Increasing the Productivity of Laboratory Assets Through Effective Management

While the majority of a lab manager's time and effort goes toward managing the performance of human assets, the job also carries a significant responsibility for managing the performance of capital assets.

By

Although of central importance to lab operations, capital assets are typically managed as a series of ad hoc activities drawing extra attention only when circumstances bring issues to the forefront. Critical elements such as instrument maintenance are certainly systematized and actively managed, but few managers have considered asset management as an integrated function and some don’t appreciate the full scope of this responsibility. As a result, management styles tend to be reactive and piecemeal which implies that this may be a fertile area to explore for improvement opportunities.

Asset management is not a familiar term within the context of laboratory operations. Therefore, the first step toward improvement is to establish boundaries and limits on the elements included in the function with at least a general explanation of the management roles encompassed. A little reflection on the performance expectations for lab managers might suggest that the following elements could reasonably be included in asset management:

  • Capital Planning
  • Capital Acquisition
  • Maintenance
  • Quality
  • Regulatory/Accreditation Compliance
  • Operational Productivity
  • Management of Change
  • Disaster Recovery
  • Monitoring/Measures

These are familiar functions within the realm of responsibility of laboratory managers but are rarely considered as part of the same performance dimension. It is instructive to examine the management expectations that go with each of these functions to gain an appreciation for the scope of the responsibility and to identify areas where new improvement opportunities might lie.

Capital planning

Capital planning management involves three activities — capacity management, re-deployment strategy, and retirement/obsolescence decisions.

Capacity management refers to the process of assignment and scheduling of work to take full advantage of each instrument so that the lab realizes the maximum benefit from its assets. This includes an ancillary responsibility for monitoring usage rates as a feed into the capital cycle for timing the introduction of additional capacity when needed. Since analyst labor is usually the limiting resource determining utilization rates, capacity optimization is generally addressed in the human resource and workflow management issues that dominate a lab manager’s attention. However, the connection into the capital cycle is more loosely managed which can result in operational bottlenecks if staff members fail to inform the manager until instrument limits are reached. Without active monitoring, the lab manager might not have sufficient time to introduce an additional instrument into the capital cycle or might lack appropriate data for economic justification to shepherd the request through the approval process.

In addition to planning for capacity expansion, effective management identifies under-utilized assets for redeployment to other labs or other parts of the organization where they can derive greater value for the business. In cases where redeployment is not an option, the strategy might be to lower the cost of ownership by adjusting maintenance schedules to more closely match the utilization level. That is, if the equipment is underutilized, preventive maintenance is likely performed more frequently than necessary so that the interval between services can be lengthened to save labor and material costs. Also, under-utilized equipment might signal an outsourcing opportunity.

The last portion of capital planning is management of equipment obsolescence and retirement. There are several critical factors to monitor to guide these decisions — condition of the equipment, timing of the capital cycle, state of the technological, criticality of the equipment, and economic cycle. Rising maintenance costs foretell the end of the useful life of an instrument as the increased cost of ownership begins to exceed its benefit. Managers must be alerted at the appropriate time in order to enter replacement equipment into the capital cycle so that approved budget is available before the equipment fails. Timing is especially important for critical equipment since the replacement cycle can take over a year from start to finish. The manager must also be aware of technological advances that might warrant replacement before the end of the useful life of the equipment. For example, some improvements in sensitivity or automation yield such significant increases in productivity that it is more cost effective to dispose of even partially depreciated fully useable equipment than to forego the new technologies. And, of course, the phase of the economic cycle for the particular industry determines availability of capital funds which must be factored into capital planning management.

