Questica Blog

How engineer-to-order companies can budget for The Next Big Thing

With a cloud-based budgeting platform, custom-build manufacturers gain more control over their budgets.

Some trends come and go, while others make a lasting impression. Unfortunately, it can be difficult – if not impossible – to properly vet which fad is actually The Next Big Thing and which is simply a passing phase. No doubt, back in the late 1980s or early 1990s, many manufacturing executives thought the internet was nothing but a neat little sideshow before it started gaining in popularity, capability and mass implementation. Those who missed out on early adoption might’ve been kicking themselves later on.

Whether it’s a fad or a trend, the simple fact is that custom-design manufacturing companies need to have the room in their budgets to allow some wiggle room for quickly adopting to the Next Big Thing. According to Frost & Sullivan, global manufacturing is only expected to grow modestly through 2016. As such, manufacturers are willing to take more risks to potentially increase their growth opportunities.

From additive manufacturing to advanced analytics and from increasing automation to the Internet of Things, there are a multitude of different disruptive trends emerging on the horizon with the potential to reshape the industry. While some of these fads might fizzle out (although these particular trends seem to be here to stay), it can be tricky to figure out which ones will last until they’ve already become the norm.

“Modern-day budgets are like living things and they need constant attention.”

Increasingly, engineer-to-order manufacturers need to have a malleable and even configurable budgeting software system. Long gone are the slower-moving days when it would take years for a fad to spread through an industry before becoming a best practice or a standard operating procedure. Nowadays, with instant communication, easily shareable data and real-time monitoring of every aspect of production, a new trend can take hold instantly. And if a custom-design manufacturer is unable to quickly pivot and free up the necessary resources to incorporate The Next Big Thing, it quickly finds itself severely lagging behind the competition.

Simply relying on a piece of paper or a ledger to write down a financial forecast for the year and stuffing it into a filing cabinet or a desk drawer will not suffice. Modern-day budgets are like living things, and as such, they need constant curating and tailoring to ensure they match a rapidly evolving sector like engineer-to-order manufacturing.

A journey into the unknown

With new trends and potentially industry-wide disruptions occurring much more frequently, manufacturers are increasingly willing to take a blind leap of faith on a new cutting-edge technology or seemingly revolutionary practice in an effort to stay a step ahead of the competition, CFO.com reported. Not only does this journey into the unknown require sufficient budget flexibility to make a dream a reality, but, in some instances, it’s also necessary to also be to quickly move around resources in case the experimental new technology doesn’t quite pan out the way a manager originally intended.

A budget simply drawn up with pen or paper, or even on a spreadsheet does not provide enough flexibility to account for The Next Big Thing.A budget simply drawn up with pen or paper, or even on a spreadsheet does not provide enough flexibility to account for The Next Big Thing.

Moving from annual to monthly reviews

For many managers and executives, annual budgets are no longer viable options to keep pace with a constantly changing landscape. Instead, many manufacturers are increasingly choosing to review and update their budgeting prospects on a monthly basis. While this might be a little too drastic for some companies more familiar with the traditional once-a-year budgeting process, it can be wise to consider increasing the number of reviews per year, even if it’s once a quarter.

If a new product is suddenly unleashed into the market that has the ability to dramatically improve the way an engineer-to-order company does business, having the resources available can be a make or break moment for the company. It doesn’t need to be a ground-breaking new technology or piece of equipment either. Even something as mundane as a cheap piece of real estate that unexpectedly goes up for sale has the potential to recast the company’s needs and overhead, which can ultimately boost profit margins.

Unfortunately, those manufacturers with a locked-in annual budget may find that their company is unable to take advantage of this opportunity to gain a new critical competitive edge over their industry peers – peers who may have the resources to incorporate the new technology or purchase the piece of inexpensive land. Locking the company into a static annual budget means companies must plan out their acquisition or upgrade strategies a year or even two years in advance. This doesn’t leave a lot of wriggle room to truly take advantage of The Next Big Thing – which can be a trend that quickly overruns an entire industry. Without the ability to shift around resources and reallocate funds instantly, chances are the latest trend will only pass over the custom-design manufacturing company stuck in an annual budget.

How Questica ETO can help

Questica ETO is an ERP solution designed specifically for the engineer-to-order manufacturing sector. This platform provides real-time access to every line item for every job across the enter operation. This enterprise resource planning system also provides early warning job costing and it integrates right into most traditional accounting programs, ensuring all budgets are streamlined and all previously siloed data is now instantly  shareable. Questica ETO is also configurable to allow executives and managers the opportunity to instantly view the entire budget or introduce What-If scenarios by letting them change around hypothetical resource allocations, making it easy to factor in how purchasing and implementing The Next Big Thing will impact individual jobs and the entire company.

Take the first step!