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Manufacturing ERP systems have long centred around BOMs (Bills of Material) and Routings to specify item builds. Functionality such as time tracking, work centres, CRP (Capacity Requirements Planning), and MRP (Material Requirements Planning) & MRPII (Manufacturing Resource Planning) have evolved. Still, almost all ERP manufacturing features work on the premise of building a sales product from a recipe: a set of ingredients and the instructions to combine them. Documentation, therefore, becomes a (sometimes simple, often very complicated) matter of data accuracy and traceability.
But what about manufacturing companies that don’t have their recipe at the time of order?
Engineer to Order (ETO) manufacturers build custom-made products, sometimes without so much as a pre-set sales price. Their ERP product requirements are significantly different from those of build-to-stock or even build-to-order products. Whereas these latter products use fixed components with only potential changes in the costs or resources involved, ETO products often operate in an agile environment.
In this environment:
- Work orders may require release without all the final information included, making costing and resource allocation impossible.
- Engineering drawings do not yet exist and must be attached as they’re created and approved.
- There are attributes and quality control specifications generated during the design and construction process.
- Operations that are not defined, and indeed, may require new operations if the product is sufficiently custom. These operations may even include subcontracting, introducing an entire other process of purchasing, shipping & delivery.
- Fulfillment dates are often little more than a best guess.
- And the official documentation is done only after the fact due to include minor changes that may be necessary during manufacturing.
There are a few ERP modules that can help with front-end design. Configure-Price-Quote software such as Salesforce CPQ, Verenia and Rootstock Configurator leverage multi-level BOMs to dynamically build and quote complex assemblies.
For example, a door hardware company can leverage separate BOMs for levers, rosettes, latches, and hinges with different finishes, door thicknesses, lock functions and other criteria so that the salesperson or end client (via a web interface) can only create viable results.
Properly designed, CPQ will:
- give accurate costs,
- allow variable discounts,
- establish a lead time for production, and
- then create a unique recipe for the newly created quote.
This can represent the difference between documenting dozens of BOMs or billions.
However, CPQ is generally predicated on pre-existing, à la carte BOMs to produce final builds. The routings are relatively rigid: mount the lever on the rosette, attach to the latch, then package together with the hinges and the appropriate number of screws. CPQ won’t allow you to create a build not already defined within its structure.
Custom artwork is an even more extreme example:
Interior design companies or those serving the retail, hospitality or healthcare industries often get orders for high-impact, altogether custom pieces for reception areas.
In theory, these works can be replicated precisely for each store or hotel lobby; in practice, no two locations are identical and build modifications are required to fit in each location. Documenting these variances is critical to avoid repeat sizing errors if the product is changed out. The company’s ERP is crucial for this record-keeping, yet it can be a great encumbrance during the production process.
Many ERPs have some degree of ETO support.
Sometimes, this may involve modifying internal processes to better fit their out-of-the-box functionality, which may include an integration using a manual import (.csv) to the ERP. In other cases, to meet the demands of the manufacturer, software customizations are required. Both options involve risks: process modification leads to change management issues that can be jarring to all staff from floor to C-level. Customizations can be expensive upfront and over time due to repeated upgrade testing and process uncertainty due to employee turnover.
Choosing the correct ERP is critical to minimize both change management and customizations, but product selection is an arduous process. There are many smaller, industry-specific options that may more closely reflect a company’s operations more closely but may also lack the depth of development, 3rd party features, or a strong client base.
Generally, the larger the system, the less flexible its processes.
Finding the right balance in system selection requires in-depth research. Often, manufacturing companies will benefit from a Business Systems Analysis (BSA). In a BSA, a product-agnostic consulting firm (which can work with the company’s in-house subject matter experts) will compare the pros and cons of multiple solutions to find the best option for them. The upfront cost of the in-depth analysis will more than pay for itself over time.
ETO manufacturers belong to a specialized industry with highly varied requirements. The need for both flexibility and robust documentation means that many ERP solutions are not adequate out of the box. To avoid extensive and expensive customizations or out-the-system manual import steps, be sure to research thoroughly, and leverage BSA consultants to help make an informed decision.