Ask ten ETO manufacturers what their inventory turns should be, and you’ll probably get ten different answers.

That’s because inventory behaves differently in engineer-to-order manufacturing than it does in distribution or repetitive assembly. Every job is different. Engineering overlaps production. Purchasing decisions are tied to projects that may shift week to week, and are reliant upon new drawings from engineering.

So when Brock Industries said they target five to seven inventory turns annually, it stood out.

For context, that means inventory is cycling through the business every couple of months instead of sitting stagnant on shelves for a year. For a custom equipment manufacturer, that’s relatively disciplined.

The interesting part is how they do it.

Why ETO Doesn’t Mean “Slow Inventory”

At first glance, five to seven turns sounds aggressive for custom equipment. But the key is what inventory you choose to hold.

Brock does not carry large amounts of raw material inventory. They buy steel to the job. Major components are purchased just ahead of need. Replacement parts are often drop-shipped directly from suppliers.

In other words, inventory lives upstream whenever possible.

That strategy depends on three things:

• Reliable suppliers
• Engineering releasing drawings and BOMs on time
• Purchasing having visibility into upcoming demand
• Production schedules that are stable enough to buy against

An ERP system ties those pieces together. Without that coordination upstream between engineering, purchasing, and production, JIT quickly becomes wishful thinking.

ERP Is What Makes This Possible

This requires alignment across the entire business, which is the exact purpose of an ERP, and how Cetec ERP has helped Brock achieve 5 to 7 turns.

This requires alignment across the entire business, which is the exact purpose of an ERP, and how Cetec ERP has helped Brock achieve 5 to 7 turns.

Brock builds highly customized equipment. Drawings and BOMs have to be completed quickly enough for purchasing to act on them. Inventory data has to stay accurate enough that buyers trust what is actually on the shelf. Production schedules need to be stable enough to avoid ordering material too early “just to be safe.”

Otherwise, inventory starts accumulating quietly across the company.

As Brock has grown, a major focus has been improving visibility into purchasing, inventory, BOMs, and job costing so material can be purchased later and tracked more accurately against real demand.

That affects:

• Material timing

• Inventory valuation

• Labor tracking against estimates

• Gross margin reporting

• Production scheduling

In a lot of ETO environments, excess inventory starts long before material reaches production.

Key Takeaway

A lot of people assume low inventory turns are just part of engineer-to-order manufacturing. Sometimes they are, if they even track inventory at all. But often, excess inventory is covering for uncertainty elsewhere in the business.

The companies that improve turns successfully usually are not forcing inventory reductions from the top down. They are getting better production visibility, tighter purchasing coordination, and more confidence in their schedules.