The term “e-commerce” is most commonly associated with the retail environment. And indeed, the ability to browse, search, and order products remotely has forever changed how we buy things. In the business-to-business world, companies selling commodity items have also erected storefronts, and those selling to large original equipment manufacturers (OEMs) are engaged in e-commerce through electronic data interchange (EDI).
But what of more complex manufacturers, those that engineer products to customer orders; engineering, procurement, construction (EPC) contractors; or those involved in large, capital equipment projects that are highly collaborative? With the right enterprise application environment, these companies can also harness the efficiencies of e-commerce. In this article, I discuss the benefits that engineer-to-order (ETO) manufacturers can realize by adopting e-commerce practices as well as the specific demands that e-commerce for ETO will place on an enterprise software product.
E-commerce for ETO can drive value in several ways, specifically by
- reducing non–value-added work involved in locating and forwarding documents,
- eliminating errors resulting from working on incorrect or outdated revisions of documents, and
- improving customer service.
To realize these benefits, an underlying enterprise application used by an ETO manufacturer must be made directly available through collaboration portals that are customizable to the specific needs of the various parties involved in the complex project cycle.
Complexity and Collaboration
In a make-to-stock environment, e-commerce is relatively simple because you have a list of products and you need to see their price and availability. You may want to have a storefront where you can browse, select items, put them in a basket, and check out. Even in a make-to-order environment, e-commerce is simple: activity is initiated with the electronic order, and that order results in a pull that draws in inventory, labor, manufacturing capacity, and other resources. But when you are in an ETO environment or project-based manufacturing environment, e-commerce needs to encompass more than simple transactional data. There is a lot of discussion and engineering work related to each project or product build, and that results in a lot of documents to support the order lifecycle process. This means that e-commerce in ETO must encompass all of the collaborative communications and documents that drive the entire project, starting with the original sale of the project and specifications or requirements, through the phases of engineering and design, materials and components procurement, manufacturing, and delivery. In some cases, on-site installation and aftermarket service must also be included in a system designed to facilitate e-commerce that extends over the entire lifecycle of a manufactured product or asset.
Perhaps the most desirable approach is to open a window directly into the application—a window that is tailored for easy communication and streamlined management of all of the documents that are shared with a particular stakeholder. This window can include drawings, the actual order, shop orders, work orders, manufacturing data—even the project plan or project master. For an asset-intensive situation such as capital equipment or EPC of an electric generation plant or offshore oil rig, you could also make available an asset master. Depending on the stakeholder and the nature of the underlying manufacturing process, the specific items available through this collaboration portal or window will change. Regardless, the goal is the same: self-service and read access of appropriate, up-to-date, relevant data to all the project stakeholders.
This allows a project stakeholder, in a very streamlined fashion, to query and add information to the product, adding value. In a typical product or order lifecycle, there is a substantial amount of communication, and the portal adds value because it organizes all of these communications on all of the topics the project team is communicating about. For instance, a portal can present the following:
- documents and specifications and other related drawings through a document retrieval area
- a notes area
- a product structure or asset structure
All of this needs to be provided through a communication framework that is easy to access and easy to manage.
Figure 1. This screen from IFS Applications includes an Approve Documents portal at the upper left. Documents appear here to be automatically routed through a project team approval process.
The complex nature of ETO and the large number of project stakeholders involved really demands an information technology (IT) strategy that facilitates collaboration with any business partner—customer, supplier, or even employee—by providing this type of controlled access to data in the environment of the enterprise resource planning (ERP) system. The portal presents information to differently involved parties to facilitate communication and document it. When you are in an ETO or project environment, there are usually many collaborators working on design, procurement, engineering, manufacturing, fabrication, installation, and commissioning. It is important that all of them are using the same documents and that retrieving these documents is easy yet well controlled.
This eliminates non–value-added work associated with looking for documents, and with revision control on project documents. Doing away with this nonproductive is one way to drive lean benefits in ETO.
