Perhaps you may have not heard the term engineer-to-order (ETO) before, but perhaps your business is one of thousands that designs and builds custom equipment that is very precise, adheres to very specific tolerances, is highly technical, and produces low volume and, generally speaking, expensive products. Some examples of such products include ships, aircraft, production machinery, etc.
The typical ETO organization reflects a unique style of manufacturing—they design products to customer specifications, using a unique set of item numbers, bill of materials (BOM), and routings. Business is usually awarded to an ETO manufacturer based on estimates and quotations. Products can be complex, with long lead times and requiring a number of complex subassemblies to build.
Recently a paradigm shift has occurred in the realm of manufacturing, and ETO organizations are leading a call to change as a means of business survival.
ETO Manufacturing Challenges
Unlike standard manufacturing products, in ETO manufacturing environments, the customer is heavily involved throughout the design and manufacturing process. Constraints in the ETO manufacturing process include frequent engineering changes and long lead times from purchasing vendors that can span months—even years. Raw materials themselves are not purchased for inventory purposes, but for a specific phase of the overall manufacturing cycle. Because ETO manufacturers treat each job as a project, all costs and materials are reported to the actual work order and are further compared to the original estimate and quotation. In many cases, once the production phase is complete, the product is shipped to and assembled at the client’s site. Also in many cases, aftermarket sales services continue throughout the life of the product.
Requirements Differ between ETO Manufacturers and Discrete Manufacturers
The ETO manufacturer is faced with maintaining a business model that requires skilled, experienced, and knowledgeable tradespeople who are able to design innovative solutions to complex problems. According to a report by the National Association of Manufacturing in November of 2005, a generation of tradespeople is slated for imminent retirement, and the fewer numbers of young people enrolling in trade schools represents a challenge heading into the post-boomer economy of the early 21st century.
The typical ETO organization reflects a unique style of manufacturing—they design products to customer specifications, using a unique set of item numbers, bill of materials (BOM), and routings. Business is usually awarded to an ETO manufacturer based on estimates and quotations. Products can be complex, with long lead times and requiring a number of complex subassemblies to build.
Recently a paradigm shift has occurred in the realm of manufacturing, and ETO organizations are leading a call to change as a means of business survival.
ETO Manufacturing Challenges
Unlike standard manufacturing products, in ETO manufacturing environments, the customer is heavily involved throughout the design and manufacturing process. Constraints in the ETO manufacturing process include frequent engineering changes and long lead times from purchasing vendors that can span months—even years. Raw materials themselves are not purchased for inventory purposes, but for a specific phase of the overall manufacturing cycle. Because ETO manufacturers treat each job as a project, all costs and materials are reported to the actual work order and are further compared to the original estimate and quotation. In many cases, once the production phase is complete, the product is shipped to and assembled at the client’s site. Also in many cases, aftermarket sales services continue throughout the life of the product.
Requirements Differ between ETO Manufacturers and Discrete Manufacturers
The ETO manufacturer is faced with maintaining a business model that requires skilled, experienced, and knowledgeable tradespeople who are able to design innovative solutions to complex problems. According to a report by the National Association of Manufacturing in November of 2005, a generation of tradespeople is slated for imminent retirement, and the fewer numbers of young people enrolling in trade schools represents a challenge heading into the post-boomer economy of the early 21st century.
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