Optimizing Business Central for Engineer-to-Order (ETO) Manufacturing

Introduction

Business Central can be configured to optimize manufacturing for Job Shops, ETO, and MTO environments. Understanding the differences is critical when configuring manufacturing, planning, costing, projects, and supply chain processes.  First, let’s define our terms and compare and contrast MTO, ETO, and Job Shops

Make-to-Order (MTO)

In MTO, products are produced only after a customer order is received. The design is generally standardized, but production begins in response to actual demand rather than forecasted demand.

Example: A machine shop builds a standard conveyor system after receiving a purchase order from the customer.

Engineer-to-Order (ETO)

With ETO, a product or solution must be substantially engineered, designed, or customized to meet a customer’s unique requirements before manufacturing can begin. Engineering activities are a significant part of the fulfillment process.

Example: A manufacturer designs and builds a custom automated production line specifically for one customer’s facility.

Job Shop

Job shops are characterized by low-volume, high-mix production where products move through work centers based on the specific routing and requirements of each job. Job shops often perform custom work but typically rely on existing manufacturing capabilities and processes rather than extensive new engineering.

Example: A precision machine shop producing custom machined parts from customer-supplied drawings

Managing Complexity in ETO

Engineer-to-Order (ETO) manufacturers face a unique set of challenges that differ significantly from both traditional Make-to-Order (MTO) manufacturers and job shops. In a Make-to-Order environment, manufacturers typically build products after receiving a customer order, but the product design, bill of materials, and manufacturing processes are already established. Job shops similarly produce parts or assemblies based on customer drawings and specifications. ETO companies, however, begin with a customer requirement and engineer a custom solution from scratch before production can even begin. This engineering phase introduces additional complexity, uncertainty, and risk. One of the biggest challenges ETO companies face is balancing customer expectations with the realities of engineering, procurement, and production. Sales teams often commit to aggressive delivery dates before engineering is complete, making communication across departments critical. Microsoft Dynamics 365 Business Central helps bridge these gaps by providing a centralized platform where sales, engineering, purchasing, and production teams can share real-time information, improving visibility and enabling more accurate delivery commitments.

Capacity Planning

Capacity management presents another major challenge for ETO manufacturers. Unlike traditional MTO manufacturers that can often predict production requirements using historical demand and established routings, ETO companies must manage both engineering and manufacturing capacity for highly customized projects. Understanding future workloads, engineering resource constraints, and production bottlenecks can be difficult when every project is unique. Delays in design, material procurement, or manufacturing can quickly impact project schedules and customer commitments. Business Central helps manufacturers better manage ETO capacity by providing visibility into resource loads, work center utilization, production schedules, purchasing requirements, and material availability. By identifying capacity constraints early, companies can make informed decisions about staffing, outsourcing, procurement timing, and project prioritization. This improved visibility strengthens supply chain planning and enables more reliable customer delivery dates.

Cost Control and Financial Management

Cost control and financial management are equally important in ETO environments. Costs are directly tied to engineering effort, material availability, production capacity, and project timelines. Design-to-cost initiatives become particularly challenging when engineering changes, long-lead materials, and customer revisions occur throughout the project lifecycle. Without accurate visibility into labor, materials, subcontracting, and overhead costs, profitability can quickly erode. Business Central’s Projects module, combined with project accounting and integrated manufacturing capabilities across modules, provides detailed insight into job costs from design through delivery. Organizations can track budgets versus actual costs, monitor project profitability, and identify cost overruns before they become significant issues. Additionally, Business Central helps ETO manufacturers scale their operations through robust revenue recognition capabilities. By aligning revenue recognition with project milestones, percentage-of-completion (POC) methods, or contractual requirements, companies can better match revenue with expenses, improve financial reporting accuracy, and gain a clearer picture of business performance as they grow.

Business Central Focus

Each manufacturing strategy requires its own unique configuration and setup to optimize how each module works with each other. Each setup can be complex and nuanced.  This is a delicate balance and is summarized in each of the graphics below.

AltiusERP Can Help

Successfully implementing Business Central in a manufacturing environment requires more than simply turning on modules and configuring screens. Every manufacturer operates differently, and the optimal solution depends on whether the company follows an Engineer-to-Order (ETO), Make-to-Order (MTO), Job Shop, Configure-to-Order (CTO), or mixed-mode manufacturing strategy. At AltiusERP, manufacturing is our sole focus. We bring deep experience helping manufacturers align Business Central with their unique operational processes, supply chain requirements, costing methodologies, and financial reporting needs. From engineering-driven manufacturers to high-mix job shops and traditional make-to-order operations, we help organizations design practical solutions that improve visibility, increase efficiency, and support long-term growth. By combining industry best practices with hands-on manufacturing expertise, AltiusERP helps companies maximize the value of their Business Central investment and build a system that scales with their business.  AltiusERP – Elevate your business