What is Engineer-to-Order (ETO)? – Process, Best Practices

Last updated on by Editorial Staff
What is Engineer to Order (ETO)

ETO is a manufacturing process where the customer specifies what they want, and the manufacturing company designs and makes it.

This blog post will discuss the definition of Engineer-to-Order, the production flow, advantages, disadvantages, and best practices.

What is Engineer-to-Order?

Engineer-to-order (ETO)

Engineer-to-Order is a term used in manufacturing. It refers to a process in which a custom or unique product is designed and manufactured specifically.

It Is often used when customers have requirements that are hard to meet using regular products.

It can be a more expensive production process than traditional manufacturing, allowing customers to customize products for their specific needs.

It also allows manufacturers to produce smaller products, which can be important for niche markets or custom applications.

ETO manufacturing process

Infographics of Engineer-to-Order Manufacturing Process

The following steps make the ETO manufacturing process easier:

First, the customer provides specifications for the product they need.

First, the customer will typically give a product requirements document (PRD) that outlines their specific needs.

That is often done through a Request for Quotation (RFQ) or Request for Proposal (RFP). The engineer will then look at the Product Requirements Document (PRD) and decide if the product can be made using standard components or if specialized and dedicated components need to be designed and made.

The engineering team creates a design to meet those specifications.

The engineer will design a product that meets the customer’s requirements. That may involve creating custom components or modifying existing features to meet the customer’s needs.

The engineer will also create a Bill of Materials (BOM) for the product, listing all parts and quantities.

The customer approves the design.

The customer will review and approve the design or provide feedback for changes.

The engineer will move to step four if the customer approves the design. If not, the engineer will change the design based on the customer’s feedback.

The design is forwarded to the manufacturing team.

The engineer will send the design to the manufacturing team. The manufacturing team will create a product plan based on the engineer’s BOM.

That may involve creating and procuring custom components or machinery.

The manufacturing team will also do an automated production scheduling for producing the product, considering how long it will take to make each component and assemble the product.

Once the manufacturing team has created a plan, they will send it back to the engineer for approval.

The manufacturing team produces the finished product.

The manufacturing team will deliver the product according to the plan they created in step four.

This may involve producing custom components or machinery, which can take time and be expensive.

The manufacturing team will assemble and test the product to meet its requirements.

Engineering to order process in SAP enterprise resource planning

The Engineer-to-Order flow orders individual items if they are not in the store. The steps to do this are:

  • Receiving the order
  • Checking the availability of materials
  • Creating the bill of materials
  • Planning the production order
  • Confirming the production order
  • Producing the product
  • Inspecting and shipping the product

Best practices for engineer-to-order

Along with an accurate change management system, the following are the best practices for Engineer-to-Order manufacturing:

The customer should provide clear and concise specifications for the product they need.

  • The engineering team should create a design that meets those specifications.
  • The customer should approve the design before it is sent to manufacturing.
  • The manufacturing team should produce the finished product according to the approved design.
  • The product should be inspected and shipped to the customer.
  • The customer should provide feedback on the product to help improve future designs.
  • The engineer should update the design to meet the customer’s specifications.

Benefits of engineer-to-order

There are several advantages to using Engineer-to-Order instead of off-the-shelf products:

Customized products

In today’s global manufacturing environment, customized products are getting more and more traction. It allows manufacturers to create products specifically tailored to the customer’s needs. This can include features, dimensions, and even colors unavailable in off-the-shelf products.

Customers may need a unique size or shape for their product that is unavailable from the manufacturer.

Niche markets

Small quantities of products are often crucial in niche markets with insufficient demand to justify producing large items. It allows manufacturers to create smaller quantities of products, which can help them tap into these markets.

A company that makes custom cabinets may use ETO to produce a limited number of cabinets in different colors and styles.

Small quantities

It allows manufacturers to produce smaller products, which can be important for niche markets or custom applications. In addition, it helps reduce inventory costs and keeps specialized production line processes flexible.

A company that makes custom parts may use ETO to produce small quantities of components unavailable from the manufacturer.

Faster time to market

Unlike traditional manufacturing methods, it does not require developing a new mold or tooling for each new product. This speeds up the time it takes to get a new product to market.

A company that makes custom medical equipment may quickly use ETO to produce new products for its customers.

