The Missing Link in Engineer-to-Order Supply Chain Logistics Presentation by Dr. Paul Doherty School of Business, Wilfrid Laurier University Supply Chain Logistics 2003 Conference and Tradeshow May 14-16, Toronto, Ontario

Outline 1. The Supply Chain Revisited 2. Engineer-to-Order Manufacturing 3. Design & Costing Automation 4. DCA Impact on Manufacturing 5. DCA Case Studies 6. Discussion

The Supply Chain Revisited (SCL)

Product & Price in Doubt Product design & price optimized during quotation process Conventional engineering process is not predictable Delivery is arbitrarily affected … SCL BREAKS DOWN

Which Industries Suffer? Characteristics Complex, high-value assembled products Iterative quotation process Design never fixed until order placement Delivery lead time measured in weeks … Engineer-to-Order manufacturing

Engineer-to-Order Manufacturing Nature of business Standard product with infinite variations Customer specs drive configuration Established Engineering design rules Defined purchase and fabrication costs SCL has limited foothold Traditional engineering approaches are the obstacle

Engineering Influences

Confirming Product & Price

Why SCL Breaks Down Product definition is not automated SCL fails where all product-related data is not instantly accessible Major opportunity for application of new business-enabling technology Fundamental change necessary Design and process standardization Enterprise integration of technical workflow

Technological Trends

Business-Enabling Technology Subset of Business Intelligence Systems (BIS) Next-generation software platforms Automates knowledge processes Provides real-time decision-making Minimizes industrial process redundancy

Design & Costing Automation Computerization of product design and fabrication standards to minimize Engineering effort. "Engineer-in-a-Box" Support for mission-critical function in engineer-to-order manufacturing

Ideal DCA Technology Model Web-based enterprise environment Embedded geometric product definition driven by engineering and fabrication rules Interface enabling non-technical staff to define and validate unique configurations Automatic 3D CAD assembly generation Detailed technical documentation extraction Interfaced with ERP for costing Tied to scheduling for promised delivery date

DCA System Architecture

DCA Impact on Manufacturing Cost Savings (% of annual revenue) Sales Eliminate paperwork Engineering Eliminate redundant quote-related design work Purchasing Minimize procurement errors and return-stocking charges Estimating Eliminate redundant quote-related costing work Production Eliminate Engineering Change Orders

Dramatic Cycle Time Reduction in minutes

Changes Market Dynamics

Other DCA Benefits Deliver better customer service Improve product quality & consistency Grow market opportunity by focusing on new product development Weather economic downturns with stabilized fixed costs

Overview of DCA Operation 1. Enter customer specifications (via Web?) 2. Design rules check for errors or inconsistency 3. Design rules report prints out 4. A 3D model (digital prototype) is generated automatically Then…

Overview of DCA Operation 5. Technical documents generated: Bill of Materials Production drawings Labor content Approval drawing Price quotation Web-based visual Spare parts list Capable-to-delivery date 6. Customer acceptance received 7. Quotation is confirmed as Order and transferred to ERP

Downstream DCA Add-ons Automated CNC programming CRM and SFA Projections Sales and revenue Material requirements Capacity demand Automated production purchasing Field service documentation

DCA is SCL's Missing Link Provides total product data visibility Treats design data as any other logistics asset Drives error-free manufacturing for variable product definition Puts engineered-to-order product on predictable schedule

Case Study #1: PROFILE ProductPressure Vessels ($10,000+ per unit) Configurability80% of sales are standard variations Cost ElementsEngineering, material, welding Annual Revenue$12 million (240 units / year) Quote 'Hit' Rate10% of approximately 2,400 quotes / year

Case Study #1: PRODUCT

Case Study #1: COSTS Sales Staff$350, people (excluding overhead) Estimating Staff$100,000 Engineering Staff$350,000 Sales & Design Salaries$800,000 / year Cost for Std. Variations (80%) $640,000 / year

Case Study #1: OUTCOME TraditionalDesign & Costing Automation Features Generally less accurate Results depend on staff skill No central searchable records Cumulative quotation lead time average of 3 weeks Precise cost-base pricing of purchases, processes, labour Bill of Mat'ls & labor content Precise drawings & visuals Retain design from quote to PO Time 1 manday per quote or design 500 minutes Multiple iterations on demand 10 minutes Result 98% cycle time compression 5% of Sales reduction in fixed costs

Case Study #2: PROFILE ProductEngineered designs and costing for custom-built homes Configurability95% of sales are standard variations Cost ElementsArchitecture, Engineering, webserver infrastructure Annual RevenueStartup, plan 1,000 homes 1 st yr Value PropositionCustom homes at production prices throughout North America

Case Study #2: PROTOTYPE

Case Study #2: VISUALIZATION

Case Study #2: DRAWINGS

Case Study #2: COSTING

Discussion DCA is revolutionizing manufacturing Enterprise technology with <1 year ROI Ensures North American competitiveness Gradual erosion of ERP importance SCL needs the Missing Link Expand SCL into engineer-to-order industry Close the delivery loop for complex products Smoother supply chain interactions

Contact Information Paul Doherty, MBA, PhD, P.Eng. Wilfrid Laurier University Dept. of Business & Economics Waterloo, Ontario N2L 3C5 Tel: (519) ext 6295# The Missing Link in Engineer-to-Order Supply Chain Logistics