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There's no doubt that today's manufacturing climate is more complex than ever before. Companies are struggling with the challenges of doing more with less, maintaining control over intellectual property and costs in a global, outsourced environment, and keeping pace with escalating customer demands for ever more innovation and shorter product lifecycles. But these hurdles are just a set of basic challenges for engineer-to-order (ETO) manufacturers. They're also grappling with a unique set of issues related to establishing efficiencies and time-to-delivery advantages as well as driving sustainable growth for a business model dependent on highly-customized products.
Managing Automation magazine, in conjunction with AMR Research Inc. (Boston) and RuleStream Corp. (Wakefield, MA), a developer of rules-driven product management (RPM) software, recently produced a webcast to examine the landscape of ETO manufacturing and explore how RPM can be tapped to give this sector a competitive edge.
Rules-driven product management software, which builds on the themes of knowledge-based engineering systems, goes beyond older platforms by delivering ease-of-use functionality that makes it highly accessible to groups outside of engineering as well as integration capabilities that make it much more adaptable to users' current design environments. This new rules-driven product management (RPM) environment is also viewed as part of the larger product lifecycle management (PLM) framework, which manufacturers are implementing to address many of their pain points surrounding innovation, proposal response times and product delivery.
As defined by the webcast panel, an ETO manufacturer is any kind of manufacturing company that takes an order for a product that doesn't exist in a printed or online product catalog, does not have a part number that can be ordered, and has to be engineered or manufactured to a customer's specification. Every company in this space faces a common set of requirements central to its efforts to survive ? and thrive ? including bringing new products to market faster, improving order-to-cash cycles, keeping control over intellectual property, and eliminating non-value-added activities.
What makes the ETO equation especially tricky is the growing importance of customer demands shaping every aspect of the business, from expectations surrounding innovation to where to target investments. "The power of the customer has really accelerated," said Kevin O'Marah, vice president of research at AMR Research, one of the webcast panelists. "This applies across industries, but in an engineer-to-order environment the power of the customer as a driver of what you need to do operationally and, therefore, what tools you need to invest in has increased."
According to AMR's 2004 IT spending report, 32% of respondents are looking at technology investments to help facilitate customer-driven issues, compared to only 6% looking at technology as a way to address supplierdriven issues or even 12% as a way to deal with government compliance. The focus on customer demand over other areas is definitely a shift over the last few years, O'Marah said. (See Figure 1)
The ability to innovate is another pressing concern for ETO manufacturers. A Boston Consulting Group survey shows that over 70% of respondents plan to increase investment in the area of innovation, which is a greater number than over the previous year. That less obvious observation is critical, O'Marah said. "I would argue that what's going on is that people see the need to differentiate," he explained. "They've run the course in terms of cost-cutting as a way to make a living.
Everybody is really trying to get out there and differentiate on value-added engineering. RPM solutions support increased innovation with automation processes that manage the routine and repetitive engineering work, helping engineering get out of the custom engineering, order processing and sales support business and back into the innovative engineering process." (See Figure 2) ETO companies, therefore, could benefit from new, advanced technology to manage that intersection between increasingly demanding customers and management's expectation for delivering new and innovative products. That's where rules-driven product management comes in. "If we think that making smart business decisions at the moment of order is part of the real proof point of success here, then rules-driven product management (RPM) is something worth looking into," O'Marah said.
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