What is tolling manufacturing?

Question

Zippia Team · Accepted Answer

Tolling manufacturing is a phrase used to describe when an organization outsources all or part of its production to a third-party company by providing that third-party company with all of the necessary raw materials for the production process.

A company engaging in toll manufacturing, also referred to as tolling, will:

Outsource all or part of its production line to a third-party manufacturing company
Provide the third-party manufacturing company with the proper designs
Provide the third-party manufacturing company with the proper raw materials

Toll manufacturing includes the procurement of raw materials and every production phase, from start to finish. While the organization outsourcing this service provides the designs and raw materials, the third-party company processes the raw materials or semi-finished products.

Toll manufacturing sees the parent company (the organization outsources tolling) having greater control over the third-party company producer due to the fact that the parent company is providing and managing raw materials and their flow.