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For document composition, I'd suggest Dokumenterstellung. "erstellen" is the best term for this context. It is also used, of course, for files (Datei erstellen, etc.), so it fits right in.
As far as the tool goes, both Tool and Werkzeug are being used in German IT-speak.
If it's an independent utility, Dokumenterstellungsprogramm would sound the best to my ear. If it's a software module, you might wish to use Dokumenterstellungsmodul. If it's a function, Dokumenterstellungsfunktion.
(Textverarbeitung seems to be out of the question in view of the English).
If you can get away with dropping the tool part altogether (if context allows), you might just say Dokumenterstellung.