Q: When and how did you go about consolidating your lab services at J&J?
A: I lead the newly formed Laboratory Services Center of Excellence at J&J’s corporate headquarters. At J&J we have been looking to consolidate lab services for the past five years. J&J has three business sectors—pharmaceutical, consumer, and medical device and diagnostics. Each of our sectors has independent lab services, but the programs that we had in place never really tied together. We have a very diverse culture, one that focuses on decentralization. So how do you put a consolidated services program into a decentralized organization? For that we had to look at the organization as a whole to put the right program in place that worked enterprise-wide, while still being able to focus on local needs and customization. We now have a program in place that has been able to deliver a custom solution that provides significant value on the enterprise level.
Q: Can you explain how the consolidation took place and the steps that led to it?
A: It started as an idea to save time for scientists by bringing in outside services that have proven expertise in this area. It started as small pockets of activity across sectors, and then we realized that they were not aligned with each other. A few years ago, we started to redefine all our programs, particularly our lab instrumentation services program, since it offered the most benefit and required the most attention. We started to collaborate with the scientists from the quality manufacturing side and the R&D side across all three sectors and asked them what they felt were the key deliverables for a lab instrumentation service. We captured their thoughts, put together a model to deliver the desired service, and then went back to the scientists to validate the model. Next, we went to our finance and procurement partners to help us define some of the business details and to help us identify the right global supplier to put in place a program called “Enterprise Laboratory Instrumentation Services,” or ELIS. We always emphasize the enterprise aspect, since it is something that stretches across all our sectors and our businesses globally but still [is] very flexible at the local level.
We defined what the ELIS program looked like with three pillars of support: the first pillar is the administrative function that mans the help desk, helps with paperwork, and enters information into the various databases; next we have a high-level engineer who is certified to repair certain equipment that we have inhouse; and the third pillar is a technician who can service the basic, low-level equipment. This helps in the distribution of work so that the administrative staff can focus on their job functions while the service engineer and technician can handle their responsibilities based on the level of complexity. We went to our teams in finance and procurement to work out some details to identify the right supplier. Once we got acceptance from the organization through collaboration and careful consideration, then we were able to visualize and verbalize the program to bring in the right supplier.
Q: What did the supplier evaluation process look like?
A: We defined our request for proposals (RFP) based on the fact that we needed a global supplier. We had five different sections in our RFP, for quality, organization, finance, process, and innovation. We brought together a group of about 35 representatives from quality, R&D, finance, and procurement, from all our business sectors, to review the RFP and the bids that were submitted. We used scorecards for each section of the bid, and we split the team up into five groups, each focusing on a particular section. These groups then ranked that particular section in each of the bids, and that’s how we evaluated the bids against each other. We also tested each of the suppliers through a series of interviews with the team. Once we had identified the top three or four suppliers, we brought them in for more meetings just so that they truly understood what they were delivering to us. We also looked at where their service engineers were located globally. We asked for a map of how many engineers they had in the field globally and where they were located. We concluded with one more indepth comparison of all the suppliers who bid, who was really the key to delivering good service, and we made our decision.
We now have two global suppliers—one for lab supplies and scientific services and one for lab equipment services—who work closely together. We have very detailed master service agreements, statements of work, and quality agreements with these suppliers. So from a global perspective we have covered what is expected to be delivered and how it is expected to be delivered. If a site wants to enhance the agreements at the local level, it has a site-level agreement to do that.
Q: How long did this whole process take, from defining what you wanted to getting all the services consolidated with one supplier?
A: That whole process took about 10 months. It was a very deliberate process that coincided with a contract-renewal process for some contracts that were ending. Although the needs of the three sectors were different, the basic service platform is consistent. We now have a provider that can manage all the service contracts, the preventive maintenance (PM), and the instrument calibrations and repairs for us. This takes a significant load off the scientists and the procurement teams, and we can consolidate all our service contracts through one supplier. This supplier will look at all the hundreds of contracts we have, with all different vendors, and get us better terms for those contracts. This is one way that the program brings value to us. There are also cost and the time savings gained by allowing researchers to focus on the science that supports our businesses and [spend] less time on support functions to repair or troubleshoot various instruments. The majority of the non-value-added activities are managed by experienced suppliers with expertise in their respective areas: equipment PM, calibration, vendor management, ordering supplies and managing inventory, chemical management, etc. This demonstrates the value of the program.
Q: So how did you determine return on investment?
