Global Pharmaceutical Company
Forecasting & Backcasting
A global generic pharmaceutical manufacturer (own & 3rd party plants), was undergoing a major ERP system change, including demand planning. There was a need to establish trust in the statistical forecasting approaches that would be implemented, alongside an understanding of how to set up the algorithms to ensure the right balance between responsiveness and stability. The client was aware of the risks of "best fit" algorithms but wasn't sure of the best way to approach this vital step in ensuring baseline forecasts were fit for purpose.
Problem
- The client team were somewhat lost as to how to compare and improve forecast performance on a country-by-country basis.
- Sequoia were asked to join the existing team and to focus on forecast analysis & improvement.
- Pilot markets were tested, and processes defined that would drive a positive impact on results globally.
Solution
- Programme of comprehensive analysis and process review: to identify causes and correlations in performance.
- Forecast assessment tool: created to both test and quantify the opportunity for introducing a statistical forecasting approach for baseline forecasting on a SKU by SKU basis.
- Back-Casting process deployed: this technique quantified the performance of different algorithms on each SKU: Location to be forecast.
- Accessiable results: dynamic charts to facilitate understanding and trust in the results of both the current and proposed statistical forecasting approaches on a SKU: Location basis.
- Winning Hearts & Minds: interactive workshop for global markets to support the move to more statistical forecasting.
Impact
- Clarity of forecast approach: each market team could identify a) SKUs suitable for statistical baseline forecasting b) the most appropriate algorithm to use for each SKU c) the best parameters to feed the algorithm, using the Sequoia tools and approaches.
- 7.8% improvement in Forecast Bias in less than 12 months which in turn had a direct impact on inventory levels.
- Statistical forecasting approaches adopted: 5 percentage point increase in the first 10 months.
