From ETO to CTO: the power of ERP and product configuration software

For many production businesses that provide custom-made wares, it is only normal to make a new design for every order (Engineering to Order, or ETO). A time-consuming task, which also puts a lot of pressure on the engineering department. The preparatory process takes long, and it could be weeks, if not months, before the engineering department has the product ready. On top of this, redeveloping asks for an investment every time.

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End customers these days do not have the time, patience, or budget for this anymore. They are becoming more critical, and more demanding. Shorter delivery times, unique specifications, and sharp prices are factors which producers need to take into account more and more. For production businesses that apply the ETO principle it is becoming more and more difficult to adhere to these needs. Partly because they rely on engineering’s capacity. Finding new engineers to reach this capacity is quite difficult in today’s job market.

Transitioning from ETO to CTO

To tackle the challenges mentioned above, we see a lot of production businesses move from ETO to CTO (configure to order). This means that orders are composed and assembled on the basis of fixed cornerstones. With all this, re-engineering unique components becomes a thing of the past. Yet still, it is possible to fulfill specific customer wishes, so that your company’s unique values remain true.

Building in modules

As mentioned before, CTO works with specific fixed cornerstones or modules. These modules consist of fixed compositions, which form the end product when combined. It is important to think clearly and invest in a clear basis as starting point. Designing a product specifically for a customer, or designing a flexible standard which is made both simply and specifically, on the basis of a number of variations, asks for an entirely different mindset.

Product configuration adds value to the process

Product configuration software can play an important role within the entirety of CTO. A product configurator offers a foundation wherein the different variations can be captured. The product configuration software can do the translation from a technical product to sales or the end customer.

According to Jelle Jansma, Sales Engineer at Elfsquad, this yields a number of benefits: “When you employ a product configurator to give CTO form within your production business, you are linking different chains. Internally, but also with partners and end-users. A salesman, parter, or end customer configures to their own taste and needs on the basis of a Q&A game, forming the end product in an instant. Along with it, a clear summary of pricing. As such, the customer knows what he is dealing with, and the salesman will be able to realize a quotation extremely quickly. It is important to note that the salesman or end customer does not require any technical knowledge on an end product to make the correct choices. Integrate your product configuration software also with ERP immediately, so that during configuration a bill of materials will be created automatically in ERP. In ERP, you can then execute direct actions like planning, stocking, and inventory control. This saves a lot of time, and creates rest within the company.

Linking the chains

Where a product configurator makes for added value within any production business, it is good to know that such a configurator generates a lot of data. It is important to manage this data well, so that benefits can be gained from it. Henk-Jan Hop, Commercial Director at Ridder Data Systems agrees: “The more data you generate, the harder it becomes to maintain a good overview. Which is why it is a good idea to integrate the product configurator with an ERP-system. ERP is the heart of the organization in which all data is saved and processed structurally. Like Jelle said, the processes are linked together.”

When you send data from a configurator to an ERP, the configurations and complementary information can be sent simply, quickly, and automatically to the correct employees/department, and the correct actions can be adjusted. For example, buying long-lead items. As such, your administrative activities are simplified. Employees can then focus on important, value-adding jobs like Engineering. If they will be able to do their work more efficiently, they will have more time for R&D. Something which an engineer secretly enjoys the most.”

Jansma adds: “And because of the newly gained efficiency, lead time can be reduced drastically. Which leads to a stronger competitive position.”

50% growth, without extra employees

So the teamwork between product configuration and ERP leads to a more peaceful work stance. Jansma: “A well-designed configuration process provides clarity. Both the customer and the producer know what they are up against. By making all the processes more efficient and reducing the lead time, you will be able to achieve more as a company, with the same amount of employees.” Hop: “This is correct. It is not at all weird to claim that you are able to increase your revenues by 50% with the same amount of indirect employees put to work in the pre-production process. From sales to production. These are clear examples of attained results among our clientele.

Combination Elfsquad – Ridder

To guide production businesses in the CTO process, Elfsquad and Ridder offer an integration solution between the Elfsquad product configuration software and Ridder’s ERP-system, Ridder iQ. Hop: “This integration synchronizes all of the contacts, products, quotation data, and more between the two systems. When a salesman, distributors, and/or end customers have composed a configuration, Elfsquad’s product configurator generates a quotation and a bill of materials, which are automatically processed in Ridder’s ERP. It is a solid combination, which can add value to any production business.” Jansma agrees, and adds: “Together, we offer customers the foundation of tomorrow’s production business.”

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