Value of Integration
There are essentially two approaches to collaboration portals. One involves the use of third-party software or Web applications that are separate from an ERP application. These tools may have their place, but for ETO they fail to solve some of the major challenges of collaborating with diverse parties in high-value projects where mistakes due to an incorrect plan revision can cost hundreds of thousands or even millions of dollars. If internal users of an ERP system can make design changes that are not immediately available to external users—or vice versa—errors due to incorrect revisions are still likely. Maintaining two separate systems—ERP for internal users and a document-sharing or collaboration environment for external collaborators—also adds a layer of bureaucracy and duplication of work that further drain productivity and margin.
A contrasting approach makes the collaboration portal just one more user interface (UI) into the enterprise application. The advantage of this approach is that all of the functionality that is in the ERP application, plus documents, asset masters, product structures, equipment information, customer information, and supplier information—the entire project plan—is available to project stakeholders inside and outside of a company.
The portal does not include different functionality from the ERP functionality but rather repackages the standard underlying ERP functionality in a more streamlined fashion. Nor is it different data; the portal is accessing the same data and the same documents within the ERP environment. The UI simply allows you to present different information to stakeholders and give them varying degrees of ability to edit data, depending on their role in the project, i.e., whether they are an engineer, a component supplier, a maintenance or installation contractor, or a customer. Relying on functionality in the ERP environment itself to drive the portal also means the underlying enterprise application needs to offer robust enough functionality to support all of these different users. Otherwise, it will be difficult to meet the needs of all of the project stakeholders through a portal without adding another layer of functionality and complexity. The portal should simply be a presentation layer that masks much of the complexity of the underlying application.
Some enterprise software companies have built their applications on this latter approach, opening portals directly into the ERP environment. We feel this is the only way to deliver accurate and real-time information to a diverse project team over the order lifecycle and to facilitate effective collaboration. It is also the only way to avoid adding a new layer of administrative, non–value-added work on an already stressed project team.
Following is a list of considerations for selecting enterprise software that truly offers this capability.
How to Select ERP for ETO E-commerce
How you set up this UI is important. You want to make sure it is not an entirely different implementation to set up this portal. It is important that there is already a framework within the application to develop the portal pages targeting each type of collaborator. You could add a supplier portal, an engineering portal, a customer portal, a customer service portal, a field service portal—all easily developed with a few clicks. Identify the types of information that is to appear in each and the permissions granted each type of stakeholder and you should be ready to go.
In order to assure agility in a portal mechanism, you need a portal framework that can be adapted very easily. This requires an agile portal framework that can be configured with a number of applications to allow a user, for instance, to look at an asset master, review documents, open a bulletin board, review procurement activities, or update a project plan. All of these must be present as existing functionality within the applications so they can simply be configured in a portal view for a specific type of stakeholder. Identify how many columns appear on the portal when it displays, in what order you want these functional windows, and how you want them to behave when someone clicks on them.
The collaboration portal user needs to be looking at the same information a fully privileged user within the four walls of the organization looks at, just in a streamlined fashion that offers only the relevant information and, perhaps even more importantly, only the access and permissions appropriate for his or her role in a project.
When assessing the suitability of enterprise applications for ETO e-commerce, there are two specific questions to ask potential vendors:
Is the UI used by collaborators over the Web a bolt-on, such as Microsoft Sharepoint or Groove, or is it a resident part of the application itself? Make sure that collaboration portals leverage both functionality and data within the underlying ERP system. How do portal users access information? Is it a copy of the information, or is it a window into the same database and document management that users inside the company are using. Sharepoint or Groove systems involve a repository of documents outside of the ERP system. Truly integrated portals on the other hand represent real-time data right out of the database that underpins an ERP solution.
