Turnkey manufacturing is an industry term that describes the ability for a customer to sign a purchase order and turn over all aspects of the supply chain management to their manufacturer. 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
The work that turnkey manufacturing saves you:
When our clients do not use turnkey manufacturing then they must perform all the following things to manufacture their product at BPI Labs. They will need to find suppliers of packaging, request samples of product, negotiate prices, submit packaging samples to BPI Labs for testing, perform their own quality checks, order their packaging for an upcoming job and pay the invoice, track their packaging and update BPI Labs about its status. The work does not end here, however.
After the job is finished, they will need to receive 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. This is a general list of all the work turnkey manufacturing saves you.
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 make 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 hybrid situation happens when BPI Labs is responsible for sourcing some of the packaging for a job. This usually happens during a transitional phase, but sometimes our customers never fully transition into a completely turnkey manufacturing relationship and that’s okay too.
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 some of our customers take. First, turnkey is more cost-effective for customers who are not in a good position to perform all the manufacturing logistics and are not doing enough volume to benefit from discounts. Second, turnkey absolves you of the risk of delay due to mismanagement of the supply chain and the burden of holding left-over packaging. Third, turnkey lets BPI Labs perform more of the manufacturing work it knows so well, and it leaves your company free to focus on its markets, brands, customers, and growth.
Turnkey might not be a great option if you’re highly price sensitive with a competency in supply chain management or if you are introducing a new product into the market and there are many factors of your product still in flux. However, after all the factors of your product have congealed, it may be time to begin looking at turnkey. 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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