An Assessment of the Material Measurement Laboratory at the National Institute of Standards and Technology: Fiscal Year 2023 (2023)
Chapter: 10 Office of Reference Materials
10
Office of Reference Materials
The Office of Reference Materials in the Material Measurement Laboratory (MML) serves a significant and prominent role in translation of measurement science at the National Institute of Standards and Technology (NIST) to stakeholders. The office’s administrative activities include managing business operations, administrative oversight, product sales, and technical support for the NIST Standard Reference Material program. Through its responsibility for managing working capital and standards development funding, the office has strong influence in selecting and resourcing the technical work that is developed and disseminated.
The office is actively pursuing a modernization approach for their operations as part of its Measurement Services Modernization Strategy. Part of this effort involves close coordination with the Statistical Engineering Division to improve experimental design at an early stage of study. At the other end of the supply chain, the office is seeking to extend its distribution model by partnering with organizations possessing skills that complement its core capabilities. This strategic approach is designed to enhance the office’s efficiency while allocating resources to alternative, high value-added activities.
The Office of Reference Materials effectively translates measurement services to a broad set of stakeholders and is the leading national metrology institute in doing so. Meeting that responsibility for more than 100 years has realized a portfolio of products that is dominated by legacy products; these products are impactful and touch many domains and many users. This office is presently in the position of maintaining this legacy catalog, with most of its resources devoted to that. The legacy catalog being maintained by the office has led to a product portfolio that appears to be balanced in a way that jeopardizes NIST’s ability to support emerging needs and the industries of the future.
The Office of Reference Materials is fiscally incentivized by sales of units, with the legacy commodity products dominating the list of the highest-selling products, with only one recently developed product among the top 15 sellers. Revenue distribution is strongly skewed to the highest-selling products, with 4 percent of the catalog generating 50 percent of the office’s annual revenue. The product portfolio is managed using the relative demand for each product, a fairly passive approach. It is not clear that this commodity sales-driven approach to product portfolio management is sufficiently active to best translate NIST measurement science to stakeholders.
The top grossing product in the past year has in fact been one of the newest and most innovative offerings, RM 8671 NISTmAb, Humanized IgG1κ Monoclonal Antibody. This is a commendable situation that shows the excellence that NIST is able to project to emerging industries, the impact of new product offerings, and their revenue potential.
ASSESSMENT OF TECHNICAL PROGRAMS
The Office of Reference Materials ships approximately 30,000 units from a catalog of 1,100 products, generating approximately $22 million in revenue. Accomplishing this within the confines of the laboratory is no small feat and speaks to the immense capability of the personnel that manage and implement the tasks.
This office functions as a stand-alone e-commerce business operating within the framework of a federal agency. This presents unique business, staffing, and technical constraints that are different from
other units within MML. The Office of Reference Materials is well aware of the nature of these challenges and has taken steps to address them, as mentioned above, in the development of service modification. This suggests the need to implement an enhanced portfolio governance process.
The portfolio of Office of Reference Materials products is not currently actively managed, in large part because there is no immediate need to do so. However, portfolio optimization would free resources (personnel, facilities, and dollars) for increasing the long-term value of the portfolio for U.S. industrial growth. In fiscal year (FY) 2023, renewals of existing products represent 81 percent of the investment for the future, leaving less than 20 percent for the difficult yet essential work of prosecuting new projects.
Portfolio optimization requires having insight into the value capture potential of the products in the catalog in light of the stakeholder value delivered. Active management of the portfolio would enable strategic decision-making across the whole of the catalog, both currently and in the future, as opposed to managing the portfolio on a program-by-program basis. Careful consideration of the entire portfolio would take the form of evaluating both the value proposition to the clients and the value capture potential for NIST. In that manner, all stakeholders can be served effectively. Value capture potential may take the form of understanding the economics of the offering, including opportunity cost, working capital and equipment requirements, resource allocation in preparation, sales effort, and opportunities for growth. Value proposition seeks to understand the offering in terms of the next best alternative to the customer base, with a keen eye toward looking at the relative value capture potential versus the value delivered relative to replacement options. For offerings with high value capture potential, active sales efforts would be advantageous. For those with low value capture or poor value propositions, exit or upgrade strategies would be implemented.
Recommendation 10-1: The Office of Reference Materials should develop and implement a portfolio management process based on the articulated measurement services modernization strategy. The full portfolio of products should be considered critically and monitored on a periodic basis for (1) each offering’s utility and impact, (2) the resource commitment needed to maintain the product, and (3) effectiveness and performance of translation. Each existing product should have a maintenance and sustaining plan, and a plan to either perpetuate or discontinue products through transition to alternative products or obsolescence. A plan should be developed for every new product proposed or being developed that includes projection of these characteristics, with emphasis on life-cycle analysis, value proposition for stakeholders and value capture for the National Institute of Standards and Technology.
PORTFOLIO OF SCIENTIFIC EXPERTISE
The portfolio of expertise of the Office of Reference Materials is aligned with its mission as a stand-alone business unit and does not lend itself to direct comparison to other MML divisions. Of the 31 staff members, 12 are scientists, 7 are technicians, and 12 provide administrative or other program support. The scientific and technical staff collaborate with peers in the research divisions to produce and document existing standard reference materials and perform the necessary research and measurements to create new standard reference material products as they are needed by industrial customers.
