We currently use a small US contract manufacturer that works pretty much as you say. The turn times are terrible (7+ weeks, not 7 days), and this is a major issue, but there are exactly two reasons we continue to use them:

1. Line of credit - we are not billed until we take delivery of tested product. 2. Willingness to handle high mix, low volume products. One product line example: a dozen SKUs with 95-98% parts in common on 2 PCBs, a single set of parts (that we aren't billed for up front) and quoting to build 20 of SKU 1, 50 of SKU 2, 10 of SKU 3, etc. without charging 2-3x the price.

We manufacture in the research / test equipment / defense space and I've heard similar things from other small hardware companies that are like us.