Electronics Job Work vs Buying Finished Products: Which Is Cheaper for Your Brand?

If you sell an electronic product under your own brand, sooner or later you face the same question. Do you buy the finished product from a manufacturer, or do you hand a manufacturer your own design and have it built for you? The second route is called job work. Many founders and product teams assume it is always cheaper, and many assume it is always harder. Neither is true. The right answer depends on your product, your volumes and how much of the work you want to own.

What is electronics job work?

In electronics job work, you own the design. You give the manufacturer your circuit board files, your list of parts, your assembly instructions and your test method. The manufacturer builds the product to that specification, tests it and packs it. The product is yours, the brand is yours and the design stays yours.

Some companies call this contract manufacturing or EMS, short for electronics manufacturing services. The idea is the same. You bring the design, and the factory brings the machines, the people and the process.

What does buying finished products mean?

Here the manufacturer already has a product, designed and tested, and you buy it in the quantities you need. You may sell it under the manufacturer's name or under your own label. You do not manage a design, parts or a production run. The trade-off is that you get the manufacturer's design, with limited room to change it.

Where the money really goes

The unit price is only one line in the cost of a product. When you compare the two routes, look at every line:

• Components: the chips, connectors and other parts on the board. They are usually the largest share of the cost.
• Assembly: placing and soldering the parts on the board, then fitting it into its enclosure.
• Testing: checking every unit before it leaves the factory. Skipping this saves money today and costs far more later.
• One-time set-up: stencils, programming, test fixtures and the first trial build. This is spread across the units you order, so it weighs more on small orders.
• Packaging and labelling: boxes, manuals and the right markings for your brand.
• Stock and cash: with job work, parts often need to be bought ahead of production, which ties up money.
• Rework and returns: the cost of fixing problems after the product is in the customer's hands.
• Your own time: someone on your team has to manage drawings, parts and the factory.

Worked example

Example only. These are round numbers to show how the lines add up. They are not Vintron prices, and real component prices also change with the quantity you buy.

The lesson is not the final number. It is the shape. At 500 units the set-up cost is a large part of each unit, so job work saves little. At 5,000 units the same set-up almost disappears, and the gap grows. On top of the table, job work also asks you to put money into parts early and to manage the process. Add those to your sums before you decide.

When buying finished products is the better choice

• You want to test the market first and are not sure of the volumes.
• The existing product already does what your customers need.
• You do not have an engineering person to manage drawings and parts.
• You need stock quickly and cannot wait for a first build and trial.

When job work is the better choice

• You have your own design, or a feature the standard product does not offer.
• You want control of quality and of how the product changes over time.
• You expect steady volumes, so set-up costs spread out well.
• You want the design to stay with you and not depend on one supplier's catalogue.

Five questions to help you decide

1.  How sure are you of your volumes for the next 12 months? Uncertain volumes favour buying finished.

2.  Is the design really yours, or are you reselling a standard product? A standard product points to buying finished.

3.  Do you have a person who can manage parts, drawings and quality? If not, plan for support from the manufacturer.

4.  How much cash can you put into parts and set-up before the first sale?

5.  How important is it that you can change the product on your own schedule? If very, job work gives more room.

If most of your answers lean one way, you have your direction. If they are mixed, start with a pilot order and learn from it before you commit to a large run.

Myth vs fact

Common mistakes to avoid

• Comparing only the unit price. Include set-up, stock, testing and your own time.
• Starting without a complete package. Missing files or an unclear parts list cause delays and extra cost.
• Ignoring testing. Agree the test method before the first build, not after the first complaint.
• Choosing on price alone. A manufacturer who cannot support you later is expensive at any price.
• Assuming a number. Quantities and timelines depend on the product, so ask the manufacturer instead of guessing.

Why talk to a manufacturer that builds its own products

Vintron has been manufacturing in India since 1991. Our facility at A-37, Sector 58, Noida has 10 fully automatic SMT machines and more than 200 qualified engineers, and it builds our own cameras, recorders, PoE switches and power supplies every day. You can read more on our EMS profile and manufacturing facility pages. A team that builds products daily can tell you quickly whether your design is ready for production.

Ask the engineer

How many units do I need for job work to make sense?

It depends on your product, its parts and how much set-up it needs. We would rather look at your design than give you a number that may not suit you. Call us and share what you are building, and we will give you an honest view.

Can I give you my own design?

Yes, that is the starting point for job work. Share your board files, parts list and test method, and we will tell you what is needed and what we can do.

Will my design stay confidential?

Discuss this at the start. We are happy to talk about how your files and information are handled before you share anything.

How long does a first build take?

It depends on the product and on how quickly the parts can be sourced. We can give you a realistic plan once we see the design.

The bottom line

Job work can be the cheaper and better route, but only when the product, the volume and your team are ready for it. Compare the full cost, be honest about how much work you want to own, and speak to a manufacturer before you decide. In the next episode, we look at one of the first choices you will face: turnkey or consigned.

To talk about your product, call our toll-free number 1800-121-4322 or write to lead@vintronsmartvision.com. You can also see our facility and range at www.vintronsmartvision.com.

Vintron Smartvision Pvt. Ltd.
A-37, Sector 58, Noida 201301
Toll free: 1800-121-4322  |  lead@vintronsmartvision.com  |  www.vintronsmartvision.com