BUDGET, FACILITIES, EQUIPMENT, AND HUMAN RESOURCES
In FY 2023 the budget for the Office of Reference Materials was $12.332 million. Of this, $1.170 million was appropriated by Congress and $11.161 million came from services and a working capital fund. For comparison, in FY 2020 the numbers were $9.471 million, with $870,000 appropriated and $8.601 million coming from services and a working capital fund. This represents approximately an 8.5
percent increase. This predominantly fee-based funding model incentivizes commodity in favor of innovation. The fee-based budget gives rise to facilities that are optimized for the wrong things, and there is insufficient investment in maintaining them to be safe and of high integrity. The office has 31 staff, comprising 12 scientists, 7 technicians, 10 administrative personnel, 1 support person, and 1 associate.
The Office of Reference Materials relies on the analytical and research facilities in other divisions outside of MML to make appropriate measurements in support of mission delivery. It has facilities and equipment that enable standard reference materials preparation, packaging, and shipping. The office is allocated a 20,000-square foot building for storage, sample preparation, and shipping operations. Some products require controlled temperatures while stored, and the office maintains close to sixty –80°C freezers, seven walk-in –20°C freezers, and four walk-in 4°C refrigerators. Much of the infrastructure, both buildings and equipment, has exceeded its expected life, leading to the potential that time is spent inefficiently compensating for the reduced capabilities of old equipment and facilities compared to the capabilities of state-of-the-art equipment, which could greatly enhance work efficiency.
Many of the Office of Reference Materials’ backend activities, such as order fulfillment, warehousing, and shipping, can be accomplished better by outside vendors who have both the experience and automation to reduce errors and increase efficiency. Outsourcing selected tasks can provide more time for value-added work by Office of Reference Materials staff and create products with updated capabilities without the need for expensive capital equipment, some of which will not be used on a regular basis within ORM.
Recommendation 10-2: The Office of Reference Materials (ORM) should benchmark its tasks and the capabilities required to accomplish them against best-of-class capabilities that exist in the private sector. Tasks that are deemed to be better done by outside vendors should be targeted for outsourcing and staffing within ORM should be reallocated accordingly.
Aged infrastructure and equipment can have an impact on the safety mentality of the staff. While it is not necessarily true that modern buildings lead to positive safety performance, it is often true that old facilities in disrepair result in poor safety awareness. The laboratory tour indicated that the Office of Reference Materials runs the risk of safety incidents in the near future as a result of a perception that the risks in those facilities are minimal. This attitude allows the persistence of unsafe conditions that form the base of the safety pyramid and can ultimately result in injury or even fatality.
Unsafe conditions also have the potential to impact performance of the products. As facilities degrade, the organization may not recognize the risk of microbes and other contaminants can have on the packaging and integrity of the products. The importance of management involvement in fostering a safety culture is discussed in more detail in Chapter 2. Safety and excellence go together.
Key Recommendation 2: Safety is as much a line management responsibility as an individual one. Leaders should recognize that every task can be done safely, and every task has inherent risks. That attitude needs to be transmitted down the line in order for each individual to take responsibility for maintaining the safety of their environment and the environments of those around them. The Office of Reference Materials should maintain statistics of leading indicators of safety risks and facilities dangers that represent the base of the safety pyramid. These statistics should be socialized within the organization in such a way that the safety environment is uplifted, ultimately resulting in a revised safety culture. It may be desirable to enlist an experienced industrial partner who can bring a fresh perspective on the safety risks as a way of providing an unbiased and fresh pair of eyes to the situation.
EFFECTIVENESS OF DISSEMINATION OF OUTPUTS
Dissemination of NIST work is the essence of the Office of Reference Materials; however, it appears that there is no dissemination of their portfolio management and performance outside of informal internal assessment. There have been reports on the dissemination function and aspirations in the past.1 Such reporting on a periodic basis would serve both NIST planning and inform key NIST stakeholders. In years past, NIST published SRM Spotlight,2 a newsletter with the goal of providing information about the offerings and new reference materials.
Such tools are an opportunity to disseminate the portfolio and engage stakeholders in best taking advantage of NIST measurement science tools. Feedback and dialog with stakeholders triggered by this marketing approach can lead to a virtuous cycle that encourages active and responsive management of the portfolio, with leading indicators and market knowledge supporting decision-making.
Recommendation 10-3: The Office of Reference Materials (ORM) has done an excellent job in managing and distributing product stock, however the marketing effort that leads to sales most often relies on an outside-in approach, in which a potential customer makes a request for a standard. As part of the input for Recommendation 10-1, ORM should initiate an inside-out marketing effort to determine the current value add of each offering in the standard reference material catalogue. This active marketing can increase uptake of languishing products, and at the same time reveal products in the portfolio of limited value proposition. This effort would be expected to increase ORM revenue.
REFERENCES
Gills, T.E., S. Dittman, J.R. Rumble, Jr., C.S. Brickenkamp, G.L. Harris, and N.M. Trahey. 2001. “NIST Mechanisms for Disseminating Measurements.” Journal of Research of the National Institute of Standards and Technology 106(1):315–340.
Montgomery, R.R., ed. 2011. SRM Spotlight. March. https://www.nist.gov/publications/srm-spotlight-1.
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1 See, for example, Gills et al. (2001).
2 See, for example, Montgomery (2011).