Is there programming required to set up portals, or is there a tool kit where predefined pieces of information can be packed into portal views? If a vendor has documented strengths in your industry, perhaps there is even a tool kit with portals predefined for your various project stakeholders. An ERP vendor must be familiar enough with what a complex engineer-to-order or asset-intensive manufacturer needs and offer solutions that will be perfectly workable right out of the box. Customers can then, of course, personalize or reconfigure them, using the tool kit, to meet their unique requirements.
Once an ETO manufacturer implements a truly agile and effective portal system to facilitate e-commerce, you can expect to realize a number of benefits in a number of areas of the company.
One of the most attractive benefits will be a lean approach to document management. An ETO company running optimized collaborative e-commerce is no longer wasting time posting the current revision of a document to make it available for viewing and revision under very strict control parameters. You encounter less difficulty and a lot less waste if you know you are looking at the current version of a document. Consider for a moment the complexity of a situation where you have two or three or more engineers collaborating on a design, working on different assemblies or different phases of a capital project. Lacking an effective collaboration portal, in order for them to be sure they are working on the right revision, they need to make some phone calls, send e-mail to people, and often wait for a response. In a well-designed collaboration portal, however, you have a gateway to the most recent document, with visibility onto who else is working on it, what state it is in, and who else has related documents checked out.
In this optimized e-commerce portal, each engineer can see at a glance whether he or she has the current version, who else needs this document, and who else is working on it. This eliminates the non–value-added work of confirming that you have the current version of a document, forwarding documents through e-mail or other means, and then waiting to get the document back before the next step in a process can commence.
Internal parties using a collaboration portal can expect to eliminate non–value-added work in the area of supplier management. Lacking an optimized portal environment for ETO e-commerce, it could be that they will spend excessive time managing e-mail. Supplier management through e-mail also means that critical documents likely need to be transferred out of ERP and placed into e-mail. This time waster can be eliminated with the right portal environment. Generating requirements for suppliers to fulfill, for instance, can be automated in an open-access collaboration portal, as all of the information from a purchase order would flow directly out through the portal to the relevant suppliers. This would allow you to work in a paperless fashion, and allow vendors to see instantly what is needed, how much of a specific item is needed, when it is needed, and what the payment terms and price are, so they can carry on a negotiation or simply fulfill the purchase order.
An e-commerce collaboration portal can also be leveraged in different ways to create collaboration environments that are entirely internal. In most ERP systems, you have lots of different windows in some type of folder tree arrangement. While users of some systems can create shortcuts and links to frequently used screens, a specific-use portal could be the most elegant approach when you need to regularly interact with specific sets of documents, customer orders, and even contracts. That is easily enough done within the standard functionality of an ERP system, but if you can arrange all of the necessary elements within a single view, you can bring efficiency to regularly performed processes and functions. If this internal use of portals can be used as a means of reducing waste in dealing with a customer’s inquiry, think of how that degree of responsiveness and efficiency would be perceived by a new customer or by an existing customer you would like to earn additional business from.
ETO manufacturers who have the right approach to e-commerce collaboration portals will enjoy a definite advantage. In the meantime, their less-progressive competitors will be at a decided disadvantage. An ETO manufacturer that lacks an effective e-commerce approach will devote additional resources to project administration, can experience lost revenue from errors attributable to poor revision control, and may have a harder time being responsive enough to keep customers satisfied. And the best way to realize the benefits of e-commerce in the ETO environment is with ERP and other enterprise software that allows creation of direct collaboration portals direction into ERP functionality and data.
Greg Romanello is a business solutions consultant for IFS North America, with thirty years of materials management and manufacturing industry experience. His background includes supporting, designing, and implementing shop-floor information systems, project management systems, and comprehensive business ERP systems. Romanello has filled these roles both domestically and internationally, as he has been involved in discrete, job, and repetitive manufacturing implementations in engineer-, configure-, assemble-, and make-to-order and mixed-mode manufacturing environments. Romanello holds a degree in economics from Ripon College, Ripon, Wisconsin (USA) and various certifications, including production and inventory management (CPIM) and integrated resource management (CIRM) from APICS.