A: We determine return on investment by building the business case in collaboration with finance. One of the most difficult things to do is to get a baseline measure of how things would perform with and without this program in place. In doing this, we had to determine the costs of the current state, which can be hard to uncover, as details are sometimes buried in the budgets. We looked at all the costs and the time put in by the scientists on non-value-added work. We worked with the supplier to get a before-andafter picture to see what we will be spending and saving in terms of time and costs. Cost savings can be achieved in many ways, such as consolidating the number of contracts with one vendor, reducing the options on supplies ordered, and getting volume discounts. The other value of the program is in harmonization and standardization. For instance, calibrations can be performed using a standardized approach across all sites with the same basic protocol; services can be provided consistently across all our sites, and we don’t have to make significant time or capital investments to do that. The supplier provides a means of delivering the standardized processes we develop to the entire organization.
Our supplier also has a global inventory management system, so we now have global visibility of our lab instrumentation, which adds benefits in many ways, such as a scientist who can now search for a specific instrument and find the owner to collaborate on testing samples or troubleshooting a problem. These types of added benefits bring us together as an enterprise. We are expanding this database to include many things, such as instrument PM that further enhances our abilities as an organization to better plan for future events, such as capital and resource investments. We also have reporting on standard performance measures across all our sites. We also leverage our suppliers’ experience and expertise in the industry to standardize, leverage knowledge, and improve our operations around the globe.
Q: What are some of the challenges that you have encountered?
A: So far things have gone pretty well. Finding the right resources has sometimes been a challenge. When we implement the program at a site, we have to make sure we have the right people in place for that site, and sometimes that can take a little longer than expected, depending on where that site is located. At some sites, there is a lot of competition in the area, and we may lose some good people now and then. The challenge has really been finding the right people and retaining them. Once we get the right people in place, the programs have run very well. As far as the processes go, we have defined them very well, so we know what to do when we get there. We have created a playbook for implementing the programs, which describes project management, communication, building support, and more. When we go to a site, the project manager there knows how to set up a steering committee and how to get internal buy-in from the scientists and the executive team. We have town hall meetings to inform the scientists about the changes that are coming, so they feel comfortable with the program before, during, and after implementation. We also encourage them to participate in the program and provide feedback to help define how it’s going to work at that site. So we don’t go in thinking it’s going to work one way and the scientists think it’s another.
Q: When you selected a vendor, did you set up a trial period to see how things would work?
A: We did external benchmarking as a part of our supplier evaluation process. We went to companies where these programs were in place and talked to the leaders and scientists there. We tried to do as much due diligence as we could when evaluating the suppliers. When we brought the supplier in, we didn’t waste any time implementing the program immediately. So far everything has been going pretty well. My one regret is that we did not start with a longer-term contract. We did include a clause to end the agreement if something does go wrong.
Q: What would your advice be to lab managers with smaller labs and budgets? Is consolidation a worthwhile option for them?
A: I think it’s worth looking into the option of consolidating services with one vendor. If these labs try to manage it all internally, they are going to be paying a resource to do that anyway. If they pay a temporary resource, there is always a possibility that it will leave at some point. If you work with a supplier, then it becomes the supplier’s responsibility to maintain and train that person to handle the equipment specific to that lab. You also get the expertise and the investment that the supplier puts into this multivendor service management. You can access the comprehensive database that the supplier owns. Sometimes our internal databases don’t talk to each other, but with the supplier’s database we can analyze our inventory and track assets across the enterprise. Also, rather than managing all the individual vendors, the supplier will manage them for you. When a new vendor comes in, the supplier will make sure that vendor has the right credentials and certifications before performing the work. With regard to managing sites remotely, the supplier manages the people on-site, and we have a list of contacts for escalating issues if they come up. These services are affordable, and they are good at what they do and really help alleviate the pressure on the scientists.
Before putting any program in place, my advice is to collaborate with scientists and external companies to talk about what works and what doesn’t. You also need to build executive support, which requires understanding of what is important to the business and being able to convey the value to the business. With acceptance from the bench level and the executive level, you can organize your program such that it’s transparent and people can see the value that it is bringing. In addition, the program needs time and effort to work. You need at least six months for people to get used to the process, for new people to settle in, and for getting a lot of feedback. I would recommend frequent meetings in the first six months and then determine if the frequency can be scaled back over time. But initially you need to focus a lot of attention to make sure the program gets off the ground successfully.
Ike Harper is the director for laboratory innovation in Johnson & Johnson’s Worldwide Engineering & Technical Operations. He has bachelor’s degrees in chemistry and business administration and a master’s degree in finance and high technology. Ike has 21 years of experience in the areas of pharmaceuticals, consumer products, medical devices, and combination products. In his current role, he leads the global programs for laboratory services, such as lab instrumentation, lab supplies, lab scientific support, and asset redeployment. Ike has a unique perspective on laboratory operations, having spent time in various roles, including research & development, operations, and quality/regulatory affairs. Ike has also been a leader in several national and international standard-setting organizations for a wide range of requirements and many types of health care products.