The Procurement Process
Pharmaceutical companies, healthcare providers, research organizations, universities, and government agencies are continuously under pressure to cut costs due to a generalized economic downturn. This pressure has moved the procurement process to the forefront, with managers looking to achieve better business performance through more effective management of categories, suppliers, and teams.1
RFPS, Maintenance Contracts, Supplier Auditing, and More
Lab managers who are facing the mandate to cut costs while procuring high-quality and low-risk equipment and equipment maintenance services must use the procurement process to set the parameters of quality and risk.
Setting quality and risk
This important process starts with compiling a request for proposal (RFP). The RFP is an invitation to selected suppliers to bid on a specific piece of equipment or equipment maintenance services. The information gathered in the responses to an RFP is useful in rating equipment and maintenance suppliers to set the criteria for quality and risk.
Josephine C. Longoria, regional lab director, Guadalupe- Blanco River Authority, believes that an RFP has benefits. “An RFP enables lab personnel and management to come up with a checklist of what is important in terms of equipment and maintenance specifications and ensures that all parties involved are on board, and also allows all qualified vendors to have an opportunity to bid on the specific product based on the RFP created,” says Longoria.
Compiling an RFP occurs in the context of the policies and procedures of the lab and the quality plan. In Longoria’s lab, procurement is subject to the Texas Water Code, and for capital expenditures that exceed a certain amount, an RFP is a required step in the procurement process. “We are required to solicit at least three written bids, which are based on uniform written specifications, for items costing between $25,000 and $50,000,” says Longoria. “We must obtain competitive bids for any item over $50,000, and the Texas code also requires that we advertise a purchase or awarding of a contract.”
A well-developed RFP requires a certain level of due diligence.
A first level of due diligence goes to the equipment itself, including its price, the equipment service contract, the duration of the manufacturer’s warranty, the availability of parts and consumables, and the technical support and system updates. A second level of due diligence goes to the services that are required to maintain the equipment; labs have several options for equipment maintenance. A third level of due diligence goes to gathering information on the potential suppliers, including their financial viability.
Selecting suppliers
Following the bids and the responses to the RFP, suppliers of the equipment and maintenance services are selected, based on the information gathered in the RFP.
Daniel J. Scungio, laboratory safety officer at Sentara Healthcare, believes equipment maintenance is important to maximize quality and minimize risk. “Equipment maintenance is an essential component of quality in not only ensuring good working equipment, but also in ensuring that the instrument is consistently compliant with regulations, which minimizes the risk.”
Labs have several options for equipment maintenance. These options include working with in-house teams, third-party service providers, original equipment manufacturers (OEMs), and multiservice providers.
In-house teams are generally composed of maintenance and service teams. In some instances, members of maintenance teams are also trained to service a piece of equipment. “With certain equipment, we send one of the team members to school so that he or she gets trained to service the equipment,” says Scungio. “However, if a 24/7 maintenance schedule is required, we would not rely on our in-house team to maintain quality and lower performance risk and would outsource equipment maintenance to a third-party service provider or an OEM.”
Third-party service providers are based in a specific location or region, while OEMs are based at their factory site and offer maintenance services through their local representatives.
Certain OEMs operate as multivendor service providers and offer an integrated approach to lab equipment maintenance, asset tracking, regulatory compliance, inventory management, and equipment relocation and disposal.
PerkinElmer offers the OneSource®2 multi-vendor service platform with several instrument optimization plans, from traditional instrument service and repair plans to complete asset management. For regulated laboratories, the OneSource service platform offers qualification and validation solutions to ensure compliance and create operational efficiency.
Thermo Fisher Scientific offers the Unity Lab Services3 multi-vendor service platform as a single source for asset management, asset utilization monitoring, consulting services, multi-vendor services, scientific support services and supply management, instrument compliance and validation services, maintenance, calibration and repair, and parts and consumables.
Agilent Technologies offers the CrossLab Services4 multi-vendor service platforms in several plans: the Gold Service plan for high throughput and mission-critical systems; the Silver Service plan for lab operations; the Bronze Service plan for equipment protection; and the Preventive Maintenance plan for prolonged equipment life.
