OBJECTIVES OF THIS PAPER
Identify and discuss the unique and critical business issues that an engineer-to-order (ETO) or project-oriented manufacturer must deal with. Also, this presentation will outline the newly formed body of good business practice that resolves these issues. This new body of knowledge is a logical fusion of formerly disparate approaches to business acquisition, configuration management, project scheduling, detailed scheduling and control, project accounting, and revenue recognition into a cohesive business system. This paper is organized around the lifecycle of a project.
The project-oriented manufacturing style of operating is very different from that used by traditional discrete and repetitive manufacturers. Project-oriented manufacturing and engineer-to-order are expressions often used interchangeably. For the majority of companies operating in an ETO environment, every machine sold is similar to, but different from, anything else previously engineered and built. We often refer to these machines as "custom," "unique," "complex machinery," "capital equipment," and "bespoke."
In addition to the engineering and fabrication of the device, the performing of services is often necessary. Examples of these services are site preparation and onsite installation and training.
A complex engineered-to-order piece of equipment generally is expensive to build and expensive to buy. When a custom-designed complex machine is ordered, it is often a subsystem in a larger project. Examples of large projects for which an ETO machine would be ordered are construction of an automated assembly line, building a power station, assembling a large private data network, and building a ship.
When you combine the uncertainty of a custom design with the high costs of engineering and producing it and the impact a late delivery would have on the customer's project, you have significant economic risk. This combination of factors creates critical business issues for every department, function, and discipline that is involved in the contract and project lifecycle. This workshop will cover
• the lifecycle of an ETO project, including the presales bidding and
• the organizations or departments that participate in the project life-
cycle and the point or phase in which they are involved
• the critical business issues that each department must address
• the ideal business system framework to manage the project lifecycle
• how to contain, resolve, or eliminate the critical business issues.
BENEFITS THE READER WILL GAIN
• Understand the ideal business system framework to manage the
• How to contain, resolve, or eliminate the critical business issues
that adversely impact organizational competitiveness.
THE LIFECYCLE OF AN ETO PROJECT INCLUDING THE PRESALES BIDDING AND ESTIMATING PHASE
Embedded throughout the lifecycle of an ETO project is a continuous process of discovery. This process of discovery is centered on understanding the customer's requirements. Often, not understanding the customer's requirements is directly related to the customer not fully understanding what they want in the special device being defined, engineered, built, and installed for them. They typically want a machine "just like the one you built for us in 1962 but with some improvements." There is an expression "the devil is in the details." The devil for the company providing products and delivering services on an ETO basis is getting an accurate requirement definition from the customer. That statement, "but with some improvements" is the "force" behind the continuous process of discovery. This constant state of discovery creates a constant state of uncertainty.
Frequently the complex device being ordered is part of a capital improvement project or new facilities project. Projects of this nature typically have large budgets. Large budgets generally equate to large customer expectations, expectations such as
• seizing a marketplace opportunity
• increasing revenues
• decreasing costs or improving efficiencies.
The time value of money is an important consideration. Delivering on time is critical. Combine this with changing requirements, even if they are relatively minor in nature (but often are not), and you have an extraordinarily challenging environment.
To Be Continued