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

Abstract

There are many different production situations that can be employed to meet demand. In the engineer-toorder (ETO) production situation, products are manufactured to meet specific customer needs by unique engineering or significant customization. In such an environment, failing to supply the required materials in the right quantities and at the right time increases the risk of breaching due date agreements and thereby losing customer satisfaction. As such, materials management is one of the most important and critical processes within production planning and control in ETO. To bring attention and improvement to this area, ETO companies may benefit from a performance measurement system (PMS) that systematically monitors how well materials management is carried out. The design of a company's PMS varies with its production situation. Within the large body of literature on performance management and measurement, limited literature specifically addressing performance measurement in ETO has been identified. After being approached by a Norwegian ETO company requesting a PMS for materials management, the authors therefore set out to design the PMS from scratch, using literature on ETO, materials management and performance management and measurement as a starting point. The paper presents the proposed PMS. It provides a basis for further studies on the topic, and could be used by managers in ETO companies to assess and improve their materials management practice.

Application of vendor rationalization strategy for manufacturing cycle time reduction in engineer to order (ETO) environment

“…The studies like Palanisamy and Abdul Zubar (2013), Koul and Verma (2011) and Ghodsypour and O’Brien (1998) claim that in most of the manufacturing industries, the cost of components, items, raw materials and parts can reach up to 70–85 percent of the final product cost. Similar views are expressed by Mello et al (2015a, b), Sjøbakk et al (2015), Yang (2013) and Gosling and Naim (2009) who after considering the characterizations of ETO argued that the percentage procurement cost of components, modules and other items is very high in context to total cost of product. If planned intelligently, the procurement/acquisition of items can offer strategic advantages to company and can have a significant impact on cycle time also.…”

“…Similarly, scholars (Sjøbakk et al , 2015) attempt the characterization of supplies in ETO and caution about the conventional performance measurement schemes. They also propose their scheme of performance indicators for ETO-related supplies and observe that supplies and vendors need to be carefully handled.…”

“…Despite a number of supply-related challenges reported by scholars like Mello et al (2015a, b), Gosling and Naim (2009), Sjøbakk et al (2015), Hicks et al (2000, 2001) and Olhager (2003, 2010), not many studies are available which exclusively discuss the supplies, their nature and vendor rationalization requirements in context to ETO environment both in developed and fast-developing country perspectives like India.…”

Supplier performance assessment

“…Mani et al (2018) add that effective communication, training and capacity utilisation can also have an impact upon the accident reductions, disruptions and delays in delivery. Sjøbakk et al (2015) Materials management Cagliano et al (2014) Supply chain strategy Norton (1996, 2004) Productivity; supplier integration; standardisation of performance measures Salam and Khan (2018) Supplier assessment Kumar et al (2018) Supply risk Flexibility and responsiveness (FLX) Jordan and Bak (2016) Supply chain skills Bhagwat and Sharma (2007) Supplier monitoring Van Weele (2010) Strategic purchasing Cagliano et al (2014) Supply chain strategy Liao et al (2010) Supply flexibility; supply performance Tan and Sia (2006) Outsourcing Product quality and availability (QUL) Gunasekaran et al (2001) Quality management Bhagwat and Sharma (2007) Supplier development Amorim et al (2016) Product availability Kannan and Tan (2005) Quality assessment Tse et al (2019) Salimian et al (2017) Supplier collaboration Forecasting (FOR) Gunasekaran et al (2001) Supply chain integration Gustafsson and Karlsson (2012) Capacity development Bukh and Malmi (2005) Resource utilisation Dey et al (2015) Supplier performance evaluation Cycle time (CYT) Huang and Keskar (2007) Supplier selection Cagliano et al (2014) Supply chain strategy Kaplan and Norton (1996) Productivity; supplier integration; standardisation of performance measures Table I.…”

Resiliência Na Cadeia De Suprimentos: Um Enfoque Em Indicadores De Desempenho

“…"Precisão do estoque" é medido pela relação entre o estoque padrão e a previsão de demanda (SJØBAKK, et al 2015;CHAE, et al 2009;CAI, et al 2009;CHAN, et al 2004;BHAGWAT, et al 2007). Interrupções no fluxo de materiais e de informações podem ter efeitos negativos sobre o indicador, já que em um período de ruptura a previsão de demanda nem sempre é confiável.…”