How Business Central ETO Implementations Differ from Traditional Manufacturing

Introduction

When most people think of manufacturing they imagine a factory with conveyors or machines that are working to produce boxes and pallets full of end product. I always think of George Jetson, working in a \giant robotic factory with giant mysterious machines that hammer and saw and make the famous Spacely Sprockets.

The reality is a lot more boring than the Jetsons.  It's also a lot more diverse than those old cartoons made it look. As I wrote in an article on modes of manufacturing in business central, there are actually 8 specific modes that I define.  Among these is one I know very well called Engineer to Order.

What is Engineer to Order Manufacturing 

Engineer to Order manufacturing can be identified as a business that designs and "engineers" a solution for a customer and makes (almost always) a single finished project which is the end product.  ETO manufacturing often involves the installation and service of the product(s) they make.  One critical part of the Engineer to Order is the product design is never complete when the order is taken.  When an ETO gets a purchase order from their customer, that's when the process of designing the product begins.

Who are not Engineer to Order Manufacturers (but look like one)

There are two cases that look just like an Engineer to Order and almost fit the definition above, but in fact are not real ETO businesses.

1. Configure to Order is very "like" engineer to order but is not the same. These companies have well designed product that is configured to fit the customer's needs. 
   1. Example, the front door of a house (with fancy windows and different choices of material and colors) won't have a specific design for every possible combination. This seems to be an ETO because the process of designing the product would seem to begin with the order, however the engineering was done long ago to determine the way to assemble different doors.  The configuration isn't known until the customer orders it.
2. Job Shop Manufacturing can also seem like engineer to order in some cases.  This usually happens when there is some design needed to come up with the part the customer needs. Since design can be done by engineers, we would think that it must be engineering that's being done. There's a big difference between doing a bit of design (create some drawings or CNC programs) and engineering.  Engineering has a degree of uncertainty. It might not work as you expect.  Design is very established and well known. It will work - but it takes a bit of time to do.  That's more of a Job Shop.

If you are reading this article and think you are an ETO - be very careful and consider what I wrote above.  Even companies that are running Job Shop or Configure to Order (CTO) manufacturing can mislabel themselves as engineer to order. It's easy to misread a Configure to Order (CTO) or Job Shop as an ETO, especially if some of what they do is actually ETO manufacturing.

I wrote a blog on Job Shop manufacturing that you can also read if you're interested in that specific kind of manufacturing in Business Central.

How to Implement Engineer to Order in Business Central

I have worked with a number of these companies over the years and I find that a lot of Business Central / Dynamics NAV implementations try and use the production order management tools of BC/NAV.  I believe this is because the customer and the partner often think "this is a manufacturing company, and production orders are for manufacturing, therefore we need to use them."

In reality production orders are a terrible approach for Engineer to Order (but almost always good for the examples above).

Engineer to Order has these rules of thumb that they use.  If you agree with all of these statements you're definitely an ETO.  If you think 2 or 3 of them are true but not all, you are probably a Job Shop or CTO.

1. The Bill of Material can change over time, even for an item that has started production.
2. ETO manufacturers rarely estimate the precise time for each step in fabrication of specific items (if you do this, you're probably not an ETO).
3. ETO manufacturers often include an installation/provisioning activity in the sale.
4. Most ETO orders are progressed invoiced
5. All true ETO orders are project managed from order receipt through manufacturing through to delivery
6. ETO manufacturers often take months to complete jobs, and want to use revenue and cost recognition for their WIP. 

Because of these rules production orders cause these problems.

1. Released production orders can't be modified, so changing the BOM after the production order starts is a huge problem.
2. Production orders need routings that specify the time each machine or work center takes to make every item, but ETO can't provide this and don't know how to do so.
3. Production orders don't have a way to "ship" the items to a customer and then your own technicians do an installation.
4. Sales orders don't really do a good job in progress invoicing.
5. Production orders don't lend themselves to being assigned to a project manager. All the main tools are intended to lump them together in entirely different ways.
6. Production orders do not have WIP and revenue recognition capabilities.

Business Central Jobs to the Rescue

If you're an expert in Business Central you probably recognize that Jobs seem the right choice. In fact, the Business Central Jobs module inherently solves almost all of these issues.

1. Jobs can be modified and adjusted easily.  Job planning lines act just like a Bill of Material.
2. Jobs don't include estimates of the time to do each individual task for each part like a Routing does.  Their time estimates are high level aggregates.  For instance: routings might say Items A, B and C take 33, 45 and 27 minutes of welding total, while in a Job would just have 1.75 total welding time and not split it between the items.
3. Jobs don't necessarily have a way to do shipping out the them, but it's not hard to add a shipping task with transport fees etc.
4. Jobs are excellent at progress invoicing.
5. Jobs have a field called Project Manager on them by default. A job is in fact a project.
6. The Job WIP recognition modules are perfect for long duration manufacturing projects that need a percent of completion revenue and WIP recognition.

What are the Limitations of Jobs

You can tell that I believe the typical Engineer to Order needs to use Jobs for their manufacturing.  I also think that out of the box there are a few things missing from the standard Jobs module that would make it much easier to use.

There are a number of ISV products in the market that help enhance the Jobs module.  I don't want to get into them here, but you can find a variety of them on AppSource if you take a look. All of these shortcomings are solved by a combination of these.

Jobs Don't Have a Graphical View

Most ETO want to be able to see a Gantt view of the project. This is missing out of the box with Business Central, although there are some tools available to fill the gap.

Jobs Aren't Linked to Production Orders

Wait Rob, didn't you just say not to use production orders!? Yes I did, but for a mixed mode manufacturer (I'll dig into this in the future) you sometimes need this. Mixed mode means you do more than one mode of manufacturing in the same company.

Buying and Tracking materials on Jobs is a bit clunky

You can buy items and link the purchase order to the job. When product is received, it's automatically allocated to that job.  You can move inventory from stock into the job. All of this is out of the box.  It's just not as easy to do as it should be.

Importing and Managing BOM from CAD isn't as easy as it could be

The ability to load the BOM data from CAD (even from Excel) into the system is achievable, but trying to do a net difference (ie: the CAD drawings have changed and you import a new BOM - trying to find the differences) is very hard.

Reporting on Hours Worked isn't Easy

Jobs are inherently good at tracking and reporting on costs.  They're not as good at reporting and tracking hours.  The hours are in there, but you need to dig a bit to pull them out into a nice report.

There are just Two Cost Buckets, Budget and Actual

Most ETO businesses have three costs they want to analyze.  The initial "sales estimate" of costs, the later "engineered estimate" and the actual costs. Business Central lacks the "sales estimate" out of the box.

Conclusion

Here are some thoughts to take away from this post.

• The Engineer to Order business is often mistaken as a more "traditional manufacturer" and that leads to problems
• Some Job Shops and Configure to Order manufacturers are mistaken as ETO which also leads to problems
• If you are really an ETO - then you need to use Jobs 
• Jobs have some limitations in Out of the Box BC - but this is addressed with a variety of ISV solutions.

I don't want to show favoritism to any ISV solutions in my article, so I'll leave it to the reader to post their favorites here in the comments.