Turnkey vs. Tolling—Which Makes Sense for Me?

Updated September 18, 2024

Companies face numerous challenges when it comes to packaging and production. For many, the decision to outsource these tasks is essential, but choosing the right contract packaging solutions can be confusing. Two common choices are turnkey solutions and tolling solutions, and each offers distinct advantages and hurdles.

Understanding these two models is crucial for businesses looking to streamline their packaging, laminating, and coating processes. Turnkey solutions promise a one-stop shop where everything is handled by the manufacturer, while tolling offers more control over materials but demands more coordination. This article will help you navigate these options and determine which is the best fit for your specific needs.

What is Toll Manufacturing?

Toll manufacturing, or tolling, is a solution where the company supplies its own raw materials while the co-packer supplies everything else. The toll manufacturer provides the labor, equipment, and facilities to produce the product. At the same time, the company retains control over the materials and often the intellectual property (such as formulas or designs).

This method is particularly useful for businesses with specific production needs or those that want to maintain ownership over their product’s components.

Advantages of Toll Manufacturing

Toll manufacturing affords a greater degree of ownership over the finished product. Not only can a business owner control the quality of raw materials being used, but they also retain ownership over the intellectual property, including any patents, trademarks, or other “branding” related to the company or finished product.

Disadvantages of Toll Manufacturing

Toll manufacturing requires a greater level of coordination. The various pieces of toll manufacturing have to come together (i.e., raw materials, manufacturing company, and so on) to produce a finished whole. This part of the process can occasionally slow production down, and sometimes the price of raw materials can fluctuate, adding to manufacturing costs.

If you need additional coating or laminating services, toll manufacturing becomes even slower and costly. Plus, many business owners may be unfamiliar with packaging standards or the types of coatings they may need for toll manufacturing.

What Is Turnkey Manufacturing

Turnkey manufacturing operates similarly to toll manufacturing, however the contract manufacturer provides the raw materials.

This approach is highly convenient for companies that want to streamline operations and focus on other aspects of their business. With turnkey manufacturing, businesses can simply hand over their specifications and rely on the manufacturer to handle the rest. This model is particularly useful for businesses that need to produce large volumes or require specialized processes, such as packaging, coating, or laminating, where the manufacturer has greater purchasing power and access to resources.

Advantages of Contract Manufacturing

The advantage of a contract manufacturing relationship is that the manufacturer typically bears related turnkey manufacturing risks such as the cost, the level of stocks, and selecting which raw materials to use. Turnkey manufacturing is very much a “hands-off” approach for the business owner. This strategy results in a much faster manufacturing process than toll manufacturing. You simply hand over the job to a contractor and wait for the finished product.

A turnkey solution may be particularly beneficial for businesses whose product packaging requires a specialized coating. A larger company may be able to provide the raw materials for coating and laminating services—something you might not be able to do through a toll manufacturing contract.

Disadvantages of Contract Manufacturing

With a turnkey solution, the 3PL retains a great deal of sovereignty over the kind of raw materials being used, which can be particularly important for those who need to consider their product’s packaging and coating quality. In some cases, contractual arrangements mitigate the risks of contract manufacturing, such as pricing provisions or manufacturing warranties.

What Businesses Benefit from a Tolling Solution?

Tolling solutions tend to favor businesses seeking to produce smaller quantities of products on an as-needed basis. If you own a small business, your manufacturing needs might be more sporadic than regular, and you may wish to retain the rights to your intellectual property. And if you have the time to devote to the task, you also have the advantage of selecting just the suitable materials you need for your product.

On the other hand, a toll manufacturing contract may present you with some specialized decisions. What sort of packaging materials do you need to get? What type of coating is best for your finished product? A turnkey manufacturing service grants you greater flexibility, but you may have more pressing concerns than packaging or coating needs.

You may find that these kinds of decisions are best handled by a professional company that’s more accustomed to high-volume contracts and may have connections to provide the best, most affordable packaging and coating services currently available.

What Businesses Benefit from a Turnkey Solution?

A turnkey solution, like its name suggests, is a much simpler process. If you’re a business owner, you may value a company that handles the packaging of your products and assists with both your packaging and coating needs, depending on your requirements. Turnkey relationships can also offer some basic design support services, so you don’t have to worry about the overall design of your product’s packaging.

Additionally, if your business requires specialized packaging and coating services, outsourcing these needs to a reputable company can be a wise business decision. Typically, obtaining suitable materials for product coating involves time and attention to detail. A contract manufacturing partner may have the resources necessary to get just the right materials for the best product packaging and coating. Because these resources can be bought in bulk, they may be available more cheaply through a contract manufacturer than through a toll manufacturing contractor.

Contract Manufacturing and Contract Packaging

Contract manufacturing and contract packaging services can be invaluable to ensure that your product receives the best quality packaging, including the best coating needed for product distribution. For most business owners, choosing a coating may seem to be too small a detail to have to contend with regularly. By partnering with a larger company, you can ensure your packaging needs are met, with a coating whose quality matches your product.

Ryder Tolling and Turnkey Co-Packaging Solutions

Ryder offers both turnkey and tolling contract packaging services designed to provide lower costs and faster deliveries. We understand that time is of the essence; that’s why we ensure that we form partnerships with our clients to meet their deadlines, all while providing packaging and coating services for a variety of manufacturing needs.

If you’re looking for a packaging partner that can help your business flourish and grow, contact us today.