Home > contract manufacturing > Understanding What a Toll Producer Can Do

tolling agreement manufacturingWhen you start exploring third party manufacturing, two options will immediately enter the conversation: a toll producer and a contract manufacturer. While both of these options involve working with a subcontractor, they have important differences that you shouldn’t overlook. Ultimately, working with a third party manufacturer always has key benefits. However, it’s important that you know which type of manufacturer works most effectively for your needs. That’s what Conversion Technologies International is here for. We’re ready to walk you through these different types of outsourcing. Take a look!

What is the difference between a toll and turnkey?

When we talk about a turnkey producer, we’re really discussing a turnkey contract producer (or manufacturer) as opposed to a toll producer. We define these two types of third party manufacturing by the means through which they work with clients. When you’re the client of a toll manufacturing company, you’re paying a toll–and that sounds pretty familiar, doesn’t it? You pay the toll in order to get the service or product you seek for your business. It’s your entry fee. Once the third party manufacturer accepts your toll, you’re able to move on. Albeit, with some negotiations that we’ll explore further below.

Just like you’ve heard of a toll before, we imagine you’ve heard the word “turnkey” before. When you get something turnkey, you’re getting it as is. You don’t need to make any other changes, it’s ready to go, and you can move on. That is, as we’ll see, one of the main differences between the act of toll processing and the act of turnkey contract manufacturing. Let’s dive into that a little more, shall we?

What is the difference between working with a toll producer and a contract manufacturer?

Now, you know the difference between tolling and turnkey contract manufacturing. When those manufacturers put those qualities into action, you get unique experiences. The great thing about this is that it empowers you to get what you need as a business owner. It’s tailored to your needs.

As previously mentioned, you’re paying a toll in order to get what you need from a toll producer. However, what you’re paying for is production and delivery of the final product. You provide the raw materials, or at least a percentage of the materials, to the producer as you pay your toll. From there, the toll producer takes on the processing and finishing. In other words, the toll manufacturer isn’t doing everything for you–the procurement of those raw materials is up to you, the client.

Here’s what makes that so appealing to some business owners: you maintain some degree of control. When you choose your own raw materials, you’re sure of the overall quality and you know exactly what you’re paying for those materials. If you already have your own provider of raw materials–perhaps with a deal in place–you don’t have to give them up. Business owners who like to be more involved in the manufacturing process may prefer toll production.

A turnkey contract manufacturer, on the other hand, takes care of everything. You agree to the contract, and the manufacturer handles it from there. It’s essentially total outsourcing, as opposed to the more limited outsourcing provided by a toll producer. The contract manufacturer not only handles production, but the procurement of raw materials. It’s more hands-off for you. Whether or not that appeals to you depends on your preferences and needs.

What are the benefits of third party outsourcing?

Now, you also know the difference between a toll manufacturer and a contract manufacturer. Both of these processes exist as a form of outsourcing. Some business owners have an initial goal of keeping processes in-house. However, that’s not always possible–and it’s important to understand what third party manufacturing brings to the table. Some of the benefits include:

Cost efficiency. A lot of money goes into manufacturing in-house. For example, you’ll need to invest in equipment, as well as facilities, and yes, employees as well. When you work with a third party manufacturer, they have that ready. If you choose a contract manufacturer, they even have the raw materials ready. A toll producer, on the other hand, ensures that you can control what you’re paying for and how much a bit more. You don’t have to totally give up your involvement.

Speed. When you have a growing business, speed is everything. Especially when you need to scale up–and if your business is going well, you often do! Rather than taking the time to learn processes and acquire the components you need, you can turn to a third party manufacturer. Additionally, a third party manufacturer has a smooth process in place. They know exactly what they’re doing from the beginning.

Quality. A third party manufacturer is, again, practiced. While it’s easy to make mistakes if you’re less experienced, this is much less likely to happen with seasoned third party companies. This doesn’t just impact the quality of your work. When we make mistakes, you lose time and money.

Flexibility. With a toll producer, you maintain a degree of flexibility pertaining to your raw materials. And with both types of manufacturers, you have the ability to focus on other aspects of your business while they produce.

In conclusion:

Now that you know the difference between toll manufacturing and contract manufacturing–where do you go from here? We recommend delving a bit further into the processes. Start by consulting with the experts. The more you know, the easier it is for you to move forward. Why not start with contacting CTI? Call us at 419-924-5566 or get in touch here. We’re ready to talk!