ETO Order Processing in Discrete Manufacturing

Somnath Majumdar, CPIM

Infosys Technologies

ETO Environment in Discrete Manufacturing

• High customer involvement in Design of the product• Long lead times for order processing and fulfillment• Design changes throughout the life cycle of product

manufacturing• The Order to Cash cycle may be preceded by a Quote• The BOM and Routing of the product is not frozen at Order

Entry• The product to be manufactured may be in a project

environment where the costs may be tracked onto a project• Custom Engineering calculations may be required to be

performed before the Bill and the Routing are frozen• Sometimes the BOM and Routing may change even after

production has started

Typical Challenges faced in an ETO Environment

• Pre-Quote Stage– Estimating for the ETO Order– Multiple feeder Product Life Cycle Management systems– Seamless Integration between CAD and ERP Systems

• Post Quote Stage– Orders need to be put on hold to finalize the design and then freeze

the BOM and the Routings– The Bill and the Routing may change after the WIP Job is released– In a Standard Costing environment huge variances may occur

between the Standard and Actuals

ETO Solution Mapping – Possible Scenarios

• In Discrete Manufacturing space following two scenarios can occur– ETO in a Project Manufacturing Environment– ETO in a non-project Environment

ETO Solution – In Project Environment

• A typical project environment is one where the design, delivery and post-delivery activities include a combination of products and services engineered specifically to provide a unique solution for the customer.

• The other characteristics of this business are– Long execution times with the normal duration ranging from 2-5 years– Large capital spends and longer time-to–profit– Involvement of the Engineering functions (Design, Prototyping and Testing)

throughout the lifecycle of the project– Higher levels of risk across technical solutions, costs and timelines

Industries that follow this business model include

•Aerospace & Defense industries

•Infrastructure Development and Construction

•Process Control and Automation for Manufacturing and Utility Plants

Process Flows

ORACLE

External

Start

Enter Sales Order Header and Line

Part, Price, Quantity, Commission ,Project and

Task Number

Order Validation & Booking

Generate Order Acknowledgement

End

Pass

No

System Sales Rep

Customer Credit check

Create Configured Item

Place Order on Engg. Hold

Create Items, BOMs, Routings

Create Final Assembly

Work order

Inform Customer regarding Bad

Credit

FailApproval from

Accounts Receivable

Yes

Configure To ScheduleMake selections

from Sales Configurator

Accounts Executive

Roles

Invoke Sales Configurator

Release Engg. Hold

Run Data Collection for

ASCPRun ASCP Plan

Review and Action upon exception

messages XX

EngineerPlanner

ORACLE

External

Start

Purchase Requisitions fromASCP with project and task reference Approve

RequisitionSend Purchase

Order to Supplier

System

PO Manager

Create Purchase Order using Auto

create functionality

Approve thePurchase

Order

Supplier Invoice is received

Supplier ProcessesReceiving done in a project locator

and PO Receipt is generated

Enter Invoice Header/lines

Create Purchase RequisitionEnter Requisition Headers, Line details including project and task

reference

Match Invoice to PO/Receipt

Account Invoice and transfer to GL

Buyer

Receiving

Shipping

Validate the Invoice

Payables

End

Shipment arrives

Procure To Pay

Roles

Start

Release Planned order suggestion

from Planning System(ASCP)

Need to Build part is identified

Discrete Job Created

Run Discrete JobShortage Report

Review and update Job BOM &

Routing, if required

Run Resource Load Report

Release Discrete Job

Print Job Routing Sheet and Pick List

Issue push components to

WIP Job

Min-Max, Reorder Point, Kanban Replenishment

Pick components from stock room

OSP Operation?

Outside processing

Process

Yes

AA

BB

No

ORACLE

External

Custom

System Supervisor Stockroom Shop floor

Release To Build - 1

Roles

ORACLE

External

Custom

End

AA

System Supervisor Stockroom Shop floor

Perform Parts & Sub-assembly or

Test operation

Perform Move Transaction

Invoke and Record Data in Quality

Collection Plan (if any)

Nonconform ance?

No

Yes

More Operations?

Yes

No

BB

Send Assembly to Stock room

Nonconforma nce Process

Invoke and Record Data in Quality

Collection Plan (if any)

Close WIP Job (Batch Request)

WIP Alert for material

issue discrepancy

YesCorrect material discrepancy

No

Perform Completion Transaction

Release To Build - 2

Roles

StartRun Auto-Create Final Assembly to create discrete job

Modify Discrete Job BOM &

Routing, if required

Print Job Routing Sheet and Pick List

Pick components from stock room

Issue Push parts to discrete job

OSP Operation?

Perform Assembly or Test operation

Outside processing

Process

Yes

No

BB

Run Discrete Job Shortage Report

Release Discrete Job

AA

ORACLE

External

Custom

System Supervisor Stockroom Shop floor

Run Resource Load Report

Discrete Job Created

Release To Assemble - 1

Roles

Nonconform ance?

