- May 23, 2011
Automation.com, May 2011
By Thomas R. Cutler
Within the manufacturing sector, particularly those involved in Engineer-to-Order (ETO) manufacturing, there are special issues and challenges that typical ERP implementations don't address.
By Thomas R. Cutler
The decision to use Microsoft is often lead by familiarity. Within the manufacturing sector, particularly those involved in Engineer-to-Order (ETO) manufacturing, there are special issues and challenges. Another ERP implementation is a vast over-simplification of what is required; the automation and process issues are complex.
A system originally designed for Make-to-Forecast (MTF) and Make-to-Order (MTO) businesses will fail the CFO of an Engineer-to-Order (ETO) company. The differences are staggering. Most large manufacturing companies have built pre-designed standard products such as refrigerators, automobiles and other consumer products. This business segment was the first to implement integrated business systems to improve productivity. The focus was on the plant floor, organizing and streamlining the production process. Product design had no impact on the time to build existing products.
The business systems designed for these companies are entirely centered on shop productivity, and fall into two categories: Make-to-Forecast and Make-to-Order. Make-to-Forecast and Make-to-Order systems are designed as Process managers not Project managers. Typically, CFO’s of these organizations do not require these systems to track committed costs (essential for ETO firms) only actual costs, usually batch costs. Both MTO and MTF systems ignore the critical role and needs of Engineering and Purchasing. Make-to-Forecast systems are used by companies that build items that are put in inventory. These software systems have their roots in the Material Requirements Planning (MRP) systems that originated in the 1970’s for big mass production companies. MRP was designed strictly to solve manufacturing problems, particularly plant scheduling and routing; they are structured to collect information on production batches. They are not project-based; they are not designed to track costs to a specific client order. Materials are purchased to Inventory and released to the plant for manufacture. Shop scheduling, parts routing, machine loading are critical to speed up production. These companies employ planners and schedulers to run these systems. Make-to-Order systems are designed for companies that do not build to stock but begin manufacture once they have an order. As with build-to-stock firms, product design is not a constraint because the design exists at the time of the order. Clients provide the design and Bill of Materials (BOM), which is then entered manually, into the program. There is no attempt to deal with constant additions or changes to the BOM. These MTO systems do job costing but not Project costing (roll up several job costs into total project costs). Engineer-to-Order systems are designed to resolve several core problems; the most important being the speeding up of the definition and acquisition of materials. The time it takes to produce a product in an ETO company is totally dependent on how long it takes to define the items on a BOM and acquire these materials. Complications occur when designers are required to release the BOM in stages, not all at one time. They must also deal with change requests from the client and manufacturing throughout the project. ETO firms need a system designed for this type of concurrent engineering that dramatically reduce the time to create, control and release information to purchasing. All Microsoft Gold Partners consider themselves strategic partners for their clients, not merely technology solutions providers. Larry Cohn, the Senior Partner, at Streamline Systems, www.streamlinesys.com, a Microsoft Gold Partner, has assembled a team of professionals with vast experience of the special needs of Engineer-to-Order (ETO) manufacturing. The company has a single focus: Improving the businesses of Industrial Equipment Manufacturers. Providing business management solutions and business process improvements, the team of experts focus exclusively on state of the art technology to help equipment manufacturers become more efficient and competitive. Utilizing the robust functionality of Microsoft Dynamics AX – an integrated end-to-end business management solution, ETO manufacturers gain market share, operate more efficiently and profitably.
Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based, TR Cutler, Inc, (www.trcutlerinc.com). Cutler is the founder of the Manufacturing Media Consortium of nearly four thousand journalists and editors writing about trends in manufacturing. Cutler is a member of the Society of Professional Journalists, Online News Association, American Society of Business Publication Editors, Committee of Concerned Journalists, as well as author of more than 500 feature articles annually regarding the manufacturing sector. Cutler can be contacted at firstname.lastname@example.org or 888-902-0300.
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