Archive for September, 2010

Generally, small to medium sized technological firms design, develop, market and sell their products, while they utilize contract manufacturers to partially or fully assemble their products. In “Consignment Manufacturing,” tech firms take on the bulk of supply chain and manufacturing activities and contract out several sub-assemblies, while in “Turnkey Manufacturing” tech firms sub out all supply chain and manufacturing activities.

These supply chain and manufacturing activities consist of purchasing and maintaining inventory, kitting, shipping, receiving, assembly, and training respective personnel to carry out these activities. Hence, turnkey manufacturing is more favorable for the following reasons:

1.       The tech firm:

• Focuses on product design/development, sales and marketing
• Reduces high risk and capital expenditures associated with overhead, inventory and labour costs.

2.       The contract manufacturer:

• Spreads its costs over several projects.
• Employs workers that specialize in and are dedicated to all supply chain and manufacturing activities.

It is best for tech firms to:

• Sign an NDA with the CM to eliminate concerns over intellectual properties.
• Consign exclusively received components/sub-assemblies to CMs for integration into final assemblies.