Every company wants to improve their bottom line and share holder value. Outsourcing is a hot topic nowadays to achieve this goal. Main reasons to start outsourcing are focus on the core business, hiring expertise and operating more cost-effectively. This can be achieved when choosing toll manufacturing/custom manufacturing.
You could start early in the product lifecycle by involving a toll manufacturer. A skilled toll manufacturer is capable of taking a project from piloting phase and scale-up to full production level.
5 reasons why companies choose toll manufacturing:
• “We have a knowledge gap in expertise necessary to scale-up productions”
• “We do not have the specialized equipment required and do not want to invest in it”
• “We want a short time to market”
• “We do not have enough production capacity or storage”
• “We know meeting regulatory requirements is hard and costly for this product”
The cost efficiency argument is another advantage of toll manufacturing. For example: if you’re currently shipping your chemical products overseas, which is expensive, producing locally at a toller is more cost efficient. Another example: the demand for your product is decreasing, and this makes it less efficient to dedicate your own production plant to it, but you still have an acceptable demand for the product. This is usually the last phase in the product lifecycle. Instead of making the decision to stop or continue with inefficient production levels at your own production plant, toll manufacturing could be your solution to improve the bottom line. In the start up phase of a new product the same reasoning could apply, when volumes are still relatively low it could be interesting to use a toll manufacturer, in the mid section of the product lifecycle when volumes increase you could do it at your own plant.
Another advantage is that an experienced toller is able to produce at a much higher quality and consistency.
Market for Toll Manufacturing
The market for toll manufacturing continues to grow, key segments with growth are the fine and specialty chemical industry. Market research of AD International indicates that a short time to market, financial advantages (less capital costs and more efficient production) and focus on the core business are top drivers for outsourcing to a contract manufacturer.
To summarize, toll & custom manufacturing and repackaging services can provide your company with the opportunity to decrease costs, increase profits and offer better products to your customers to improve long-term business relationships. Using it strategically in your product lifecycle it can definitely improve your bottom line.
When considering toll manufacturing, it is important to see it as a partnership. The toll manufacturer should offer you confidentiality, reliability, regulatory expertise and timely production deliverables. Signing a non-disclosure-agreement (NDA) is common practice.
Original source: AD International