The ETO to CTO Journey

MISCHA VAN BRANDWIJK: So everybody, welcome to this industry talk around the Configure to Order Journey. Let's introduce myself first before we go on. I'm Mischa van Brandwijk, a customer success manager at Cadac Group, working for 30 plus years now in the manufacturing industry.

I had different roles in the past, started as an engineer in a manufacturing company and a machine builder. And then I switched to Cadac as a 3D CAD consultant with PDM and PLM implementations. Had eight years experience as an operations director responsible for the consulting team. In that period we developed a lot of best practices for the industry around PDM, PLM, and CPQ.

And at this moment, in the role of a customer success manager, I'm helping customers with their digital transition. Engineered to order to configure to order journeys give awareness on product thinking, configuration management, and helping customers defining their primary manufacturing processes.

Cadac is a Autodesk platinum reseller in the Netherlands. We have our headquarters in the South, in [? Hilla, ?] with several offices around Europe. The company exists for 35 plus years with around 250 experts. And we help customers in the AEC construction industry processing power manufacturing and governmental with the digital transition. And we say we are pioneers in the digital transformation.

So Marcel, your turn.

MARCEL DE GOEY: Thank you, Mischa. Hello, everybody. My name is Marcel de Goey. In the last 10 years, and as a business consultant working for the Cadac Group, it is my job to support our customers in their Configure to Order journey.

So my main activities are investigating the CTO potential, define programs and projects which contribute in realizing companies ambitions, form teams for the different initiatives, and be the sparring partner for team members, and also, connecting companies for gaining new insights.

So today, I would like to share some insights and experiences about Configure to Order. So this was a brief introduction. Mischa, take it away, please.

MISCHA VAN BRANDWIJK: Industry talk is talking about the Engineer to Order to Configure to Order journey. We see a trend in demand for how companies can make a Configure to Order transition. And this is the reason why we defined a method for this within Cadac a few years ago to help companies and our customers to really do the CTO transition.

In this session, we want to help the companies develop a vision around the Configure to Order transition, provide a method on how to implement the CTO products, help to change the organization around the Configure to Order process, and indicate the impact Configure to Order has on an organization.

But first, it's good to take a look at some industry challenges we see. And before that, we want to introduce two companies we helped with Engineer to Order to Configure to Order transition as an example.

At first, it's a company in the construction industry, Van Wijnen. They started with carpentry in 1907 and then moved on to be builders, and now grown into a company that is more than that. They help people and society to build buildings that increase the quality of living, working, learning, and living. And they develop, build, and manage, and maintain the developed houses from 26 locations in the Netherlands.

It's a pretty big company for the Netherlands. And the reasons they adopted the Configure to Order journey is because the affordability of housing is under a lot of pressure, and in a time of housing shortage, scarcity of raw materials and manpower sharply increased production costs, circularity and energy neutral construction. Affordable housing is hardly available for many Dutch people, and that's why they had to change.

How did they do that? They created a modular housing platform and built a Configure to Order concrete factory in the north of the Netherlands. The production capacity of that factory is around 4,000 homes a year, 20 a day. And their goal was to build a house in one day and make it habitable within 15 days.

So traditionally, it costs around 12 to 18 months to build a complete neighborhood of several houses. And what you see now with this new factory is going to 15 days. It's incredible what they are doing at the moment.

And that factory looks like an automotive factory, full of robotization and digitization. And that's all being connected to a platform where the end customer can configure their house through a configurator. And that's pretty unique for the Netherlands.

The other company as an example is manufacturing industry. It's Weir. Weir is a large engineering company within the mining industry. The solutions are being developed and deployed all over the globe. The product being displayed on the slide crushes rocks to collect minerals.

Their ambition was within Weir [? Venlo, ?] a business unit in the Netherlands, that they had to double the revenue within three years without expanding staff. And to fulfill this ambition, Configure to Order is their strategy means within the organization to incorporate. So pretty interesting companies which took the journey of Configure to Order.

So in current times, you see a number of challenges that many companies struggle with, and that's finding the right balance between product leadership, customer intimacy, and operational excellence. And that's not easy. And in addition, we see companies that, due to a great diversity in the product portfolio, must be able to follow multiple strategies and business processes.

And on the picture you see the marketing model from Treacy & Wiersema, and that talks about where product leadership goes over more time for innovation, have more innovative products on the market, and deliver them in a very short time on the market.