Acquisition

Some lab managers end their involvement in the capital cycle by delegating acquisition to the scientists once they obtain the financing approval. However, managers have a fiduciary responsibility to see that the appropriated funds are used wisely and in accordance with business goals. This requires some oversight of the actual buying cycle and is not a trivial task. Due diligence in purchasing requires an investment in time and resources to manage risk and obtain the most value for the money. The elements of the capital buying cycle have been described in detail by Klink. 1,2 Many chemists have preconceived ideas or preferences for specific brands of instruments and will skip the thorough analysis embodied in the buying cycle if permitted. Wise asset management asks that decisions pass through the rigor of the entire process to confirm that the preferred instrument is indeed the best choice to bring the organization the most benefit for its investment. The process also provides the best opportunity to embed service options such as guaranteed response times or software upgrades at the point where these concessions are more likely to be granted by the vendors. Experience has shown that competitive market comparisons can often lower the capital investment.

Maintenance

Maintenance is the most familiar of the asset management tasks and typically is the function that receives the most attention from the lab manager. The two areas of responsibility are preventative maintenance aimed at preserving function of the asset and repair aimed at restoring function. As one of the most costly items in the typical laboratory budget, this function has received some attention so that more advanced models have evolved to streamline management and introduce more efficient operations. The management philosophies surrounding laboratory maintenance have already been described in some detail3 so that the specifics will not be rehashed here. Suffice it to say that considerable opportunities for improved productivity and efficiency remain for most lab managers and this remains a fertile area for investigation by those labs facing cost reduction mandates.

Quality

The laboratory quality system encompasses virtually all aspects of operations and imposes responsibility for execution directly on management. Naturally, these responsibilities touch asset management, primarily in two areas — validation and calibration. The first responsibility, validation, means that each asset must be proven to be fit for its intended purpose by objective evidence. This responsibility goes beyond merely verifying that instruments meet manufacturer’s specifications as is done during the buying cycle but requires the additional step of proving capability of delivering data at the precision required for each method assigned to the instrument. This can range from a relatively simple procedure in unregulated basic chemical or petrochemical labs to a very complex task requiring special expertise for regulated industries such as pharmaceuticals.

The second quality element, calibration, falls into the core competency of a test laboratory so that virtually all have well developed reliable systems. While oversight responsibility is clearly within the management sphere, failures in this area are so intolerable that accountability is shared by the entire staff. Issues typically arise only when external contractors are used and there are no management controls in place to insure that the work is done properly. Simply requiring certificates or other documentation is no guarantee that calibrations are actually performed correctly — good asset management practice requires performance based acceptance criteria based on replication of results for standard reference or monitor samples.

Regulatory/accreditation

Regulatory requirements touch asset management primarily through the documentation system. Compliance requires rigorous recording of all activities associated with use and maintenance of quality critical assets as well as QC data proving instrument performance. Thus, management of assets requires the establishment of a systematic method for collecting required information plus periodic audits to insure that the system is being properly used and maintained by the staff.

Accreditation requirements impose an additional onus on calibration and maintenance systems for assets that fall within the scope of the quality system. For example, the laboratory may be required to use only accredited vendors for servicing these assets which limits choices, raises costs, and imposes additional documentation requirements. Even when services are performed by internal personnel, there are additional requirements such as construction of uncertainty budgets, traceability of standards, and proof of the competency of the technician. While the management bureaucracy surrounding the regulatory and accreditation requirements associated with each asset is often regarded as a nuisance, it can become even more time consuming and expensive when it is not seriously followed.

Operational productivity

The techniques for extracting maximum value from assets are embodied in “lean” concepts4 and require managing human and capital assets in concert. The operators and equipment are viewed as a single system that seeks to optimize performance by elimination of waste. Location of assets in a manner that minimizes operator movement and provides easy access to logistical support is a key concept of this approach. Thus, part of asset management is matching physical location with assigned job responsibilities so that all equipment for a specific job is conveniently grouped near the appropriate supply lines to minimize technician transit time between tasks. This takes skill and ingenuity to organize the work and is typically an on-going activity since most labs are dynamic organizations experiencing frequent change.

