From Engineer to Order to Configure to Order: The Essentials

26 November 2019

Written by Valerija Olsevska

To ensure profitability, and to meet the market demands for quick response and shorter lead time, more and more engineer-to-order (ETO) companies are looking for new approaches to deliver their products. While the final product might meet all the sophisticated needs of a customer, the ETO is time-consuming, the cost price is often under pressure plus failure costs are more common sense and scaling the business is nearly impossible. Due to this, the topics of product modularity and configuration have enjoyed increasing attention in recent years. Take an example of ABB E-configurator, Damen modular barge configurator, Broshuis case, or even an example of a modular house configurator Habitat 21.

What the right name for this movement is still not completely defined, some refer to it as mass customization or smart customization, we prefer to call it a configure-to-order (CTO) approach. To enable CTO a modular and parameterized product concepts are used, where all aimed components can match. Where with ETO you will (re)design for each customer order, with CTO you compile every order from existing blocks with a help of a product configurator. With the move to CTO approach you introduce fundamentally new concepts into your business.

Product modularization

The definition of product is redesigned and “standardized” to support modularity and configurability. A prerequisite to do so is the standardization of core technology. For example, if you are a machine builder, you need to standardize you mechanical, electrical and mechatronic technology in coherent design and building blocks. In some ETO companies the focus might be on standardization of the parts of the products, in other words, only some of the product solution space is predefined.

Several viewpoints of product should be supported: (1) engineering view (2) manufacturing view, and (3) customer/sales view (if sales configurator is applicable). The requirements of these views are typically significantly different. As a result, several product structures are created. For example, structures for sales are focused on what the product can do, and technical structures are designed for easy manufacturing.

Product configurator

A product configurator is responsible for the conversion of customer requirements into unique product structure. The market of configurators can be confusing (Autodesk even categorizes 4 types of configurators). It is important to distinguish between two categories: sales or commercial configurators and technical product configurators. Principally they are the same and use the same configured product data source – e.g. the PDM-system. However, the technical configurator continues (no re-entering the same data) with the output of the sales configurator. Output of the sales configurator is quotation and lead time, and product configurator creates the information related to product engineering and manufacturing (Bill of materials, routing and even CAD drawings). Technical configurator is typically used internally to verify and validate a customized product and to complete all option and features choices which could not be made in the sales configurator.

Configuration process

The configuration process is split into two phases: (1) sales and (2) technical configurations. Both these phases can be supported by a product configurator; but each phase requires separate functionalities (and sometimes actually different systems). The link between two configurations often is a challenge. Ensuring that the sales configuration is generated correctly makes the rest of the process quite straightforward (with possibility to automate). Of course, if there is no sales configurator it is sales engineer’s responsibility to translate customer requirements.

Preferably the customer is the user of the sales configurator, e.g. at the company’s website. The behaviour of the customer at the website during configuration provides a lot of insights about customer needs and emotions.

IT infrastructure

Ideally, the CTO-concept should enable seamlessness between engineering, sales and manufacturing. Configurators will not deliver value without proper integration with other IT systems. A configurator needs to reflect what engineers has defined in PLM/PDM and at the same time show in real time what, according to ERP, manufacturing can build. Besides, your ERP might be based on project driven business, to derive precise lead times from systems you may need to rethink your planning logic.

Important to remember…

Whether it is a move from ETO to CTO or any other transition it is not a rare case that old business assumptions are the main roadblocks towards a new model. It is a typical argument that ETO customer needs cannot be met with standardization. However, CTO is not about limiting the freedom of engineers, but much more about how you manage your product and deliver it to customers. The top management is extremely challenged to initiate, manage and control this move. It is not just a matter of assigning a project leader or putting it on the agenda of the manager engineering.

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