Enterprise Forecasting: The Next Generation Solution

As pharma companies become worldwide organisations, accurate enterprise forecasting has become essential. However, many ERP systems have been unable to provide comprehensive, reliable and accurate data for the long term – until now.

Large pharmaceutical conglomerates have transformed their operations in the last decade. They have transitioned from multinational structures to global organisations. Production facilities have been greatly rationalised. The orientation of the remaining manufacturing sites is, in general, a single source. Outsourcing and offshoring of activities are becoming more common. In line with this change, most companies in the industry have or are in the process of rolling out integrated enterprise resource planning (ERP) systems solutions such as SAP or Oracle Apps to globally manage their enterprises.

The new global paradigm has accentuated the importance of enterprise forecasting and raised the bar to a level where accurate mid- and long-term forecasts are now essential. Unfortunately, the operational characteristics of the forecasting functionalities found in integrated ERP solutions fall short of meeting this level. Volume forecasts at the pack level for up to 24 months, even if split by week for the first six months to better manage distribution and finished goods inventories, only fulfil one of the many forecasting requirements of a pharmaceutical company. From a volume perspective, the lack of production capacity for active product ingredients is the most important concern. The pharmaceutical industry suffers from long production and replenishment lead times, especially for active ingredients, which may be as long as three years, and which cannot be shortened due to regulations controlling the physical expansion of capacity.

Forecasting needs

Time factor

As a result of the long lead times, volume forecasts, pulled monthly from the commercial affiliates and globally consolidated for rough-cut capacity planning, must cover at least 72 months. These projections must be aligned with the financial and corporate strategic forecasts. Companies managing globally can no longer afford the lack of standardisation and efficiency resulting from multiple different Excel spreadsheets and forecasts, often found for the same products.

The strategic forecast is usually expressed in terms of the corporate currency. It integrates all in-line and pipeline products that are expected to be launched over the years covered. Again, the pharmaceutical industry differs from other manufacturing industries, especially fast-moving consumer goods, in several key ways. These include the complex R&D that is required to obtain drug approval, its long patent life, the highly regulated marketplace, the medical practitioner as the decision-maker of the drugs consumed by the patients, and finally, the high margins driving the industry to be top-line driven.

From marketing and product development perspectives, the number of patients taking a product is the key measure for the forecast. Future resource activities, market and life cycle events assumed for the company’s brand or the competitive products will directly impact the number of patients to be prescribed a drug; therefore, the number of pills/capsules prescribed, packs shipped to wholesalers, net revenues accrued and kilos of active ingredients required to meet the future demand of patients must all be translated into one common language through which the assumptions or events driving the forecasts are transparent to all stakeholders within the organisation.

Comprehensive data

The forecasting needs of a pharmaceutical company and the languages (volume, value, market shares and patients) need to be integrated in order to support marketing, finance, supply chain and product development (see figure). Because of the long-term forecast horizon, assumptions are critical to the process and their exactness will determine the accuracy of the forecast. The ease of consolidating the assumptions, their impacts and the transparency offered to all users will establish the operational efficiency of the process.

Market research must play an important role in supporting the process since assumptions are defined in a closed market such that whatever patient shares are gained are lost by others in the market. Only a total market forecasting platform can provide the required reality check for such long-term forecasts. Enterprise forecasting implies adhering to a unified methodology and investing in a centralised information system platform in order to deliver the common language that encompasses both in-line and pipeline products. This cannot be achieved on the basis of multiple systems.

This information system platform must rely on a centralised database concept, such as that provided by Oracle, containing both the internal sales and external audit data for all affiliate companies. The system platform must respect local market dynamics in its design, while facilitating the consolidation of forecasts and assumptions for global management. It is exactly this type of new IT system that Futurion has built over the last four years through collaborative work with some of the major pharmaceutical companies globally and locally – the FUTURCAST Oracle Total Market Forecasting system platform.

Company profile

Founded in 1985, Futurion is a leading innovator of cutting-edge forecasting solutions. For more information, visit: www.futurcast.com.

< Back to Supply Chain index

< Back to Market Resources index