What is in this article?:
A great benefit of a strong planning system is that previously forecasts could only be done at the product level, today we can forecast right down to the customer level, anytime at the press of a button.
With the benefit of clear hindsight, I wanted to share my experiences of transforming a single process in our supply chain -- forecasting -- which has brought many profitable and some unexpected outcomes to bear for my company, and most importantly, to our customers.
Cipla Medpro is South Africa's fastest growing pharmaceutical company and currently the third largest by value in a highly competitive market. We strive to provide South Africans and the neighboring Southern countries of Namibia, Botswana, the Swaziland and Lesotho with superior-quality, but affordable medicines.
In order to do this, we seek to eliminate as much waste and inefficiency from our supply chain as possible while meeting our compliance obligations. This last bit is more easily said than done and not a uniquely South African problem.
The pharmaceutical sector is highly regulated all around the world. We must comply with, among others, World Health Organization standards, the South African Medicines Control Council, our own local pharmaceutical and manufacturing standards.
On top of all the various forms of regulation, pharmaceutical supply chain logistics are relatively complicated and unpredictable and contribute significantly to the price of medicine. When it comes to transporting medicine, there are strict requirements for each product with regards to temperature control and the type of vehicles in which each can be transported. Routes need to be mapped carefully in advance, taking variables like adverse weather and road quality into account.
These factors and others make achieving economies of scale very difficult when compared to most other industries, which can more easily aggregate their cargos. Although my story isn’t about logistics as such, I point to these factors because when your forecasting is inaccurate, you add unnecessary transportation costs and complexity.
Why Prioritize Forecasting?
Every link in the supply chain is dependent upon the forecast, so getting it right is vital to the health of the business. Obviously some circumstances, especially in transportation, will always be beyond control. But it is a tricky job. Although we don’t carry too many SKUs, we have very high turnover on each one. Also, there are no clear, predictable seasonal patterns to our demand.
The cardinal sin in our business is running out of stock and not being able to fulfill an order. You only need to have this happen once before you are swiftly replaced by another supplier. Most suppliers ‘insure’ against this by holding excessive levels of safety stocks, but this inevitably leads to waste and obsolescence and ultimately, higher costs. So striking the optimal balance is a difficult process but one that can make a huge difference on the price and availability of medicines. This is why I decided to make forecasting our top priority.