Implementation of Engineer to order (ETO) operation process in UK brothers House construction firm

This assignment evaluates the implementation of Engineer to order (ETO) operation process in UK brothers House construction firm. It discusses the project selection, background of the case project, evaluation of project delivery methods, evaluation of financial contract types, and evaluation of procurement methods.

PROJECT EXECUTION

Contents
INTRODUCTION......................................................................................................................3
TASK.........................................................................................................................................3
Project Selection.....................................................................................................................3
Background of case project....................................................................................................4
Evaluation of project delivery methods.................................................................................5
Evaluation of financial contract type.....................................................................................7
Evaluation of procurement methods......................................................................................9
Risk management plan...........................................................................................................9
CONCLUSION........................................................................................................................11
REFERENCES.........................................................................................................................12

INTRODUCTION
ETO is the systematic process in which companies take care of designing and ensure
customer requirements carefully. Present study is based on UK brother house firm that is
building construction firm that is planning to make changes in its operational process and
implement ETO system. Current assignment will evaluate procurement methods and will
recommend the best one for this project. In addition, study will evaluate financial contract
and will describe suitability of each one.
TASK
Project Selection
Project
“Implementation of Engineer to order (ETO) operation process in UK brothers House
construction firm”
ETO can be defined as operational process that is used by manufacturing companies
to prepare or manufacture their products with limited inventory. In this process companies
have to select proper and adequate engineering design and have to ensure customer
requirements so that end product can meet their expectation in significant manner. Designing
is done once order is received, firm involves its manufacturing team and specify the
requirements to design excellent quality products with the use of minimum inventory.
Though, it is a complex project because it requires proper planning and also firm needs to
involve consumers as well to know their actual requirements (Komarov, 2016). It also needs
robust designing process that is quite difficult to implement but ETO is popular for its
efficient numbering process in which procurement team prepare bill of each item, assembly
etc which is going to use in manufacturing of that product. ETO is the operational process in
which team of UK BROTHERS HOUSE can manage engineering changes in its
manufacturing process in effective manner to save its inventory and to reduce its cost of
supply chain as well. Most of the time manufacturing and supply chain process of UK
BROTHERS HOUSE raise its operational cost hence it is essential to control over it hence
implementation of this ETO process would be best solution where enterprise can manufacture
its building in easy manner and in cost effective manner.

Background of case project
To develop most effective ETO products there is need to have specific robust system
and must have ERP system so that engineering complexities can be managed well. Engineer
to order can be described as production approach that added product lead time in engineering
activities (Rahmani, Maqsood and Khalfan, 2017). It is very important for UK BROTHERS
HOUSE that to improve its delivery time and adopt concurrent engineering integrated system
so that it can meet its consumer’s requirements quickly. ETO is the demand drive approach of
manufacturing, this is very effective process when enterprise has to save its stock alone with
managing quality and lead time. This implementation can boost sales of building of UK
BROTHERS HOUSE and can support organisation in satisfying its consumers to great
extent. ETO process would have proper steps:
 Sales engineering: It is the phase where customer give order an consumers give
outline of their requirements. Once requirement is received then sales staff will have
to closely monitor the product engineering to produce effective quality building for
consumers to meet profit target (Hoberman and et.al., 2017). Engineering team will
have to concentrate on various iterations in process until the design or configuration
of product is finally approved.
 Process planning: Here producer is required to ensure production capabilities alone
with expected cost. Here firm will have to ensure sourcing of right material, preparing
all documents, production scheduling and associated cost with all these activities.
This would help in identifying the areas where cost can be saved and stock can be
utilised in most effective manner to produce excellent quality building for consumers
of UK BROTHERS HOUSE (Anema and et.al., 2016).
 Inventory management: Once planning is done then team will have to look upon the
management of inventory. Hence team members will have to use specialised
production line and production schedule so that inventory can be used in significant
manner so that wastage can be minimised and final product can be manufactured
within specified cost.
 Manufacturing: As in ETO process many unknown variables are present hence
company needs to manage floor alone with its manufacturing process (Sayyah and
et.al., 2019).
UK BROTHERS HOUSE will have to focus on accurate documentation while working
on this ETO process that would help in real time inventory management in the organisation.

Evaluation of project delivery methods
There are various kinds of project delivery methods and different companies use
different methods as per their suitability (Franz and et.al., 2017).
Design- bid-build
This is the technique or process that is used since longer duration hence it is the
traditional method of project delivery. In this process owner of the project comes in talk with
team and designer ensure to draw schematics. After that designer make connection with
consultant. Once design is done then firm makes contract with contractors to construct a
building or product. Best bid is selected by firm and subcontractors are hire accordingly those
who can work on project (Engebø and et.al., 2020).
Figure 1: design bid build
(Source: Brief Comparison of Three Popular Construction Project Delivery Methods, 2016)
Advantage of this process is that it is easy and liner process that help owner in
understanding well about their requirements and end product look. Another benefit of using
this process is that owner of product can easily get involved into process and convey their
requirements in easy manner. This process is based on completed design documents hence
contractors bid are look upon and accordingly best contractor is selected by UK BROTHERS
HOUSE for designing products with ETO process for consumers (Feghaly and et.al., 2019).
Architects are also important part of delivery process and in this design bid building delivery
method they are very active hence end product designs are prepared effectively.

