Engineer to Order vs Configure to Order: What is the difference?

Posted on August 26, 2021

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Modern manufacturing is all about the speed and customizability of the products. You want to give your customers the option to adapt your items to their specific needs, while still minimizing the time it takes you to produce them. In order to do that, you need to have a system in place. Out of the many approaches available, two in particular have been gaining traction recently — Engineer to Order (ETO) and Configure to Order (CTO). But what are they? What are the differences between them? And which one of them should you employ? Let’s find out.

What is Engineer to Order?

Put simply, an Engineer to Order manufacturing environment is one where a company plans and constructs a product based on individual customer requirements. In other words, the production will not start until an order is received. That is because, prior to a sale, it is yet unclear what materials are demanded, or even what needs to be built. It might sound a bit confusing, because it’s counterintuitive — usually, an order is made once the product is ready, not the other way around. How can you sell something that doesn’t yet exist? However, it’s relatively simple. A customer will declare what specifications are needed, and based on that, the manufacturer will design, purchase the parts, and assemble the item. As you can guess, it allows for a great level of tailoring.

What is Configure to Order?

Configure to Order is still an approach that allows for tailoring, but the base product is already built when an order is placed. The manufacturer will produce ‘base’ units, usually referred to as ‘embryos’, which can then be modified or added to. Those are kept in stock until an order — which will have specific variations to it — is placed. The manufacturer will then use the pre-made embryos to adjust to those requirements. Think about it like ice cream. The ice cream van will have their soft serve ready for you, but you can choose what sauce (or sauces) will grace it, which sprinkles, nuts or sweets will top it, and whether you want it in a cup or a cone. Your favourite combination will not be predicted, but the ingredients will be safe and sound in the van, waiting for you. However, if you had to wait for the ice cream man to go and pick up the groceries at their local shop, you’d probably go and buy a popsicle instead.

Which should I choose?

The main difference here is where the order happens. With ETO, an order is made before the manufacturing process has begun, while with CTO, base products exist before an order is received. This changes when materials are procured. When deciding whether you should opt for the ETO or the CTO approach, the question at the centre is the compromise between overproducing items that will not be in demand and the efficiency and speed of manufacturing items on a large scale. Both of the approaches are good, it just depends what you’re looking for. Just like our ice cream man would never opt for a ETO-based system, a bespoke electronics company might find CTO too wasteful. In order to make a decision, you will need to consider your products and their purpose.

How complex your products are

More intricate products normally require a higher level of customizability. In order to meet your customer’s specifications, you’d need to have continuous discussions with them, make sure you’re on the right track, and communicate your design before it moves onto production. In this case, ETO would probably be your best bet. Not only will it allow your client to tailor the items they’re purchasing to the smallest detail, they’ll also have this open line of communication to tweak the products until they’re entirely happy with them.

How indecisive your customers are

In some industries, too much choice equals trouble, or just a lengthy and unproductive manufacturing process. The beauty of CTO is that, instead of throwing a blank canvas at your customer and asking them to paint their perfect solution, you’re giving them a wide but limited list of options that they can mix and match, which can sometimes relieve them and you of a burden.

What the quantities of units usually required are

If your products are bought in large numbers, you should also consider the effectiveness of each method when coming to deal with the scale. Producing individual, customized items can prove difficult, not to mention the time you’re adding by producing almost from scratch and waiting on materials to arrive. In this case, you may want to consider CTO. 

How much waste you’re willing to absorb

Offering tailored products to the point of only purchasing materials after a sale has been made is a huge advantage. But it’s not just that — it also means you don’t get any components that won’t be used, produce any items that will lack demand and sit there gathering dust, or invest a hefty sum of money that will perhaps never be recovered. Instead, you buy what you need, as much as you need, and if your materials are expensive or difficult to store, it might be a better way to go.

Where does EASA come in?

Excel spreadsheets are inefficient for ETO and CTO processes

Whichever approach you opt for, you’re going to require a well-oiled admin system to help you make sense of it all. Many companies choose to work with Excel as a database for this purpose. However, this has some inherent issues. Compatibility problems between devices, security concerns, and confusing document versions that lead to inevitable crossed wires, are all significant blockers for a good production process. Especially when using ETO, when data specifications are tossed back and forth between parties, anything that clears up confusion is invaluable.

Let’s take a pretty generic Excel spreadsheet for example. You’ve entered all of your data, it’s all neatly organized, and now you need to share it with stakeholders. Unless you’re using a flash drive to manually transfer it — which is incredibly inefficient — you’ll probably be sending it out via email. This can lead to all sorts of problems, particularly security issues, especially if you’re dealing with sensitive information. After all, emails are an incredibly common target for cybercriminals. Then, when the other side tries to open the file, they find out that their version of Excel isn’t compatible with the document and cannot show it properly. If they get over this hurdle, they may find an error or have to enter new data. They save a new version of the file and send it through via email again, creating increased confusion about which is the latest. This is already bad enough without even mentioning accidental changes that mess up the entire document.

EASA helps you overcome Excel’s deficiencies

EASA fixes all of that. With our web-based app that feeds from one master spreadsheet — no matter how many complex macros or VBA functions — you can pull out the information that’s needed without worrying about the limitations of a classic Excel sheet. Our software takes your Excel file and transforms it into a secure online web app with full  database functionality, accessible from every device with a browser to authorized users. 

Basically, we use your master Excel sheet and create a web interface containing the input and output data fields according to your needs. This includes charts, tables, graphics and any other Excel features your document uses. Instead of trusting the fickle nature of the Microsoft program, now you have a webpage that feeds from the sheet — the people you share it with only need their details and a browser, they don’t even need to have Excel installed on their device, eradicating any compatibility issues. The spreadsheet is now run as a backend process on your corporate network or the cloud, with the EASA Platform taking any input data, loading it into the sheet, running it again and returning the calculated data to the web app, circumventing any version confusion. To top it all off, you can run multiple instances of the app (in other words, use the master spreadsheet as a template). Each user will get a private copy of the software, so no one can overwrite someone else’s work.  

Whether you work with ETO or CTO, our program will make your life easier, and help you avoid the faux pas that can so often lead to additional costs, time and effort. Book a demo with us today and see for yourself, or learn more about how EASA works.