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Maintaining Your
Equipment Without
Breaking Your Budget
ABRF 2015 Annual Meeting
St. Louis, Missouri
March 28th-31st, 2015
Joanne Lannigan, M.S.
Flow Cytometry Core
University of Virginia SOM
[email protected]
Background
 Capital equipment investments in SRLs are in the
$100s of thousands to millions
 Limited availability of funding for replacements
 Equipment Maintenance & Repair is often the second
largest expense in a SRL budget
 Instrument downtime or poor performance impacts
revenue generation
 Proper management of this expense can provide an
overall cost savings for a SRL
Multiple Approaches
 OEM service contract
 Full vs. limited (PM only;
parts only, etc.)
 Third party company
 Asset Management
Company
 Manages all equipment
 In-house and
subcontracting
service contract
 Full vs. limited (PM only;  In-house/self repair
parts only, deductible
etc.)
 Time & Material
 OEM
 3rd party
 Self Insurance
Pros & Cons
OEM contracts
Pros
Cons
 Parts availability
 Expensive
 Guarantee response
 Limited plan
time
 Manufacturer trained
 Software
revisions/upgrades
flexibility
Pros & Cons
Third Party Contracts
Pros
Cons
 More cost effective
 Parts availability
 Flexible plans
 No Software
 Guaranteed
response time
 Less bureaucratic
revisions/upgrades
Pros & Cons
Time & Material
Pros
 Can be cost
effective over time
 Paying only for
services/parts used
Cons
 Delayed response
time
 No Software
revisions
 No technical support
 No PM included
Pros & Cons
Asset Management Companies
Pros
 Can be cost
effective over time
 No need for multiple
contracts
Cons
 Delayed response
time
 No technical support
 Lack expertise in
highly complex
equipment
Pros & Cons
Self Insurance
Pros
 Can be cost
effective over time
 Only pay for what
you actually need
 Risk is spread over
multiple instruments
(departments)
Cons
 Delayed response
time
 No technical support
 May take a few
years to be cost
effective
Which Approach is
Best for You?
Factors to Consider
 Age of equipment
 Frequency of use
 Repair/downtime
 Revenue generation
history
 Complexity of
technology
 Redundancy
 Criticalness to
operation
 Local expertise
 Current
maintenance costs
 Satisfaction with
current service
provider
Other Factors to Consider
 T&M costs
(travel/labor/minimum)
 Cost/availability of
replacement parts
 Response time
required
 Need for telephone
support
 Self-insurance
mechanism available
 Cost to replace
 Impact of downtime
beyond revenue
 Preventive
Maintenance??
 Flexible contract
options
This Means You Need DATA!!
 Instrument data tracking
 Purchase date/warranty expiration
 Service history
 Contract, warranty, T&M
 Downtime/revenue lost
 Maintenance Costs
 Contract, T&M, Parts, PM
 Utilization information
 Revenue produced
Scenario #1
T&M vs. OEM Service Contract
 Instrument X is 5 years old
 Average revenue/yr. over 5 years $46.4K
 OEM service contract Years 2-4 (year 1 warranty)
 No third party service available
 Two backup instruments available
 Some in-house expertise
 Parts not readily available for purchase
T&M vs. OEM Service Contract
Year
Year 1
Service contract price # calls
Warranty
Year 2
Net contract
Net T&M
Year 3
Net contract
Net T&M
Year 4
Net contract
Net T&M
Year 5
Net contract
Net T&M
$25,000.00
Total
Net contract
Net T&M
$110,000.00
Estimated
Labor/Travel
3 NA
1
Estimated Parts
NA
$2,500.00
Downtime
5 days
$500.00
20 days
40 days
$35,000.00
$9,720.00
$31,440.00
$44,000.00
$15,796.00
$31,092.00
$57,000.00
$26,948.00
$36,896.00
$64,000.00
$29,380.00
$31,380.00
$5,120.00
$10,240.00
40 days
80 days
$232,000.00
$107,132.00
$157,688.00
$14,868.00
$16,312.00
2 days
4 days
$27,500.00
3
$7,500.00
$4,000.00
4 days
8 days
$28,000.00
5
$12,500.00
$3,500.00
9 days
18 days
$29,500.00
5
17
$12,500.00
$35,000.00
Revenue Generated
Revenue Lost
$32,000.00
$640.00
$15,000.00
$23,000.00
Savings over 5 years = $50,556
$280.00
$560.00
$704.00
$1,408.00
$2,052.00
$4,104.00
Things to Consider
T&M vs. OEM Service Contract
 No PMs
 Delayed response times
 Additional loss of revenue
 Catastrophic failures
 No telephone support
Scenario #2
T&M vs. Third Party Service Contract
 Instrument X is 5 years old
 Average revenue/yr. over 5 years $46.4K
 Service contract Years 2-4 (year 1 warranty)
 Third party service available at 20% below OEM
