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"RuleStream addresses the unique challenges of
engineer-to-order (ETO) manufacturers with a comprehensive
approach spanning sales, engineering and manufacturing. By capturing engineering knowledge and using it to
automate key business processes across the enterprise, RuleStream’s ETO clients have increased sales and win rates while reducing internal operating expenses and shortening lead times for custom products."
Source : RuleStream Corporation
The Practical Realities of Automating ETO Business Processes
Business Processes is also known as :
Business Process,
Business Method,
Business Process Management,
Business Management,
Business Process Modeling,
Business Process Trends,
Business Process Change,
Business Process Diagram,
Business Process Improvement,
Business Process Mapping,
Business Process Analysis,
Automate Business Processes,
Business Process Rules,
Business Process Guide,
Business Process Reengineering,
Business Process Notation,
Business Process Software,
Leading Business Process,
Business Process Outsourcing,
Business Process News,
Business Process Information,
Improve Business Processes,
Business Process Competency,
Process Mapping,
Process Management,
Governance Business Process.
Today, Engineer-to-Order (ETO) manufacturers experience significant market
pressure across their sales, engineering and manufacturing groups as they
strive to win business and streamline end-to-end processes.
By capturing engineering knowledge and using it to automate key business
processes, manufacturers can increase sales bid and win rates, decrease
internal operating expenses and shorten lead times.
Being ETO
Engineer-to-Order (ETO) manufacturers-also known as "custom product" or
"project-based" manufacturers-have an innovative, forward-thinking business
model that offers both big competitive differentiators and big challenges.These
challenges arise from the fact that ETO manufacturers typically have complex
products that must be closely aligned with detailed customer specifications while
simultaneously taking into account engineering standards, supply chain capabilities
and manufacturing constraints. For these companies, meeting customer
requirements entails the quotation and design of brand new components or
previously unknown assemblies.
According to the ETO Institute's Web site-"ETO companies build unique
products designed to customer specifications. Each product requires a unique
set of item numbers, bills of material and routings. Estimates and quotations are
required to win business. Products are complex with long lead times, typically
months or even years. Unlike standard products, the customer is heavily involved
throughout the entire design and manufacturing process. Engineering changes are
a way of life. Material is purchased not for inventory but for a specific project.
All actual costs are allocated to a project and tracked against the original
estimate.Once complete, the product is typically installed at the customer's site.
In most cases, aftermarket services continue throughout the life of the product."
In comparison, "Make-to-Stock" manufacturers maintain a production
environment where end item products are usually finished prior to receipt of a
customer order. Customer orders are generally filled from finished goods
inventories, and production orders are used to replenish finished goods inventories.
Executing a successful ETO model requires companies to capture and reuse
company knowledge and standards to help employees meet the challenges of
today's competitive, global environment with higher quality, better margin control
and overall business growth.Through software automation tools, ETO
manufacturers can more easily differentiate their products and meet customer
needs, resulting in increased sales and the ability to charge a premium.
However, there are many challenges in the ETO business model that require an
innovative approach to automating business processes.These include the need
to balance the interpretation of a large number of features and options, critical
engineering performance criteria and ever changing manufacturing assets.
Unique ETO Challenges
The primary challenge of ETO manufacturers is achieving an effective linkage
between departments which traditionally operate independently-sales-engineering
and engineering-manufacturing.
In addition, many companies also struggle with multiple independent software
systems, configurators, spreadsheets and homegrown tools across quotation,
engineering and manufacturing processes.
These tools are typically not integrated and rarely run according to the same set
of documented standards and best practices.The result of running an ETO
business with lackluster information technology manifests itself in a vexing array
of operational problems, covered on the next few pages.
These include -
- Business Problems for Sales
- Business Problems for Engineering
- Business Problems for Manufacturing
Creating a consistent set of company rules and standards is one key to meeting
these challenges. Effectively linking sales, engineering and manufacturing teams is
another key. But how can a manufacturing company link these functions together
on top of continuously evolving standards while using software tools to automate
everything that can be automated?
