Variabilization- Turn Fixed Cost Into Variable Cost
The concept of variabilization, a willful shift from fixed to variable costs, has been around since the late 1990s. First-in-class companies have moved from a fixed cost model to a variable model, primarily to enhance their agility, responsiveness, and competitiveness when economic times are good…and to be well positioned to endure tough times when the macroeconomic situation turns bad. In short, why build a power plant in your backyard or a regulatory-friendly cGMP manufacturing capability in your existing facility when you can capture “pay as you go” benefits by simply paying for the resource/service (e.g., electricity or reagent contract manufacturing) when you need it?
Why build a power plant in your backyard?
When it comes to cGMP reagent contract manufacturing and supply chain infrastructure in the life sciences and molecular diagnostics segments, it’s not always best to build it yourself. Contract manufacturing is a tried and true model in many industries, and our bigger cousins in the pharmaceutical space transitioned to this model years ago. The impetus was to variabilize their cost structure.
Whether your organization is just getting off the ground or it’s an established player, tying up precious capital in Operations needs to be a conscious choice. Unless there are compelling strategic reasons for such complete vertical integration, many high-performance companies are choosing to maintain or build out core internal capabilities, while outsourcing most of the rest to a reputable CMO. A contract manufacturing capability, such as Argonaut’s, augments and enables such a strategy. We’ve seen many emerging companies come to the realization that they would rather have their PhD scientist focus on innovation, rather than “manufacturing” buffers, mixes, and kits at the bench. As well, larger companies recognize the benefit of shifting some legacy skus and even entire on-market product portfolios out of their facilities to make room for higher-value skus or new production coming their way.
When it comes to manufacturing reagents, companies across the spectrum increasingly see the value of variabilization to their business model as they entertain key “make vs. buy” decisions. Argonaut is a great “buy” option to explore before pitching a final recommendation to executive management.
Contact us to learn more about how variabilization can save you money?