Engineer to Order (ETO) is a manufacturing mode involving collaboration with a customer on the engineering phase of the product lifecycle in order to arrive at a product design that meets the customer’s functional requirements.
Touted as a common business model in industrial manufacturing, aerospace, defense and the energy industry, Engineer to Order is distinguished from other to-order manufacturing modes including Make to Order and Configure to Order in that engineering or product design are a core part of a manufacturing project that requires specific manufacturing project management processes. The engineering component of the project often overlaps with early stages of manufacturing and ordering of long lead time raw materials, which means that processes must be in place to issue purchase orders and work orders before a finished design is released to manufacturing. ETO requires a management team master not only product lifecycle management (PLM), but also project lifecycle management and customer lifecycle management.
Today’s business software can in fact be used to support ETO, and other modes like Engineer Procure Construct that involve manufacturing or fabrication to meet customer needs. The ideal business software, however, must support the entire business lifecycle from customer or contract acquisition, project planning, execution, manufacturing or fabrication and, when necessary, installation. It also must offer real-time business control and analysis and establish a single version of the truth for all parties involved in work for customers.
“Unlike standard products, with ETO products the customer is heavily involved throughout the entire design and manufacturing process. In most cases, aftermarket services continue throughout the life of the product. That's why generic, off-the-shelf ERP systems will not work for ETO manufacturers, a recent piece revealed.
Some of the key differences between standard manufacturing or Make to stock (MTS (News - Alert)) style manufacturers and their engineer-to-order manufacturing (ETO) counterparts include:
- MTS uses a price list while ETO supplies estimates and quotes
- MTS inventory is based on a party number while in comparison ETO inventory is based on a contract order
- MTS makes no or only a few engineering changes but ETO makes multiple engineering changes
Edited by Jamie Epstein