Executive Briefings

Pharmaceutical / Bio-Tech: Feeling the Effects of Better Demand Visibility

Analyst Insight: The life sciences industry is realizing significant supply chain and operational benefits by driving even modest increases in demand forecast accuracy. Companies included in a recent AMR Research study pointed to improved demand management processes as the number one reason for this increased supply chain visibility. And the benefits don't stop there!

In a recent AMR Research study, 59 percent of life sciences companies reported an increase in demand forecast accuracy over the past 12 months.  Demand forecast accuracy is our proxy for driving visibility across a life sciences manufacturer's downstream supply chain.  Achieving greater visibility to key downstream data such as demand and inventory will be critical for life sciences companies to drive a wide range of financial and supply chain benefits.  The key points for all life sciences companies to consider are:

• The companies that realized increased demand forecast accuracy pointed to three key enablers.  These were better demand management processes, improved integration of sales and marketing with operations, and more robust sales and operations planning processes.

• Improving the bottom line is near the top of every CFO's agenda, and life sciences companies have been pursuing productivity improvements for years.  So it's no surprise that in our study manufacturing productivity increased at those companies that had better demand forecast accuracy.  However, with a better understanding and control of costs, 80 percent of those companies that increased demand forecast accuracy also realized an increase in profitability.  With companies where forecast accuracy stayed the same or declined, the lift to the bottom line was significantly lower.

• Beyond productivity and profitability, the companies that drove increased demand forecast accuracy and supply chain visibility also improved their new product development and launch success.  Timely and efficient new product commercialization will be critical for life sciences companies as they aim to accelerate pipeline productivity.

The Outlook

In 2010, we expect to see more life sciences companies focus on demand forecast accuracy as a key lever of operational and supply chain improvements.  Slowly but steadily the industry will build demand-driven supply chain capabilities on the foundation of increased supply chain visibility.  The leaders in life sciences are one step ahead.  These companies are focused on understanding how many supply chains they really have versus having one strategy for all products, total costs to serve instead of cost to deliver, and driving complexity out of their operations.

In a recent AMR Research study, 59 percent of life sciences companies reported an increase in demand forecast accuracy over the past 12 months.  Demand forecast accuracy is our proxy for driving visibility across a life sciences manufacturer's downstream supply chain.  Achieving greater visibility to key downstream data such as demand and inventory will be critical for life sciences companies to drive a wide range of financial and supply chain benefits.  The key points for all life sciences companies to consider are:

• The companies that realized increased demand forecast accuracy pointed to three key enablers.  These were better demand management processes, improved integration of sales and marketing with operations, and more robust sales and operations planning processes.

• Improving the bottom line is near the top of every CFO's agenda, and life sciences companies have been pursuing productivity improvements for years.  So it's no surprise that in our study manufacturing productivity increased at those companies that had better demand forecast accuracy.  However, with a better understanding and control of costs, 80 percent of those companies that increased demand forecast accuracy also realized an increase in profitability.  With companies where forecast accuracy stayed the same or declined, the lift to the bottom line was significantly lower.

• Beyond productivity and profitability, the companies that drove increased demand forecast accuracy and supply chain visibility also improved their new product development and launch success.  Timely and efficient new product commercialization will be critical for life sciences companies as they aim to accelerate pipeline productivity.

The Outlook

In 2010, we expect to see more life sciences companies focus on demand forecast accuracy as a key lever of operational and supply chain improvements.  Slowly but steadily the industry will build demand-driven supply chain capabilities on the foundation of increased supply chain visibility.  The leaders in life sciences are one step ahead.  These companies are focused on understanding how many supply chains they really have versus having one strategy for all products, total costs to serve instead of cost to deliver, and driving complexity out of their operations.