 Two backup instruments available
 Some in-house expertise
 Most parts available for purchase outside OEM
T&M vs. Third Party Service Contract
Year
Year 1
Service contract
price
Warranty
Year 2
Net contract
Net T&M
Year 3
Net contract
Net T&M
Year 4
Net contract
Net T&M
Year 5
Net contract
Net T&M
$20,000.00
Total
Net contract
Net T&M
$88,000.00
# calls
Estimated
Labor/Travel
3 NA
1
Estimated Parts
NA
$2,000.00
Downtime
5 days
$400.00
2 days
3 days
$22,000.00
3
$4,800.00
$3,200.00
4 days
6 days
$22,400.00
5
$6,000.00
$2,800.00
9 days
12 days
$23,600.00
5
$10,000.00
$12,000.00
20 days
25 days
17
$22,800.00
$18,400.00 40 days
Revenue Generated
Revenue Lost
$32,000.00
$640.00
$35,000.00
$14,720.00
$32,320.00
$44,000.00
$21,296.00
$35,296.00
$57,000.00
$32,548.00
$46,148.00
$64,000.00
$35,280.00
$36,880.00
$232,000.00
$135,204.00
$179,548.00
Savings over 5 years = $44,344
$280.00
$420.00
$704.00
$1,056.00
$2,052.00
$2,736.00
$5,120.00
$6,400.00
$8,796.00
$11,252.00
Things to Consider
T&M vs. Third Party Service Contract
 No PMs
 Delayed response times
 Catastrophic failures
 Proprietary parts availability
 No software upgrades
Scenario #3
OEM vs. Third Party Service Contract
 Instrument X is 5 years old
 Average revenue/yr. over 5 years $498K
 Service contract Years 2-4 (year 1 warranty)
 Third party service available at 20% below OEM
 No backup instruments available
 No in-house expertise
 Most parts are readily available outside OEM
Service Contract: OEM vs.Third Party
Year
Year 1
Year 2
OEM contract
3rd Party
Year 3
OEM contract
3rd Party
Year 4
OEM contract
3rd Party
Year 5
OEM contract
3rd Party
Total
OEM contract
3rd Party
Service contract price # calls
Warranty
Downtime
3 5 days
1 2 days
$200,000.00
$160,000.00
3 4 days
$220,000.00
$176,000.00
5 9 days
$224,000.00
$179,200.00
5 20 days
$236,000.00
$188,800.00
17 40 days
$880,000.00
$704,000.00
Revenue Generated
Revenue Lost
$450,000.00
$9,000.00
$517,000.00
$312,864.00
$352,864.00
$546,000.00
$317,264.00
$361,264.00
$498,000.00
$256,072.00
$300,872.00
$479,000.00
$204,680.00
$251,880.00
$2,490,000.00
$1,540,880.00
$1,716,880.00
$4,136.00
$8,736.00
$17,928.00
$38,320.00
$78,120.00
Savings over 5 years = $176,000
Things to Consider
OEM vs. Third Party Service Contract
 OEM known failures/fixes
 Proprietary parts availability
 Expertise of third party
 Proprietary issues
 Availability of less than full service contract
plans
 Technical phone support
Scenario #4
Self Insurance vs. OEM Service Contract
 Instrument X is 5 years old
 Average revenue/yr. over 5 years $498K
 Service contract Years 2-4 (year 1 warranty)
 Budget 50% of OEM contract, risk pool carryover
 No backup instruments available
 No in-house expertise
 Some parts readily available outside OEM
Scenario #4
Self Insurance vs. OEM Contract
Year
Year 1
Year 2
OEM contract
Self insured
Year 3
OEM contract
Self insured
Year 4
OEM contract
Self insured
Year 5
OEM contract
Self insured
Total
OEM contract
Self insured
Service contract
price
Warranty
Carryover
Actual
# calls
Downtime
3 5 days
Estimated Labor/Travel Estimated Parts
NA
NA
Annual Net
1 2 days
$200,000.00
$100,000.00
$0.00
$200,000.00
$100,000.00
$2,700.00
$6,000.00
$91,300.00
$4,800.00
$75,000.00
$30,200.00
$6,000.00
$125,000.00
-$19,000.00
$10,000.00
$35,000.00
$73,000.00
$0.00
$23,500.00
$0.00
$241,000.00
3 4 days
$220,000.00
$110,000.00
$91,300.00
$220,000.00
$18,700.00
5 9 days
$224,000.00
$112,000.00
$30,200.00
$224,000.00
$81,800.00
5 20 days
$236,000.00
$118,000.00
-$19,000.00
$236,000.00
$137,000.00
17 40 days
$880,000.00
$440,000.00
$880,000.00
$337,500.00
Savings over 5 years = $542,500
Things to Consider
Self-insurance vs. OEM Service Contract
 Delayed Service Response
 Loss of revenue
 Long term vs. short term
 Catastrophic years
 Technical phone support
 Larger the risk pool the better
Bottom Line
 You need good historical data to make good decisions!!
 No one option fits all equipment or core environments
 Weed through the threats and promises
 Ask the tough questions:






Guarantee response times
Available technical support
Parts availability
Alternate service plan options
PM included
Expertise of service personnel
 Understand the basics of your instruments and perform
regular routine maintenance
 Be prepared for catastrophic failures