Management of change

Management of change is a mechanism for anticipating safety or regulatory issues associated with modification or movement of assets so that the priority assigned to this task typically varies with the degree of risk — it is a high priority for labs in the chemical and petrochemical industries where the consequences of a mistake can be loss of life and property. This function recognizes that the lab does not operate in isolation but is part of a larger system that is impacted by its actions. For example, the physical act of moving an instrument from one laboratory to another is easily accomplished by lab staff without the assistance of others in the organization. But, in fact, this simple act may have significant implications for others. Management of change is a process for examining these secondary consequences and communicating the change throughout all systems that connect with the lab. While the management of change process can vary from organization to organization, certain elements are included in nearly all systems.

Stakeholders that have an interest in asset changes occurring in the laboratory might include:

  • Engineering
  • Facilities
  • Environmental
  • Safety
  • Financial
  • Purchasing
  • IT/LIMS

This is not meant to be an all inclusive list but illustrates the types of stakeholders that should be included. It is instructive to examine the asset change issues for each of these.

Engineering typically maintains plat drawings of the facility showing the layout and location of all equipment. Any movement of the equipment requires that these drawings be updated. There may also be engineering drawings of the asset itself which must be updated if the equipment is modified. In a plant environment, these drawings are used in the mandated process hazard analysis (PHA) function so that accuracy is vital to maintaining safe operations.

Facilities managers have an interest when usage of electricity, water, air, or other utilities decreases in one area and increases in another. This function manages utility consumption to insure that demand does not exceed capacity and that adequate safety margin is available to support future business goals and initiatives. They are also concerned about the ability of building systems such as air conditioning or ventilation to accommodate the equipment and possible interferences with surrounding tenants or assets. Signage in both the old and new locations may need to be modified and the vacated area may need to be refurbished to support other uses.

Movement or modification of equipment may produce changes in waste streams that are managed by the environmental function. These changes might require different segregation or collection schemes and might even impact the site environmental permits. For example, discharge of cooling water into a drain might seem innocuous but could impact regulated water use permits in subsidence prone areas or outfall limits into public facilities.

Safety specialists need to be consulted to evaluate any compatibility issues between reagents associated with the equipment and other chemicals in the area. Documentation of all the materials in an area is also important for the safety of emergency responders in the event of a fire or other incident. New chemical exposure monitoring programs may be needed in some cases or even new alarm systems, such as low oxygen monitors, if the equipment uses nitrogen.

Changes that might affect overhead allocations or shared service agreements need to be recorded in the financial systems. There may be tax implications if the equipment will be used for a different purpose since R&D often falls under different tax statutes than other operational expenses. Service or lease contracts might be affected if the equipment is transferred to a different organization or to a different usage. And, of course, if equipment is sent for disposal or salvage, the details of these transactions must be recorded so that assets are correctly valued in the financial statements — a much more important consideration since the advent of Sarbanes- Oxley.

If the laboratory is part of an organization that maintains a warehouse operation for common expendables, the purchasing function should be notified of asset changes that might affect usage rates of stocked items so that reorder points and quantities can be adjusted. If equipment is removed from the site, unused supply inventories can sometimes be returned to the vendor for credit before they become obsolete.

The information technology (IT) function and the LIMS administrator have an interest in asset changes that might affect network traffic or laboratory workflows. Routers, servers, and firewall configurations might need reprogramming. The instrument interface might need to be reconfigured and different shared services such as printers or faxes may require installation of new software drivers.

Management of change is the system that identifies all of these stakeholders and links them into the asset management system to insure that all of these activities are accomplished. Health, safety, and environmental effects are the overriding considerations in this process and take precedence over all other factors. A robust system will track location of capital inventory, insure that the extent and nature of all changes are documented throughout the organization, and that support personnel are notified and aware of the implications of the changes.

