Engineer-to Order (ETO) of a Turbine 

Purpose

One of your company’s main tasks is the production of high-quality and technically complex turbines, which you manufacture on behalf of power plant construction companies, and so on. You purchase some of the turbine components from suppliers, the rest you manufacture yourself. Each process, from component assembly, to plant acceptance and delivery to the customer, is extremely time-consuming. Delays may lead to severe contractual penalties, and therefore, should be avoided at all costs, or possible delays should be recognized as such long before they arise.

You manage the manufacture of turbines as project business. This allows you to plan and monitor dates, costs, and revenue on a project-basis. Because of your long years of experience in this area, you already have standard project structures, such as project plans, and networks, as well as standard production data, such as task lists, prices, duration, and so on. You can use these templates at the start of a new project, and tailor them to the individual needs of each project.

Process Flow

  1. On the basis of an inquiry, you create an operational project. Because you are experienced in designing and manufacturing turbines, you can make reference to an existing standard work breakdown structure (WBS) and standard networks in the system. First, you check the feasibility of the project dates. So that you can quote a sales price, you perform sales pricing on the basis of the project planning data.

    2. Inquiry and Quotation Processing

  2. On acceptance you create a sales order and release the project. You plan revenue using a billing plan in the sales order. You control the different billing dates using project milestones. In accordance with the contractual negotiations with the customer, a down payment is made on conclusion of the contract.

    3. Order Entry Processing

  3. You procure one of the turbine components externally from a supplier, and run through purchase order handling for that part. You manufacture one of the components yourself. The decision on which components are to be externally procured, and which are to be manufactured in-house has already been made.
    You place orders for long-lead items early to avoid delays to project progress. Your project controls the requirement for particular components in the manufacture of the turbine. As soon as all components are available, you assemble the turbine.

    4. Project Processing

  4. You deliver the finished product to your customer. Using confirmation, you create the customer acceptance and generate the final invoice.

    5. Turbine Assembly

  5. During project processing, you constantly control project earned value using confirmations and the cost/revenue situation, so that you can take any corrective action that may be required. You run several period-end closings, however only one is run as an example. On completion of the project you create the final invoice and close the project technically.

Period-End Closing with the Schedule Manager

The following graphic illustrates the different project phases, the activities in these phases, and the enterprise areas involved in each phase.

The process described in the example contains the most important aspects in project processing, and the possibilities of implementing them in the SAP System.

The processes are not intended to be complete. For example, project settlement is not described, because the most important activities are already described in the period-end closing.