A Performance Measurement System to Support Materials Management in Engineer-to-Order Companies

Abstract

Materials management is one of the most important and critical processes within production planning and control in engineer-to-order (ETO) companies. To bring attention to this activity, ETO companies may benefit from a performance measurement system (PMS) that systematically monitors how well the activity is carried out. However, limited literature specifically addressing performance measurement in ETO has been identified. As a response to this, literature on ETO and performance management and –measurement has been reviewed and discussed in order to propose a PMS for measuring materials management performance in ETO. The research provides a basis for further studies on the topic, and the proposed PMS could be used by managers in ETO companies to assess and improve their materials management practice.

Designing a performance measurement system to support materials management in engineer-to-order: a case study

“…Besides previous work by the authors [1,6], no literature explicitly referring to PMS for ETO has been identified. However, quite a bit of literature on performance measurement in construction, which shares the same discontinuity aspects as ETO processes, exists [45][46][47][48][49][50].…”

“…All activities in the manufacturing value chain, i.e., design/ engineering, procurement and fabrication, final assembly and shipment, are initiated by the customer order [3]. Failing to supply the required materials in right quantities and at the right time may interrupt work further downstream in the manufacturing value chain, which increases the risk of breaching due date agreements and ultimately losing customer satisfaction [1]. Materials management, i.e., management of the flow of materials and information to match supply and demand in the manufacturing value chain [4], is therefore considered to be imperative within production planning and control in ETO [5].…”

“…The engineer-to-order (ETO) production situation is receiving increased attention from both researchers and practitioners as customer preferences are shifting from standard, high-volume products to more complex and customized products [1]. In ETO, products are manufactured to meet a specific customer's needs by carrying out unique engineering or significant customization [2].…”

“…Due to the importance of materials management in ETO companies, ETO companies could arguably benefit from measuring how well the activity is carried out [1]. The term performance measurement system (PMS) is used for the set of metrics used to quantify the efficiency and effectiveness of such activities [7].…”

A Lean Approach for Real-Time Planning and Monitoring in Engineer-to-Order Construction Projects

“…High inventory levels and long lead times Reduction of waste and inefficiencies through lean management [44][45][46] Interruptions due to missing material Synchronization of fabrication and installation [44,47,48] Problems identified in a late stage Immediate or real-time feedback loops of schedule and budget deviations [4,46,49] Unreliable schedules and construction progress measurement [4,47,49] Centralized planning by project manager Decentralized and operational monitoring and planning [4,46,50] Based on experience of persons rather than systems/methods Systematic and methodological approach [4,45,50,51] Collaboration between participants Collaborative planning and definition of installation tasks [4,44,50] Missing development of IT tools in construction…”