Engineered to Order (ETO) Change Management

Managing change in an environment where the specifications originate outside the enterprise provides a unique set of challenges. This is the scenario for companies serving the engineered to order (ETO) marketplace. Communicating and tracking changes throughout the project’s life-cycle is critical to ensuring the solution meets the needs of the customer and is profitable for the supplier. The change can originate from multiple locations and at any time in the project. Changes initiated during the quote cycle will need a method for quick response so that the quote will reflect the request. Changes received after the order has been processed will need a method of review that will include costs and resource impacts.

One of the more challenging aspects of managing change for the ETO enterprise is the approval path for changes received after the order has been received. Sales will often push the change order through declaring that the proposed changes are within scope and should be “easy enough to do”. Or my personal favorite “can’t you just”. The decision on whether or not to accept the change needs to be a deliberate one. The change needs to be reviewed within the context and scope of the project by all functions that could possibly be affected. For most organizations this will cause significant delays, making schedule attainment nearly impossible. Instead the effects are dealt with as the project progresses, requiring huge effort to meet the demands of the schedule. The net effect is the amount of time and resources needed to complete the project will balloon. This will impact not only the project of immediate concern, but all other projects as well.

For a large number of businesses their ETO business represents a small overall portion of their total units sold. However that portion of the business often utilizes a disproportionate amount of the overall resources. Much of that wasted effort is expended closing the loop on the changes proposed by the customer as well as changes originating from within. Emails, phone calls, travel and sometimes even litigation are needed to resolve change issues. So why take on any ETO business? Most companies see it as a necessary evil, driven by a competitive environment and demanding customers. While I will not argue the need for customization here, I contend that the process does not have to be as uncertain as is practiced.

Changes from internal and external origins need to have a clear path for review and approval. The ability to measure the resource, cost, schedule and profit impacts, as part of the decision process will ensure that margin targets are met. While some may see this additional oversight as an impediment to responsiveness, the added control, associativity and transparency will drive increased efficiency. By making deliberate, informed decisions the development process will ultimately move forward more quickly.