ETO, CTO, MTO, ATO and MTS explained: what they mean for quoting

A company makes conveyor systems. About seventy percent of its conveyors are a standard design with options. The customer picks the length, the width, the belt type and the drive. The other thirty percent are "just a small change": a different height, a curve that isn't normally offered, or a connection to the customer's own machine. At a trade fair, someone asks whether the company is ETO or CTO. The owner isn't sure. The real answer is both.

That answer is right more often than you'd think.

Five ways of producing

The abbreviations come from operations and production planning. In the research literature, MTS, ATO, MTO and ETO stand for different positions of the customer order decoupling point. That's the point where a product gets tied to one specific customer's order. Before that point, you're working for no one in particular. After it, you're working for that one customer. Going from MTS to ETO, more and more of the work happens only after the order. CTO sits a little to the side: it mostly describes how the customer chooses.

Think of a bakery. Bread already on the shelf in the morning is MTS. A cake where you pick from set flavours and decorations is CTO. A wedding cake designed just for you is ETO. Here they all are in plain English.

These terms overlap. MTS, ATO and MTO are mostly about when you make things. ETO adds the design: that also happens (partly) after the order. CTO is mostly about how the customer chooses, from options that are already set. A CTO product can be made ATO or MTO.

Engineer to order vs make to order

People often mix these two up. In both cases, nothing gets made until the customer orders. The difference is the design. With make to order, the design usually exists already. You build a known product, just not before someone orders it. With engineer to order, working out the design is part of the job after the order. For quoting, that matters a lot. An MTO quote is about price and delivery time. An ETO quote first needs someone to work out what the product will be.

What each mode asks of a quote

Where your product sits makes a big difference to quoting:

• MTS: the quote is a list price and a delivery time from stock. A configurator adds little. (A configurator is software where you build a product by picking options.)
• ATO: the customer picks modules, like building blocks. The quote adds them up, with rules about what fits together. A simple configurator works well.
• MTO: the design is fixed. The quote is about price and delivery time. A configurator mostly helps when there are many versions.
• CTO: the customer picks options and sizes. The quote has to apply rules, work out a price and often produce a bill of materials, which is the list of parts. This is where a configurator adds the most.
• ETO: every quote needs engineering. How fast the quote goes out depends on the engineering queue. A configurator can handle the part that repeats.

Researchers describe a configurator as an application that supports the configuration process. It turns each customer's specific needs into correct and complete product information. That information helps you win the order and deliver it. That description, from 2010, shows why CTO is the centre of gravity. CTO is where that translation is easiest to capture in rules.

The mixed mode most manufacturers have

The conveyor company from the start doesn't have to choose. Many manufacturers sit somewhere between CTO and ETO. A big share of their orders can be built from options. On top of that comes a part that needs adapting. A company like that isn't ETO or CTO. It's both.

Think of it as a core and a shell, like an apple:

• The core: the part of the product that's always built the same way, from known options and sizes. That's CTO.
• The shell: the changes for one customer. That's ETO.

For quoting, that split is useful. You can capture the core in rules and price it instantly. Only the shell has to go through engineering. So instead of a whole quote sitting in engineering's queue for two weeks, only the adapted part does. Where else the time in a quote goes is covered in Faster quoting in manufacturing.

From ETO towards more CTO

What started as custom work often turns into a fixed pattern after a few repeats. The same change keeps coming back, just with different sizes. That's the moment to turn it into an option, with rules.

That way the boundary between ETO and CTO moves step by step: not by limiting the product, but by writing down what keeps repeating. It fits the idea of mass customization: matching products to each customer's needs, while staying almost as efficient as mass production. How modules help with that is covered in Variant management and modular design.

A parametric model helps here. That's a 3D model that builds itself from sizes and rules, instead of a fixed set of variants. A change that used to need engineering becomes a size the customer picks. There's more on this in Parametric 3D product configurators.

What a configurator can and cannot do in ETO

In an engineer-to-order business, a configurator can:

• price the core quickly and the same way every time
• show which part falls outside the rules and has to go to engineering
• give a first picture or a budget price, so the customer knows if it's within reach
• hand engineering a complete and correct starting description, instead of an email full of loose wishes

A configurator can't:

• take over truly new design work
• invent rules nobody has written down
• judge whether an unusual request makes technical sense

A 2022 study followed a large ETO company over time while it developed a configurator. Its conclusion: you need a clear and complete project plan before development starts. In ETO, that matters even more. You need to agree up front where the core stops and the shell begins.

CPQ stands for Configure, Price, Quote. What it is and how it links configuring, pricing and quoting is explained in What is CPQ?. How we build a parametric model that captures exactly that core is shown on 3D & Development.

Not sure where your product sits, or which part could be turned into rules? Tell us what you make, and we'll look for the core together. Get in touch, or read more on 3D & Development.