Engineer-to-order
Engineer-to-order (ETO) is a production model in which the product is designed for each order to the customer's specification, before materials are bought and the equipment is built.
Also known as: ETO, engineering-to-order, project-based manufacturing
In an engineer-to-order company the product is not already drawn when the order comes in. Every order starts with engineering: the customer's requirements become drawings, bills of materials and specifications, and only then can purchasing, manufacturing, assembly and testing be planned. That sets ETO apart from make-to-stock, where goods are produced for stock, and from make-to-order and assemble-to-order, where the product is already designed and is only produced or assembled when the order arrives. In practice each ETO order runs as a project, with its own estimate, long purchasing lead times, work at subcontractors, change orders along the way and a documentation package delivered with the equipment. That is why estimate versus actual per project, revision control on drawings and material traceability matter more than stock control and batch planning.
Example
A company that builds machines for energy, marine or aquaculture designs each machine to the customer's requirements, buys steel and components against the order, has welding and machining done by subcontractors, assembles in its own workshop and runs a FAT with the customer before delivery.
In Norwegian context
Many Norwegian suppliers to energy, maritime and aquaculture work engineer-to-order. When the ERP system is built for series production, estimates, purchasing status and documentation easily end up in spreadsheets on the side.
Read more in the in-depth article on this topic.
Related terms
- Post-project costing (estimate vs actual) — Post-project costing compares what a project or order actually cost with the estimate the quote was based on.
- Manufacturing Record Book — A Manufacturing Record Book (MRB) is the complete manufacturing documentation for a delivery: certificates, welding and NDT records, test and dimensional reports that show the equipment was made to requirements.
- FAT/SAT — A FAT (Factory Acceptance Test) is the test in which the customer accepts the equipment at the supplier's premises before shipping. A SAT (Site Acceptance Test) is the test after installation, where the equipment is tried in its real environment.
- Project accounting — Project accounting is the tracking of income and costs per project: budget or estimate, hours and purchases incurred, amount invoiced and the expected result when the project is finished.