Forecasting: How to master demand planning
*Christian Naumann, vice president global commercial operations, Xarelto, Bayer Schering, on why commercial operations should drive demand planning*
By on Jan 10, 2011Christian Naumann, vice president global commercial operations, Xarelto, Bayer Schering, on why commercial operations should drive demand planning
Launching a new product is an all-hands-on-deck moment for a pharmaceutical company.
New markets must be defined, accurate forecasts must be created, and the appropriate amount of product must be deployed.
The department thats responsible for these various functions working synchronously isnt always clear-cut, especially when it comes to demand planning.
Should product supply determine how much product gets deployed or should affiliates?
And who should be charged with ensuring continuous market supply during launch?
Christian Naumann, vice president global commercial operations, Xarelto, Bayer Schering, says the key to a smooth launch is to put commercial operations into the drivers seat.
The focus [should shift] from product supply, and an isolated interpretation of what the market might do, to operations, Naumann said at eyeforpharmas Pharma Forecasting Excellence summit in Zurich.
Commercial operations [should drive] the whole structure.
Start small
Bayer Schering recently overhauled its approach to demand planning in preparation for the launch of its new brand, Xarelto, an oral anticoagulant indicated for the prevention of venous thromboembolism (VTE) in adult patients.
Venous thromboembolism is the formation of a blood clot deep in a blood vessel.
The clots generally coagulate in the legs and can move around your body and hit your lungs, which can be fatal, or hit your brain and cause a stroke, Naumann explained.
Venous thromboembolism can be chronic but also occurs in various acute settings.
The stress of surgery can provoke VTE; clots are frequent during hip or knee replacements.
Immobilized patients sitting around for days on end after surgery, no matter its type, can develop VTE as well.
Between 2008 and 2014, Bayer Schering plans to launch Xarelto for five different indications and is treating each as a new product launch targeting different customers, doctor groups, and countries.
The first launch of Xarelto in 2008 was for the narrow indication of VTE prevention after hip or knee replacement.
Bayer Schering decided to start small because Xarelto would be contending with established competitorsWarfarin, the primary anticoagulant in the US and UK has been around since the 1950sand wanted to work out the kinks on a small scale first.
First, you launch the small one, you get everybody on track, everyone is on their toes, and then you launch the big one, Naumann said.
From a product supply standpoint, the first launch was enough to warrant a change; it alone introduced 450 new stock-keeping units (SKUs).
With the promise of 4,650 more Xarelto SKUs on the way in the coming yearsa quarter of all SKUs at Bayer Scheringa streamlined product deployment process was necessary.
Think big
The new process, delineated in the 2008 Sales & Operations planning manual, made commercial operations responsible for the smooth interaction between forecasts and product deployment.
To accomplish this, Bayer Schering took a bottom-up approach.
Affiliates were asked to create their own 12- to 36-month, demand-based forecasts, and global product supply was charged with supplying the product those forecasts asked for.
The goal at this stage was to prevent unexpected, significant increases of short-term demand that might lead to out-of-stocks and API bottleneck situations.
If affiliates make their own forecasts, its easier to guarantee this, and easier to optimize capacity planning according to expected market development.
The goal is to end up with vendor management of entry, Naumann said.
So the affiliate plans independently of what product supply does, and the affiliate receives what theyve planned for.
To ensure affiliate forecasts were accurate, Bayer Schering then moved up the ladder to sales and marketing country managers.
These managers became responsible for setting forecast accuracy targets and making sure that affiliate forecasts met them.
They also were asked to measure global product supply against a set of key performance indicators to track adherence to the delivery plan and service level in responding to changes in demand.
To ensure country managers didnt simply delegate these responsibilities to someone else, their bonuses became dependent not only on sales and operations but also forecast accuracy.
For our company, this is a change of paradigm, Naumann said.
Managing inventory to match demand
Bayer Schering also took steps to better accommodate variations in value and demand through time.
Marketing managers (not supply centers) were made responsible for assigning products to SKU classesclass A, B, or Cwhich differ in their forecast accuracy and out-of-stock targets.
More important products are assigned a higher class, less important products a lower class.
Adequate targets are very important to keep your inventory level and your out-of-stock situation under control, according to Naumann.
Supply centers would love to define [these classes] because they could then optimize their production processes and say, I define my lot sizes, I define my processes, but thats not the way it works.
Naumann reported that implementing these changes has allowed Bayer Schering to shift away from a lump sum delivery model in which affiliates received big deliveries early on that exceeded demand by an indeterminate amount.
Now, affiliates manage their inventories from the get-go and can accurately match demand as it changes over time.
In the end, the local market and the affiliate drive the whole process, Naumann said.