FROM ENGINEERING-TO-ORDER TO CONFIGURE-TO ORDER CULTURE
Engineer-to-order - ETO for short - is considered as a manufacturing strategy in which most of the engineering, sourcing and manufacturing activities are initiated after an order has been received from the customer. Therefore, each product is highly modified, customized or developed as a one-off product with differing value chain processes for each of the product variants. Today, ETO companies are facing a multitude of challenges, such as increased global competition, delivery-time pressures, shrinking margins and a rapid evolution of technology. To ensure profitability in spite of these challenges, more and more ETO companies are pursuing innovative engineering strategies involving a gradual conversion from an engineer-to-order (ETO) to a configure-to-order (CTO) approach.
There is no way of stopping the escalation of product complexity! However, many ETO companies are struggling to cope with the resulting problems in their business processes, in particular with regards to the complexity induced by customer demand. In fact, many companies are facing a situation today that is increasingly chaotic, barely under control and far from being efficient. In terms of cost, ETO manufacturers are finding that every time the number of variants is doubled, the related costs increase by 20% to 30% and their suppliers are facing a pretty similar situation.
For ETO companies it is a permanent challenge to make sure that the growing number of design and engineering changes are reliably traced and referenced back to the original design data. The situation is further complicated by the fact that the constituents in the value chain are confronted with a similar challenge – especially when the product contains critical electrical and electronic functionality. Overall, it becomes apparent that the overall situation amounts to an alarming error potential.
So, what did MFL GROUP do to exclude a similar worst case scenario from happening?
Looking at best practices in other industries, e.g. the computer industry or the automotive industry, we can learn how successful companies are addressing the challenges of customer induced variant complexity by adopting a configure-or-order paradigm.
At MFL GROUP we reduce customer specific engineering content by increasing configured content.
In simple words: configure-to-order implies a reduction of the customized product content in favor of an increase of the percentage of standard content that is fanned out into configurable – or configure-to-order – content. By drastically reducing the percentage of engineered-to-order content, the risk of failure due to undocumented changes of the engineering specification and friction in the organization can therefore be reduced by definition.