Simplifying the complexities of “Engineer-to-order”

Simplifying the complexities of “Engineer-to-order”

“Engineer-to-order” is now not just a reality, but a necessity and a great way to increase sales and improve margins in industries that cater to the unique demands of their customers. From a one-size-fits-all approach to now looking to custom design complex products and solutions to exact customer specifications, the manufacturing industry has come a long way.

While it does give the business a competitive edge, the engineer-to-order approach is riddled with its own set of challenges. For e.g. one of the most common challenges faced by companies in this case is the long lead times required to develop accurate drawings and models for the shop floor. Experts have contemplated this issue for long, debating if it is the development approach i.e. the choice between Platform design, Modular design, or rules-based design approach that can cause or simplify this challenge. While each approach has its share of pros and cons, it seems most top-performing companies are more likely to use rules-based design approach.

Design aside, engineer-to-order companies need to be able to provide accurate cost estimates to customers, manage all aspects of complex projects, deliver on time and on budget-all while keeping a close eye on cash flow. Finally, they need an accurate picture of the profitability of each project to comprehend the impact on the business. And here is where solution partners such as IrisLogic can simplify the complexities of the engineer-to-order process.

Below are a few instances, of the problems that companies face with respect to engineer-to-order and how IrisLogic can help drive these problems away.

  • Companies purchase raw material on a need basis as per the designs which impacts their lead times and more importantly, their supply chain, billing and Vendor management.

How can IrisLogic help?

  • Our solution is equipped with a full ERP system which supports company purchase of direct and indirect materials, MRO and services.
    • Purchase Orders can be for stock or directly for a project. On receipt the material goes directly to Work-in-Progress (WIP) and the cost is allocated to the project as WIP or COGS.
    • Vendor Performance ranks suppliers based on delivery, quality and price. If designated, a PO line item can be received directly into Inspection for quality verification and, if necessary, returned to the vendor.
    • Because most materials are bought on the job, companies don’t want the constraints of an item-based system which requires all item transactions to go to/from inventory.

Which is why IrisLogic’s solution enables Inventory Management without Item Numbers

  • Bill of material structures for a project does not require the use of an item number. The company may choose to enter a part first in the item master or not. If the use of the item master is elected, a standard description, long description, unit of measure conversions, preferred vendors, cross references and many other fields can be defined. By specifying stocked or non-stocked, the system will manage the inventory accurately.
    • Complete lot and serial tracking, for stock and non-stock items, multiple inventory locations, multiple cost types, cycle counting and physical inventory are all supported.
    • Companies find it challenging to rapidly develop accurate quotes

So, Iris Logic’s has a unique solution that can smooth the process.

  • The solution collects actual material costs at the time the purchase order receipt is vouchered.
    • Actual labour costs are collected as reported to the system. All job costs may be viewed individually, or collectively rolled up into a parent project.
    • Jobs may also be defined as projects, allowing the actual costs to be applied directly to COGS, with full Revenue Recognition accounting to support long lead-time production.
    • Companies also face the challenge of accurately recognising revenue
      • IrisLogic’s solutions lets the customers recognize revenue based on the percentage of actual expenses incurred, rather than against shipment of the product(s) produced.
    • And lastly, Iris Logic helps smooth over the process of progressive billing based on contractual payment agreements or milestone completions.
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