Turnkey vs Not-Turnkey
Turnkey manufacturing is an industry-wide term that describes the ability for a customer to sign a purchase order and manage no aspect of the supply chain in the manufacturing of a product. At BPI Labs, we do turnkey manufacturing for a few of our customers. This option isn’t for everyone, but it might be for you. Read on to learn more.
What you will read in this post:
- The benefits of turnkey manufacturing
- How we turn your product turnkey
- The turnkey options
- Who is right for turnkey
How Turnkey Can Make Life Better
When our clients do not use turnkey manufacturing then they must find suppliers of packaging, request samples of product, negotiate prices, submit packaging samples to BPI Labs for testing, order their packaging for an upcoming job and pay the invoice, track their packaging and update BPI Labs about its status, and finally ship all the left-over packaging back to their warehouse for storage after we finish a job. (Although that last part can be mitigated with a warehousing agreement with BPI Labs.) If any packaging arrives at BPI Labs damaged or as a wrong item, then our customer must take the claim up with the packaging supplier and reorder. Any mistake in managing this supply chain often results in increased shipping charges for expedited shipping and sometimes delays the job until BPI Labs can reschedule a manufacturing date.
How BPI Labs does turnkey manufacturing
Turnkey manufacturing by BPI Labs eliminates most, if not all, of the above work. We will find packaging suppliers with whom we trust, negotiate prices, request samples, purchase packaging for upcoming jobs and pay the invoice, and store leftover packaging in our warehouse. The relief your company may feel on its cash flow might be enough reason to consider turnkey packaging. But your warehouse will feel slimmer and more organized because you won’t need to store leftover packaging and you won’t need to deal with lost or missing inventory. The only thing turnkey manufacturing by BPI Labs does not do is choose your packaging for you. That only makes sense since your product’s packaging represents your brand, not BPI Labs’ brand.
The only thing turnkey manufacturing by BPI Labs does not do is choose your packaging for you.
How we turn your job turnkey
When BPI Labs feels that a customer is ready to have their job made turnkey, we’ll send out samples of their chosen packaging to our suppliers for a matching component. It is not unusual for our suppliers to locate the originating manufacturer and offer a counter-offer to supply the packaging. BPI Labs will then leverage its own volume discounts and negotiate the lowest price possible from suppliers with competing offers. Sometimes this results in turnkey manufacturing being cheaper even with BPI Labs’ turnkey fees. It is notable that most turnkey jobs begin as a hybrid of turnkey and not-turnkey. This happens during a transition phase, but sometimes our customers never fully transition into a completely turnkey manufacturing relationship and they’re fine with that.
Why doesn’t everyone use turnkey?
Turnkey is not for everybody. If our customer is able to source packaging for significantly less than BPI Labs, then it may make sense for them to manage the supply chain. BPI Labs does charge 20% on the landed cost of packaging for its turnkey service, and customers who must have the lowest price possible will not want to pay the turnkey fee. Also, having control of the supply chain may appeal to certain businesses where they feel they have a core competency in that area. Finally, turning a product into a turnkey job does require some labor and might delay the introduction of a new product into a market. This makes turnkey a better option for products that have already seen a successful introduction.
Turnkey manufacturing offers significant advantages over the more hands-on approach our customers could take. It is never a guarantee that turnkey is a more expensive option as we’ve seen with some customers. If our customers add up all the time and money they spend on managing the supply chain, they might be surprised to see how expensive not using turnkey can be. If you think turnkey is an option you would like to explore then please contact your project manager at BPI Labs today to discuss the possibilities.
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