Forecasting: Aligning marketing and operations

*Daniel Oertli, director of demand planning at Merck Serono, on how comprehensive product referentials can improve forecasting*



Daniel Oertli, director of demand planning at Merck Serono, on how comprehensive product referentials can improve forecasting

The operations side of a pharmaceutical company sees the world from a different perspective than the marketing department.

Where marketing focuses on the broader view, operations seeks short-term detail derived from real data in the market.

Where marketing requires flexibility, operations requires structure.

Reconciling these two views can be difficult.

Sometimes, operations must ignore the marketing perspective altogether, Daniel Oertli, director of demand planning at Merck Serono, said at eyeforpharmas Pharma Forecasting Excellence summit, in Zurich.

He offered a case study: Lets say the marketing department is sure that a product will launch in 2015, but tomorrow they say it will launch in 2014, and the day after they say it will launch in 2016.

If we follow that in operations, Oertli said, we have to add a new production line or a new factory every other day and then take it out the next.

Looking for alignment

After Merck KGaAs merger with Serono in 2007, the company was focused almost exclusively on sales, the market, and ensuring continuity.

When operations finally had time to look up last year, it realized it hadnt taken into consideration the larger, aggregated view of marketing, and that often the two perspectives didnt align at all.

We saw that sometimes we were not fully aligned, Oertli said, because we have some expectations from the top that are not realized or taken into account by the market.

Oertli decided that, in order to reconcile the perspectives of marketing and operations, he would create a comprehensive product referential.

The goal was to establish a standardized format that provided structure and accommodated flexibility.

The aim is to provide immediate and comprehensive visibility, Oertli said.

Be it wrong or right, be it two sets or a thousand sets of numbers, we at least need some visibility to trigger discussion among management.

The aggregate view

Oertli and his team chose an advanced planning tool already in use by the company.

Then they created a hierarchy that broke down products by brand, strength, macro configuration, configuration, and item.

Geography was broken down by worldwide, area, region, and country.

By assembling a relationship between item, which provides very detailed information about a product, such as packaging style and language, and country, the team could get the microscopic view on which operations depends.

And by coupling, say, brand with worldwide,they could see the macroscopic lens that successful long-term marketing requires.

We are able either to have a fully aggregate view over a brand, saying that for one of our major brands we want to introduce this, or [we can] go quite into detail, Oertli said.

Value in visibility

The team began to apply this hierarchy to specific product development and rollout.

Typically for a new configuration, they aligned macro configuration and area.

In defining a global rollout, they aligned configuration and region.

And in defining a detailed rollout, they aligned item and country.

The resulting charts projected the base scenario from marketing alongside the bottom-up view from operations and a purely statistically based forecast.

Often, at the aggregate level, the team found that everything looked aligned, but if they dug down one level by geography or product, they began to see divergence.

And if they dug down yet another level, even more discrepancies came to light.

You find alignment on the macro level, but when you really break it down into lower and lower levels, you see divergence, Oertli said.

Its like you have one hand in the cold and one hand in the heat, and you say on average its fine.

The ultimate goal of the product referential, Oertli says, is not to present a conclusive path forward, but rather to shine a light on gaps and help trigger discussion on how best to narrow them.

His team has been running the referential for less than year, but already people in HQ and operations are hooked.

Everybody is addicted because its a new visibility, Oertli said.

We dont believe simply in the data, but were able to show we have questions here. We dont have the answers, but we want to discuss this with you.


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