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Three Keys to Balancing Features and Costs

Find the right balance between additional features and costs in new equipment

by
Scott D. Hanton, PhD

Scott Hanton is the editorial director of Lab Manager. He spent 30 years as a research chemist, lab manager, and business leader at Air Products and Intertek. He earned...

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Purchasing new lab equipment is both exciting for the lab and a critical role for lab management. There is never sufficient capital budget for the lab to have everything that it wants, so building an investment priority driven by needs is critical. An effective approach to prioritize capital investments is to focus on needs, which solve problems for the lab, over wants, which solve inconveniences for the lab. This needs-based approach will enable the limited capital budget to provide the greatest impact for the lab, the staff, and the key stakeholders. This approach also enables clearer business cases to be written and provides for improved communication with line management regarding the approval of these investments. While a needs-based approach will serve the lab well around which equipment to purchase, a broader view is beneficial when considering which features of the proposed equipment to include in the proposal. Here are three things lab managers must consider to improve their ability to balance the desired features with the cost of the investment:

#1 – Incremental benefits

The highest priority is the need(s) solved by base equipment. Once that need is covered, it is important to examine additional benefits that potential extra features can deliver. It is necessary to explore the range of additional features, including software and accessories that are available. The bulk of the cost is driven by the base equipment, so additional features can have minimal cost or even be part of the negotiation around the investment. It may be beneficial to include extra value in the proposal including additional features, rather than trying to negotiate for a lower cost. It is often easier and more efficient to include these features in the original purchase, rather than trying to go back to line management for a second approval sometime in the future.

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#2 – Return on investment

One of the key components of a business case to make a new capital investment is the return on investment (ROI). This helps line management understand the benefits of the investment to the organization both conceptually and financially. Additional features can add incremental value to the benefits of the acquisition and help improve the calculated ROI. Pay specific attention to those features that can have a positive impact on the benefits included in the ROI calculation. Any that return a significantly greater benefit than their cost are well worth pursuing.

#3 – Length of ownership

Labs often expect to keep capital equipment for a long time. Many instruments can be productive for well in excess of 10 years. Over that time, how the instrument is used, the types of technical work done with it, and the cutting edge of the technology will change. Purchasing additional features now will contribute to the usefulness of the equipment and enable it to be productive longer, which may postpone the replacement purchase. The incremental cost of the features now is likely to be much lower than the costs associated with replacing the equipment early if those features are not included.