"Manufacturers that provide engineering design as a
service to their customers need technology that supports
the responsiveness necessary to remain competitive.."
Mike Burkett, Research Director
AMR Research
“Engineer-to-order businesses need more than manufacturing automation
to achieve efficiencies that will lead to scalable business growth.
They need more extensive rules-driven product management
approaches that automate significant amounts of "well characterized”
engineering processes, quotes, and related administrative tasks."
Mark Halpern
Gartner, Inc
Business Problems for Sales
Depending on how one defines the metrics, ETO manufacturers frequently
struggle with low win rates or a high cost of sales.This is frequently the biggest
sales related problem in the company.
Additional issues include:
- Quoting process is so lengthy that it keeps the bid rate low -
that is; sales engineering is the bottleneck on revenue
- Sacrificing accuracy and completeness of customer requirements in an effort
to shorten quote times with little or no positive effect
- Inability to know with confidence the margin on an order at the time of
quotation due to top-down estimation rules
- Costly production of sales or approval drawings and 3D models
- Difficulty of accurately capturing graphical layout or schematic requirements
- Inability to capture the mind-share of your dealers or other channel
participants due to lack of tools
- Frequently going back to the customer to re-price an order due to late-stage
sales or order processing "discoveries"
"Sales configurators assemble products from a set of
pre-engineered components while [RuleStream] allows
products to be dynamically engineered at the time of order."
John MacKrell, Senior Consultant
CIMdata
Business Problems for Engineering
Engineering teams at ETO manufacturers frequently struggle with lengthy design
cycles which contribute to a lengthy overall lead time and a subsequent lost
sales.
Other problems include:
- Culture clashes between sales and engineering due orders that cannot be built
as booked
- Painful re-engagement of the customer during the design processes due to
post-order "discoveries" made by engineering
- Time pressures allow for less value-added engineering time to look at design
alternatives and cost saving supplier/material changes
- Engineering budget is nearly consumed by sales-related or order-engineering
tasks rather than new product innovation and development work
“Eliminating non-value added activities in engineering;
estimating, customer quotations, purchasing, shop floor
reporting…offers opportunities for dramatic improvement.”
The ETO Institute
Business Problems for Manufacturing
ETO manufacturing operations experience longer and more expensive manufacturing
processes than need be for a wide variety for reasons including:
- Lack of synchronization between engineering and manufacturing teams results
in product designs that cannot be manufactured as-is
- Short time frames allowed in manufacturing engineering result in shop floor
error discovery or work stoppages
- No time to create order-specific routings results in large variances on the shop
floor
- Long lead time raw material and purchase parts must be ordered from a
Manufacturing Bill of Materials (MBOM) estimate rather than after engineering
is completed-leading to either excess inventory or shortages
- Inability to rapidly change thousands of drawings and routings leaves new
manufacturing assets underused for too long
“Whether you call it lean manufacturing, quick response
manufacturing, speed to market or something else,
performance and profit improvement in a customer
manufacturing environment boils down to cutting lead time.”
Vincent Bozzone, ETO Consultant
Delta Dynamics, Inc
Five Steps for Automating ETO Business Processes
Manufacturers can significantly improve key business metrics while incorporating
the latest company knowledge into every new design through the implementation
of ETO automation software. Many ETO companies have known this for years
and frequently attempt to piece together solutions from available tools and inhouse
custom programming efforts.All too often, however, this approach results
in less-than-expected results.
Following these straightforward tips could help you avoid common pitfalls and
help ensure a successful implementation of an automation solution.
"Product development has seen a number of dramatic technology shifts
over the past 30 years that have lead to major changes in the way
products are designed and produced. Process automation is radically
changing. RuleStream Corporation with their breakthrough capabilities in
process knowledge capture and reuse is positioned to lead a new wave of
innovation. Early adopters will gain a competitive advantage forcing
others to react out of economic necessity."
