Turnkey vs. Consignment
When it comes to sourcing cable or wire harness assemblies, Original Equipment Manufacturers (OEMs) often face a critical decision: Should they opt for a turnkey or consignment solution? In this blog post, we will explore the benefits of both options to help you make an informed choice that aligns with your business objectives.
Understanding the Basics
- Turnkey Solution
- A turnkey solution refers to a comprehensive, all-in-one service where a provider manages every aspect of the project from start to finish. This includes procuring components, manufacturing, quality assurance, and final delivery.
- Consignment Solution
- A consignment solution involves the OEM providing components required for assembly, while the contact manufacturer (CM) is responsible for the assembly process. The term “consignment” refers to the practice of consigning, or entrusting, goods to another party for sale or processing.
Turnkey Solutions vs. Consignment Solutions
Turnkey Solutions streamline project management by consolidating all responsibilities under a single provider offering a clear advantage over consignment models. Unlike consignment solutions, which require OEMs to manage component procurement and coordinate with multiple parties, turnkey solutions amplify coordination by handling every aspect of the assembly process.
- Efficient Supply Chain Management and Cost Efficiency
- Turnkey Solution providers often excel in supply chain management and cost efficiency, offering significant benefits over consignment models. Turnkey providers typically possess well-established supply chains and strong relationships with suppliers, which lead to faster lead times and cost savings on materials. By leveraging these networks, they can source high-quality components at competitive prices, thereby reducing overall costs and streamlining procurement. In contrast, consignment solutions require OEMs to handle component procurement themselves, which can lead to longer lead times, additional overhead, and higher costs. Additionally, turnkey providers like DDH offer value-added engineering to research and recommend suitable alternative components further optimizing cost and delivery performance, a level of service not typically available in consignment arrangements.
- Warranty Coverage
- Turnkey solutions offer robust warranty coverage, often including a minimum one-year guarantee on workmanship and materials, which provides a distinct advantage over consignment models. This warranty ensures that any defects or issues related to the assembly process are addressed promptly by the provider, offering peace of mind and protection for your investment. In contrast, consignment solutions typically do not include such comprehensive warranty coverage, leaving the OEM to manage potential issues related to component quality and assembly defects. The added security of a turnkey warranty allows you to focus on other aspects of your business while relying on the provider to handle and resolve any problems that arise during the warranty period.
- Integrated Quality Control
- Turnkey solutions offer superior integrated quality control compared to consignment models. Providers of turnkey solutions implement rigorous quality assurance protocols throughout the entire assembly process, ensuring that the final product consistently meets customer specifications and industry standards. This proactive approach helps mitigate risks related to defects and guarantees consistent product reliability. In contrast, consignment solutions often place the burden of quality control on the OEM, which can lead to inconsistencies and potential issues if the components do not align perfectly with the assembly process. With turnkey solutions, you benefit from a seamless quality control system managed by a single provider, reducing the likelihood of defects and ensuring a reliable, high-quality end product.
- Reduced Inventory and Warehousing Costs
- Opting for a turnkey solution offers substantial benefits over consignment models in terms of inventory, warehousing costs, and overhead. With a turnkey solution, you transfer the responsibility of managing inventory to the provider, who takes care of procurement, storage, and handling components. This can lead to significant savings on warehousing costs and streamline the entire process. In contrast, consignment solutions require the OEM to manage and store components, which can increase overhead expenses and tie up valuable resources. By choosing turnkey, you not only reduce inventory-related costs but also free up your resources for other strategic activities, benefiting from a more efficient and cost-effective approach to inventory management.
In the competitive landscape of cable and wire harness assembly, choosing the right approach can significantly impact your operational efficiency and cost-effectiveness. Turnkey solutions clearly stand out as the superior choice compared to consignment models, offering a range of benefits that streamline your project from start to finish. With turnkey solutions, you gain simplified project management through a single provider, ensuring seamless coordination and reduced risk of miscommunication. The efficient supply chain management of turnkey providers leads to cost savings and faster lead times, while comprehensive warranty coverage offers peace of mind and protection for your investment.
Looking for a turnkey solution for your cable and wire harness assembly, PCBA, metal or box build projects?
Contact DDH today to learn how our all-in-one-services can meet your needs and deliver exceptional results.