GE Healthcare Life Sciences offers Lab Optimization Solutions.5 These Lab Optimization Solutions include Lab Asset Management Assessments (LAMAs), change management, process optimization, and asset intelligence solutions.
GE Healthcare Life Sciences also offers the Multivendor Life Cycle Asset Management (LCAM).6 The LCAM offers a comprehensive life cycle asset management portfolio that improves productivity and reduces costs, regardless of manufacturer. It utilizes a single point of contact with various modules.
Pros and cons
There are pros and cons associated with each option for equipment maintenance.
“Whether a lab relies on its in-house team, a third-party provider, an OEM, or a multiservice provider, quality is measured by the increase or decrease in the level of risk, which is inherent in maintaining the equipment to meet the demands of the lab,” says Scungio.
Maintaining in-house teams requires a huge investment on staffing, training, infrastructure, and inventory management, and is likely to make operations dependent on the allocated resources for maintenance. In a continuously changing technological environment, the efficiency and technical expertise of the team is always a concern and any resource loss would add to the risk. These are the reasons that lab managers and their procurement departments are moving toward outsourcing to an OEM, a third-party service provider, or a multiservice provider either as a first option or as a stopgap measure in the event of any failure of the in-house team.
Third-party service providers do not have the large overheads of OEMs, are able to provide services at a cost savings, and can be useful in times of a sudden equipment breakdown as their response time is quick, even though their inability to maintain quality due to technological change and associated risks may be trade-off points.
For small labs with a limited number and limited types of equipment, OEM service teams are a favorable option. Whether the lab is small or large, an OEM guarantees a qualitative low risk due to potentially uninterrupted laboratory functioning. An OEM also increases the total cost of ownership of a piece of equipment due to comparatively costly spare parts and labor and high administration costs.
In terms of the quality and precision of the service, a multi-vendor service provider is comparable to an OEM. A multi-vendor service provider can handle equipment supplied by other vendors and supports on-site services. Opting to use a multiservice provider decreases the total cost of equipment ownership by streamlining the service processes, increasing operational efficiency, and reducing the expenses while minimizing the risk involved. For large labs, a multi-vendor service provider offers an optimum solution for asset management, and for very critical equipment, a multiservice provider can ensure that equipment uptime is maintained.
Postprocurement
Postprocurement, lab managers must monitor supplier performance for continual improvement and to ensure adherence to the quality and risk criteria.
“The use of a continual improvement philosophy is fast becoming a requirement to keep costs down and ensure that quality is at a maximum and risk is at a minimum,” says Scungio. “Continual improvement is even more important when equipment and maintenance services are used in the context of patient services where health and safety issues are important considerations.”
Below are tips for monitoring supplier performance.
Auditing
- Conduct a meeting with the supplier at the beginning of the equipment maintenance program.
- Conduct audits to review established supplier delivery metrics such as the on-time and quality delivery of services.
- Conduct audits to test the compliance of a supplier’s quality management systems. • Conduct audits to review the actions taken by the supplier under the improvement plan.
- Conduct audits of supplier process recertification for suppliers providing regulatory compliance.
- Conduct audits to perform a risk reassessment to identify any new risks.
Remediation
- In the event of deviation from established delivery metrics, devise an improvement plan for the supplier to follow
- Request that a supplier take corrective actions to develop and implement mitigation plans for the risks identified during risk assessment
- Monitor the status of any risk mitigation plan during future audits
Supplier auditing must be done on a regular basis, and in the event of risk identification, the frequency of supplier auditing and monitoring must be based on the results of any risk assessment.
Going forward
Companies are using procurement and sourcing functions to differentiate themselves from competitors and optimize key business processes.7 With the pressure to cut costs on the rise, it is incumbent on company management to empower and support lab managers to make the best possible procurement decisions, thereby maximizing their quality and minimizing the risks inherent in purchasing equipment and equipment maintenance services.
References:
1. http://www.atkearney.com/procurement/assessment-of-excellence-in-procurement-study/full-report
2. www.perkinelmer.com/onesource/
3. www.thermofisher.com/en/about-us/unity-lab-services.html
4. http://crosslab.chem.agilent.com/services.html
7. http://www.atkearneypas.com/solutions/spend-analysis.html