Toll manufacturing can be simply defined as an arrangement, where a company with specialised equipment processes raw materials or unfinished goods for a different company. If you haven’t heard of this before, you might have come across toll processing, which is the exact same thing, only a different name. It’s also important to note that, although contract manufacturing has some similarities to toll manufacturing, they are different things. In contract manufacturing, the manufacturing company also provides the materials, whereas in toll manufacturing, that’s the customers job. There are a few things you’ll need to know about this process before you agree to an arrangement.
1. It’s an on-demand service
In a strange and unprecedented way, toll manufacturing is actually akin to other on-demand services like Netflix. This manufacturing allows companies to offer their services on-demand and at all times, as part of an arrangement that is beneficial for both the customer and the manufacturer. It’s a great way to build up contacts, too – if you’re start up company, and have some raw materials or unfinished products that require specific machinery, then entering into a toll manufacturing arrangement can both help you finish those products and build a relationship with another company.
2. It’s cost-effective
Toll manufacturing is very cost-effective for customers. It allows them to keep the cost at just manufacturing, without having to factor in equipment costs, facility costs and employee salaries. The customer is equipped with everything it needs to manufacture, without having to pay anywhere near what they would if the equipment was theirs. If you don’t want to bankrupt yourself by paying for extra equipment, toll manufacturing could help you out. It’s a win-win situation, as the manufacturing company receives this payment and can put this towards anything they like.
3. It’s a time saver
Toll manufacturing agreements can save your company a lot of time. Getting your product on the market can be a lengthy process, especially if you’re trying to acquire the equipment and extra employees required to do so. Time for ordering and installing new machinery is taken care of, as the machinery you need is already set up and waiting at another company. Toll manufacturing can help you to get your products on the market as quick as possible, which may be especially helpful if products are in high demand and out of stock.