Where operational excellence speaks over reduce of failure costs and increase of turnover or short term or the lead time. And at last, there is the customer intimacy, and that talks about reduce quotation lead time, introduce new products faster, and an optimal customer experience.

So these are some typical challenges that our customers are sharing on a regular basis. And make them more practical, these companies are unable to grow because of scarcity of technical personal, competence due to local heroes or one-man armies, unable to develop future products and services because of the manpower and competencies which are not in the company, loss of order and marketing position due to delivery times, due to pricing, and loss of orders and marketing due to long quotation processes.

And most of the time, there is a lot of organizational inefficiency because processes are not defined, disconnected departments as a result, and there is no common language on product information.

So unable to grow has a lot to do with the demographic situation. And as an example, in the Netherlands, we see in a chart from a statistical company called the CBS that the research shows that 34% of technical companies state that they are unable to grow to shortage of personnel and employees. 90% blame the shortage of production tooling as a main reason.

This is probably not only a problem in the Netherlands but a global trend. So Marcel, let's go to the definition of Configure to Order and help us out on that subject.

MARCEL DE GOEY: All right, thank you, Mischa, for this introduction and explaining the industry challenges. Of course, I'm more than happy to share our perspective on a Configure to Order way of working and how this can be a strategy to help overcome the challenges that a lot of companies are facing today.

So when we take a look at our customer processes, we recognize, in general, three types of primary processes. These processes are identified as Configure to Order process on the left, and Engineering to Order process, and a Design to Order process.

So there are two main differences that separates these three types of processes and how they can be recognized. So the first difference is about the moment in time when the required product data is being created.

So for a CTO, the product data is already prepared and available upfront in the process. And for ETO we see that some adjustments or small new designs and product data is created after the order is received. And of course, on the other hand, on the other perspective we have on the right, the DTO process. And then DTO process has more development cycles required. So the actual useful data is being created at a very late stage in the process.

The second main difference is about the people that are involved in these processes. So for CTO, there can be very little people involved since the product data creation is upfront available and can be generated automatically. So the data goes directly from the sales to the production department, where we see the ETO mostly sales engineering and engineering is involved to get some clarification on requirements and specifications.

Within the DTO process where a new functionality needs to be designed, we see often a very large role for the R&D department. And in addition to that, the whole organization needs to support that project to come in the end to a new functional product.

So at this slide, we see two main processes often defined as ETO and DTO. Both the processes begin with a customer and the salesperson getting clarity and an agreement on the commercial and technical requirements.

Once there is an order, the engineer starts by designing the product. And once new functionality is required, R&D people join in the process.

So when the product is released from engineering, work preparation and purchasing can start by calculating and purchasing the components. If all the required components are produced and available, the assembly process can start.

And then we go to the testing phase. The product can be commissioned and installed at the customer site. And the maintenance phase is being transferred to the service organization.

So within these two types of processes, people speak a lot about their products referring as it's a one-of-a-kind product. It's called a special product, or it's a customer-specific solutions. All kinds of those terms you hear.

So and in the bottom, we see how this process is actually being experienced by the people within the process. So due to all kinds of missing information and unclarities within the specification process, a lot of communication and rework needs to be done to be able to deliver a functional product. So it appears that every time these processes are being executed, they are experienced for the very first time.

So to have a better understanding about the first time, let's have a look at some first-time experiences. So in the Netherlands, everybody is used to ride a bike. So we have about 17 million people and 22 million bicycles.

So to be able to survive on a bike in Dutch traffic, we need to learn to ride a bike on a very early age. And how was it like riding a bike for the very first time? Well, I will share a personal experience. For me, it didn't work out that well. It's also, when we take another example, as well as driving a car for the very first time, it might also not be that successful as well.

So try to imagine what happens if you perform a cycling activity. We do it for 1,000 time. So we developed and prepared our equipment. We know where to go. We know when to finish. We are able to improve by every time we perform this activity. This test will go a lot better.

And of course, the same experiences are also for our national hero Max Verstappen when he is driving his Formula One car. He is also able to improve by every training activity that he does.

So the keywords that we are looking for here is repetition. If we are able to create repetition within our products and processes, we are also able to automate these processes.

And this is where CTO comes out. So let's have a look at how CTO helps out by creating this repetition because the first thing that we need to do about CTO is to establish a common language.