But this process has some drawback as well, cost of manufacturing or construction
cannot be established until design is prepared properly. If bid prices are not matched with
project requirements then UK BROTHERS HOUSE will have to reprocess it hence it may
create chances of delay of project delivery and design cost can be increased as well. This is
systematic process hence if there is issue in one stage then it will impact on next phase as
well hence owner may not get its required product on time (Sayyah and et.al., 2019).
Design-build
This is another approach of project delivery in which owner demands for single point
of responsibility from contractor. Hence contractor takes responsibility of design, cost control
an schedule as well. One of the main opportunities is for the firm that it needed minimum
time commitments from owner otherwise it creates problem for the entire team of firm. As
owner has less involvement in the process hence there is less chance of having conflicts
between contractor and design team (Rahmani, Maqsood and Khalfan, 2017). One of the
essential benefit of design build process is that it is cost saving technique because designer an
contractor prepare designs by ensuring to have minimum construction cost and they finally
chose such design that has less expensive and able to meet consumer’s requirements. Hence it
is cost reduction incentive to firm. Another benefit of this process is that project completion
can be done on time or before the time as there is no dead time between constructions start
date and design completion time. Contractor can start working on it in early phases hence it
increases chances of early completion of project. Benefit of this delivery method is that it
reduces clams exposure. As there is limited liability gap, designer has insurance cover for any
kind of negligence errors hence chances of claim are very less (Hoberman and et.al., 2017).
But there are some drawback of this project delivery method as well that transparency
in bidding is very low hence it may increase prices. Design team consults with contractors for
quality check, as involvement of consumers is less hence if consumes is not satisfied with end
product then it may create problem for contractor.
CM@Risk
It is also known as construction manager at risk delivery method. In this kind of
process owner of product or project select their construction manager (CM) who would take
responsibility of entire product manufacturing and delivery. Selection of construction
manager will be done on the bases of cost, quality, track record etc. CM will work as team

leader and will arrange all the process for owner (Sayyah and et.al., 2019). CM will provide
inputs, issues related to price and quality to consumer.
One of the main advantages of using this method is that it will give authority to CM to
have control over entire design. Contractor is involved in each small activity hence there are
chances that end product can meet the requirement of consumers. But there is some drawback
of this delivery method that if any kind of changes occur then it would be responsibility of
owner only. If owner fails to select appropriate contractor then entire project may get failed to
meet requirement of end user (Rahmani, Maqsood and Khalfan, 2017).
From the above evaluation it can be recommended that design build project delivery
method is more suitable for the UK BROTHERS HOUSE as cost of this process is very less
as compare to other methods. This is faster than other design bid build methods and
CM@risk. Design bid delivery method has ability to ensure quality better than other methods.
Evaluation of financial contract type
In order to prepare any product UK BROTHERS HOUSE will have to make
connection or contract with many contractors and suppliers. This will form a financial
contract between both parties so that ETO products can be designed in firm effectively.
Lump sum contract
This kinds of contracts are used by many construction firms, the main reason of
getting involve in this kind of financial contract is to minimise administration cost and reduce
design cost as well. Contractor submit total price of project rather than giving individual price
of each item. This is used in such kinds of project with risk is minimum (Franz and et.al.,
2017).
One of the main advantages of this kind of contract is that it has low risk for owner
and construction cost is also fixed. As owner is not typically involved in manufacturing
process hence, less supervision of owner help in controlling over time and material as well.
There are high chances of completion of project faster because contractor always try to raise
its production and show its capabilities sin market.
Disadvantage of this financial contract is that there is high risk for contractor. If
owner demands for changes after completion of product then changes can not be quantify ,
this may affect image of contractor. In this contract construction process may take longer
duration as compare to construction activities.

Guaranteed maximum price contract
This is financial contract type in which it is ensured that sum of this agreement will
not be exceed with specified amount. This kind of agreement is made in design build delivery
methods where owner takes responsibility of entire project. As contractor is looking upon
design, construction work hence cost control is possible (Siebenthal and Hopkins, 2016). If
entire construction process goes higher price to maximum price level then contractor will
have to bear the additional cost. But if price go to lower than maximum level then contractor
comes to saving mode. Hence this kind of contract can be gain or loss for contractor.
One of the main advantages of this kind of financial contract is that it has accelerated
schedule. As it solidifies price of final contract early hence financing is easy on project. By
this way project can be accelerate itself. Contractor gets saving incentive facility in this
financial contract because entire process is in the control over contractor hence individual has
benefit of getting rewards of it.
Drawback of this contract is that contract may report inaccurate cost to owner to earn
more profit. Another issue with this contract is that it may increase risk of contractor if prices
of items get increased due to changes in weather or supply chain system (Anema and et.al.,
2016).
Cost plus fixed free contract
This financial contract is another kind of agreement in which contractor gets money
for normal expenses and also get additional fixed free for rest services. Contractor gets profit
from project, the entire cost of construction is calculated on the bases of mark value of items
require in construction. Fixed free portion is done one the bases of negotiation between both
involved parties.
The benefit of this contract is that it usually far away from inflate prices and has low
risk for contractor as well. It helps in getting higher quality output of end product. But
drawback of this agreement is that negotiation may be done at the starting level otherwise it
may create confusion (Inoue, Tokashiki and Aydan, 2019).
From the above evaluation it can be recommended that guaranteed maximum price
contract is suitable for UK BROTHERS HOUSE for implementation of ETO products in

