Buying Used Equipment Can Save Time and Money

Industry consolidations, competition for expensive manufacturing space, and excess capacity have all led to a global increase in the inventory and availability of second-hand pharmaceutical process and packaging equipment. 

Both pharmaceutical companies and contract manufacturers (CDMOs) have discovered that the second-hand equipment market provides readily available machinery to fulfill a range of needs. Used equipment is immediately available, cutting lead time for specification, delivery, and install. This allows for faster product launches, process upgrades, capacity expansions, and critical equipment replacements that can reduce downtime or backorders. 

When Used Equipment Makes Sense

Various situations can cause pharmaceutical companies to opt for purchasing used equipment rather than new machinery. These include:

Market Opportunity

  • Market conditions may require rapid increases in capacity. For example, three manufacturing sites may be approved to manufacture the same product. Site A, which was the first to market with the product, holds 60% of the marketplace. Site B entered the market second and captures 30% by offering a slightly lower price. Site C entered later and wins 10% with a slightly lower price, but due to contracts in place, can only secure enough business in the short term to keep the product on its production schedule with the hope of earning more business in the future. Then, Site A suddenly exits the market, leaving a gap between supply and demand, as well as an opportunity to increase margin. Sites B and C now need capacity quickly. Site B sources new equipment with a 6- to 8-month lead time for delivery (all equipment has lead time for install, debugging, and validation prior to production). Site C sources used equipment with a shorter lead time for only repair and refurbishment rather than specifying and building completely new equipment. As a result, Site C puts product into the market faster and with a lower capital expenditure.
  • Research and development budgets are not created equal. Some products command greater R&D budgets but many others have small budgets. The products with smaller budgets may require additional equipment to facilitate scale-up and production, either because of existing capacity restraints or because of different requirements. Sourcing secondhand equipment is a way to operate on smaller R&D budgets and shorter schedules.

 Quality & Supply Chain

  • An equipment upgrade can improve product quality and process consistency, but budget and schedule do not allow for new equipment. Thus, used equipment can be purchased faster and less expensively.
  • Certain pieces of equipment can be critical for a reliable production process. If the critical equipment is not always available, due to use in another process or regular downtime, sourcing low-cost, redundant equipment can be a viable strategy for mitigating supply chain risk and ensuring on-time delivery. 

Equipment Downtime

  • Equipment downtime for repair or cleaning impacts the ability to reliably deliver product on time. Having a second machine on-hand could eliminate a process bottleneck, but, again, budget and schedule do not allow for new equipment.
  • Equipment is broken and not getting fixed. Extended repair lead time for refurbishment, rebuilds, or long-lead parts can cause backorders, contract breaches, and drug shortages. One pharma manufacturer had a machine that required a rebuild. Downtime was scheduled, but long-lead parts were not available due to downstream production issues outside of the OEM’s control. The scheduled downtime was exceeded. New equipment was not an option as the machine has already been out of service for 8 weeks. The rebuilt parts (which were overseas) remain undelivered for 3 more weeks and backorders exceeded $1 million. A used equipment dealer had a newer model of the machine, but the needed parts were the same. The machine was ordered and delivered the next day to the manufacturer, the needed parts were installed on the existing machine, and production resumed within 72 hours of equipment delivery.

New Equipment Requires Vigilant Verification and Specification

A pharmaceutical company or CDMO that decides to purchase new equipment should be aware of certain critical elements that require extra caution compared to securing used machinery. For example: 

  1. Qualifying and selecting a new equipment supplier can take several weeks, adding to overall lead time.
  1. Most new pharmaceutical production and packaging equipment is customized for a process. Pharmaceutical companies and suppliers work together to agree upon the equipment’s specifications. Customization adds expensive options and time to building and delivering the machinery. Lead times can be 6 to 8 months or more, depending on the equipment and specifications.
  1. After requirements and specification have been agreed upon and the machine is built, members of the team must travel to conduct a factory acceptance test (FAT) to test the constructed machine against the user requirements. Any issues must be addressed before shipment. The time from FAT to shipment can be short, but usually involves a week or more just to prepare the equipment to ship. If the equipment is coming from overseas, then it can be subject to extra transit time and export/import processes.
  1. Physical delivery of the unit to the buyer can present problems. The equipment needs a place to go, which requires space and, in many cases, GMP space. Equipment needs to be removed from existing space or it may need new space. In many cases, the site cannot immediately install the equipment because of other projects or schedules.
  1. Once in place, the equipment is installed and the commissioning phase and site acceptance test (SAT) begins. During commissioning and SAT, information and requirements are verified, operational issues are corrected, agreed-upon specifications are verified, and processes and procedures are developed.

Avoid Scope Creep 

However, even the best-laid plans can go awry as requirements and product markets change. Changes made after specifications have been agreed upon can drastically increase costs and increase lead time. This is often referred to as “scope creep,” whereby even the smallest adjustments can affect the length of a project. Not only will scope creep impact purchase price and delivery time, unchecked scope creep can result in a one-of-a-kind machine that is difficult to operate, maintain, and service.

Canceled projects happen as well. Equipment may be purchased for a new product, but the product fails to meet desired clinical results, the formulation is never right, or the market never materializes. The new equipment, then, becomes surplus equipment. Sometimes, this happens before the equipment is ever delivered to the original buyer.

Delivery is not the end of the purchase process with new equipment. Remember to keep in mind that new equipment is not always defect-free. Equipment can fail to reach target parameters for the process, can be built incorrectly—where the final machines do not meet the agreed-upon specifications—or the specifications were not correct in the first place. This results in the equipment not making a saleable product. As an alternative, good quality used equipment can potentially reduce purchase lead time from months to weeks (or less). Time spent selecting suppliers and then discussing requirements, specifications, and options is decreased as the equipment is already built.

Conclusion

There are many reasons pharmaceutical manufacturers turn to used equipment. These reasons include market opportunities, everyday production and scheduling issues, and solving significant production problems all with limited time and budget. Used equipment can be a time-saving, money-saving, and contract-saving choice. The key to capturing used equipment is to find a reputable dealer, who maintains a broad range of equipment in inventory from world-leading pharmaceutical manufacturers that is made by world-leading equipment manufacturers. All equipment, new or used, goes through the same installation and start-up process. Even though any issues may be different, both still need to happen. When buying new, remember to not lose sight of the project at hand with ambitious customizations. This can lead to spending additional time and money, and can even lower the overall effectiveness of the equipment.

 

Matt Hicks

Matt Hicks, Chief Operating Officer at Federal Equipment Company, is a pharmaceutical industry veteran with more than 15 years of experience helping companies get the most value and utility out of their manufacturing and process equipment assets.