Disaster recovery

Within any lab, there is some risk of loss of critical assets due to accidents or gross equipment failures. For those labs supporting an industrial operation such as a large chemical plant, plans must be in place to quickly restore service to avoid significant economic loss. Options might include switching critical tests to backup instruments, using a contract lab, obtaining temporary mobile lab facilities, locating critical equipment in unit control rooms, or similar tactics. Typically these plans also consider reduced testing schedules and general paths to restoring full functionality of the lab. The main point of the plan is to identify these contingencies beforehand in order to restore function in the shortest possible time.

Monitoring/measures

Any complex system needs monitors or measures to insure that it is functioning as intended and the asset management system is no exception. The system needs to generate data that can be collected and compiled into reports that reflect asset performance and allow the manager to correct non-conformances by exception. Given the number of instruments in a typical lab, reports on the performance of individual assets is simply not practical. Ideally, reports should identify exceptions such as:

  • Instruments ≥ 75% Capacity
  • Instruments ≤ 25% Capacity
  • Instruments with >1 Repair per 2yr.
  • Instruments with cost of ownership increasing by >10%/yr.
  • Instruments with > 7 days/yr. Downtime
  • % Missed PMs
  • Repairs > 2 days
  • Maintenance budget variance

Just as many labs use standard test times to track productivity, standard maintenance times and costs assigned to each piece of equipment can be compared to the actual data collected in the maintenance management system to identify outliers. Other measures may be appropriate depending on the type of laboratory.

Management options

The majority of lab managers administer the asset management function through delegation and reactive responses. Due to the nature of the tasks, failures and omissions can go unnoticed for long periods of time allowing the system to degenerate. Many labs are unable to produce even basic elements such as an accurate inventory of assets and fail to appreciate the importance of tools such as management of change until a crisis erupts that highlights the problem.

As with most repetitive functions, asset management requires a systematic approach. Stakeholders and issues should be identified as in the described examples so that appropriate workflows can be designed to fulfill data collection requirements. The system may be as basic as an assortment of forms to collect the data along with routing instructions to distribute it to the appropriate stakeholder or as complex as a computer database with automated workflows and custom reporting tools. The manager usually occupies a position somewhere in the workflow as a means for monitoring the system and maintaining an awareness of lab operations. Unfortunately, these activities consume scarce resources which are usually obtained at the expense of the core testing function.

As might be expected for a complex, largely secondary function, a marketplace has developed for service providers who furnish and administer some of the elements of the asset management system (e.g., Thermo Electron’s LIFECYCLE program). The initial focus of these services was on providing maintenance options for instruments and equipment but the offerings are growing beyond this segment to include cradle-tograve management of the lab’s assets. These providers promise lower costs while relieving the lab manager of the daily management burden and freeing lab personnel for the core analytical function. The best of the services provide extensive reports and metrics to assure the manager that the system is functioning properly.

Conclusion

Effective system management can yield significant benefits for a laboratory as illustrated by the efficiencies and cost savings in maintenance operations reported in a case study by Rohm & Haas.5 When the same systematic approach is expanded to encompass all of the activities surrounding management of capital assets, even more benefits can be realized. As lab managers are pressed to control costs, this is an area worth looking at for productivity gains.

References
  1. Fred Klink, “Managing the Buying Cycle for Laboratory Instruments: Part 1,” Man. Modern Lab., 3(4), 1998, pp. 75-82.
  2. Fred Klink, “Managing the Buying Cycle for Laboratory Instruments: Part 2,” Man. Modern Lab., 4(1), 1999, pp. 1-7.
  3. L. Wayne Collins, “Managing Laboratory Maintenance,” American Laboratory, February, 2006, pp.
  4. James P. Womack and Daniel T. Jones, Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Free Press: New York, 2003.
  5. Thomas Doberstein, “Managed Maintenance: More than Just Savings,” Man. Modern Lab., 7(4), 2005, pp. 41-43.
Categories: Business Management

Published In

Keeping your Patent Rights Safe Magazine Issue Cover
Keeping your Patent Rights Safe

Published: August 1, 2006

Cover Story