In-house manufacturing is a cost and labor intensive way for businesses to make their products. Contract manufacturing, which entails outsourcing different aspects of sourcing and manufacturing to different contractors, is a popular alternative among businesses. However, this method often leaves businesses with a number of complex responsibilities, especially for global sourcing projects, such as design and documentation, supply chain coordination, and material procurement. These responsibilities can lead to increased engineering budgets, extended project timelines, quality issues due to miscommunication, and various other issues.
One efficient solution that has gained increasing popularity among businesses for solving these issues is turnkey manufacturing.
A form of contract manufacturing, turnkey manufacturing is an approach to outsourcing production that provides businesses with an end-to-end, hassle-free solution by allowing them to outsource their entire manufacturing process, from design hand-off to delivery, to a single contractor. This means one contact window, one responsible supplier, one invoice or bill, and a lot of reduced complexity. In this article, we will delve into the turnkey contract manufacturing model, how it works, and its benefits and limitations. We will also explore selecting the right turnkey manufacturing solutions provider to leverage its benefits.
Understanding Turnkey Manufacturing
Also known as end-to-end manufacturing, turnkey manufacturing is a model where a company outsources the entire production process to a specialized manufacturer. The term "turnkey," referring to a product or service, originates from the idea that an end user only has to perform an action as simple as "turning a key" to use the product or service. This implies that the service or product is delivered ready for immediate use, involving no effort from the user in the production or delivery process.
An example is a food delivery service. Customers are not involved in ingredient procurement, cooking, or transporting the food to their location. They simply order, and the company delivers the food to their doorstep. This process constitutes a turnkey service. Another example of a turnkey product is a fully furnished house for sale. A customer only needs to pay and move in.
Fig. 1: Turnkey Manufacturing Process
In turnkey manufacturing, the manufacturer is responsible for almost all aspects of the production process, generally starting from the handoff of a product design, through development, commercialization, to material procurement, manufacturing, assembly, testing, and final delivery. Typically, the client presents the manufacturer with a mature product or a ready design, and the manufacturer is responsible for making it happen from there on. This approach provides businesses with a single point of contact, simplifying communication and ensuring a smooth and efficient production cycle.
The turnkey approach offers additional benefits over contract manufacturing as the latter can increase lead times and communication costs if customers aren't properly prepared to start the process. There is also a risk of additional complexity in managing supply chains, poor quality and inventory if the right partner isn't identified. Turnkey manufacturing provides the benefits of contract manufacturing (streamlined processes, additional labor and technical resources, etc.) without the complexity of managing or overseeing day to day operations. A complexity that can ensue from a less integrated or capable contract manufacturer.
Key Stages in Turnkey Contract Manufacturing
Turnkey manufacturing processes for different products vary, involving a mix and match of various steps, depending on the level of manufacturer involvement and capabilities, and when that “handover” takes placeHowever, all turnkey projects typically involve the following broadly defined steps.
Product design and conceptualization
The turnkey manufacturer collaborates with the client to develop the product design, taking into account its utility, specifications, functionality, and target market. Oftentimes, the client may have a ready-made design of the product; it may be on the market already or still in the design phase. In such cases, the manufacturer is responsible for the optimization of DFM (design for manufacturing), focusing on reviewing design feasibility (whether the product can be made as designed) and design optimization for lower production cost, better product quality, and faster/easier manufacturing and related processes. DFM also involves discussions about material selection, product requirements and testing, and other aspects of the product and process definition.
Prototyping and testing
After finalizing the design and obtaining the client's approval, the manufacturer builds prototypes, employing rapid prototyping, custom manufacturing, and pilot production techniques. Using the prototypes, designers and developers validate and test the product, iterate on designs, and gather feedback from stakeholders before moving forward with the full-scale production. This iterative process helps identify and resolve issues early on. At this stage, the manufacturer also confirms that the product conforms to relevant standards.
Depending on the product and the customer's requirements, turnkey contract manufacturing may involve new product introduction services, such as product documentation, concept validation, and other aspects.
Fig. 2: Komaspec's Turnkey Manufacturing Facility
Sourcing and procurement
If the prototypes scale through testing, the manufacturer sources and procures the required raw materials, components, or parts from trusted suppliers. They leverage their network and expertise to secure quality materials at competitive prices. This saves the customer the complexity of managing the full supply chain; though they may be involved in designating suppliers or consigning parts for crucial components.
Manufacturing and assembly
The actual manufacturing and assembly of the product occur at this stage. Depending on the product, the turnkey manufacturer may manufacture the product using in-house facilities or order parts from specialized suppliers and assemble the product in-house. The latter is known as contract assembly. The customer is not directly involved in either case, and it's up to the manufacturer to ensure that all stakeholders adhere to the customer's timeline and product specifications. This stage involves everything from fabrication and assembly to postprocessing, with the finished products as the outcome.
Quality control and testing
The manufacturer should implement quality control measures at different points during the manufacturing and assembly process based upon best practices or discussion with customer. This helps to identify and rectify any defects or issues before the product reaches the market. Generally, this will involve incoming quality control (IQC), process quality control (PQC), and outgoing quality control (OQC) measures.
Packaging and shipping
Lastly, the turnkey manufacturer packages the finished product according to the client's specifications and manages the logistics for timely delivery to the client or end-users. Depending on the customer’s needs, this may be container shipments, drop shipments via express couriers or even air freight.
Benefits of Turnkey Manufacturing
Turnkey manufacturing is the preferred manufacturing model of countless businesses, including most of the world's biggest brands. This widespread popularity is a result of the model's many inherent benefits. Some of these are as follows.
