Toll Manufacturing vs. Contract Manufacturing

Slide 1

Toll vs Contract Manufacturing

Medical devices are in high demand and companies who provide them often compare the efficiencies of toll vs contract manufacturing for the best output of their equipment.

With an increasing frequency of chronic illnesses and continuing novel technological discoveries in medical and life sciences fields, the medical device manufacturing industry is rapidly growing. For every Medtronic or DuPuy Synthes, there are countless smaller and startup medical device manufacturers (MDMs) who often lack the deeper pockets needed to underwrite manufacturing costs. Outsourcing these costs has long been used to help turn ideas into reality.

That’s where companies look to farm out this manufacturing process and need to decide if toll vs contract manufacturing is right for them. There are benefits to each, depending on circumstances such as timing, budget and demand, so it is important to explore the differences to understand the right approach for the particular need.

The main difference between toll vs contract manufacturing lies in the process, and often there is confusion between the two. Both manufacturing arrangements involve outsourcing of production with the intent of easing the burden and cost associated with manufacturing while reaping the benefits of state-of-the-art facilities, technologically advanced machinery, and skilled workforces. These on-demand service models are ideal for new product development, seasonal projects, and testing products by utilizing a variable-cost operation.

Toll Manufacturing

With toll manufacturing (AKA “toll processing”):

  • an original equipment manufacturer (OEM) provides a third-party manufacturer with raw materials or semi-finished products in order to complete a manufacturing process.
  • the manufacturer is fully equipped with the necessary production equipment and specialists.
  • the toll manufacturer charges the company a fee (a toll) to complete a job.

Drake Medical Plastics acts as a toll manufacturer when we receive customer owned and sourced materials such as high performance, specialty polymer resin and convert these materials into desired shapes such as rod, tube, plate or film. Our customers are thereby able to develop the exact product they envision, without the time and capital investment required to build their own manufacturing operation.

This option not only saves the customer in capital expenses, but they can rely on us to ensure that there is the kind of quality control that they require. We have state-of-the art capabilities and stay plugged into the latest technology and processing procedures, so our customers don’t have to concern themselves with outdated production techniques. We also ensure the highest quality additives to give polymers the peak performance that our customers demand.

Contract Manufacturing

With contract manufacturing:

  • companies outsource the entire production process to the third-party.
  • the contract manufacturer selects the vendors for all supplies, purchases all the materials for the production process and, finally, produces the final product to the source company’s specifications.
  • a contract manufacturer quotes the final price at which he will supply the product, and the source company is concerned only with this price. Any variations in the prices of the raw materials are the concern of the manufacturer only.

Drake Medical Plastics acts as a contract manufacturer when injection-molding and machining our FDA registered, implantable PEEK orthopedic anchor screws to the MDM’s specifications.

What to look for in a Contract Manufacturer

If you are an OEM in the medical field, you know that demand is greater than ever to provide medical facilities with the most state-of-the-art equipment possible. It has to be reliable, built to perform and long lasting. In the medical industry, annual estimates expect total revenue of medical equipment to reach $208 billion by the year 2023 and over $612 billion globally by 2025.

For this reason, a number of smaller companies have entered into the manufacturing marketplace. Understanding the criteria for sourcing the most reliable toll and contract manufacturers is imperative to keeping an OEM’s supply chain on track to meet industry needs…and requirements.

The most important factors that an OEM should look for in a contract manufacturer are:

years of experience in sourcing, competitive pricing and assembly of top-quality components

reputation for staying on top of trends, new techniques, and equipment

partnering with OEMs to provide more vertical resources to integrate competencies for better efficiency

keeping tabs on upstream product design and offering new solutions to evolving needs and requirements

Why Many Choose “American Made”

So many companies think that if they want to save money, they should outsource their manufacturing to companies in Mexico or the Far East. There are many reasons why, whether a company wants toll vs contract manufacturing, it is best to keep the process in this country.

While the labor is cheaper in other countries, the quality may be too. Technology changes are rapid and the workers in other countries are not trained often enough to keep up. The equipment used for manufacturing is expensive to maintain, and the rigorous QA that most manufacturers in the United States live by is far superior to the environment elsewhere.

Finally, the cycle time of offshore production can be a huge issue. Most OEM’s want their equipment ready in record time and waiting for shipments to arrive and go through the customs process can create unwanted delays. If the goods are received on one coast and must be shipped, that extra step can also create headaches for an OEM.

No matter the size of the medical device manufacturer or their stage of production, contract and toll manufacturers allow companies more flexibility while easing the burden and cost of in-house manufacturing.