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Thomas R. Cutler

Quality Insider

Enterprise Resource Planning and Quality

Is ERP helping or hindering quality in the engineer-to-order environment?

Published: Monday, March 6, 2006 - 23:00

Is enterprise resource planning (ERP) software helping or hindering quality? Many companies that purchased their first ERP package years ago now find that the system is hindering their efforts to adopt new quality initiatives, including lean manufacturing and Six Sigma. Since the purchase several years ago, the business has changed, and the ERP system wasn’t flexible enough to keep pace. Perhaps it was the wrong system. The wrong ERP system selection is more apparent than in the engineer-to-order (ETO) manufacturing sector.Following are some areas of ERP deficiency for the ETO manufacturing environment:

Estimating–Most ERP systems don’t support the estimating requirements of ETO companies, requiring external estimating systems to be developed with the most popular tool, MS Excel. A new estimate is created in Excel without the hindsight of the actual cost of a similar job stored in the ERP system. Getting the information in to the ERP is essential as it need to form the baseline budget for the project or job. Here the information is typically re-keyed into the ERP system. According to Brian Thomas, COO of Kvichak Marine Industries, “Rest assured, estimating in the ETO environment, with whatever tools one uses, is challenging. Estimating a never before built item, with thousands of parts, thousands of man hours and customizations, is both art and science. We use historical experience to estimate future performance....Not always accurate, but the best we have for today.” Thomas acknowledges that estimates are still done in Excel, and downloaded to their ETO ERP system by Encompix. Yes, there’s double entry and mistakes can be made. He expects to implement the estimating module with Encompix to achieve full integration and eliminate the errors that are inevitable with double data entry.

Engineering–All ETO companies use CAD systems for design but there’s often a disconnect between the CAD and ERP system. The engineer creates the drawing, parts list and bill of materials. Again, typically the data is re-keyed into the ERP system. The result is a nonvalue-added activity prone to mistakes that may not be discovered until the product is actually built, resulting in costly rework. New items are created in the CAD system because the engineer is unaware of two or three identical parts already residing in the item master.

Project Management–In many ETO companies, especially those supplying the automotive industry, MS Project is the tool of choice. This tool is for managing projects and works as a status reporting tool to the customer. Once the project schedule is established in MS Project, then detailed routings need to be created in the ERP system. Again, more manual data entry results in more errors.

Some ERP systems provide interfaces to CAD and project management systems. Typically, these interfaces provide the initial creation of a bill of material (BOM) or routings. If there were never any engineering changes or rescheduling of the project plan this static interface might work, however in the ETO world change is a way of life. The changes that occur in the ERP system don’t always get reflected back in the CAD or project management system. The answer is to have a system that provides two-way communication.

ERP Must Fit the ETO Process
Many ETO manufacturers recognize the limitations of a standard ERP system, yet have not recognized themselves as engineer-to-order. The ETO Institute provides a survey of questions to help evaluation whether the manufacturing process is ETO or repetitive.

Ultimately, an ERP system that’s a close fit to the company’s business processes and can facilitate the seamless flow of data and information throughout the organization without relying on duplicate effort and manual intervention is really important to have.

About the author
Thomas R. Cutler is the President & CEO of Fort Lauderdale, Florida-based TR Cutler Inc., the largest manufacturing marketing firm worldwide. Cutler is the founder of the Manufacturing Media Consortium of 2700 journalists and editors writing about trends in manufacturing. He’s the lead spokesperson for the ETO Institute and the author of the Manufacturer’s Public Relations and Media Guide.



About The Author

Thomas R. Cutler’s picture

Thomas R. Cutler

Thomas R. Cutler is the President and CEO of Fort Lauderdale, Florida-based, TR Cutler Inc., celebrating its 21st year. Cutler is the founder of the Manufacturing Media Consortium including more than 8000 journalists, editors, and economists writing about trends in manufacturing, industry, material handling, and process improvement. Cutler authors more than 1,000 feature articles annually regarding the manufacturing sector. More than 4,500 industry leaders follow Cutler on Twitter daily at @ThomasRCutler. Contact Cutler at trcutler@trcutlerinc.com.