The concept of recession has never created a huge impact in the global economy until last year, when the United States have hit the red mark and finally succumbed to what has been the greatest economic turmoil of all time. The so-called “late 2000s recession” did not only affect the U.S. but the rest of the world. Hence, it is not surprising why many companies, who are struggling to beat the odds, have preferred outsourcing or offshore manufacturing. In chemical and processing industries, toll manufacturing became a buzzword.
Toll manufacturers, like any typical outsourcing services, can provide utmost operations and produce greater or at least maintain productivity with the most promising level of superiority. Some might ask the difference it makes if this type of manufacturer operates just like a company’s in-house operation. The real value here is the cost of labor. And so, for a company who is trying to make every effort count and maximize their resources without spending more, this is definitely a welcome advantage.
Most chemical and processing industries make use of toll manufacturing to its fullest potential. These types of businesses require large-scale investments including building construction, facility maintenance systems, utilities, and human resources. That’s why small to medium businesses would rather outsource part of their manufacturing to minimize operational and maintenance costs.
Sounds good? Think again. Not all toll manufacturers are created equal and can provide the kind of services your business really need. In fact, some businesses tend to fail in this type of arrangement simply because they rely too much on their partner. What they failed to consider are the factors needed to evaluate if a certain manufacturer can efficiently toll manufacture a company’s products without compromising quality and productivity.
Before you embark on this type of contract, it is important that you have considered the following:
Like any business, location is extremely important in this type of business. Travelling to and from the parent company can save a lot of effort and resources (such as gasoline) if the partner is just within reach. It should easily and economically receive raw materials and ship back the products.
It is also important to do a thorough check of the site. The location should conform to your standards as well as regulatory requirements for safety. This is especially applicable if you are into the chemical industry. Contamination can be a big problem if left unattended. It can produce greater risks, bigger costs and even huge losses. Also, chemical manufacturing can bring about undesirable effects to the environment which can have an effect on people and other living things. That is why governments clearly impose regulation to ensure safety and security at all times.
The overall agreement should be feasible for both parties. Operating profitably should be the utmost concern of the primary manufacturer and that of the toll manufacturer. The main goal here is not just to lessen the operating cost but also the revenue generated from the operations or productions.
3. Fee (or the toll)
Typically, these types of manufacturers provide the same products as that of the parent company for a certain fee or toll. However, not all of them can provide practical rates or charges. Hence, it is important to evaluate if the charges or fees are reasonable.
With the many advantages that toll manufacturing brings to the economy, this type of business-to-business transaction can definitely improve not only one’s business existence but the global economy as well. But before you initiate such partnerships, it is best to study the current situation first and the underlying factors that go with it. Cliché as it may sound, it is really better to be safe than sorry.
Jo is a writer for ‘ReAgent’ (http://www.toll-manufacturers.co.uk), a well-known UK based chemical producer offering bespoke manufacturing service which involves chemical formulation and deformulation, toll mixing, toll packing, toll filling and toll blending, in addition to a complete range of specialist toll manufacturing. If your firm is looking for superior quality chemical products in customized containers and bespoke pack sizes that comply to your specific needs then check out ReAgent Manufacturing.