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Call us for a free FastStart Consultation: (844) 680-2046


by Daniel Harris,
Market Research Associate
Last Updated: October 21, 2016

Completing an engineer to order (ETO) project can take from days to decades. While managing an engineering project can be daunting, usually the real challenge is managing the business of engineering. Asking engineers to design widgets is one thing; persuading them to complete the necessary paperwork (or electronic work, as the case may be) is another thing entirely.

Because of the nimble nature of most ETO projects, the ability to create fast and accurate quotes, bids and responses to requests for quotations (RFQs) is crucial. Converting quotes to orders and bills of material (BOM) is also critical. In order to give accurate quotes, the inventory system, including costs and quantities, must be current. In addition, there must be up-to-date information on vendors and components, with costs and lead times, to support make-versus-buy decisions for subassemblies.

ETO systems generally include manufacturing resource planning (MRP) functions and often directly interface with manufacturing execution systems (MESes). It is important that ETO planning allow for more than 100 percent utilization of equipment and personnel, for example, for double shifts, weekend or holiday work. The payroll system must track overtime and compensatory time (comp time) for workers. The accounts receivable system should be able to create bills based on the terms of bids and should be able to process performance-based payments. Customer relationship management (CRM) systems should track historical data and also store the specifics of all winning proposals for failed bids for later analysis.

General ledger and accounts payable are standard. Most ETO manufacturing software installations are on-premises. Software as a service (SaaS) options are available. The attractiveness of a cloud-based alternative is primarily based on the information technology infrastructure already in place in the firm.

Common Features of ETO Software

In evaluating software, engineer to order manufacturers should consider the following functions to meet their unique requirements:

Quote to order The ETO system should support quote creation. The system should use current inventory information and historical data to estimate costs and delivery dates.
Bill of materials management The system should create BOMs directly from orders, even the orders that are generated from quotes. The system should allow revisions to the BOM to provide additional levels of detail. In advanced systems, a conceptual BOM is used as part of the process to develop a quote.
Make or buy decision support Make or buy decision support applies job estimating to subassemblies to evaluate whether it is more profitable to make or buy components. Advanced systems will factor in time to build or buy as well as cost.
Conditional order management The system should be able to place conditional orders with suppliers to inform them which orders are likely on the condition that a particular bid is accepted.
Customer relations management The CRM should track each customer’s historic sales against recent sales to gauge trends. It should track recent RFQs and the winning bids for any opportunity that the firm sought.
Accounts receivable The accounts receivable system should convert the terms from an accepted bid/order into an account receivables entry. It should correctly calculate and post performance-based payments.
Cost plus pricing The system should create cost plus bids if required. It should allow variable markups for components and subassemblies.
Overtime management The estimating system should account for current work in progress when calculating costs, including overtime costs as necessary. Overtime and comp time should be automatically charged against the correct projects.
Bonus based on production goals The system should automatically calculate any performance-based bonuses (or penalties) for the project and for individual employees. Project bonuses and penalties are transferred to accounts receivable and employee bonus information is transferred to payroll.
Integration with project management The ETO system should integrate with the project management system to track overall performance of the project. Any discrepancies between accounting data and project management data should be highlighted.
Spare parts management The ETO system should identify and account for the production or acquisition of any contractually required spare parts. The system should track lead times to decide which parts should be stocked, which should be built to order, and which can be ordered from vendors.
Warranty and service contract management The warranty and service contracts are detailed in the bid and final proposal. The ETO system should track the dates and milestones on the contracts.
Estimate confidence level The system should allow a confidence level to be assigned to each entry in a proposal. The confidence level should be able to either be kept internal or shared with the client as desired.
Engineering change management Tracks engineering changes and their impact on delivery date and profit on the project. It should also be easy to enter the changes into the system so that the changes can flow to other projects and the overall schedule.
Failed bidder stipend accounting If the RFP or bid process allows bidders to receive a stipend for failed proposals, the accounting system should correctly charge the costs of developing the response against the stipend.

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