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Toll Manufacturing vs Contract Manufacturing

Though they are very similar, in practice are very different. In this article the differences will be brought to light and made to be understood. We will also talk about the similarities.

First things first though: choosing the right manufacturer to do the work is key. When choosing a manufacturer check out our post here for questions you should be asking.

Now that you know the questions you should ask when choosing a manufacturer let’s get started. Let’s begin with the literal definitions of Toll Manufacturing and Contract Manufacturing.

               Toll Manufacturing – When a company provides its raw materials or semi-finished goods to a third-party service provider (The manufacturer). That provider, has a specialized infrastructure to complete the job and provides the service of manufacturing processes for the company using the materials/components for a fee.

             

Contract manufacturing agreements

  Contract Manufacturing – When a third-party company hired to produce the goods provides the manufacturing process/service as well sources all the raw materials and packaging components. Contract manufacturing creates a supply-chain vendor for a branded, private label or custom-made product. The contract manufacturer is responsible for making the product to the client’s exact specifications and meeting the delivery time requirements.

In conclusion, the two processes are very similar, but their differences are substantial. Substantial because raw material sourcing is an integral part of the process affecting timely manufacturing, delivery of finished product and cost.

Which service is right for you? It all depends on how you decide to source your materials. If you want an easier “one-stop-shop” type of process, then Contract Manufacturing is the way to go. If you prefer to  source your own raw materials and/or packaging materials, then Toll Manufacturing is the answer.