Ken Versprille, PLM Research Director
CPDA
Step 1 - Understand Your Business
You cannot fix what you do not understand. Create a map of your end-to-end
business process at a high enough level to keep the picture on one sheet of
letter-sized paper.Try to understand the information flow and pay particular
attention to the order of when decisions are made and information becomes
available.
Try to identify the bottlenecks in the process and their linkage to key business
objectives such as revenue growth, cost of sales, lead time, cost of quality, etc.
The results may be surprising.
Step 2 - Pick the Right Starting Point
Where you start implementing automation software tools depends on the
priority of the business challenges and needs identified in the first step.
However, the answer may not be obvious due to the interdependency of sales
and engineering. For example, companies looking to improve revenue might best
accomplish that goal by shortening engineering lead time and winning more
orders.
Alternatively, companies looking to streamline engineering tasks might best
accomplish that goal by cleaning up the sales quotation process.
There are some advantages and disadvantages to both starting points.
Starting with Engineering
If lead time, shop floor quality or purchasing related issues are at the top of the
list, starting in engineering is the most direct way to address these with
automation. Results have shown that the advantage to starting in engineering is
an immediate increase in product quality and shop floor throughput.The
disadvantage to starting in engineering is that it has only an indirect effect on
market share and revenue.
Starting with Sales
Starting with sales is most directly associated with market share or competitive
issues. Results in this area have shown that the advantage to starting in sales is
the capture of mind-share within distribution channel and sales teams in order to
drive up orders, revenue and margins.The disadvantage is a relatively minor effect
on reducing lead time until the level of detail in the rules is there to help drive
orders through engineering faster.
"RuleStream is more than just great engineering
automation software for a company like ours.
It´s also a great sales solution.With RuleStream, we
can now respond more efficiently and quickly to the
unique needs of our customers and prospects. And
we can deliver more timely and accurate quote
responses, as well as better products with
improved customization capabilities."
Jim Brown, Project Manager
Fresno Valves & Castings
Step 3 - Select Commercial Off-the-Shelf Software
Many ETO manufacturers have already developed portions of an end-to-end
automation solution. Common non-commercial technologies used include
spreadsheets,VB, SQL or Java
Alternatively, companies also frequently "hijack" software systems such as sales
configurators, MRP configurators or expert systems to process engineering rules.
Still other companies have paid outside consulting firms to develop turnkey
automation applications in certain areas.
None of these approaches is ideal.
An ideal solution keeps manufacturers out of the risky game of software
development.The ideal solution would also integrate seamlessly with key systems
of record (ERP, CAD, etc.) that are already in-place. Finally, the ideal solution
would put the manufacturer in charge of owning and specifying the rules and
standards that govern the behavior of the tool.
A good commercial software tool should provide a powerful environment in
which sales, engineering and manufacturing engineers can create sophisticated
automation applications without being (or relying on) software developers.
This means IT can devote more time and effort to establishing and maintaining
the required infrastructure of the company instead of managing home-grown
software applications.And most importantly, product knowledge is not locked
away in a format that is difficult to update and maintain.Without technology that
supports this paradigm, most homegrown solutions risk becoming obsolete
within a year after they are built.
Step 4 - Start Small and Go Live Quickly
It's important to realize that value from commercial automation solutions can be
gained incrementally.Whether you start with engineering or sales, these solutions
offer rapid time to benefit while building a platform for continuous improvement.
To get value from a good commercial automation solution, manufacturers don't
need to enter all of their sales, engineering and manufacturing rules, nor do they
have to enter rules for all their product lines before they "turn on" the system.
Rather, it can be broken into phases with each phase of the implementation
timed to go live in two to six months.
Based on an analysis, your business processes and the urgent concerns of upper
management, implementations can be scaled down for fast time-to-benefit.This
"land and expand" model allows companies to pick an area of the business or a
particular product line, capture some of those rules and get started. Rules can
then be added, changed, modified and rolled out any time, creating a continuous
improvement loop.
With RuleStream, product specialists at Interior
Concepts developed and deployed a product
design tool for the first product line in 80 days.
