What is engineer-to-order manufacturing about?
Engineer-to-order (ETO) is a manufacturing system that is often used for very complex or specialized products. The project starts once an order is received, which kicks off a long design, engineering, and production timeline. The final products or solutions, as well as subassemblies and components, are engineered or customized by the manufacturer according to the customer’s specifications. This often means that the products requested have never been fully built before.
ETO manufacturing requires high subject matter expertise, meticulous requirements, engineering analysis, and high design effort. The costs tied to these requirements are high because of human resources needed and must be maintained even before a customer orders. Projects and work breakdown structures are used to manage procurement processes and dependencies during the extended lead-time.
Download our Manufacturing Sales Handbook to find out more about the ETO model and how digital can help accelerate sales for businesses using this model.
Risks that affect Engineer-to-Order model sales strategies
The ETO model provides customers with much more flexibility but at the cost of speed
The chart above outlines the four key risks that all manufacturing businesses have to consider during operations. Each model handles risk differently. Some models can bypass certain risks by transferring the risks to other areas of the business. In the following segment, we highlight the primary risks of the ETO model and how it can affect their sales.
Risk 1: Time needed to deliver products
With ETO, customers get highly customized products that fit their unique use cases. The downside is, delivery time can be much longer. Products can be engineered or designed from the ground up. Together with collaboration with the customer, this product lead time can be much longer than simply putting pre-fabricated components together. Manufacturers may also need time to modify the production line to manufacture the engineered products and their components.
Risk 2: Agility and the impact of change
An ETO manufacturer’s business strategy is built around product change. Every customer has unique product requirements that require custom design and manufacturing. Therefore changes typically happen at the design phase, and seldom (if ever) affect the production phase or final product. The impact of change is expected and is how ETO manufacturers generate profit.
Risk 3: Cost of engineering incurred and risk of design error
Much of an ETO business’s flexibility comes from its ability to design and produce custom products or solutions. Its engineering costs are much higher compared to those of other manufacturing models. An ETO manufacturer incurs engineering costs for the design of every product or solution that a customer asks for. In this case, design errors can cause a significant amount of extra costs. Engineers will have to rework on design and go through the entire approval process once again. If errors are found after production, the costs increase exponentially as goods produced become obsolete immediately.
Risk 4: Investment needed in development
The bulk of an ETO business’s costs come from keeping it running. It needs to maintain its team of skilled engineers, and advanced production facilities ready for any incoming projects. That means every project reaches a fully developed ETO business, instead of needing investment in hiring or infrastructure to get started.
How an ETO manufacturing business can improve sales
ETO manufacturers have a unique challenge when it comes to sales. No two projects are the same. Every customer comes with their own unique problems that require highly customized—and creative—solutions. In this sense, ETO manufacturers are really selling their creativity and expertise. Each project is a complex mix of precise calculations, engineering knowledge, and man-hours—100% tailored for the customer.
The solution needs to precisely match requirements before the price is even a consideration. To close a sale, the sales team needs to go beyond getting the requirements right. They would also need deep technical knowledge, and understanding of engineering constraints to build a feasible solution at the right price. For this situation, end-to-end sales digitization is an absolute necessity.
A Digital Sales Platform with embedded CPQ can turn complex engineering knowledge into a series of menus and options. Instead of performing calculations and designing a solution from scratch, a sales rep or sales engineer can refer to historical data and previous designs within one system. This digitally transferable knowledge eliminates the need to manually compare designs to find similarities—and empowers repeatability, an all-important factor for ETO businesses.
In parallel, the Digital Sales Platform can also speed up the solution configuration and calculation process. It uses real-time costs and prices from the ERP and has rules put in place to help generate quotes for complex solutions in minutes. Price accuracy—a constant concern for ETO businesses that recycle cost estimates—is also guaranteed as only the latest most updated prices are used. This helps prevent costly rework or margin erosion—quotes generated are always ready for customers. To further accelerate the process, the Digital Sales Platform also uses workflow automation that can get quotes approved (for technical viability) quickly by all the relevant departments.
For ETO businesses, a Digital Sales Platform can become an integral part of the business. It is designed to make ETO manufacturing sales much simpler than before. It stores ERP-maintained engineering knowledge that sales teams can use immediately. At the same time, it can also help the business manage customer engagements, and offer customers powerful self-serve access to your complex B2B manufacturing business.
Find out more about how the In Mind Cloud Digital Sales Platform can transform the way your B2B manufacturing business sells. Download the Manufacturing Sales Handbook to find out how our Digital Sales Platform is ready to elevate your manufacturing sales. If you have further questions, you can always book a no-obligation consultation with our manufacturing sales experts to get your answers.