Engineer-to-order Project-based production Bill of materials from engineering

Custom ETO ERP development

With engineer-to-order, the design only starts after the order has been signed. There is then no item number, no complete bill of materials and no routing, while purchasing already has to start on long-lead-time components. Standard ERP assumes the opposite. Appfront builds ERP software for companies that engineer per order: machine building, shipbuilding, special vehicles, process installations and custom interior fit-out.

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What makes engineer-to-order different

Make-to-stock produces based on forecasts: item, bill of materials and routing are fixed. Make-to-order makes that same known item only after the order, at most with choices within a predefined range of options. In both cases, the system knows at order intake what needs to be made. Not so with engineer-to-order: the specifications are not yet known in detail when the order is received, and the design work is part of the lead time. Every order is an engineering project, so the quote is a calculation based on a concept, and purchasing has to start before engineering is finished.

Is this the right fit? This page is about project-based engineering per order. If you combine discrete manufacturing with process manufacturing, with bills of materials alongside recipes and with batch registration in the same system, you should look at ERP for mixed production. There, two production logics must coexist; here, the product does not yet exist at the moment it is ordered.

The design happens within the lead time

Drawing hours are not preparation but a phase of the project. While it runs, material requirements are still changing.

The bill of materials grows as the project progresses

At order stage there is only an outline. Mechanical, electrical and control engineering add to it at their own pace.

Margin only becomes clear afterwards

There is no cost price per item to steer by. Only comparing calculation against actual results shows whether this order type is profitable.

Purchasing against a bill of materials that does not yet exist

This is where most ETO companies get stuck with their ERP. The classic requirements calculation runs from article to bill of materials to routing to demand; remove the first element and the rest of the chain has nothing to calculate from. Yet purchasing still has to start, because the main drive, the casting or the control cabinet has a lead time that exceeds the engineering timeline. Waiting for a complete bill of materials means they end up setting the delivery date.

Companies therefore work with a provisional bill of materials with line items such as "drive, type to be determined", with an estimated amount and a lead time from the quote calculation. As soon as mechanical engineering chooses the drive, the actual item has to replace that line without the project losing its history: the purchase order, the commitment and the variance against budget must remain correct. If your system only knows fully specified items, the buyer works around it: the bill of materials lives in a spreadsheet and nobody knows any more how much of the budget is committed.

Phased release belongs with this. Engineering that releases only once the whole design is finished holds purchasing up. Release per assembly solves that, provided the system accepts partial releases and recalculates later without overwriting the first tranche.

And then engineering changes something that has already been ordered

Take a frame that has already been cut and welded when mechanical engineering moves the motor flange. The system then needs to show more than the new bill of materials: that four pieces of the old version are still in stock, that a purchase order is running for fixings that will no longer fit, that the welding hours were booked against the previous revision, and whether the supplier can still amend the order. In ETO, an engineering change order is therefore a core process. For each affected position, it should be visible where the costs land: a customer change as an agreed additional-work line, or a design error as an internal cost item.

What an ETO ERP must be able to do

These parts are connected: a growing bill of materials without change management produces chaos, and change management without project costing is merely administration.

Project structure with partial deliveries

Sections or modules with their own schedule, budget and handover milestone, to which hours, purchasing and invoicing are linked.

Budget positions without an article number

Positions with an amount and a lead time, later replaced by the definitive article while retaining the purchase order and booked costs.

Release per assembly

Engineering releases each part separately; the system schedules against it and recalculates as soon as the next tranche arrives.

Change management with impact view

Each change order shows, per affected component, its status, its costs and the consequences for the schedule.

Pre- and post-calculation side by side

Quote calculation and actual costs in the same structure, so the variance can be read per component.

Additional work with customer approval

A change request receives a price and a status; only once approved does it flow through into budget and invoicing.

Where the margin becomes visible, or disappears

With ETO, the comparison between pre-calculation and post-calculation is the most important report in the system, and at the same time the report that is unusable in most companies. The cause is structural: the quote is built per functional block (drive, frame, controls, assembly), while the accounts are kept per cost type (materials, subcontracted work, hours). If those structures don't match, you can establish that the project became more expensive, but not where.

Engineering hours deserve particular attention. Booked as overhead, the cost of the weeks the design engineer spent on extra work disappears into the average for the project. In ETO, those hours are product costs, and together with the commissioning hours they are the items where overruns first appear. Additional work is the third weak spot: changes are the norm here, most are small enough to be done informally without paperwork, and taken together they make all the difference. See also software for the manufacturing industry.

Engineering hours as project costs, not overhead
Pre-calculation and post-calculation in the same structure
Hours, purchasing and subcontracting on one project number
Commitments visible as soon as the purchase order is running
Change orders with status, value and customer approval
Variance per functional block, not just at project total

CAD, PDM and the two bills of materials

Engineering and production look at the same components, but organise them differently. The engineering bill of materials follows the functional structure and disciplines: driveline, frame, hydraulics, controls. The production bill of materials follows the assembly sequence and work orders. An integration that only transfers part numbers produces a list that is unusable.

