Toll manufacturers such as Elcan Industries, continue to grow in size and scope, and for good reason. They make the manufacturing processes much more efficient, especially for companies that don’t have the capability to handle manufacturing in-house. For someone who is not well-versed with the manufacturing process, you are probably wondering, what exactly is toll manufacturing, right? Well, it is a process whereby a company contracts another in order to use its equipment and expertise for manufacturing purposes. Toll manufacturing has a number of benefits that can help drive up profitability in the long run.
Let’s go through a few reasons why toll manufacturing is a great way to boost profits.
It gives a shorter time to market
Sometimes success in business is determined by who gets to market first. In essence, for a company that wants to dominate the market with an innovative product, toll manufacturing can help with this process. That’s because, instead of shipping products to overseas destinations, they can contract a local manufacturer to handle the process for them. The result is that they have a faster product to market cycle, which is an important leverage for market dominance and profitability.
Access to specialized equipment
With toll manufacturing, even a company that doesn’t have the capital to invest in high-end technology can produce high-quality products and compete effectively in the market. That’s because they can always contract the best manufacturer to handle the process for them. Such a company can then focus more on marketing and brand building, which if done right, can boost sales and profitability.
It helps in navigating regulatory requirements
The manufacture of certain products, especially chemicals, requires conformity to stringent regulations, and it can be costly. With toll manufacturing, a company can sidestep these regulations. That’s because, it is the manufacturer that needs to meet them, provided they are clearly laid out for them. The result is that, the contractor gets to meet requirements that give access to lucrative markets. It also saves the money for regulatory procedures, money that can be invested in marketing. It’s a process that can significantly drive up profitability.
It helps with economies of scale
When it comes to manufacturing, being able to produce at scale is critical. Otherwise, the company may be unable to breakeven. Unfortunately, being able to produce at scale comes at a cost. That’s because, it requires heavy investments in equipment. Toll manufacturing eliminates this problem by delegating the job to a manufacturer with an already established manufacturing capacity. Without the problem of scalability in production, and the right marketing, growth becomes limitless. By extension, this means higher profitability.
It cuts on other costs such as storage
One of the factors that can eat into the profits of small companies is that of storage. With toll manufacturing, this is an issue that can be eliminated completely. That’s because storage can be outsourced to the toll manufacturer. With reduced overhead, the outsourcing company can get higher margins on sales. When done at scale, it can make a significant difference to the bottom-line.