firm, as it will help in having close monitoring over entire process by contractor and entity
will be able to make profit from market as well.
Evaluation of procurement methods
Competitive Negotiated
This is the method of procurement in which qualified contractors are selected to give
details of request for proposal that involves scope, specification of project. Separate
negotiation is made by contractor with each bidder and one which is most suitable is selected.
One of the main advantage is that client can chose their contractor after evaluating
qualification of the person. It is time and cost saving method as well. But drawback of this
method is that reliance on trust is present between parties, if it is not structured properly then
it may create problem after starting the construction process (Siebenthal and Hopkins, 2016).
Best Value
This is procurement technique that focuses on quality, expertise rather than just
concentrating on price only. Advantage of this method is that it is needed less decision
making, even if there is any kind of risk then it can be managed easily. But sometimes it
fails to evaluate capabilities of contractor.
Competitive, Negotiated is more suitable procurement technique as compare to best
value as it helps in minimising cost and raising profit as well (Hoberman and et.al., 2017).
Risk management plan
Implementation of ETO system is in UK brothers house may have some risk in this
project.
Risk register
Risk Likelihood Impact Severity Owner
Human resource
risk
As there are
chances that
engineers fails
to understand
this ETO system
Moderate High High Project sponsor,
construction
firm

and apply
properly on
construction
process
Technical risk
As new software
will require,
system needs to
be changed
hence technique
issues may take
place
High High Moderate Engineers and
contractor
Financial risk
There are
chances to raise
in cost when
new ETO
system is
implemented in
business hence
financial risk
may take place
moderate Moderate Moderate Project manager
Risk quadrant analyses
Risk Probability Level of impact
Human resource risk Moderate High
Technical risk Low Low
Financial risk Moderate moderate
Risk mitigation plan
Risk Mitigation action
Human Resource risk Project contractor and project manager need

to ensure to give proper training to all
engineers so that they learn more about ETO.
This will help in reducing risk of human
resource.
Technical risk Project manager needs to check each
construction activity properly before it gets
started, that would help in avoiding technical
risk. Every technical equipment must be
checked before it is used.
Financial risk Project manager must schedule proper
activities and cost must be negotiated
properly after evaluating market value. Cost
and profit must be analyses properly that
would help in reducing risk of funds.
CONCLUSION
From the above study it can be concluded that Guaranteed maximum price contract is
very effective as it gives benefit to contractor. This helps in generating more profit and
reducing risks of project as well. Design build is the best delivery method that helps
contractor to take responsibility on entire construction to meet out the consumer
requirements.

REFERENCES
Books and Journals
Anema, A. and et.al., 2016. Association between food insecurity and procurement methods
among people living with HIV in a high resource setting. PloS one. 11(8).
Engebø, A. and et.al., 2020. Collaborative project delivery methods: a scoping
review. Journal of Civil Engineering and Management. 26(3). pp.278-303.
Feghaly, J. and et.al., 2019. Selecting project delivery methods for water treatment
plants. Engineering, Construction and Architectural Management.
Franz, B. and et.al., 2017. Impact of team integration and group cohesion on project delivery
performance. Journal of construction engineering and management. 143(1).
pp.04016088.
Hoberman, G. and et.al., 2017. Procurement systems and methods. U.S. Patent 9,779,445.
Inoue, H., Tokashiki, N. and Aydan, Ö., 2019. An integrated study on the risk assessment of
Abuchiragama karstic underground shelter (Okinawa, Japan) under static and dynamic
conditions. 2019 Rock Dynamics Summit: Proceedings of the 2019 Rock Dynamics
Summit (RDS 2019), May 7-11, 2019, Okinawa, Japan. pp.389.
Komarov, O., 2016. Customs control and risk management system on the example of the
Ukrainian customs. Customs Scientific Journal CUSTOMS. 6(2). pp.85-97.
Rahmani, F., Maqsood, T. and Khalfan, M., 2017. An overview of construction procurement
methods in Australia. Engineering, Construction and Architectural Management.
Sayyah, A. and et.al., 2019. A multi-objective modelling approach to assess the impact of
maintenance scheduling on equipment procurement methods. International Journal of
Industrial and Systems Engineering. 31(2). pp.184-208.
Siebenthal, C. S. and Hopkins, K. L., 2016. Project Managment(No. SAND2016-6643PE).
Sandia National Lab.(SNL-NM), Albuquerque, NM (United States).
Online
Brief Comparison of Three Popular Construction Project Delivery Methods. 2016. [Online].
Available through < http://www.jacksongalloway.com/news/2016/4/12/comparing-
three-popular-construction-contracting-methods-designbuild-design-bid-build-and-
construction-manager-at-risk>