Lab managers are the key portfolio managers for analytical materials characterization labs. The decisions around purchasing new instruments, upgrading existing tools, or outsourcing characterization work must be part of the overall strategic plan for the lab. These three choices have different impacts on the capital and operations budgets, the capabilities and capacity of the lab, and the relationships the lab builds with potential outsourcing partnerships. 

While all labs face similar decisions, the high cost of some materials characterization instruments makes this a key concern for advanced materials labs.

Buy, upgrade, or outsource?

The key decision framework is around buying new equipment, updating existing equipment, or outsourcing the analyses to another lab to get the needed results. In many ways, this is analogous to a classic buy or rent scenario. Each has its benefits and limitations.

Buy

Analytical characterization instruments have a wide variety of costs, but none are inexpensive. Analytical scientists love new tools and toys and will favor buying new equipment. A key issue is the depth of the capital budget and the lab’s ability to afford new instruments.

Upgrade

Sometimes, existing instruments can be improved through modest upgrades to sources, detectors, accessories, and software. These can be more modest investments that expand the capabilities of older instruments.

Outsource

There are a variety of qualified contract labs available that can provide a wide range of characterization services. Finding the right partner can allow the lab to spend its precious capital in the most important areas. 

Key decision drivers

Lab managers must make strategic decisions around spending and investment in the lab. These decisions will dictate the lab’s ability to deliver its purpose and delight its stakeholders. Some examples include:

• Demand profile – how often the characterization is needed, how steady the requests are, and the turnaround time expectations from stakeholders
• Strategic importance – how central this characterization is to the lab’s core purpose, the level of intellectual property (IP) required to do it well, and where the testing falls in innovation versus routine testing
• Financial considerations – availability of capital funds, the total cost of ownership, the cost per sample analyzed, and the staff costs to run characterizations versus manage an outsourcing relationship
• Technical complexity – the expertise required to complete the characterization, the maturity of the methods involved, and the level of burden on the instruments for analyses, maintenance, and calibration
• Risks and compliance – regulatory requirements around data integrity, vendor reliability, and business continuity risks

The buy case—when to buy or upgrade

There are several factors that can cause lab managers to choose the buy or upgrade options. These revolve around the benefits of having ready access to the instruments, the need to use the instrumentation to drive innovation, and when developing internal expertise is critical for the organization. Having control over the assets that are critical to the strategic plan for the institution is a good reason to invest in them rather than outsourcing these activities. The return on investment in the business case will need to specify these needs and predict the future benefits through monetization to justify the investments. These decisions are often driven by critical product development bottlenecks, crucial timelines, IP, and control of data.

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The rent case—when to outsource

In many ways, the case to rent, or outsource, is driven by the complementary factors to the buy case. These are activities that have low or variable demand, require high-cost instruments, require expensive expertise, or are simply providing redundancy to existing capabilities. Good examples of materials characterization testing to consider for outsourcing are analyses like time-of-flight secondary ion mass spectrometry, x-ray photoelectron spectroscopy, and transmission electron microscopy. In many projects, these very expensive instruments provide highly insightful data, but the needs are rare or variable, and the total cost of ownership is high. 

Hybrid model

Many labs use both a buy and a rent approach to address some of these issues. They build sufficient capability and expertise to complete some of the workload, but develop effective outsource partners to deal with peaks in workload or to manage specific variable needs. The outsource partners also provide redundancy and help mitigate business continuity concerns.

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Financial considerations

Labs can use financial data to help make better decisions around buy or outsource questions. Data like total cost of ownership over a five-to-10-year span, cost per sample comparisons between analyzing internally or with an outsource partner, and volume thresholds for a break-even analysis can all provide context around these decisions. Some other financial considerations that can be more difficult to parse from the data but are also powerful include opportunity costs for downtime and lost productivity, methods transfer costs, and vendor management and logistics costs associated with outsourcing. Careful consideration of the cost information helps lab managers make good decisions.

Operational considerations

Operational considerations revolve around the workflows and stakeholder expectations. Some data that most labs have to help make these decisions are turnaround times and expectations, quality requirements, knowledge retention, and vendor auditing and management. These all take time and attention, and they can impact the lab’s ability to satisfy its stakeholders. 

Decision framework

There are two things that can help lab managers make these buy or outsource decisions:

1. A practical decision matrix: the axes are sample volume from low to high, and the strategic importance from low to high. The quadrants inform the decision. The high/high quadrant is best served by a buy decision. The low/low quadrant is best served by an outsource decision. The mixed quadrants are often best served by a hybrid approach.
2. Key questions to ask: These four powerful questions help identify what is most important and strategic:
   1. Is this capability core to our mission?
   2. What is the three-to-five-year volume demand forecast?
   3. What risks do we assume in insourcing and in outsourcing?
   4. Do we have the necessary expertise to do this successfully?

Final thought

Lab managers are accountable to be the stewards of analytical characterization capability. They must periodically reassess their buy and outsource decisions to stay aligned with the organizational strategy, the evolution of technology, and the capabilities of the lab staff.