No

Nonconforma nce Process

Yes

More Operations?AA

Yes

No

BB

Send Assembly to stock

room/shipping

Perform Completion Transaction

Enter Serial Nos. (if serialized)

Invoke and Record Data in Quality

Collection Plan (if any)

Perform Move Transaction

Invoke and Record Data in Quality

Collection Plan (if any)

ORACLE

External

Custom

System Supervisor Stockroom Shop floor

CC

Release To Assemble - 2

Roles

CC

ORACLE

External

Custom

System Supervisor Stockroom Shop floor

EndClose Discrete Job (Batch Request)

YesCorrect material

discrepancy

No

WIP Alert for material

issue discrepancy

Release To Assemble - 3

Roles

Challenges in Project Environment The key challenges are• Visibility and control of the work breakdown structure, budgets, revenues, task

status and other Key Performance Indicators (KPI) across various business functions.

• Cost Capture and assignment to the project from various modules like Purchasing, WIP, Service and Finance (Timecards and Expense Reports)

• Integration between project management applications and the supply chain to ensure control and optimum fulfillment of project demands

Oracle Project Manufacturing supports the following key areas:• Project manufacturing sales management and fulfillment, costing, Advanced

supply chain planning.• Project manufacturing procurement and shop floor execution, including Flow

Manufacturing integration• Assemble-To-Order and Pick-To-Order environments

ETO Solution – In non-Project Environment • This is typically employed by organizations that manufacture Engineer

to Order products based on customer specifications but they typically don’t use projects to track the product manufacturing

• In most cases a design close to the product being requested by the customer would have been manufactured before but there would be significant effort in designing for their current order as well

• This would involved creation of new items, Bills and Routings as part of the design process before the order is progressed

• The actual Bill and Routing for the ETO Product may eventually change based on changing requirements from the customer through the Order to Ship process

• Typical Industries in this non project space include:– Industrial Manufacturing units– Custom Electronic Equipment Manufacturing

Process Flows

StartNew Product

Requirement by customer

Create Quote for an ETO

product

Prepare engineering drawings for ETO product

Identify new items and

BOMs

Create new items, BOMs and Routings

Perform full level cost rollup

for ETO final assembly

Create Price list entry for ETO final assembly

Convert quote into order

Import Order for ETO final

assembly with ETO hold

Validate order and remove ETO hold

Create Discrete Job for ETO

final assembly

Complete Discrete Job

Credit Check Schedule Order

Order AckShip ETO final assembly

End ORACLE

External

Sales

Finance

Engg.

Mfg

PlannerInvoice Customer

Customer

Process Flow – ETO Sales Order Processing

Challenges in non-Project Environment • Estimating for the Quote to the customer• Continuous changes in the Bill and Routing for the end product even

after WIP Job is released• Cost Rollup Issues due to continual changes in Bills and Routings• Planning for the Raw Material for ETO Orders• Managing lead times for purchasing. In most cases buyers don’t have

time to negotiate good prices with suppliers as most ETO jobs are special and already running late in terms of customer promise dates

Typical Issues faced• Bills and Routings change after the Job is released to the floor• Engineering hours spent on the design is so significant that it

needs to be somehow built into the product standard cost as direct labor cost

• Costing accounting does not want to see variances in all ETO Jobs. Some organizations keep rolling up the standard cost till job is completed

• Product lead times management• Complex Materials purchase• Planning for raw materials• Integration between CAD and ERP Systems

Solutions to some of the Gaps in ETO Order Processing

• Automatic Holds on Sales Orders based on certain conditions that are fulfilled using Holds API. The logic for this could be derived from– Engineering calculations that are run automatically which put the

Order Line on Hold– One of the options in the configurator selects an item that puts the

item on hold based of an Item attribute or flexfield setup• Automatic Notification to Engineer when the Order is put on hold• Custom program to release holds based on certain conditions

that are fulfilled• Customization of ECO Workflow to notify and execute certain

actions for work to be done for the ECO by the concerned departments

Typical Benefits reaped by companies who implemented the ETO Solution

• Cycle time reduction in processing ETO Orders• Coordination among various departments involved like

Engineering, Purchasing and Operations to schedule ETO Orders in advance using the ECO Workflow

• In a ETO Project based scenario the costs for the ETO Order are collected onto a project

• Oracle PLM solution implementation helped to reduce the cycle time for creation of Items, BOMs and Routings for new ETO Orders

• Semantic search/ attribute catalog category based search capabilities helped designers to search for already existing BOMs/Items in the system to make sure the new item being created did not exist in the system

The Road Ahead…There is no complete solution available in this area as yet. Some of the areas that could definitely be improved upon in the coming years include

1)Backward and Forward integration between ERP and CAD systems2)Better estimation capabilities for ETO Orders the pre-quote stage3)Whenever an ETO Order is to be manufactured using Project Manufacturing there are way too many steps required in Projects area to process the same. Need is for a simpler interface4)Enhanced search capabilities for Designers to search for ETO Items, BOMs and Routings

Q & A

Thank You