Laboratory Outsourcing

2005 Global Laboratory outsourcing trends

By Rajesh Chowdhry, CEO, Aryan Consulting and Technical Services Inc, Canada

Aryan Consulting and Technical Services Inc. (ACTS) sees continued and growing
interest for outsourcing of laboratory activities across global industry sectors for 2005
and beyond.

Traditional in-house corporate laboratories are under pressure:

Whatever the size or configuration of a testing lab and no matter which technologies and
methods they use, they perform a valuable role in assuring the quality and reliability of a
multitude of products. This need for product testing is met both by in-house laboratories
and outsource or independent labs.

In-House labs offer the company direct involvement with the testing methods and
procedures. A company using an in-house testing procedure is not dependent on outside
sources for meeting its required turnaround deadlines. Also, knowledge of the product
and the required testing procedures already exists within the company.

The outsourced or independent lab is theoretically free from influence and is able to
provide unbiased results. The objectivity of independent laboratory testing procedures is
monitored by and subject to a variety of outside audits and evaluations as per ISO 17025
established standards.

The profit motive dictates that independent labs remain competitive with an emphasis on
innovation and efficiency. Technologies are constantly changing and independent labs
are generally better able to keep up with the latest technological advances. In their third-
party position, these labs can also add product credibility via their independent test
results.
The traditional in-house laboratory normally is low on the list for budgetary funds,
impacting the corporate lab's performance.

Essential, but expensive to operate and often under-utilized -- this describes many
traditional in-house laboratories in the energy and petrochemical industries. The global
petrochemical industry alone spends more than $10 billion annually on laboratory testing.

The in-house lab can't deliver state-of-the-art testing, which very often is what the parent
corporation needs. The in-house laboratory then becomes less useful to the parent
corporation. A downward spiral begins. In-house lab instruments are not replaced nor
improved; expertise and headcount are reduced to the point where the in-house laboratory
cannot meet corporate needs and falls below justifiable utilization. The long-term future
of the traditional in-house laboratory is an open question.

What's driving the trend for lab outsourcing:

Structural cost and sustainability issues are driving the outsourcing of laboratory services.
The chemical, petroleum and pharmaceutical industries are particularly affected by this
trend. The in-house laboratory portfolio of major chemical, petroleum and
pharmaceutical corporations is changing.

Where is laboratory outsourcing occurring:

The United Kingdom, Europe and North America are leading the way, with Australia,
India, China and other locations close behind. Different regions of the world, and certain
countries within those regions, have differing motivations for considering outsourcing,
but they're all considering outsourcing, Economic and investment reasons are prime
reasons, but there are other motivations to outsource the lab. For example, as former
Soviet Union countries enter global markets, cost savings are not driving lab outsourcing.
Instead they encounter issues related to international recognition, international quality
standards, need for technology and capital investment. So they're looking to independent
organizations to invest capabilities, expertise and international standards required to
become accepted competitors in their global target markets.

Lab outsourcing benefits:

Cost savings, commercial sustainability and optimal staffing are among the advantages
driving the outsourcing of analytical testing for large companies.

With margins under pressure, every company is looking for optimal utilization of
resources at their disposal. Better assets turnover is the key under low profit margins in
Petroleum and Petrochemical Industry. Thus outsourcing of laboratory services is
becoming the leading trend among large companies.

How lab outsourcing works:

Corporations are looking for effective ways to break the cycle of high overhead and
under-utilization. A tailored laboratory outsourcing program can accomplish this goal.

Following are the typical steps need to follow

• Performance benchmarking and evaluation by an independent consultant

• Identify the in-house laboratories services into routine samples, quality
control testing and research projects.
• Prepare time chart for expansion and replacement needs of in-house
laboratory
• Schedule phased outsourcing of lab services starting from routine testings
which are demanding updated methods not available in-house.

Release of resources and deployment in production facilities is the key for this
outsourcing program.

Acts Laboratories (P) Ltd brings in the expertise to perform any one or all of above
described functions and can help companies achieve the goal of optimum utilization of
their resources. Our state of the art communication system guarantees the access to
information, protection of intellectual properties and speed of response.

Laboratory Outsourcing Examples

• Avecia,
• Unilever,
• Citgo,
• Shell,
• bp,
• BASF,
• ExxonMobil,
• Dow Chemical
• Shell Chemical LP,
• DuPont,
• ConocoPhillips
• Ashland Chemical.
• Irving Oil
• Bechtel International
• Toyo Engineering
• Tecknip Italy
• Mistsubishi
• ONGC, India
• Haldia Petrochemicals, India
• Major Steel Plants in India for Environmental Labs
Examples of lab services being outsourced.

• Aerospace company outsources chemistry, metallurgy laboratory

One of the world's largest jet engine manufacturers has awarded the provision of
embedded chemistry and metallurgy laboratory services.
• North Sea Offshore laboratory services outsourced
A major North Sea offshore oil producer has consolidated all laboratory services
and outsourced to an independent lab
• Fine Chemical, Pharmaceutical, Biotechnology laboratory outsourced:
A global chemical company outsourced a large Pharmaceutical and
Biotechnology Research Centre Laboratory
• Global Catalyst Producer outsources laboratory to Independent lab: A
global producer of polymer catalysts outsourced catalyst production quality
testing to Independent lab, de-bottlenecking quality control for production and
inventory cycles by outsourcing key quality control tests. Outsourcing included
process engineering design services.
• Petroleum Refinery Laboratory Outsourcing Project: A major petroleum
refiner has awarded the laboratory services outsource contract for a large refinery
in the United Kingdom, supporting quality control requirements for the refinery.
• Governmental Fuel Research Institution outsources laboratory:
A respected national research institution outsourced fuel testing and development
laboratory.
• Two North American Refinery Laboratories outsourced: Independent lab runs
both refinery QC laboratory operations on a 24/7 basis. One is located in Canada,
the other in the USA.

For more information please contact us about lab benchmarking and laboratory
outsourcing.

Dr. S K Jain ACTS Laboratories (P) Ltd email: skj@actslab.com