They had already struggled with a custom built
application for over one year without success.
"We anticipate that RuleStream will save us a significant
amount of time and money while improving
both the accuracy and consistency of our products"
Russ Nagel,Vice President of Operations
Interior Concepts, Inc
Step 5 - Build a Process of Continuous Improvement
The only way to be sure that decisions throughout an ETO business
automatically incorporate the most up-to-date product-based intellectual
property is to create a knowledge base that is always expanding, improving and
providing more benefits.
Manufacturers who decide to automate ETO processes gain the most value and
ROI from automation software tools when they simultaneously build a business
process to support their investment.One way to do this is to designate a
standards committee whose responsibilities include ongoing refinement of
company standards and business processes.This committee should contain
members from various areas of the company, including commercial, product
branding, engineering and manufacturing, and should also have the mandate of
providing and incorporating feedback from customer service, shop floor, sales and
other processes into the rule base.
This constantly adjusting set of rules and standards can be redeployed to sales
and engineering teams on a regular basis or as necessary to make sure the latest
sets of lessons learned are being put to good use.
"With RuleStream,B&W proposals reflect a more accurate
depiction of system performance much earlier in the
game,and without a lot of approximation and guesswork.
RuleStream lets us get so close to the final design that it
takes a lot less review. The whole proposal process is much
faster, which lets us respond to client RFPs more quickly.
Calculations and analysis that used to take a full day can
now be done in minutes, giving our engineering designers
more time to work on other proposals."
Paul Weitzel, Engineering Manager
Babcock & Wilcox Company
Summary - Follow the Steps to Success
ETO manufacturers who have followed the steps above to automate their
business processes have achieved great results.
Typical improvements include:
- Significant increase in bid-rate, win-rate, margin accuracy and revenue
- Cutting 30 to 60 percent off order-to-ship lead time
- Creation of consistent, accurate, more fully engineered quotes in minutes
instead of days
- Reduced time to prepare engineering and shop floor drawings by up to
90 percent
- Improved accuracy and consistency of product designs
With innovative tools and a practical approach, manufacturers can implement
automation tools to address the challenges of the ETO business model and get
to a new level of competitiveness.
RuleStream is a software technology company focused on the emerging
Engineering Process Management (EPM) market. RuleStream provides manufacturers
a leading edge technology platform that captures engineering-related intellectual
property in an intuitive fashion to automate complex engineering design, simulation,
systems engineering, and manufacturing applications.
An extension to existing Product Lifecycle Management (PLM) and Engineering
Resource Planning (ERP) environments, RuleStream expands the value proposition of
these solutions by providing a process management approach that enables
manufacturing companies to better leverage key senior engineers while dramatically
reducing mundane, repetitive tasks and addressing iterative functions with extensive
labor dependencies.The result is improved quality at a reduced cost with an order of
magnitude improvement in the ability to manage and execute the product life cycle
process.
RuleStream's unique system allows manufacturing companies to create a database
of product-related knowledge.This database consists of design engineering and
manufacturing rules, as well as sales, commercial, simulation and other standards.
Once captured, these rules can be executed by knowledge workers to more quickly
create work products. RuleStream extends the value of established enterprise systems
including ERP, PLM, MPM,CAD, and CAE.
RuleStream customers include business leaders like General Electric and The Babcock
& Wilcox Company. RuleStream's customers also include innovators like Fresno Valves
& Castings, Interior Concepts, Lytron, Robbins & Myers and S.A.Armstrong. For more
information visit www.rulestream.com.
Table of Contents
- Being ETO
- Unique ETO Challenges
- Business Problems for Sales
- Business Problems for Engineering
- Business Problems for Manufacturing
- Five Steps for Automating ETO Processes
- Step 1 - Understand Your Business
- Step 2 - Pick the Right Starting Point
- Step 3 - Select Commercial Off-the-Shelf Software
- Step 4 - Start Small and Go Live Quickly
- Step 5 - Build a Process for Continuous Improvement
- Summary - Following the Steps to Success