Improve Laboratory Financial Performance with a Digital Chemical Inventory Management System
What makes a laboratory successful? Is it the number of patents it files, paper it publishes or people it helps? Although all of these can be used as laboratory performance metrics, they can also be hard to quantify. For this reason, laboratory success is often measured through financial performance.
Compared to the other laboratory performance metrics, financial performance is considered an ideal way to measure the success of a laboratory because it demonstrates how effectively lab managers allocate and manage resources (expenses), as well as how the general market appreciates laboratory results (revenues). The laboratory that is able to consistently return a profit from their revenue after subtracting expenses is considered successful.
If many laboratories measure success through financial performance, laboratory managers need to seek ways to either reduce expenses or increase revenue. Since strategies for increasing revenue are particular to each laboratory’s market, we’ll consider those another time. For our purposes today, let’s spend some time focusing on managing expenses, as the application of these principles is more applicable to laboratories across the board. Also, as Andrew Carnegie, the Founder of U.S. Steel, once said, “Watch the costs and the profits will take care of themselves.”
When discussing laboratory costs, most lab managers tend to focus on a laboratory’s largest expense – employee labor costs. However, by focusing exclusively on the costs associated with labor, lab managers may miss out on some of the low-hanging fruit regarding other expense categories. For example, one area that is frequently overlooked is chemical management. A real-time, comprehensive digital chemical inventory management system, like Accelrys CISPro, may be the key in reducing costs associated with chemical management.
There are a number of expenses associated with chemical management, including the following:
- Inventory Costs – Reagents can be extremely expensive in two ways. First, if there is an insufficient quantity of a reagent in storage, scientific progress in the laboratory may come to a halt. Secondly, reagents have a limited shelf life and expire within a few months. This means that laboratories should not keep too much of them in storage because they will only go to waste. The goal is to balance inventory so that scientists always have enough on hand, but not enough that the reagents regularly expire before they can be used.
- Regulatory Costs – Another cost associated with chemicals concerns compliance. Laboratories that are storing chemicals have an obligation to track and store the associated Safety Data Sheet (SDS). In addition, laboratories in the United States have to be compliant with various government regulations, including the Toxic Substances Control Act (TSCA), while companies operating in Europe need to comply with the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) regulation. These are just two of many global chemical regulations. Compliance is a costly component of inventory management that should definitely be considered among other financial aspects of a laboratory.
- Overhead Costs – Inventory management also consists of overhead costs such as the associated labor expense it takes to manage inventory purchasing and tracking. Companies that are reliant upon regular physical inventories to determine chemical quantities and track inventory inefficiently using spreadsheets may be spending a lot on labor costs for what should be simple management.
A digital system built around chemical management best practices will help lab managers reduce the costs associated with inventory. Each stage of the chemical management lifecycle, beginning at procurement and ending with the disposal of chemicals, is carefully and thoroughly addressed. This is accomplished with a relational database that provides real-time information to management regarding quantity used, use history and location information. It can seamlessly integrate with other systems, such as purchasing and accounts payable.
In turn, this information can be used to ensure that the right chemicals are in the right place at the right time, thus avoiding spoilage. In addition, beyond tracking SDS for quick access, a digital chemical inventory management system can also be used to produce regulatory reports with accurate information for compliance purposes, reducing the associated compliance costs. Lastly, a system built on chemical management best practices can help reduce the labor expenses associated with managing inventory by automating the chemical tracking process and reducing the need for monthly physical inventories.
If laboratory performance metrics measure a great deal of success through financial performance, it is time to implement a best practices digital chemical management system. Doing so may help laboratories reduce the costs associated with the entire inventory management lifecycle. Any additional profits can then be reinvested into the laboratory to help it grow further.
For laboratory managers interested in reducing the overall costs associated with their chemical inventory management, please visit the Accelrys CISPro website today.