Toll manufacturing and contract manufacturing are both forms of outsourcing chemical production that reduce costs and ensure higher quality products are provided for the manufacturer’s clients. Because these two manufacturing services have similarities, they are often confused as being the same. Let’s take a look at the differences between toll manufacturing and contract manufacturing so you can decide which custom chemicals manufacturing service is best for your business.
Differences Between the Services
The main difference between toll manufacturing and contract manufacturing is the acquisition of materials. In toll manufacturing, the chemical manufacturing company is responsible for the procurement and refinement of the raw materials necessary to create the final product. This is a valuable part of the service, as the manufacturing company has specialized equipment and employees with professional skills who are able to create a greater product if given the freedom to obtain materials themselves.
Contract manufacturing, however, has the largest contrast in that the manufacturing company’s client provides the materials for the product. This allows a company to supply specific materials they want to use but removes part of the quality control the manufacturer has over the final product, giving them only the ability to refine the production process rather than being able to pick out the best materials themselves.
Advantages of Toll Manufacturing
- Due Control – The chemical manufacturer has control over what vendors they use and, thus, the price and quality of the materials used within the final product.
- Delegate Sub-Processes – The manufacturer can sublet the processes that are not part of their core expertise to further ensure the highest quality final product.
- Consistent Prices – Even if the cost of raw materials goes up, the price of using a toll manufacturer remains because the fee is pre-decided.
Advantages of Contract Manufacturing
- Saves Time – The contract manufacturer does not need to spend time selecting a vendor because the client provides the materials to be used in the final product.
- No Transportation Hassles – Similarly, because the materials are provided, the manufacturer does not have to wait for materials to be transported to them after selecting their vendor.
- Economies of Scale – The contract manufacturer reduces costs by spreading the cost over a large number of units. When the manufacturer’s production level goes up, the average cost per unit decreases. This saves money without reducing the quality of the final product.
