Technology Modernization Comes to the ETO Industry

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Engineer-to-order (ETO) companies create value for their customers by putting specialized expertise, innovative engineering, and project manufacturing operations to work. However, many ETO firms are not yet taking advantage of the best of modern business management technology. In this series of blog posts, we consider several pressing industry issues and discuss how Sikich can help ETO companies get ahead by deploying Sikich HEADSTART for ETO, a business management technology solution based on Microsoft Dynamics 365 Business Central.

The ETO industry faces a digital lag

Engineer-to-order (ETO) companies make it their mission to perform challenging manufacturing projects to produce the industrial assets that allow other companies to be in business. They design and build machines that can make other machinery or machine components, or they manufacture machines that make certain end products from a combination of materials and components.

ETO companies prize intellectual property as a key asset. It may take the form of machine patents and innovations, specialized expertise in how to meet the needs of customers in their target market, or unique engineering and manufacturing processes and equipment required to create the machine products these customers need. ETO companies invest heavily in developing and maintaining the expert skills and production capabilities that can translate materials and components into profitable, competitive customer solutions.

In contrast, ETO firms may not always be aware of the opportunities of technological innovations and modern digital-infrastructure solutions that could help them manage their operations—especially if they have been successful and enjoy long-standing customer relationships. That can result in the juxtaposition of advanced, machine-driven or even roboticized engineering and production processes with oversight by project managers who juggle numerous spreadsheets or multiple, older software tools. Redundancies and errors are common when project managers record and retrieve information in and from multiple resources. For them, just like for finance teams, account execs, or company leadership, it can be difficult and time-consuming to use these basic tools to assess the status of projects and see how they perform against financial forecasts and committed budgets and schedules.

In addition, many ETO companies use specialized, stand-alone engineering and production systems that are no longer state-of-the-art and which were customized to meet their specific requirements. Almost by definition, these require ongoing investments of labor and funds to keep them useful. For new employees, they can be baffling to learn and navigate.

The need to satisfy customers and retain talent

Over years of business and many projects, these inefficiencies usually result in costs an ETO company might prefer to avoid. They also make it harder for project managers to have productive conversations with customers. A customer might want to ask for a quick project update, explore an idea, or have a question answered on the fly. If you need to manipulate a sheaf of spreadsheets, that can be difficult.

In addition, customers may have to update their requirements with little advance notice. The resulting change orders can boost project costs and lengthen production schedules. Skilled project managers usually can rally their resources and accommodate unexpected turns. Even so, margins can suffer and customers may not be satisfied with their vendor’s ability to work with them when change orders cause delays and drive up their costs.

At a time of generational change in the workplace, you may also want to think about what you can offer the candidates and recent hires who expect to use modern technology to do their jobs and pursue their career goals. For them, empowerment can take the form of software tools that help them serve customers, be productive in their area of accountability, and take the initiative for innovation. You can motivate and enable talented people by giving them the tools and data to make this possible. By winning their loyalty as satisfied employees you may gain a lasting competitive advantage.

Finding the best fit of ETO operations and management software

When ETO companies face the limitations of basic, general-purpose software tools and processes that hail back to predigital times, they sometimes decide to go all out with modern technology. That’s when they may find that there aren’t many viable options when you want to find a comprehensive business management system created for ETO and configure-to-order (CTO) firms that are not also large enterprises. Midmarket companies may get the idea that they have just two choices, neither of them optimal: they can update their current, fragmented software tools with more powerful and usable solutions and make process changes to become more efficient. Or, they can invest in an all-in-one enterprise resource planning (ERP) system, which may come with too many capabilities that do not fit their business.

In the first case, they may still need to address data and process gaps between specialized systems which are not integrated. In the second, they will have to make adjustments to fit standard software to their needs. That may require finding skilled consultants who can make the right modifications and ensure that these will be easy to manage for the company as software updates and business changes happen.

Faced with these choices, many ETO and CTO companies acquire software systems that provide them with more capabilities and options than they need. They may then see a small and intermittent payoff in efficiency and productivity improvements from their large investment. If the software was not engineered with the needs of actual users in mind, it’s almost certain that some project managers and other team members will not use it. They will stick to their spreadsheets or find workarounds.

Building a software foundation in the cloud

Sikich is a technology and business consultancy with a deep commitment to manufacturing. We feel that ETO and CTO companies should benefit from a software solution that is a better match than either disparate, specialized applications or a large-scale ERP system whose deployment length may not be acceptable for companies intent on generating tangible benefits from it within their timeframe. Some well-reviewed and widely adopted, standard ERP solutions could serve as a foundation for the industry software we envision. One of them is Microsoft Dynamics 365 Business Central, a modern, evolving system from one of the industry’s leaders.

Business Central is a modern ERP system with roots in the last decade of the previous millennium. Companies can implement it in the private, public, or hybrid cloud as well as on-premises. Microsoft has continuously strengthened and refined it, and the Sikich practice and expertise has grown and matured along with it. Business Central comes with extensive functionality to power a business, including project management, finance, sales, services, and supply chain. It’s modular, so you can follow your priorities in deploying the capabilities you want, and you can choose whether to deploy on-premises or in the cloud. Business Central interfaces, functionality, and workflows are designed for people in real business roles. The solution provides insight and visualization tools that help them make sense of business data to answer questions and fuel decisions. The system integrates with the Microsoft 365 apps that many companies use, such as Excel, Outlook, Word, PowerPoint, and Teams. You can create and share documents or work with colleagues and customers, pulling information from Business Central into the software tool on your screen.

For many companies, Business Central is transformative, allowing them to focus on what they do best while becoming smarter and more agile. Following a roadmap for evolving the solution, Microsoft continues to enhance it with scheduled updates twice a year. Companies can extend Business Central by drawing on the resources for business intelligence, app development, automation, and virtual agents on the Microsoft Power Platform.

The next step

If you want to have an exploratory conversation about our ETO industry technology solution or arrange for a demo, here are some next steps:

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This publication contains general information only and Sikich is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or any other professional advice or services. This publication is not a substitute for such professional advice or services, nor should you use it as a basis for any decision, action or omission that may affect you or your business. Before making any decision, taking any action or omitting an action that may affect you or your business, you should consult a qualified professional advisor. You acknowledge that Sikich shall not be responsible for any loss sustained by you or any person who relies on this publication.

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