Discovering Value in Outsourcing Facilities Management

Life sciences businesses are turning to outsourcing as a way to drive down costs and support critical process quality.
May 01, 2005
Volume 18, Issue 5

Timothy Maechling
Your company's job is to make biopharmaceutical products. Managing facilities is a function supporting the main task. General manufacturing companies discovered this long ago, but pharmaceutical producers have been lagging. Once you consider the outsouring of non-core activities like facility management (FM), office services, space planning, and utilities management, you can focus on core business functions that make profits.

Historically, life sciences businesses paid more attention to maximizing production than to reducing costs. But with intense competition and relentless pressure on prices, they are seeking ways to become more agile and efficient. Concentrating one's efforts on cutting costs makes sound business sense, and that is where outsourcing becomes a viable strategy.

Timothy Maechling and Jeffrey Bredeson
Changes on the vendor side have made this possible. No longer do life sciences companies have to assume that their processes are too specialized, and their regulatory requirements too exacting to entrust to outside vendors. Service providers have grown and matured, developing specialized life-sciences industry knowledge that qualifies them to undertake mission-critical support functions like metrology and pilot production setup.

This article focuses on the benefits and implementation of outsourcing facilities management. When properly planned and implemented, outsourcing leads to business improvements that measurably reduce costs, increase customer satisfaction, and enhance shareholder value. We will show how to write a set of clear objectives and a disciplined, step-by-step approach to choosing a service provider.

FM OUTSOURCING CUTS COSTS FM outsourcing lowers costs for a variety of reasons:

  • It brings market discipline to a function historically treated as an internal monopoly. Large companies often let staffing levels and internal wage rates drift above market levels. Service providers with a core competency in FM will rationalize staffing and compensation. Simultaneously, they can attract and retain the best-qualified service personnel in any given market area.
  • Internal staffs, by doing things the way they have always been done, often provide more service than is necessary. Suppose, for example, that a company's practice is to run calibrations with five points to ensure accurate readings of all measurement and control systems. A service provider might be empowered to change the calibration requirement to taking just one data point in non-critical areas without a negative effect on service quality, which represents a cost savings.
  • Service providers can deploy state-of-the-art technologies to control lighting, heating and cooling; streamline maintenance; and diagnose equipment trouble to prevent unscheduled failures and extend service life. In each instance, savings can be substantial.
  • Service providers, by way of national or global arrangements with their vendors, have price leverage in procuring goods and services.

CORPORATE-LEVEL FM BENEFITS When you set up an outsourcing relationship, indirect benefits begin to accrue. These show up as overhead reductions and increased productivity, and make the company more efficient.

Increasing Focus on the Core Business Current pricing and competitive pressures are forcing life sciences businesses to consider what functions they should own and control. Core functions typically mean those that drive revenue: research and development, production, and marketing. Focus your capital and talent on those functions — others become candidates for outsourcing.

Companies that outsource FM typically find they get better service at lower cost by turning that function over to a qualified outside supplier. Converting the savings from outsourcing to funding R&D strengthens the product pipeline, pleases investors, and ultimately influences share price.

Sharing and Reducing Risk Outsourcing shifts liabilities such as retirement plan funding and healthcare coverage to the service provider. It also mitigates risk in other ways. For example, regulatory compliance depends on accurate calibration of production and laboratory instruments. Some life sciences companies outsource this task to service providers whose personnel have proven competent.

Traditional facility maintenance also can limit business risk because utilities and heating, ventilating, and air conditioning (HVAC) systems managed by an expert service provider directly support critical research and production environments. For instance:

  • Reliable electric power ensures high-value scientific experiments proceed without interruption.
  • Tight control over temperature and humidity in storage spaces keeps conditions from drifting out of specification and reduces the risk of regulatory violations and product losses.

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