Onshoring Your Insourced Solutions?

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Incognito debates the pros and cons of onshore support.

What?!

Well precisely. Only a few years ago that headline wouldn’t be comprehensible, but I heard it in a business meeting recently to describe a collaborative project to reinstate services that were previously performed offshore (China in this case), but which are now provided by an outsourcing partner who perform the services using their staff in a laboratory which is either party or wholly funded by them on our premises. So instead of sending an analytical development, research project, or routine sample measurements to your offshore colleagues, you send to it your contract research organization (CRO) – who just happens to be working in the lab next door!

Crazy? Feasible? Beneficial? I’m about to find out – but I thought it might be interesting to debate some of the pros and cons here.

I’ve seen the type of analytical work that is outsourced and the way that it’s done change radically over the years. Outsourcing of elemental analysis and physical-chemical testing were the only things we sent off site when I was starting my career, primarily because of the cost of equipment and the frequency of the testing meant that we couldn’t justify having the testing done in-house. The philosophy was that we developed and produced the product, we held the knowledge of the product, and therefore we were best at the analytics to characterize, develop, and support manufacture of the product. This is fine when the economic and geo-political climate meant that we had a ton of good graduates, a large instrument and infrastructure budget, and time to develop and implement high-quality analytical measurements. How many of those luxuries do we have today? By the way – that wasn’t a pharma company I’m describing – even the chemical industry could be classified in those terms back then.

Offshoring became en vogue around the turn of the century and through the mid-noughties as a way to drive down costs and increase turnover as the labour cost gap between our own country and India, China, and other emerging economic areas grew and the skills gap narrowed. One of the major barriers to making the offshore dream a reality was the difficulty of finding a reliable outsourcing partner, who shared your quality values but could deliver large volumes of work quickly and effectively. Of course the “simplest” way to overcome these issues was to use, or even establish, a division of your own business in the target offshore territory. However, even though your offshore “division” may in theory share common strategic and corporate values, most of the time – in my experience – one could be working with a totally different organization. Any thoughts of scientific, economic, or time leverage we may have with our “colleagues” isn’t a reality – however plausible it may have sounded when management first sold you the concept.

It’s a small world, but I wouldn’t want to vacuum it. All the communication technology in the world doesn’t overcome the sense of “team” that is created through face-to face-meetings and “pressing the flesh”. Assembling and communicating a technical dossier that is comprehensive enough to enable an offshore partner to undertake work on our behalf is often an onerous task, and the bundle of documents I send to our local CRO is always shorter. This is true despite the fact that my offshore colleagues have access to our internal LIMS and project management software and our local partner does not.

Often the offshore laboratory doesn’t have the same equipment as we do, which can cause issues with technical transfer of methods, and this is true even when we are the same organization. The tales of the 12 h flight to discover that someone can’t make a dead volume connection or the 8 h flight to discover that the mass spectrometer (MS) has a very long length of tubing from the column oven, or the 2500 miles to discover that the eluent was prepped volumetrically rather than gravimetrically, and the three flight connection trip to discover that the gas chromatography (GC) column was installed VERY high within the GC inlet are within my own experience or those my colleagues. Whilst these are extreme and somewhat embellished – I’m sure many of you are smiling and nodding as you read this. And whilst you may consider it very amateur to have arrived at that point in each of these projects without the ability to solve such simple issues – perhaps you should ask our “Technical Reference Team” who are charged with arbitrating disputes between client and the receiving laboratory – they’ll tell you it’s the simple things that confound remote collaborations in the vast majority of cases.

The labour cost gap argument only holds for so long until improved skills and falling unemployment rates in the offshore territory demand that this is closed – something which I’ve found to be even more prevalent with in-house offshoring. As labour rates rise, staff turnover increases as a result of the need to keep costs low and the inexperienced group starts to suffer quality issues. Alternatively, if labour rates are increased to meet demands and restrict staff turnover, the reduced cost savings often bring smaller quality and timeliness issues into sharper focus. In my experience these, alongside the added hassle with long-distance communication and slow problem solving, are the most common reasons why offshore projects fail. When you are offshoring to a contractor, it is easier (but not easy) to sever your relationship, however, when the issue is with a department within your own organization, then this becomes a major problem. I hear you say “failure to properly manage the project”. I would only comment that had I wanted to be a project manager that’s what I would have chosen to be and in many cases the upside of offshoring just isn’t worth it – to me.

Of course, the type of project that is outsourced can impact the degree of success with bespoke projects being more difficult to manage than high volume “routine” work that can be more closely controlled with protocols and quality management techniques. However, if you are involved with development, transfer, implementation, and on-going management of analytical methodology, you will know that managing even these handle-turning projects is not easy.

So the alternative is to outsource with a local company – which many of us have been successfully doing for years. In fact, outsourcing is so much part of the plan for businesses these days that some of the contract houses have grown to become bigger than the originator/sponsor organizations. Whilst traditionally the development of analytics was done by the originator and the “grunt work” by the contractor, increasingly this is not the case. As I look at the modern analytical chemistry landscape, many of the finest minds and best development work is done within the CRO community, who have developed ways to make money on research without needing to be prohibitively expensive, such as in insurance should the project be more difficult than anticipated and “go long”. Reasons for this improvement include the ability to run exploratory methods faster using higher throughput techniques, multiplexed computer-assisted development platforms running more generic development approaches, and investment in more highly skilled people.

All good then – it looks like we can begin to onshore again, but why don’t we just give the work to the CROs that we have worked with for many years? Well, as I see it, this works fine but if I was given the choice between working with a company 2000 miles, 200 miles, or two yards away – guess which one I’m going for. One that will take me back to the good old days when we had a bunch of good people and good instruments that could be used to provide full service analytics which really enabled the business to move forward.

So the big question then is - can this in-sourcing be achieved with the constraint that the originator needs to save money, the contractor needs to make money, and the service needs to be delivered in a timely fashion with high quality? If the originator organization isn’t able to do this, how on earth can a CRO take on the headcount and resource costs? Well as we noted above, there are some very big CROs these days who can leverage their purchasing power to make some impressive instrument investments and source good people for reasonable, but fair, costs and make this all fairly mobile to ensure that we have the flexibility we need to deploy resources in the areas where it is most required. As well as the CRO organizations, I also see the role of facilities management companies becoming more and more significant in terms of the laboratory technical services they provide.

So can they make in-sourcing pay and save us money whilst delivering a timely and quality service? As yet this is an untested approach and I’m about to find out. One thing I do know – I’ll know if it’s working or not and can easily do something about it if the people I’m working with are in the lab next door.

Your thoughts and views are welcome as always.

Contact author: Incognito

E-mail: admin@chromatographyonline.com