The disadvantages of ETO manufacturing

 Disadvantages of ETO

The following are the main disadvantages of Engineer to Order production:

Increased Costs

First, producing customized products can be more expensive than having standard products. That takes longer and requires more resources to create a design that meets the customer’s needs.

A company that makes custom cabinets may have to spend more time and money on research and development to create a new design for each customer.

Need for both engineering and manufacturing capability

ETO requires established company capabilities for both engineering and manufacturing. This can be a challenge for companies that do not have in-house resources.

A company that makes custom medical equipment may need to partner with another company to produce the finished product.

Limited availability

Customized products are not always available due to limited production capabilities. This can lead to backorders and frustrated customers.

A company that makes custom cabinets may only have a certain number of cabinet styles and colors available at any time.

Limited selection

Products produced using Engineering-to-Order usually have a limited selection. This is because products are not based on standard inventory and need more time to plan and create.

A company that makes custom medical equipment may only offer a few different products.

Longer lead times

Engineer-to-Order products typically have longer lead times than off-the-shelf products. This is because it takes time to receive the order, check the availability of materials, create the bill of materials, plan the production order, and produce the product.

A company that makes custom cabinets may need up to two weeks of lead time to produce the cabinets.

A few more disadvantages

  • The process can be more complex than the traditional production method.
  • It requires specialized knowledge and skills.
  • Product quality can be more challenging to ensure.
  • Product testing and validation are essential.
  • Customer involvement is essential.
  • This task requires a lot of coordination between different groups. For example, you will need the engineers, the people who make the product, and the salespeople to work together to make this happen.
  • It requires a high degree of standardization to be effective.
  • It may not be suitable for all products or applications.
  • Requires a high level of commitment and investment to be successful.

Example to ETO

Engineering-to-Order Model stands out among manufacturing techniques due to its complexity and cost. Specifically, this process is employed when a company receives complex and costly special orders from governments or large corporations.

This process allows Statistical Process Control (SPC) to monitor production trends so defects can be caught early on.

This ensures that costs remain low and quality does not suffer. In particular, the ETO process is widely used in the defense, aerospace, energy industry, and beyond.

Make-to-order (MTO) vs Engineer to order ( ETO)

MTO and ETO are the two most common production methods, which have some differences, as listed below.

MTO

  • MTO manufacturing methods have evolved over the years.
  • It offers various customizable products specially crafted to meet customers’ unique needs. Whether you’re looking for extra-large sizes, decorative additions, or high-quality materials – MTO allows immediate production so your desires can be fulfilled quickly.
    • Ex: Here, customers can choose the size and color of the product according to their needs.
  • It offers only a limited selection and customization.

ETO

  • ETO solutions that offer greater complexity and strength. Every day brings new possibilities for innovating our industrial practices.
  • ETO manufacturing puts the power of customization into customers’ hands. From one-of-a-kind options to matching exact specifications, consumers can find exactly what they need without compromising on quality or craftsmanship. At the same time, expected lead times guarantee high-caliber results.
    • EX: Here, customers are in control! They can customize every detail – from the picket style and post spacing to the building materials used. So create your unique fence today with incredible design options at your fingertips.
  • It offers a completely personalized product experience–from customization of every element to the tailored design, you can create the perfect solution for your needs. 

FAQs

What is the difference between MTO and ETO?

MTO stands for “Make to Order.” This is one of the critical manufacturing functions where products are made based on accurate inventory management. ETO process where products are made based on customer specifications.

Can I use Engineer-to-Order for all my products?

No, not all products are suitable for this. It would help if you had a clear idea of what you are selling before putting a price on it. It may not be appropriate for mass-produced products or have a relatively short life cycle. Whether or not it is suitable for a particular product depends on several factors, including the customer’s needs and the product’s complexity.

Do I need special skills or knowledge to use Engineer-to-Order?

Yes, skilled production work counts with engineer-to-order effectively. However, this process is more complex than traditional manufacturing processes.

Is Engineering to Order available from all manufacturers?

No, not all manufacturers offer Engineering To order products. Therefore, you need to check with the manufacturer to see if they provide this service.

Conclusion

ETO is a process in which engineering and manufacturing occur at the company. The product is designed to meet customer needs.

This blog post discussed the definition of Engineer-to-Order, the process flow, and best practices. We also looked at how it works in SAP ERP and some best practices for implementing it.