required and the final product can be delivered quickly.
Intricacies of an engineer-to-order product
Each approach to getting a product designed and manufactured brings along its own set of challenges; however taking steps to address those issues directly can mean a competitive advantage for an ETO company. This article addresses how to tackle some of the common drawbacks associated with an engineered-to-order approach.
Challenges with an engineered-to-order approach
Moving forward with an engineered-to-order approach means that there will be a high level of customer participation in the design and manufacturing process of the product. With multiple parties working together to make a complex product a reality, it is not uncommon for difficulties to transpire along the way. And a problem in the design phase can be just as damaging as a setback in manufacturing phase.
Typically with the engineered-to-order approach, production information and specifications are constantly moving between the ETO company and the customer. Because most product data (design specifications, requirement files, engineering changes, etc.) is often tossed back and forth several times between the ETO company and the customer, either party can become confused if the exchange of product information is poorly managed. For example, it might be difficult to answer questions like how much and what inventory should be lined up for production.
Because engineered-to-order products are well-tailored, they are often built from difficult to source parts, expensive parts and highly engineered components. Acquiring the necessary product components can be both a time consuming and costly endeavor causing issues before and during production runs.
ETO companies often face difficulties when managing engineering changes because finalizing engineering specifications can often require several revisions. For this reason, it is important to define how engineering changes will be handled in a contract, which includes determining what types of changes will be accepted or rejected and what you will charge for engineering changes. By establishing the ground rules upfront, you can ensure both parties are happy and understand cost impact as changes come through the pipe.
The good news is there are ways to tackle ETO challenges and create a strong foundation for success.
Documentation tips to help ETO companies create efficiencies
It is particularly important to manage and store product data because competition can swoop in at any point and take away market share. And even though challenges can arise with the engineered-to-order approach, there are simple steps that can be taken to create efficiencies throughout the design and manufacturing phases.
Documenting product data during both the design and manufacturing stages can pay off in a major way. Because engineered-to-order products are highly customized, it is best to keep records of all the product information (part specs, datasheets, etc.). This means that any and all product information can be leveraged to its fullest when design records and manufacturing requirements are maintained for a given product.
All product data is important, but it can be particularly helpful to take the following steps:
Step 1: Establish a consistent part numbering scheme
Assigning part numbers to parts can help create efficient design and manufacturing processes. Because the same part can be used in multiple product designs, a unique identifier (i.e. a part number) can help design move along more quickly. Using part numbers can also make finding parts on the manufacturing floor easy and help avoid confusion on the manufacturing line. For example, a shop floor worker can quickly and easily identify a specific part by using a part number.
Step 2: Create a bill of materials (BOM) for each product
A bill of materials is the list all the items, parts, assemblies and sub-assemblies needed to manufacture a product. Creating a BOM for each product establishes a useful way to manage a large amount of product data as well as highly complex product information. More importantly, managing BOMs means that product record information can be leveraged in the future. For example, having a BOM record may become especially handy in the event that a highly customized product becomes more of a commodity product.
Step 3: Manage engineering changes electronically
Controlling engineering changes is important for overall product accuracy. It provides a way to reference change information for why a change occurred, what changed and when a change was implemented as a product is designed and manufactured. While paper forms are a common way to capture change information, an electronic change management system provides a more efficient method for collecting and managing changes, making for smoother collaboration between multiple parties.
While these steps can help create efficiencies in certain processes, you will want to make sure you have a plan for collecting and managing documentation from the beginning of the project all the way through completion. If you do not set up an initial method for collecting documentation, you risk tracking and organizational problems down the road. Setting up early will enable you to scale with greater efficiency and fewer errors.
It is also important to ensure you are in fact building what the customer ordered. Be certain that all customer demands have been both documented and approved throughout the production process. It can be helpful to incorporate this information into a design and manufacturing plan that shows customer requirements are being met. Keep in mind too that the product needs to meet not only the requirements of the customer, but also should fulfill the appropriate quality and compliance requirements. Thus when an engineered-to-order project is complete, the ETO company can submit final product documentation of customer requirements along with the product.
Gain a competitive advantage
Following the steps outlined above can help an ETO company establish a pathway for success. To get started, it is worth considering how a system can help support product data management needs.
Arena PLM provides a way for manufacturers to manage product data electronically, including part numbers, BOMs and engineering changes. Because the software is cloud-based, it is easy to get started. The system is also designed to support product data collaboration between multiple parties. The benefits gained from a BOM and change management system easily outweigh the expensive product problems that can arise during the design and manufacturing stages.
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