Configure-to-order, engineer-to-order, and make-to-order are 3 terms you regularly hear in the manufacturing industry. With creating complex products, it used to be feasible to work according to make-to-order or engineer-to-order, but thanks to technological developments more and more businesses move to configure-to-order. In this item you will discover the benefits of configure-to-order, and how you can utilize a product configurator to successfully make the transition to CTO.
My customers are asking for more and more customization, my production has to become more flexible, my production runtime needs to be shorter and customer demand is difficult to predict. These are just a few emerging from the market trends in 4.0. Unfortunately they are examples that belong to the engineer-to-order and make-to-order processes. The configure-to-order process, however, fits the current market trends much better. Why? What does configure-to-order mean and which steps does it require you to take? We created a guide which tells you all about the benefits and transition to CTO. You will find this whitepaper below.
ETO is the order process where businesses design, engineer, and produce their products per customer order. This is characterized by its complex sales process, lots of freedom of customer specific solutions and long runtimes.
Before we look at the benefits of configure to order (CTO), let’s consider the difference between both variants.
When we are talking about make-to-order or MTO, it means that a product was created on demand, exactly following the specifications chosen by the customer. It concerns extensive customization. CTO is more about composing orders and assembling from existing building blocks. Re-engineering is no longer a thing. These building blocks allow you to design a customer specific product which is registered within the primaire process. This results in ease and predictability.
It could be that you’re thinking: I’ve been working with ETO for years, why would I change this now? The following points will describe the pitfalls of ETO:
Naturally, the customer is very involved in the entire process. This means frequent contact between the customer, Sales, and Engineering. Is the design unapproved? Back to the drawing table. The result? Weeks go by, and production hasn’t even started yet.
The complicated quotation process works as a snowball effect throughout the entire supply chain. Faulty compositions are sold which results in yet even more contact and friction between Sales, Engineering, and Production. In short: a lot of frustration.
There is no time at all to focus on what engineers like to do the most: R&D. Product development and innovation stand still. In part because of constantly engineering other products, knowledge transfer and gaining advantage over competitors become difficult.
CTO brings a number of important benefits, especially when you produce complex products.
When you choose to work with CTO, you determine exactly what you can or cannot create in advance. When a customer sends their desired configuration, you no longer have to check with engineering to find out if it can be built. Your process is standardized, so you can design your factory in a very streamlined manner. This reduces delivery time, and additionally you can immediately let your customer know when their order will be ready.
The moment you start considering your possible configurations in advance, another large benefit will show: the cooperation between your departments will improve. As the configurations will be validated by engineering and production beforehand, so your salespeople will never sell anything that cannot actually be built. After an order you will automatically create 3D-models and BOMs.
By automating the pre-production process, there will finally be time for R&D. Engineers can let their innovation drive speak and develop product solutions that truly help you as a company.
Because in a product configurator (CPQ Software) you determine all limits of possible configurations beforehand, your sales reps know exactly what they are able to sell without in-depth knowledge. This validation beforehand can supply your sales- and dealer channels with exactly the knowledge they need, so they can be much more convincing in their sales.
These benefits all add to the biggest benefit: thanks to CTO you save enormously on your costs, without harming the customer experience. On the contrary: your customers still experience the satisfaction of choosing their designs, and immediately get the price and delivery time. Because your factory is fully streamlined your customer will not be likely to deal with delays or unexpected costs.
You could read it in the several benefits we listed: to make configure-to-order a success, everything has to be defined very well in advance. What are the different modules in the configuration, and how do they relate to each other in a complex machine?
If you don’t pay enough time and attention to this, you might only process 60% of your orders, while the rest remains as customization. Yet, that’s still 60%. Deviant cases will show up over time, making analyzing easier and allowing you to then still include them in your CTO-process. You will then eventually still process up to 95% of your orders, leaving just a little customization.
Which steps should I follow to work CTO?
In short, the steps concretely look as follows:
Elfsquad is able to perfectly guide you both in the change from ETO to CTO and the implementation of the Product Configurator.
Has your interest been piqued as to how our CPQ solution could also support your processes? We would love to tell you more! During a demo, we explain all about:
Elfsquad removes all worries from your pre-production process. With Elfsquad as backbone, we realize the digital factory that smart industries have been trying to find for so long. We do this through a product configurator, with integrated solutions for marketing, sales, and operations.
Let us know what you think.