What does work is an explicit mapping between both structures, tracked per revision, with a difference list per release: which positions have been removed, which added, which quantity changed. Without that list, comparing revisions becomes a source of errors that only surfaces during assembly. Bill of materials data usually runs through the PDM system's API; for geometry, ISO 10303-242 is often used, better known as STEP AP242, which has combined the AP203 and AP214 protocols since 2014.

On the documentation side, the project nature makes the difference. Anyone placing machines on the European market compiles a technical file per machine; with ETO, that means a file per order containing the drawing revisions, material certificates and test reports for that one build. Document management tied to the part number does not work here. The framework is also changing: the Machinery Regulation (EU) 2023/1230 becomes mandatory from 20 January 2027 and then replaces the Machinery Directive 2006/42/EC. In structural steelwork, EN 1090 comes into play, of which part 1 governs CE marking of structural components, and the execution classes EXC1 through EXC4 determine how heavy the burden of proof is per project.

Phased release EBOM to MBOM Change orders Budget items Requirements calculation per project Post-calculation PDM API integration ISO 10303-242 Project file

When an off-the-shelf package is the better choice

Engineer-to-order is not a blind spot in the ERP market. Mature packages with genuine ETO functionality exist, including Dutch suppliers that explicitly name machine building and vehicle body building as their target group, with data exchange between CAD, PDM and ERP and projects divided into phases. For some readers of this page, such a package is the wiser route, and we would rather say so now than halfway through a quoting process.

If your process follows the pattern of project, engineering, release, purchasing, production and post-calculation, you can buy that ready-made, including maintenance and adjustments for changing regulations. Your effort shifts from building to configuring.

Custom development pays off in fewer situations than vendors suggest. The strongest is a configuration or costing logic that is genuinely yours: a calculation model that derives the main components, the engineering effort and the price from a customer specification. Forcing that model into a packaged form removes precisely the distinctive part. The second is a package that only allows purchasing once an item is fully specified; the third is being stuck on a supplier's roadmap.

The downside comes with it: when building your own, keeping up with changing standards falls to your own organisation. Often the middle route is the best answer: a package as the administrative core, custom development for the configurator or costing. How we weigh that choice is covered in a custom-built ERP system.

Package when your process follows the usual ETO pattern
Package when bill of materials discipline still needs to mature
Custom development when you have your own configuration or costing logic
Custom development when the package requires a complete bill of materials
Middle route: package as the core, custom development at the front end

Frequently asked questions about ETO ERP

With make-to-order, the product already exists: the article number, bill of materials and routing are fixed, and the order triggers production. With engineer-to-order, the specifications are not yet known in detail when the order is received, and design only begins after the order. The engineering work therefore sits within the lead time, and the bill of materials takes shape as the project progresses.

By releasing in phases and working with budget positions. Components with long lead times, such as drives, castings or control cabinets, are entered early in the project as a position with an estimated amount and an expected lead time, still without an article number. Once engineering specifies them, the actual article replaces the position, with the purchase order and recorded costs retained.

With engineer-to-order, that is not an exception but a core process. The change is recorded as an engineering change order, and the system shows the status of each affected position: not yet ordered, ordered, received or already processed. The choice then follows: cancel, retain or write off. Equally important is who bears the cost: a customer-requested change should be covered by an agreed additional-work line, whereas your own design error remains an internal cost.

Often yes, and for some companies that is the wiser route. Mature packages with genuine engineer-to-order functionality exist, including Dutch suppliers focused on the manufacturing industry. If your process follows the pattern of project, engineering, release, purchasing, production and post-calculation, you can buy that off the shelf. Custom becomes interesting only if you have your own calculation logic, or if the package demands a complete bill of materials before you are allowed to purchase.

The source code and documentation belong to the client and sit in a repository to which you have access yourself. On handover, a description of the architecture, the data models, the integrations and the deployment is included, so another party can take over without first having to reverse-engineer anything. We work with mainstream technology, because that determines how many parties can take on the maintenance.

The manufacturer of the machine remains responsible for this, regardless of which system manages the documentation. The ERP makes that obligation manageable by linking the technical file to the project number, so that certificates, material certificates and drawing revisions can be traced per order. The framework is also changing: the Machinery Regulation (EU) 2023/1230 becomes mandatory from 20 January 2027. With a self-built system, the responsibility for building it in lies with you.

Related services

ERP for mixed production

For companies that combine discrete and process manufacturing: bills of materials alongside recipes, and batch and lot registration within the same system. See ERP for mixed production.

Custom ERP system

If the question extends beyond production, to purchasing, sales, service and administration, then a custom ERP system is the broader starting point.

Software for the manufacturing industry

Production control, shop floor data capture, quality records and machine integrations alongside the ERP itself: software for the manufacturing industry.

Taking a closer look at your ETO process

Tell us what your quote calculation looks like, when engineering releases, and what currently happens when a change comes in for a component that has already been ordered. Those three answers usually show whether a package, custom software or a combination fits best.

Book an advisory call info@appfront.nl