Contract Manufacturing: Consignment vs Turnkey

Oct 05, 2022

Technology is constantly evolving; every day a new product is created, and consumers are always looking for the next best thing. So how are companies keeping up with demand? Outsourcing the production of these products is the most logical step. Many companies have turned to contract manufacturing to meet demands and maximize profit. There are two main manufacturing models that many companies use: consignment manufacturing and turnkey manufacturing. What’s the difference? #contractmanufacturing

Consignment Manufacturing

Consignment (Batch) manufacturing can be thought of as co-partners between the manufacturing company and electronics’ company. This model is known as partial outsourcing. The benefits of consignment manufacturing offers companies the ability to retain some in-house control over the manufacturing and supply chain processes; purchasing, sorting, packaging and delivering materials needed to the contract manufacturer for assembly.?

There are many reasons companies may choose consignment manufacturing. Generally speaking, emerging companies often choose to begin production with this model to have a more hands-on-approach with their project. They may also believe turnkey contract manufacturers will be unwilling to accept their starting order. Some companies may choose consignment manufacturing because they already have in-house production facilities they wish to use, while others use this model when trying to augment staffing during high production times. Projects that require a close eye often use consignment manufacturing.?#consignmentmanufacturing

Turnkey Manufacturing

Turnkey manufacturing is a full service manufacturing process where a contractor provides all manufacturing and supply chain services, including, but not limited to, design, fabrication, installation, material acquisition, assembly, testing, aftermarket service and warranty support. Essentially, the company outsources the design and manufacturing of a project to a third-party contractor with expertise to provide insight and feedback on a project which ultimately optimizes the process, packaging, and production times.??

Many companies will opt for turnkey manufacturing simply because it saves time, keeps risk and cost low, and quickly meets market demands. There are many benefits to working with a turnkey manufacturer. For example, when there is a design change all parties, all paperwork, and all departments must be informed and must be approved for it to move forward. Having one point of contact, one purchase order, and one dedicated facility that focuses on your project eliminates hours of wasted communication and optimizes project efficiency.? #turnkeymanufacturing

Which is Better?

Both models have their pros and cons. In the consignment model, companies have a more hands-on-approach and work together with the manufacturing company. This model would make sense when a product relies on specialized components or in cases where a company’s intellectual property is contained in a component or a board. However, in recent years companies have gravitated towards turnkey manufacturing. Companies would rather focus on the sales and marketing of their products and let the manufacturing companies focus on what they do best, manufacturing.?

Making a Decision

Each company’s needs are different, and we have a lot to offer. From design questions to prototyping to high volume assembly in our state-of-the-art facilities, Meritronics Inc is here to be of service. With over 25 years of experience, and over five manufacturing plants globally, with some overseas, we are ready to discuss all the advantages and savings that work for you and your company.

Contact one of our project managers today at (408) 969-0888 or at [email protected].?