Feature

Considerations for Outsourcing Laboratory Equipment Maintenance

Martin Long is the sales and marketing director at PerkinElmer LAS, Laboratory Services SBE, Chalfont Road, Seer Green, UK HP9 2FX, tel. +44 1494 679183, martin.long@perkinelmer.com

Until recently, the costs of maintaining laboratory equipment were not a major factor in the cost-savings initiatives of many pharmaceutical companies. Concerns over compliance, equipment uptime, and quality of results meant that using multiple maintenance contracts with multiple vendors remained a normal practice. But now, initiatives have become edicts as no stone is left unturned in the search for organizational efficiency and profitability. Today's pharmaceutical company is less risk-averse and aggressively pursuing cost savings on laboratory equipment maintenance by implementing internal initiatives and working more closely with outsourced maintenance providers. The maintenance models summarized in Figure 1 show the options available to pharmaceutical companies. The benefits this model can provide vary according to policy, history, makeup of a company's decision-making unit, and the amount of internal resources currently allocated to equipment support. The definition of service quality also varies among companies. In this article, the definition is based on basic service delivery comprising initial response time, first-time fix rate, quality of repair, on-time delivery of preventive maintenance, and robustness of the qualification regime. The amount of cost savings depends on how much effort the company has already put into reducing costs. For example, if a company operates an outsourced asset-management program, then it would not realize the same savings as a company currently contracting to original equipment manufacturers (OEMs), if both moved to an on-site triage model. Figure 1 assumes OEM contracts are in place and that OEMs set the quality standard because they design, manufacture, and provide applications support for their products—even though some do not live up to this standard in practice. The figure also assumes that independent service providers have lower costs but inferior service to OEMs, when in practice some are more agile, flexible, and responsive than the OEMs. The asset-management model manages the work of OEM maintenance providers on a call-out time-and-materials basis to deliver cost savings, whereas the on-site engineer model delivers savings through increased labor efficiencies. The on-site triage model combines the strongest attributes of these last two models into a single solution. Figure 1 claims the on-site engineer and triage models provide higher service quality than OEMs. (This claim is justified later in this article.) Does that mean the triage model is the best model? The answer depends on each company's business priorities and its ability to gain the support of and mobilize multiple scientists and functional stakeholders to drive organizational change. Some models require more thought-process changes than others. Traditional OEM contract model A typical pharmaceutical research and development (R&D) and manufacturing organization deals with at least 150 laboratory equipment providers and has key contracts in place for the most prevalent mission-critical equipment, including high performance liquid chromatography (HPLC), fast performance liquid chromatography (FPLC), ion chromatography (IC), mass spectroscopy (MS), centrifuges, plate readers, and robotic liquid-handling systems. At a typical site, HPLC represents 35–50% of equipment by volume, but MS support will constitute the highest aggregate maintenance spending, followed closely by HPLC. Significant internal time is needed to manage the commercial aspects (e.g., the service level and response time) of major contracts and to ensure service levels meet the needs of the overall business as well as those of specific laboratories. Each equipment provider has unique preventive maintenance and qualification protocols, response times, and service reports, thereby creating significant ongoing administrative challenges. It also may be difficult to understand clearly the real value that each contract provides. Contracts pass risks onto the provider. If equipment is reliable, then contracts are very profitable to the service provider. But the converse also is true. Knowledge of equipment failure rates, uptime, and cost of ownership all would help companies make better risk assessments, but companies rarely find the resources to collate and manage such asset knowledge effectively. Therefore, most companies committed to OEM contract regimes usually focus on price reviews with their OEMs rather than on performance, risk, and service-level efficiency opportunities that could benefit their business. Reducing price without improving efficiency is achieved by persuading an OEM to reduce its margins, with cost reductions of as much as 10% attainable in some situations (especially if the company also is buying significant quantities of new product). Stakeholders also have an opportunity to move away from contracts altogether and work with an OEM on a time-and-materials call-out basis, in which contracts are placed for scheduled preventive maintenance only. In this model, financial risk is passed to the pharmaceutical company, with opportunities for cost savings of more than 10%. But companies rarely have the asset knowledge to be confident enough to make such a decision. Scientists often favor OEM contracts or a time-and-materials approach because they maintain the long-standing personal relationships that played a major role in their decision to procure a specific product in the first place. Conversely, managing multiple contracts is expensive and it squeezes OEM margins rather than focusing on efficiency improvements, which means there are minimal opportunities to reduce costs in subsequent years. Moreover, there is always the danger that prices will increase as OEMs strive to win back margins demanded by their shareholders. (continued)