Tolling is a process in which a manufacturing company, commonly referred to as the toller, provides manufacturing services to a client company, commonly referred to as the tollee. The toller is responsible for using its resources, such as equipment and personnel, to manufacture and produce goods based on the tollee?s requirements. The toller is compensated for the manufacturing services it provides, typically on a per-unit basis.

Tolling is commonly used in the manufacturing industry to facilitate the production of goods without requiring the toller to own or operate the necessary manufacturing equipment. This arrangement allows the toller to specialize in the manufacturing process while the tollee can focus on other aspects of their business, such as marketing and sales.

Some of the benefits of tolling include reduced investment in manufacturing equipment and facilities, increased flexibility for the toller to adjust capacity based on demand, and reduced regulatory compliance burdens for the toller. Additionally, tolling allows the toller to leverage their expertise and experience in manufacturing by working with a diverse array of clients, potentially leading to increased innovation and process improvement.

However, tolling does come with risks. The toller assumes responsibility for the quality of the goods produced, and any defects or issues could negatively impact the relationship with the tollee. Additionally, the toller is exposed to fluctuations in demand and production volume, which could lead to inconsistencies in revenue and profitability.

Overall, tolling is an important aspect of the manufacturing industry, providing a means for companies to specialize in their respective areas of expertise and facilitate the production of goods more efficiently and effectively.