So when we start the project, we normally ask the teams to write down all types of buzzwords when they think about Configure to Order. So a very small example of such a word cloud is being displayed on the screen. And after this exercise, everybody looks a bit like this because those are a lot of difficult words when you see them for the very first time.

So what we need to do is to establish a common language. We clarify, at least, the highlighted words. And for this clarification we use some examples of the most modular product ever that everybody knows and where we all grew up with. And yes, indeed, it is Lego, of course. So let's have a look.

Imagine the Lego car on the bottom right on the slide is one of the specific products from our customers. So for a manufacturing company this could be a machine. For a construction company this could be a house, for instance.

So every product consists of some typical components. These collections of components we call modules. So in general, we see that a module is a generic collection, and it has no physical representation or identification. And on the screen, we see five modules here, for instance.

So on the left, from left to right, we have a front module. We have an engine module. We have a chassis module in the center. We have a body module, and we have an axis module completely on the right.

So when we have a closer look on the front module, we can imagine this module comes in different representations. So within the highlighted circle, we have a front module of a car executed with a radiator in this case. So we call this a variant of the front module.

Next to the radiator variant, we also have a variant without the radiator. This is the second variant. It's highlighted in the circle. So horizontally, we speak about modules, and these are generic. Vertically, we speak about variants, and these are very specific.

So in the case of variants, we know the specification, the costing involved, unknown. We know the interaction with all the variants, and we are able to define their interfacing. And as you can see, there is one exception in the center. It is located-- it's the chassis module, and there's only one variant of this module.

So this means, for the end product, that every car is using the same execution of the chassis, and this makes a lot of people happy in the organization.

All right, the next one, so all right, to create a product we need a certain set of interfacing variants which can be combined. So the product in the yellow right on the circle we call a configuration. And if you want to create a different product, we use a different sets of variants and to create another configuration.

So the collection of all these variants, we call this a product platform. And it's important that the content of the product platform matches the market needs for a certain period of time. This is where product management begins.

So in this example of the LEGO platform, it consists of 11 variants because it's the sum of the variants. So the question is, how many configurations can we make with these 11 variants without considering any boundaries?

So instead of the sum, we can now multiply the variance, and this gives us 36 unique product configurations. So with 11 variants, we can create 36 configurations. And we only maintain the specification and documentation of these 11 variants instead of these 36 products.

So that's a huge difference in terms of workload for the organization.

Then we also have the product mix. This slide is showing how to identify the type of product variation within product structures of configuration. So the CTO product configuration on the left contains only variants from the platform. So it's a 100% CTO configuration.

If the product contains any ETO or DTO specifications, the interaction with the other variants needs to be validated at the product level. So of course, we embrace and stimulate the use of CTO variants within ETO and DTO products as much as possible. And it's important to realize that only the CTO content is part of the platform.

So ETO and DTO components which are being developed in projects, they are excluded from the platform. And as a result, they are not being maintained.

So now we have a common understanding. Let's have a look at what benefits it may have for the organization. So imagine the product platform is available for the sales organization or even for customers. We see this on the left side of the slide. And it's based on the configuration process. [? Seals ?] is able to configure the required product and already reserve a time slot for production instantly.

So involvement of the engineering and work preparation department is no longer required since all the product specifications are validated and released upfront in the process.

So the engineering time that comes available can be used for innovation projects, for design updates, for more difficult DTO projects. These are just some examples.

If you take a look for the sales organization, what's in it for sales? Well, imagine the product platform is being implemented in CPQ software, which makes it possible for salespersons or agents to instantly configure multiple products, generate quotations automatically. This can be done on a customer site and with the use of mobile devices. So the CPQ in the sales process is all about being the first and the first time right.

If they can look at production, so what's in it for production, instead of using manual tooling, we can think about a fully automated production process as long as we are able to create repetition and product design. And also, for assembly, because we know exactly what scope of products we can expect, we can effectively arrange assembly working spaces.

So in these working spaces we have only the required tools available. So there's minimum room for error, and all kinds of instruments from the lean manufacturing toolkits become more interesting to support of the use.

So how nice would it be if you assure the components will always fit because of the high design quality? And imagine separating testing of some functionalities becomes also possible. So we don't need any [INAUDIBLE] processes anymore. We just know the product works properly. It's tested separately. And once installed inside on the customer side, it's working as it should be.

