1. 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, 2003 - Toronto, Ontario

2. 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

3. The Supply Chain Revisited (SCL)

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

5. 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

6. 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

7. Engineering Influences

8. Confirming Product & Price

9. 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

10. Technological Trends

11. 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

12. 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

13. 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

14. DCA System Architecture

15. 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

16. Dramatic Cycle Time Reduction in minutes

17. Changes Market Dynamics

18. 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

19. 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…

20. 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

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

22. 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

23. 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

24. Case Study #1: PRODUCT

25. Case Study #1: COSTS Sales Staff$350,000 12 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

26. 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

27. 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

28. Case Study #2: PROTOTYPE

30. Case Study #2: VISUALIZATION

31. Case Study #2: DRAWINGS

32. Case Study #2: COSTING

33. 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

34. Contact Information Paul Doherty, MBA, PhD, P.Eng. Wilfrid Laurier University Dept. of Business & Economics Waterloo, Ontario N2L 3C5 Tel: (519) 884-0710 ext 6295# Email: pdoherty@wlu.ca The Missing Link in Engineer-to-Order Supply Chain Logistics