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

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 (ETO)?

Engineer-to-order (ETO)

Engineer-to-Order (ETO) 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 ETO 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.

This 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 will 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. This may involve designing 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 the design and approve it or provide feedback for changes.

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

The design is forward 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.

This 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 produce 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 the product and test it 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 (ETO) instead of off-the-shelf products:

Customized Products

In today’s global manufacturing environment, customized products are getting more and more traction. ETO 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.

A customer may need a unique size or shape for their product that is not available from the manufacturer.

Niche Markets

Small quantities of products are often crucial in niche markets with insufficient demand to justify producing large items. ETO 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

ETO allows manufacturers to produce smaller quantities of products, which can be important for niche markets or custom applications. This 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 not available 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 use ETO to produce new products for their customers quickly.

The disadvantages of ETO manufacturing

 Disadvantages of ETO

Following are the main disadvantages of Engineer to Order production:

Increased Costs

First, producing customized products can be more expensive than having standard products. This takes longer and requires more resources to create a design that meets the customer’s specific 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 given 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 all work together to make this happen.
  • 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.

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.

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. Thanks for reading!