So what's in it for the organization? This is probably the biggest awareness of all, and it's important to realize that the correctness of the product data is key. So this is a commonly known chart, and it's being displayed from the Configuration Management Institute.

And it shows that, horizontally, that once the correctness of the data is not actually 100% and it declines by 8%, for example, the effectiveness of employees drops by 50% while executing a process with only eight tasks combined. In other words, required resources to double their effort to finish the process.

So it's shocking, but it's very recognizable because how often does an engineer need to contact sales to get clarification about the requirements or the specifications from a customer? It's just an example which occurs on a daily basis.

And what does it mean financially? So on the left side, we see a classic ETO effort and on the right side a typical CTO one. So the difference in this example is the amount of engineering and work preparation effort while executing 50 projects with an hourly rate of $50.

So of course, this example results in a significant saving, but it's important to make two remarks. So once the product platform is defined and designed, it needs to be maintained as well. So that need to be taken into account. And also, for a lot of customers, it's not even the financial benefits which are important for decision making. But it's the actual engineering time that comes available and which can be used for strategic purposes.

And if you take a look at what does it mean for the industry and generally, we can say that, in time, product cost price will be reduced. Repetition enables quality improvements. Elimination of workloads results in a shorter delivery time. There will be less diversity and this approves the availability of spare parts. And service and upgrade time reduces due to the exchangeability of the modules.

So in the end, when we have a summarize, we see we are more cost efficient with less errors resulting in the very first time right. So well, Mischa, I know this all sounds great. So tell us how do we do this?

MISCHA VAN BRANDWIJK: Great. So thanks, Marcel. We have explained our view on Configure to Order, Engineered to Order, Designed to Order products, processes, and how we apply these in the industry. Now, let's take a look on how to create the actual transition.

Most important is you need to embrace change. Embracing change implies that you don't see change as a adversity but an opportunity to improve yourself or try new things. You need to be positive about your situation, capabilities, and ability to adapt to change. It can allow enjoy new experiences, develop new skills and ideas, and learn a new knowledge and information.

In the next slides we address some difficult topics to take into consideration when starting a big organizational change. In the end, we are all people with emotions, and we go through this process which everybody knows as the Kubler-Ross grief curve.

It's important to note that this curve is being taken as an individual, as a department, for instance, engineering department or a sales department, and in the end, as an entire organization. Everybody will go through these different phases in their own pace. And we can all imagine that an employee with 30 years of experience has more to let go than a student which just started at the first job.

Knowing this, it's absolutely mandatory to be aware of people struggling with these emotions in different phases, and support needs to be given by management. It's a lovely quote from Darwin around change. "It's not the strongest of the species that survives, nor the most intelligent that survives. It's the one that is most adaptable to change." So let's embrace change.

It's also important to use a program approach for this Configure to Order transition. Program management ensures a controlled implementation of a company-wide change through prioritizing and executing activities and projects. As a result, new competencies are developed and anchored in your organization. These make it possible to achieve new and/or revised business goals.

The advantage of a program is that it's flexible. So during the ride, it's possible to add or delete projects or activities within the roadmap because, in time, your situation as a company can change. This is in contrast to a project where a fixed and defined outcome is determined within time and money.

Within the program approach, we work from right to left. So always start from vision and business objectives. Don't be tempted to start with IT projects. Where do we want to be as an organization in 4 to 5 years?

From there, we work toward subgoals and arrive at the competencies that are necessary to achieve these business objectives. To achieve a competency, you need activities or a project. So an example of a competence is we want to handle 80% of our orders according to a Configure to Order method. This is a competency that the organization does not yet have but should acquire.

To achieve this competence, a transition is needed, and activities and projects have to be defined to implement the competence in your organization. Projects and activities from the project roadmap for the coming years to achieve the transition from Engineered to Order to Configure to Order. And projects can be IT implementations, process definitions, Configure to Order product definitions. All that kind of activities are present in the project roadmap.

Of course, you cannot do this at your home. You need a leading team with a broad representation of your organization. You need the board to define the business goals and define horizons. You need sales and marketing. They know what your customers need from out of the industry.

You need engineering to define a technical solution, work preparation and purchasing. How should we make, buy it? Assembly service, how should we assembly and maintain? And of course, a program manager for guiding this program and prioritize projects and give feedback to the board.

And consultants to support and give hands and advice and to connect to other companies which already did the Configure to Order transition.

And expect a lot of homework. That's important. And because of this homework and this big transition, your worst enemy is availability of resources.

