Proactive asset management, export drive in South Korea
In this article, ben Potenza, vp Marketing at equipnet Inc., the company operating the world’s leading online marketplace for used laboratory, manufacturing and packaging equipment, examines the case for pharmaceutical and biopharmaceutical companies in South Korea to adopt a proactive approach to asset management. he discusses the specialist support available to make it happen and illustrates the financial gains that can accrue.
Consistent double-digit growth in the domestic pharmaceutical market over the past five years and notable government support for pharmaceutical R&D and production of biologicals have catapulted South Korea into a prominent position in the Asia-Pacific region. A high quality, universal healthcare system is in place, while tight cost control on the price of drugs available in the National Health Insurance (NHI) scheme - in force since 2011 - is helping to keep overall budgets in check as the population grows and ages.
Importantly, South Korea is now duplicating in pharmaceuticals the successful model from industry sectors as diverse as ship building, car production and
smartphone manufacture, where initial investment to mimic technology pioneered in Japan, the US or Europe is quickly followed by companies becoming innovators in their own right. For example, as patent protection for biological drugs comes to an end, the new market for biosimilars (the generic versions of these biological drugs) is predicted to grow to $110billion over the next decade. South Korea aims to capture more than $20billion of this market by 2020 and, by the same time, have three of the world’s top 50 pharma companies.
A significant opportunity
Within such a dynamic environment it is not surprising that millions of dollars are now tied up in the sophisticated laboratory, pilot-scale and production equipment and instrumentation that these companies rely on.
Importantly, as the industry accelerates towards a more mature state, it is anticipated that we will see projects completing, research goals shifting and new facilities opening, whilst others relocate or close due to merger and acquisition activity. The likely result? On one hand, equipment will fall out of use, whilst on the other hand, investment into new kit will be required. Global industry surveys suggest that an average of around 10 per cent of a company’s asset base is lying idle at any one time, and that most business managers do not have good visibility of these under-utilised assets. This illustrates the size of opportunity for a proactive approach to asset management.
Value principles and tailored solutions
Against this background, surplus asset management best practices have been evolving over the last decade. Specialist service companies, staffed by industry experts and proven project management professionals, have emerged to become leaders in this new field. They offer an approach and services that are significantly different from the traditional equipment dealer or auctioneer.
As one of the preeminent vendors in this field, Equip Net provides a holistic approach to surplus asset management that balances the needs across an entire global enterprise. This is effectively illustrated using its ‘Value Control Model’. Figure 1 shows how a managed programme can be customised based on time, using:
• A central tracking platform that provides communication and workflow tools and ensures exposure of assets throughout the business
• Various disposition channels, including redeployment, negotiated sales with managed pricing through an online marketplace, and competitive auction events
• Clearance, disposal and scrap programmes
Redeployment cannot be successfully and consistently achieved unless there is a central tracking platform installed within all company locations. Users should be able to post, track, identify and internally redeploy equipment that is not being used in its present location, ahead of any decision to move to external sale. An established example of best practice in this area is Equip Net’s ARMS™ (Asset Redeployment Management System) platform. This simple, yet robust, programme sits behind a company’s firewall and features workflow management, multiple access levels for plant managers and executives across the business, in-depth search functionality and comprehensive listing specifications, providing information that lets the company know exactly what they have and where it’s located.
Where redeployment is not possible, sale or disposal is the next logical step. The rise of the Internet has seen the development of various websites to meet this need. When considering an online transaction, however - particularly for a high-value and complex piece of equipment - the human touch from an industry expert is perhaps still the most important aspect of any marketplace.
Innovative features to look for when selecting an online marketplace include:
• ‘Top-down’ offers rather than the more usual ‘bottom-
up’ bidding model
• Expert evaluation of goods offered for sale from a proven, reliable team
• Accurate setting of sale prices
• Concentrated promotion of the marketplace platform and, within it, advertising of specific equipment
• Payment by results
Often, a company’s desire to recoup as much money as possible on surplus assets is superseded by time restrictions. In such circumstances, when liquidity becomes the highest priority, an auction becomes the dependable channel in order to achieve this goal. Designing and managing a successful auction event depends on many factors. A specialist partner should advise on the right approach in each case; options might include online auctions, live/webcast auction events, sealed bid and private treaty sales. Using a vendor with specific industry experience combined with a solid reputation is crucial to success.
In every business there are those assets that hold very little value and are best dealt with through clearance, by donations, scrap and environmental recycling. You should consider the scrap value of your idle equipment and compare that amount against the market sales value to arrive at a strategy that will generate the highest return.
A major pharmaceutical company was required to close one section of its R&D laboratory facility in Europe. It enlisted the help of EquipNet, who created an inventory of redundant assets from the site, with the intent of redeploying as much as possible. Remaining items were then to be sold on – all within a six-month project timeframe.
In order to achieve this, assets were initially catalogued and photographed, and fair market valuations were established for each item. Items were then listed on a secure, company-specific software platform so that the organisation’s many facilities had full exposure to the items available. Due to tight time restraints, the equipment was simultaneously advertised externally online. Items that didn’t redeploy or sell through the managed price approach were put into a web-based auction.
The location was cleared within the allotted timeframe and the company maximised the return on its original investment in those assets – all without interrupting ongoing operations. At the end of the project:
• 10 per cent of the items were redeployed. By relocating this equipment, new purchases were avoided, generating a cost saving of more than $200,000
• 64 per cent of the items were sold
• 20 per cent of the items held no resale value and were scrapped
Buying not selling?
Until recently, purchasing second-user equipment was only seen as relevant for cash-strapped start-ups and hard up academic labs. Now though, things are different. Businesses of all shapes and sizes – from cutting-edge research companies, to multi-national, multi-facility giants – are now regularly considering this route to equip their facilities. Why? The ability to save between 50-75% of the cost of new equipment is, of course, a very attractive factor. Budgets can be stretched further and cash saved for additional items. In addition, second-user equipment is generally available immediately. Delivery can be made as soon as a purchase is completed, something that is not always guaranteed when ordering a new system.
The many positives outweigh any potential challenges. When purchasing second-user equipment, many of the same factors that concern people when they are selling assets – working with someone who has knowledge of the instrumentation and with specialists who understand market value – are important. In practice, by researching the exact model that you are considering, and ensuring you find out as much information as possible regarding previous use, maintenance history and the like, risk is minimised.
Proactive asset management – relocating or selling idle equipment, and buying second-user kit – is being recognised as a valuable strategy, but many businesses also realise that they do not have the resource or skill base to tackle the issue in-house. By collaborating with an experienced external partner, companies can navigate redeployment, auction and disposal of equipment efficiently and effectively. Working alongside a specialist not only reduces workload, allowing staff to focus on their day to day business, but also ensures companies find the best market for their assets, and so deliver maximum value in any given circumstance.