When a manufacturer is evaluating potential contract manufacturing and/or toll processing partners, it’s important to understand the differences. These are two ways a third party can manufacture whole products or ingredients, or complete critical processes such as milling, blending, liquid bottling, final product packaging, and more.

How does toll processing work in the context of a manufacturer’s production process? The graphic below illustrates the basics. In short, a manufacturer procures and owns the materials involved, and pays a toll manufacturer for the production services provided. Toll processing is defined as performing the steps to process materials to customer specifications, for payment.

This differs from other contract manufacturer arrangements, in which the contract manufacturer may source and purchase materials, then manufacture or process to specification.