We are too busy, too many orders, less employees, so we can't have a project to do things better and more efficient. These are the words we continually hear in the industry. So your challenges will never be solved when you keep doing the things at the same way you are doing them for 40 years.

So within the program, define a Configure to Order roadmap. So in phase one, you do a quick scan where you determine objectives and check the business case and also form the theme.

And phase two is about product definition. In this phase, the team will investigate and determine the trends, requirements, and features of a product. And once phase two is finished, sales can already start selling according to new product information while the engineers start with phase three, the design update.

And from phase three you go to phase four. Maybe change some existing processes or steps in your primary process. And of course, new processes should be in place because you should think about new product introduction or a change process and product management.

And at the end, also, the processes should be supported by a good IT implementation. So you need a configure price quote solution, or your engineering department design automation should be implemented. Product data management, product lifecycle management, and of course, your ERP system should all be in place to support those new processes and the Configure to Order transition.

And after the first product is implemented in your new process and supported by the IT environment, you can start with the product definition of the second one. Keep going through all the products needed in the Configure to Order process.

So we see four pillars within the Configure to Order approach. And we will need a review of them.

So product, process, organization, and IT, these are the four which have to be in balance. And again, do not start with the subject IT.

First, we start with the product. The product is your IP that you put on the market. Make sure the platform is defined and that it matches the market need. After definition, this platform can also be maintained by product management.

Set up the correct processes within the organization whereby each type of product is assigned to its own order process as efficient as possible. In general, the yellow processes, primary process are in place at most companies. But think about new product introduction, change processes, a very healthy product platform. These are missing at most companies we see in the industry.

On the basis of process, the organization will probably also have to be adjusted on certain points, or new roles will arise that must be given a place. Maybe even move people to roles that better fits with their capabilities and competencies. And these are the hard subjects because that has all to do with change.

Based on product process and organization, we have to design the IT landscape, which the organization we're working for the coming years and will be implemented in the coming years.

So in this picture, a typical Configure to Order process example where you see simply a process defined versus the tooling which will support that process. So Configure to Order, a configure price quote solution to support the sales department, 3D CAD, Autodesk Inventor, or Autodesk Revit for AEC, a CPQ reposition, Epicore, and a lot of customers but can also be other products in the market available.

Design automation, it's very important to have that automation on the engineering with Inventor, iLogic, or next product configuration. PDM, also that's full professional, of course. A PLM out of that Fusion Manage will fit there. Or if there is prediction, you can use the Cam products.

Of course, ERP and your share end system has a place in the whole process. And sometimes, you need an integration platform to integrate all the systems to communicate the product information from start, from sales to all over the process to service. And we can use Cadac Connect for that. That's an integration platform based on Microsoft Azure.

So that's the IT part of the presentation. So Marcel, can you show us some examples of product platform definitions from some companies as we are almost at the end of the presentation?

MARCEL DE GOEY: Yes, of course, Mischa. Let's take a short look at some of the platforms that are being built by our customers. We have two examples that we can share.

So the first one is HTC, which is a company that develops and produces speedgates in the Netherlands. And the speedgates are being deployed mainly in Europe. And HTC is quite interesting because they have a manufacturing business process, but for the sales organization they are mainly active within the construction world. So they are a bit of a hybrid, so they need hybrid solutions.

Weir was already introduced by Mischa earlier on in the presentation, and Goudsmit is a company which has a broad product portfolio. And this example, in the case that we show, is a recycling machine. And also this machine is being developed and produced in the Netherlands as well.

So these platform visualizations give a great insight in the complexity and the scale of the product platform. So it helps in communicating and informing people in the organization that are actually not involved in these projects but will be influenced by it.

So these three companies are successful, and they share one number one priority. This priority is actually the quality of their product data, which has the focus.

So if you have become interested, I suggest to check out the corporate websites of these companies for some really useful information. And Mischa, any closing words from you?

MISCHA VAN BRANDWIJK: Yeah, of course. Yeah, of course. Marcel inspired you with this industry talk and give you some insights about the Configure to Order journey. And of course, we hope to see you step into this journey, like many others in the industry.

We believe Configure to Order is the method to achieve more wins with greater and better products and stay ahead of your competition.

So if you have questions, don't hesitate to reach out to us or add a comment to the class page. Or if you like this class, please, click recommend. So thanks for your attention.