- Seamless, hassle-free manufacturing: Running a successful business involves numerous critical aspects. In addition to having a great product, the company handles marketing, sales, customer satisfaction, personnel management, etc. Turnkey manufacturing enables businesses to outsource one of the most vital aspects of their entire operation, manufacturing, effectively freeing up time, resources, and staffing to focus on other aspects of the business. With a single point of contact managing the entire process, there is less chance of miscommunication or coordination issues, reducing the risk of delays or errors.
- High-quality products: Businesses significantly minimize the possibility of having a weak link in their operations by entrusting manufacturing to an expert turnkey manufacturing solutions provider instead of dealing with multiple contractors. Specialized turnkey manufacturers typically have dedicated cutting-edge facilities that ensure high product quality. This enables them to implement tighter quality control measures. They also have direct access to industry-leading materials and parts suppliers. Because there is only one supplier which is responsible for all production and quality control, any quality issues are going to be their responsibility to fix, making responsibilities and liabilities clear - when there are multiple supplier involved, tracking down where the issue is becomes much more time consuming and complex.
- Faster time to market: The turnkey manufacturing model tremendously reduces product development timelines. To begin with, because the entire process takes place "under one roof," progression between stages is streamlined. The in-house experts in charge of the different stages of production are involved from the beginning, allowing proper planning and timely problem identification. Therefore, they spend time getting up to speed when it gets to their stage. For example, the post-processing expert is involved at the design stage and can point out any potential issues that may arise in post-processing long before the product gets to that stage, significantly increasing development speed. Experts in each stage can quickly consult, make adjustments, and exchange feedback with those in the preceding and subsequent stages. Having a turnkey manufacturer also saves businesses the time and stress of supply chain management, delays in transit, and logistics protocols.
- Reduced production cost: Cost savings is an imperative consideration for businesses. With turnkey manufacturing, businesses save immense costs in numerous ways, the most significant being the cost of building and running a factory. The turnkey project model provides businesses with the benefits of having a dedicated manufacturing facility without the cost or risks involved. It also allows businesses to switch manufacturers without incurring significant costs. Furthermore, in addition to saving logistics, planning, material procurement, and man management costs, clients also save costs on multiple contractors by negotiating better deals with a single contractor. Another cost benefit of turnkey contract manufacturing is price certainty. Once the client and manufacturer agree on a deal, the client doesn't have to worry about market conditions and price fluctuations.
Limitations of Turnkey Manufacturing
While turnkey manufacturing offers numerous advantages, it also comes with certain limitations and challenges that businesses should know before opting for this approach. Here are some rules of turnkey manufacturing:
- Lack of control: When companies choose the turnkey project model, they relinquish control of the entire production process to the provider. This relinquishment of control may lead to limited oversight over the manufacturing process, making intervening difficult if issues arise or changes are needed. There is also the risk of compromising product quality if the turnkey manufacturer does not adhere to the desired QC standards.
- Dependency on the turnkey provider: Companies may become heavily reliant on the turnkey manufacturer for their production needs. This dependence can be a concern if the provider faces financial difficulties or operational issues, leading to potential disruptions in the supply chain.
- Cost and price Transparency: Though turnkey manufacturing can lead to cost savings, the pricing structure may not always be entirely transparent. A manufacturer may present the customer with a quote that is padded, bloated, or lacking in details. All these may lead to losses for the customer.
Analyzing the limitations of turnkey contract manufacturing will reveal that many of the risks associated with the approach stem from a manufacturer's incompetence. Similarly, the benefits are subject to the proficiency of the manufacturer. Therefore, selecting the right manufacturer is critical to the success of your turnkey project.
Turnkey manufacturing has emerged as a game-changer in the manufacturing landscape, providing companies with a holistic and efficient solution for bringing their products to market. By outsourcing the entire production process to specialized providers, businesses can benefit from reduced costs, increased efficiency, faster time-to-market, and higher product quality, giving them the opportunity to focus on their core competencies and other aspects of the business.
Komaspec is an industry-leading turnkey manufacturing solutions provider with a reputation for quality and reliability. With over a hundred state-of-the-art machines spread across three manufacturing facilities, more than 20 engineering staff, and wide-ranging application and process experience, we provide turnkey manufacturing services for customers in North America, Europe and elsewhere in recreational vehicles, mining, IOT, agritech and other sectors.
We offer complex mechanical and electromechanical product assembly, sheet metal processing in our dedicated plant, injection molding, welding, CNC machining, stamping and other services, along with a full-service team of engineers and project professionals to push projects quickly and efficiently.
Contact us, and an expert member of our team will promptly reach out to you on how best we can collaborate on your next project. Partner with us today to harness the immense benefits of turnkey manufacturing for your next project.
- “What is Contract Manufacturing?” Komaspec, www.komaspec.com/about-us/blog/what-is-contract-manufacturing/.
- “Turnkey.” Merriam-Webster, www.merriam-webster.com/dictionary/turnkey.
- “What is Design for Manufacturing?” PTC, www.ptc.com/en/blogs/plm/what-is-design-for-manufacturing.
- “What is Contract Assembly?” Komaspec, www.komaspec.com/about-us/blog/what-is-contract-assembly/.
- “New Product Introduction (NPI).” Komaspec, www.komaspec.com/new-product-introduction-npi/.
- “Instant Quote & Online Order Direct from the Factory.” Komacut, www.komacut.com/.