Reduce Costs Now

As featured in the April issue of Manufacturing Chemist 2016.

Reduce Costs Now

Alternative Sources For Pharmaceutical Processing and Packaging Equipment 

Now is the time to consider new sources of equipment.

Pharmaceutical manufacturers are confronted with two challenges. First, whether a multinational, branded drug maker, generic drug company, or a contract manufacturing organization, they are challenged to deliver safe and effective drugs at lower costs.  Furthermore, they must do this even in the face of increasing costs from new technology, manufacturing space, research and development, clinical trials, and regulatory compliance.  Secondly, manufacturers are under increasing competitive pressure to quickly launch and deliver new products with sufficient supply for a global marketplace.  One area where manufacturers can relieve some of these pressures is in their capital equipment purchases.

Industry consolidations, loss of patent protections, competition for expensive manufacturing space, and excess capacity have all led to a global increase in the inventory and availability of second-hand process and packaging equipment.  There is a wide range of production equipment available to suit the needs of everyone in the pharmaceutical supply chain. From the chemical reactors and dryers used to manufacture active pharmaceutical ingredients to equipment used to mix, blend, granulate, compress powders into tablets, and fill capsules, through packaging areas including aseptic fill-finish, equipment is readily available from reputable equipment dealers.  Many companies are actively reducing redundant manufacturing facilities as part of cost cutting measures and this equipment was not obsolete, nor non-compliant, it was simply redundant capacity or idled equipment.

Most of this equipment is relatively new.  The supply, install and qualification of new pharmaceutical equipment often takes more than a year.  Markets can change quickly in that time which means many “new” equipment purchases are redundant or unnecessary shortly after start-up.  In many cases, the equipment has been installed and commissioned for only a short time. Nevertheless, this equipment is now considered “used.”  Additionally, equipment may have been used in production for only a short period of time before generic competition entered the market.  That equipment was a good investment at the time, but now it is in the way of new products and processes.

New products and processes require different equipment mixes.  Many “big-pharma” companies have discovered that the second-hand market provides readily available equipment to meet different manufacturing needs.  Equipment that is already available cuts lead time for delivery and install, thus allowing faster product launch.  The equipment was made by trusted original equipment manufacturers and often comes with their support and service.  This ready source of reliable equipment allows greater flexibility for market swings and equipment redundancy should a critical machine fail.

Backup equipment mitigates supply risks. Drug shortages or backorders may occur if critical equipment does not have a backup.  Manufacturers can mitigate this risk by sourcing backup machines or hard-to-find-spares for critical processes.  If the purchase price of the backup is roughly thirty to forty percent of new equipment, manufactures can mitigate that portion of the supply chain risk at much lower prices.  This strategy can apply to other pieces of equipment as well, not just process and packaging.

Support equipment can be sourced effectively when budgets are thin. When funds are stretched and Capital Expenditure budget approvals are hard to come by, facility and support equipment upgrades and replacements may suffer.  This equipment is not used directly in the process of making drug products, but is often just as critical. For example, air compressors, electric stand-by generators, purified water systems and CIP skids are all critical to the manufacturing process but are in the building and support areas of the budget.  Cheaper, available alternatives with trusted names can help meet overall facility needs.

Trust is important in the used equipment business.  Manufacturers should evaluate only reputable dealers with trusted sources of supply.  They should also understand that they are evaluating used, not new equipment.  This equipment may come with some wear, need some repairs or upgrades, and typically does not come with a manufacturer’s warranty.  All of this is reflected in the price which is a bargain compared to new.  This is why a dealer’s reputation is important.

Trust OEM’s who support used equipment. The dealer should have relationships within the equipment industry.  These relationships with original equipment manufacturers and service providers ensure the install and parts and service availability, all needed to keep the machine operational and upgraded.  For any major or complex purchase, equipment buyers should always inspect the equipment before buying, either personally or by hiring the original equipment manufacturer.  Some equipment may be simple enough that a good set of photos or a video are enough to assure the buyer that the equipment will meet their needs.  More complex pieces may require a deeper inspection.  The dealer should be able to facilitate this inspection with power, air, and other utilities.

More and more companies are considering used equipment for their manufacturing needs.  The inventory available has never been better.  With all of the options that need to be considered, there are many reasons why used equipment may be a good fit for your next project.  One comment often heard is “our engineers and scientists will not consider used equipment,” without any articulated reason or anecdote to back up this statement. Without such logical consideration, this is really the same as shrugging the shoulders and saying “we have always done it this way,” even in the face of new opportunities to deliver higher value to the organization.  Many big-pharma manufacturers have made this logical consideration and are exploring these opportunities today; every pharmaceutical manufacturer should consider such opportunities within today’s market challenges.

Matt Hicks
Matt Hicks, Chief Operating Officer at Federal Equipment Company, is a pharmaceutical industry veteran with more than 15 years of experience helping companies get the most value and utility out of its manufacturing and process equipment assets.

LinkedIn www.linkedin.com/in/matthicks
Email matt.hicks@fedequip.com