How Furniture Manufacturers Can Turn Their Engineering-to-Order (ETO) Processes Profitable

Jul 20, 2016 -- Customers today do not demand products that companies sell to them; rather they ask for products that are customized to their specific requirements. Customization could range from anything to size, shape, color, style, special features and conveniences. For furniture manufacturers however, this is not new. Almost every product developed by furniture manufacturers involves a large degree of customization to it. It is for this reason that this industry falls under engineering-to-order (ETO) category of product development. Traditional design and manufacturing processes, however, are often based on a mass production model, the efficiencies of which depend on economies of scale from high volume, long-term production runs.

There is nothing wrong however in continuing with the traditional processes until you have a few or even hundred custom products to manufacture. Managing a distinct Bill of Materials (BOM) for few product variants is still feasible at this stage. But, as these product ranges evolve, you’ll realize that managing and updating the configurations for each of them gulps a huge amount of time, which you could have probably utilized for developing entirely new and innovative products.

Moreover, for an industry like furniture, timing is everything. It is all about how quickly you respond to customer’s request for proposal (RFPs) and how quickly you will be providing a solution to the customer, if you are selected as a vendor. Winning business revolves entirely around your ability to get the timing equation correct, which is enormously challenging if you are selling a custom product that must be engineered to order.

The Complexities of Developing ETO Products

Developing engineered to order products has its own set of complexities and challenges. It is quite evident that ETO product development process will often involve customer participation at different stages. This means that product information is bound to toss back and forth several times between the company and the customer. And in this juggling, there is every possible chance of miscommunication from engineering and shop floor to sales and customer service. Due to several revisions, ETO companies also find it difficult to manage engineering change orders (ECOs), which in turn affects the inventory control and accuracy in quote estimation.

On the contrary, market demands faster response to inquiries. Apart from speed, it is also important that manufacturers quote accurately to remain profitable. However, slow, people-dependent processes will end companies to choose a quote that either consists of an added cost margin prone to losing deal, or an aggressive quote without proper facts leading to an unprofitable business. However, accurate quote estimation is like winning only half the battle. It is equally important to deliver as per the promised quote. It is important to ensure that items for orders can be manufactured within the strategies defined by product managers. Right from developing design instruction, production, installation and sourcing, everything needs to be streamlined with the order requirements, to avoid errors and cost overruns that would eventually turn a profitable business to a loss incurring one.

Turning ETO Processes Profitable

ETO products further add to the capabilities of furniture manufacturers and can drive profitability. The key to success however is to maintain speed and accuracy in quote estimation, which could be partly achieved by considering the engineering and decision-making processes early in the development cycle. Right from the conceptual level, product managers can gather customer opinions and their requirements to allow engineers to evaluate options and variants at stage where design is flexible and iteration costs are less. This approach helps in minimizing the change orders downstream.

Designing for ETO

The most critical aspect of a successful and profitable ETO process is to develop a product design that is adaptive to reusability. ETO products can be designed using modular design approaches, platform design techniques and rule based design approaches to leverage the power of commonality and yet maintain differentiation in the products. A recent Tech-Clarity Research shows that top performing companies often consider these approaches important, to gain competitive edge in the market, reduce cost and maximize design reusability to adapt more quickly to new market demands.

Identifying common Bill of Materials (BOM) across all the product variants will help in improving the efficiency of managing variability. One approach to reusing the product knowledge is to develop a template of product breakdowns describing the common functions, systems and components across the range of products. This will provide a fair idea to figure out variants of a single product design using the logic, functionality and components of other common product candidates.

The next step is to stop developing parts and assemblies for different configuration and implement design automation process wherever applicable, to reduce the engineering lead time. Automation helps engineers to create different variants of the single product dynamically without actually creating a new assembly. Based on set of rules, a pre-defined configuration for the product can be developed which can be utilized both by engineers as well as customers, which reduces change orders significantly.

Furniture Manufacturer for Hospitality Industry – A Case in Point

A leading furniture manufacturer was able to reduce the engineering lead time for number of customizable product ranges, and managed to respond with accurate quotes to customer’s inquiries by automating their ETO process. Using Inventor iLogic rules and custom software add-ins, a process was developed to automate the design of number of products like wooden doors, glass shower systems and vanity systems. Rules were applied to automatically generate part file, 2D drawings with Bill of Materials (BOM) along with high quality images.

To further reduce the time required for quoting end customer and invoice generation, cloud based Autodesk Configurator 360 was utilized, where both manufacturer and customer were able to access information as and when required. The interface provided a platform to easily customize the product, download the models and drawings as well as allowed customers to request for quote directly for their chosen design. The process thus reduced the possibility of human error and provided the manufacturer an opportunity to deliver custom designed products to customers faster.

Conclusion

Engineered to order products possess a strategic value for furniture manufacturers and can help them in achieving a competitive position in the marketplace. However, it is also true that ETO processes are often challenging and time consuming due to the involvement of customization. But, market demand for customized products is already on rise and is visible across most of the industries. For some offering customized products might be a strategic weapon while for others it might be a necessity to meet customer needs and remain in the competition.

The need is then to focus on improving the ETO processes by responding to customer needs early in the development cycle and adopting a design process that suits the development of products with variability. Utilizing 3D design with modular or rule based approach reduces the lead times and helps the manufacturer to respond to inquiries faster with accurate quotes and thus remain profitable and competitive.

About Author:

Kashyap Vyas is an Engineer at Hi-Tech CADD Services and holds a Master’s degree in Thermal Engineering with several research papers to his credit. He covers CAD and CAE topics for the engineering industry. His contributions are primarily focused on encouraging manufacturers and suppliers to adopt virtual product development tools to build efficient products with reduced time-to-market.




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