Home > contract manufacturing > The Tolling Fee Manufacturing Benefits You Should Know About

Tolling Fee ManufacturingYou’re probably here because you’re curious about tolling fee manufacturing—and maybe a little confused. Don’t worry. We’ve done the work for you! Below, we’re discussing the ins and outs of this process, as well as its benefits.

What is tolling fee manufacturing?

The workings of tolling fee manufacturing lie in the name. You pay a toll in order to secure a service, or a permission. When we toll manufacture products, we’re manufacturing them in exchange for a fee, otherwise referred to as toll. Yes, essentially tolling fee manufacturing is a type of third party manufacturing, or outsourcing. Rather than manufacturing or refining a product in house, you’re having us (the tolling fee manufacturing company) do it for you.

Toll processing doesn’t work exactly like every other form of third party manufacturing, however. There are multiple options for you to choose from–and for many business owners, tolling fee manufacturing comes out as the clear winner. Let’s look at the difference between working with a tolling company and working with a contract manufacturing company.

What is the difference between toll manufacturing and contract manufacturing?

Now that you know a little bit more about what it means to toll a product, let’s explore it in comparison to its main competitor, contract manufacturing. In both cases, you are outsourcing your manufacturing processes to a third party. In both cases, you’re giving a specific order, which the third party commits to fulfilling to your specifications.

However, one of the main differences between the two lies in the raw materials used for your order. When you work with a contract manufacturer, the contract you sign covers everything—you’re not only agreeing for the contract manufacturer to cover the production and equipment necessary, but the raw materials as well. In contrast, a tolling fee manufacturer handles the production and equipment, but does not procure the raw materials. Rather, you provide those materials directly.

While having raw materials covered under your contract may seem easier on paper, the reality is a bit more complicated. There are several reasons why many business owners would rather work with toll manufacturers than contract manufacturers—and one of them actually has to do with that very issue.

Why would I want to procure raw materials myself?

So—what is the benefit of procuring raw materials for yourself, rather than having a third party do it for you? A lot of it lies in what small business worry about when first working with third party manufacturers: control. When you allow a contract manufacturer to procure raw materials for you, you are giving up a bit more control. Some business owners prefer to inspect and select raw materials for themselves. Even if you trust your contract manufacturer, this final call will not be up to you.

For other business owners, it’s simply a matter of preference. Your standards may differ from those of your contract manufacturer’s. A toll processor, on the other hand, enables you to remain more involved in the process. Choosing the raw materials ensures that they’re exactly what you want them to be. At the same time, it’s also a major benefit if you have a preferred source for those materials. If you’ve worked out a specific deal with that source, or have found a great price otherwise, you may actually save money by working with a tolling fee manufacturer.

For some business owners, it’s simply a matter of wanting to have options. This difference with tolling fee manufacturers allows you more flexibility. Now, it’s important to remember that some companies offer both models. This can ensure an additional degree of flexibility—if you choose one model but later need a different one, you don’t necessarily have to switch companies.

What are the benefits of tolling fee manufacturing?

Of course, personal control and flexibility is not the only benefit of working with a tolling fee manufacturer. As we mentioned previously, you may also discover that tolling fee manufacturing is more affordable than contract manufacturing. However, on a more specific level, tolling fee manufacturing can also be more affordable than manufacturing in house.

Why? Because for one thing, you’re not investing in equipment or facilities when you outsource production. In some cases, you’ll only need certain types of equipment and facilities for a short amount of time. Therefore, it makes no sense for you to invest in them for the long term. Additionally, you won’t have to personally employ and train people for production. The third party manufacturer takes care of it all, and that saves you money.

Furthermore, third party manufacturers are more experienced. They have efficient processes in place, which means you won’t have to deal with trial and error. You’ll get the product you want faster, and with far less opportunity for error. In the same sense, your final product will be of a higher quality when it’s made from experienced manufacturers with ready systems in place.

In short, working with a tolling fee manufacturer is faster, often most cost efficient, and offers a higher level of quality control. It’s easy to see why so many business owners choose this process.

In conclusion

While you may not initially feel ready to outsource production to a third party, it can offer you many benefits. Keep in mind that tolling fee manufacturing is a natural part of scaling up as your company becomes more successful, and you begin producing more. As we’ve discussed above, outsourcing doesn’t mean relinquishing control. Nor does it mean cutting quality—the opposite, in fact.

Here are just a few operations that you can outsource:

We’re ready to answer any questions you may have left. Give CTI a call at 419-924-5566 or contact CTI here to learn more!