Engineer-to-Order
ETOEngineer-to-Order (ETO) is a production method where a product is designed and manufactured only after a customer order is received.
Engineer-to-Order (ETO) is a manufacturing process for unique or highly customized products. The entire process begins with a customer's specific requirements. Unlike other production methods, ETO involves custom design and engineering work for each individual order. This means no product is built until a firm order is in hand and the design is finalized and approved by the customer.
The ETO workflow starts when a customer places an order with unique specifications. The engineering team then creates a new design, complete with drawings, a unique bill of materials (BOM), and production routing. The purchasing department sources and procures all necessary components and raw materials, some of which may be unique to the project. Finally, the production team schedules and builds the product. This process requires close collaboration between sales, engineering, purchasing, and the shop floor.
Manufacturers use the ETO model to produce complex, high-value items without the risk of holding unsold finished goods inventory. It allows for maximum product customization to meet precise customer needs. The main trade-offs are longer lead times and higher production costs. These factors result from the added engineering, custom material sourcing, and specialized labor required for each job.
A specialty machine shop receives an order for a custom robotic welding cell. Their engineers design the cell to fit the customer's factory floor and specific part geometry. The total lead time is 16 weeks, which includes 4 weeks for design, 6 for material procurement, and 6 for assembly and testing.
What is the main difference between Engineer-to-Order (ETO) and Make-to-Order (MTO)?
ETO includes custom design and engineering work before manufacturing begins. MTO uses pre-existing, standard designs to build a product after an order is placed.
Why are lead times in ETO so long?
Lead times include the time needed for custom design, engineering approval, sourcing unique materials, and the final manufacturing process for each order.
Which industries typically use an ETO model?
ETO is common in industries that produce complex, high-value items. Examples include aerospace, industrial machinery, custom architectural fabrication, and shipbuilding.
How does ETO affect inventory management?
ETO eliminates finished goods inventory. However, it can require managing a wide variety of raw materials to support different custom designs.
What software systems are helpful for managing an ETO process?
Enterprise Resource Planning (ERP) systems with project management and engineering modules are important. Configure, Price, Quote (CPQ) software also helps manage the initial sales and specification process.
Make to Order
MTOMake to Order (MTO) is a production strategy where manufacturing starts only after a confirmed customer order is received.
Assemble-to-Order
ATOAssemble-to-Order is a production strategy where products are built from pre-made components after a customer places an order.
Bill of Materials
BOMA Bill of Materials (BOM) is a complete list of the raw materials, components, and assemblies required to build a product.
Job Shop
A job shop is a manufacturing facility that produces small batches of custom products based on specific customer orders.
Lead Time
Lead time is the total time elapsed from when a customer places an order to when they receive the finished product.