Proactive Surplus Asset Management Releases Hidden Value for Top Pharma Businesses in India
Krishnamoorthy Vishwanathan, Managing Director, EquipNet India

In this article we take a look at how a pioneering whole-business approach to asset redeployment and the sale of surplus and idle laboratory and production equipment is helping companies in India maximise return on the significant investment they have made in these costly systems.

Across the world, the chemical, pharmaceutical and biotech industries continue to show strong growth, and the Indian market is at the front of the pack. The consensus from a range of reports suggests that the industry in India has been growing at between 10 and 15 per cent per annum for the past five years. By 2020, estimates indicate the market will be worth approximately USD 55 billion.

These remarkable levels of growth translate into a very dynamic marketplace, and huge opportunities. With the world’s biggest companies having set up in the Indian market, and many new businesses starting up locally, it is a really exciting time to be part of this sector. In 2013, a well known Indian research group claimed there were 4,655 manufacturing plants in India, employing a total of more than 345,000 people.

Within these facilities, companies invest many millions of dollars in equipment, instrumentation and plant – the result: a very significant asset base. However, as projects are completed, or the emphasis of research shifts , or as companies merge and relocate or close facilities, equipment can fall out of use. In fact, industry surveys say that on average, 5 per cent of a manufacturing company's global asset base is laying idle, and that most laboratory managers do not have good visibility of these underutilised assets.

A New Approach Needs New Skills
Business managers are increasingly realising the hidden value that is sitting in their facilities. However, in order to achieve the best possible returns as assets are relocated or sold on, there is a requirement for formalised processes, specialist knowledge of the industry and its equipment , dedicated resources, and a concerted effort to change management. Many companies lack the time or resources that are necessary to achieve this.

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 the 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, EquipNet 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 (on the next page) 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 on-line marketplace, and competitive auction events.
  • Clearance, disposal and scrap programmes.
Having made a significant investment in evaluating, selecting and purchasing a piece of equipment, redeployment to another part of the business when its initial use is over will always delivering the highest on-going value for that asset. However, 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 moving to external sale. An established example is EquipNet'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 what they have and where it's located.

Sales and Auctions
If a company chooses not to redeploy an asset, a sale is the next logical step. The rise of the internet has seen the development of online marketplace packages to meet this need. When considering an online transaction however, particularly for a high-value and complex piece of equipment, the human touch is perhaps still the most important factor. Using a vendor with specific industry experience combined with a solid reputation is crucial to success.

Innovative features to look for with online marketplaces 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 this case, liquidity becomes the highest priority. Auctions are dependable channel to achieve this goal however 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.

Scrap and Disposals
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. Working with your chosen expert, you should expect to be advised of the scrap value of your idle equipment, presented with a comparison of that amount against the market value to sell it, together with a recommended strategy that will generate the highest rate of return for your company.

In Practice
Mid-way through last year (2013), a multi-national pharmaceutical company needed to close a development centre, located in Western India.

With a timeframe of just five months to completely clear the facility so that another department could relocate into the building, the pressure was on. EquipNet managed this complex project from start to finish, meeting the deadline and realising more financial targets agreed for the sale of assets .

A total register of 650 assets (a mix of analytical and laboratory instruments and R & D equipment) was created for the project. Market values were established by EquipNet's equipment specialists, who confirmed that around 80 percent of the value would be realised by 25 per cent of the assets. A negotiated sales approach - targeting sales to individual end users - was employed to dispose of the items. Everything was sold, and the facility was cleared on time. Importantly, all required government formalities for an 'Export Oriented Unit (EOU)' - including all statutory documentation and processes - were completed by the EquipNet specialists for both the client company and for the buyers of the assets.

Choosing when to invest internal resource in a specific activity and when to seek extra help is a tough but essential management task. Defining and focusing on core company strengths and recognising the need for expert support in other areas ensures operational efficiency and can have a major impact on the bottom line.

Surplus asset management is being recognised as increasingly critical, and many realise that they do not have the resource or skill base to tackle the issue in-house. With dedicated companies offering services to alleviate the burden, asset management is now joining the list of activities ripe for outsourcing.