Engineer-to-order

Engineer-to-order is a production strategy in which the design or the engineering work happens per order. Against it stand make-to-stock, where a fixed product is made to inventory, and make-to-order, where an existing design is made only after the order. Machining suppliers usually sit between those two: the design comes from the customer, but the sequence of operations and the fixture are worked out per order.

What it means for the calculation

The strategy decides where the time and the risk sit. In stock work the price is known and the risk sits in the inventory. In order-driven work there is no price until someone works it out, and working it out costs hours that do not always come back. So in engineer-to-order not only the machining time counts, but the preparation and engineering time as well, plus the chance that the request never becomes an order. A shop making almost only one-off parts carries a structurally higher preparation load per euro of turnover than a shop with a lot of repeat work.

Where this comes up

In the way a shop takes in and plans its orders, and in the ratio between one-off parts and repeat orders in the order book.

Common mistakes

Putting the preparation time of a one-off part into the same overhead percentage as repeat work. Also lowering the price of the first order on the expectation of a repeat order that has been agreed nowhere.

What is the difference with make-to-order?

In make-to-order the design already exists; in engineer-to-order it is created or worked out per order.

Where does a machining supplier sit?

Usually in between: the design comes from the customer, the work preparation happens per order.

Why is stock work cheaper per piece?

Because the preparation is a one-off and the batches are usually larger.