What is Engineer To Order (ETO)?
Engineer to order is a production approach characterized by: Engineering activities need to be added to product lead time. Upon receipt of a customer order, the order engineering requirements and specifications are not known in detail.
What does that mean for the manufacturing management and the inventory management?
This means that normally a project will be set up consisting of :
Labor (design, blueprint, engineering, assembly, installation, ..)
For the assembly and for each sub-assembly, a BIll Of Material (BOM) will be created, and production orders will be planned. A sub-assembly may have to be manufactured. Materials Requirements Planning (MRP) that determines which components are short and need to be ordered, and when to order them to be on time with the final assembly, will be needed.
Regarding inventory management, the determination of the ReOrder Point (ROP) and the Order Quantity can not be done based on the history of sales orders and plain forecasts since exact same sales orders don't exist. Neither do forecasts exist . The determination will be done based on insights of new sales orders that use some common components, current stock and purchase orders in transit. The inventory is just-in-time inventory. Components and maybe sub-assemblies will be made just-in-time.