ERP For The Engineering Industry
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ERP For the Engineering Industry
Resource Planning (ERP) in the engineering industry poses its own
unique challenges. More so if your environment is an Engineer To Order (ETO) as opposed to a Made to Order (MTO)
one. It is important to have a good grasp of what is the difference
between the two environments to understand the underlying complexities.
ETO vs MTO
is a methodology employed to boost sales and improve margins for those
companies with customers who need solutions made to fit their own unique
environment. It begins with selling product concepts which don’t have
fixed designs and are expected to result in a new, unique end product.
This could be any product, from enterprise software applications to
special aircraft/vehicles to a pair of shoes. Engineers will often not
know the final requirements, materials or design until other primary
ideas are agreed upon. The final product is conceptualised in broad
brushstrokes and, for want of a better phrase, reverse engineered down
to how (and with which materials) it is actually going to be made. It is
a process which requires a greater degree of creativity on behalf of
the manufacturer and a close relationship with clients is necessary to
ensure a product which is unique.MTO environments, on the other hand,
normally have a selection of fixed designs and specifications already.
Although there may be some variation in design or materials, the bulk of
the concept is already materially in existence.
ERP and the ETO Workflow
manufacturing design processes are fairly iterative, ETO even more so.
So whichever ERP system you choose to implement, ensure that it
supports an iterative process rather than a pure linear one.
A good ERP system should be able to support most of the following steps in the ETO workflow
The basic conceptual ideas and requirements are gathered from the customer and documented.
sales order is agreed upon between the client and the manufacturer.
This will include quoted costs, estimated delivery dates, and other
basic information like an initial work breakdown structure (WBS)
document. A WBS document defines and assists to track the project
outcome and all components needed to create it. Costing is usually based
on actual costs related to past similar projects with a contingency
amount catered for. This generally includes consideration of reworks and
scrap which may be written off.
the further definition of the project team and management assignments,
departmental labour/fabrication, re-scheduling, anticipated resources,
acceptance and release of the WBS to establish and coordinate project
activities. This should be done with due consideration to other current
and anticipated projects.
development begin work on product realization, usually initiated by an
advance payment as part of the payment structure as agreed with the
customer. Integration between the CAD
(computer-aided design) and ERP (enterprise resource planning) software
should be as seamless as possible to facilitate the flow between the
design and manufacture phases.
A basic bill of material (BOMs)
covering all elements is created to satisfy initial requirements. Work
orders (or sub-recipes/BOMs) for each component are planned in sequence.
It is important to note that many customers will require product tracking;
that is, the origin, specification, and batch number of every lot of
materials used, in order to ensure future reproduction or identify the
source of material flaws or an unacceptable quality of finished
components. Other important aspects of product tracking are for an end
product warranty or product recall purposes.
milestones are firmed up and the client billing plan finalised. A
deposit or down payment should be received to launch project development
but may be adjusted in final invoicing.
of payment and approval for the go-ahead of lead-time components as
each milestone is realized. It is imperative to have the progress
acknowledged by the customer and signed off. It is not enough to accept
progress payments as proof of acceptance.
MRP (material requirements planning)
orders (or sub-recipes) for all required materials and elements are
detailed and implemented across the complete revised BOM.
A preliminary assembly of components and confirmation of production approval. Typically another advance payment is made.
Delivering of components and final assembly/installation, usually at client premises.
agreed snag list may have to be actioned. After the customer has tested
and accepted the product, final payment and contract settlement are
made and documented.
The manufacturer conducts an
analysis of cost, delivery progress, and profit through documentation
and reports related to the project.
The Omni Accounts Job Costing module together with BOM and product tracking functionality within Omni ERP Accounting software fulfil many of the ETO workflow requirements.
Protect Your Intellectual Property
a reminder about an area which is often forgotten or where controls are
very slack. Often in any manufacturing environment, cutting edge
designs, ingredients and/or unique processes are used. Due
consideration to the documentation and protection of this intellectual
information must be given and safeguards put in place to protect it.
Not only must the information be protected from outside access but
controls must be put in place internally so that a disgruntled employee
cannot make off with the information and sell it to a competitor thus
destroying the company’s competitive edge.
Ensure that the ERP system chosen takes this into consideration.
Omni ERP Accounting Software functionality, selectively tailored for
you, you can add powerful tools for managing your business effectively.
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