Consignment vs. Direct Sourcing for PCBA: Which Really Saves You More?

Are you trying to cut costs but getting lost in supplier management? Choosing turnkey sourcing¹ can free up your time and reduce your total expenses, letting you focus on your business.

Factory direct sourcing² is often the most cost-effective choice for small and medium-sized businesses. A good manufacturing partner leverages its purchasing volume and established supply chain to secure better prices and quality, which ultimately reduces your overall operational costs and minimises your risk.

It feels good to have control over your component sourcing. You can shop around and maybe even shave a few percentage points off your Bill of Materials (BOM)³. But is the price on the BOM the real cost? The truth is, the total cost of bringing a product to market involves much more than just the parts. Let's dig into why letting your factory partner handle sourcing might be the smartest financial decision you can make.

Why Does Sourcing Parts Yourself Seem Cheaper but Cost More?

You've painstakingly sourced every part on your BOM and saved 10%. But now you're managing dozens of suppliers and facing unexpected delays. The truth is, those initial savings are often eaten by hidden costs.

Sourcing parts yourself adds significant hidden expenses. These include the salaries of a purchasing team, management overhead, complex logistics, and the high financial risk of poor quality. These costs often erase any initial savings on the components.

I saw this happen with a client from the US in 2023. They decided to build their own internal purchasing team to handle component sourcing. On paper, they did a great job and reduced their BOM cost by about 10%. They were happy with that number. However, after a year, their finance team did a full review. They found that the company's total operational costs had actually increased by 23%. This was a shock. The cost of salaries for the new team, the time their engineers spent managing suppliers, and the logistical headaches added up quickly. To make matters worse, they didn't have a dedicated quality inspection team⁴. A faulty batch of components made it into production at the end of the year, causing major delays and rework costs. In 2024, they handed all sourcing back to us.

How Can a Factory Get Better Prices Than You?

You're a growing business, but you struggle to get the best prices from component distributors. This means you pay more and face stock shortages, which can halt your production line. Your factory partner can change this.

Factories get better prices through volume purchasing⁵. By combining orders from all their clients, they become a major buyer. This gives them significant negotiating power with suppliers for lower prices and priority access to components.

The concept is simple: aggregated demand. We don't just buy parts for your 1,000-unit order. We buy parts for your order plus the orders from a dozen other clients. Suddenly, we are placing orders for 100,000 units at a time. This massive volume makes us a very important customer to suppliers. It gives us negotiating power that a single small or medium-sized business just can't achieve. Over our 15 years in business, we've built a vast and reliable network of suppliers right here in China, the world's largest electronics market. This means we can source high-quality original components or find trusted, cost-effective alternatives to meet your budget. We have the relationships and the purchasing power to secure better pricing and shorter lead times. This directly benefits you, not just in cost, but in the speed and reliability of your supply chain.

Who Takes the Blame When Components Fail?

Your new batch of PCBAs arrived, but many are failing functional tests. Now the finger-pointing begins. Is it a bad component, an assembly error, or a design flaw? Your project is now at a standstill.

When you provide the parts (consignment), you are responsible for their quality. If your factory sources the parts (turnkey), the full responsibility for component quality⁶, from sourcing to final assembly, rests with them. This clarifies accountability.

Let's trace what happens when a bad component enters the supply chain.

In a Consignment Model:

1. You source and ship the parts to us.
2. We assemble the boards.
3. The boards fail the functional test.
4. The problem is a faulty component. This is now your problem.
5. You must contact your supplier, manage the return, source replacements, and pay for the shipping and potential re-assembly fees. Your production is on hold.

In our Turnkey Model:

1. We source the components for your project.
2. Our dedicated Incoming Quality Control (IQC) team inspects them. We use visual inspection, LCR meters to test values, and even X-Ray analysis for critical parts like BGAs.
3. We identify the faulty component before it ever reaches the assembly line. This is now our problem.
4. We immediately use our supply chain leverage⁷ to get replacements from the supplier.
5. The correct parts are placed on the assembly line. Your project experiences minimal or no delay.

With a turnkey partner, you have one point of contact and one party that is fully accountable. We manage the risk so you don't have to.

Conclusion

While consignment offers apparent control, factory direct sourcing provides superior value. It lowers your total cost, reduces risk, and frees you to focus on innovation and growing your business.