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Flevy Management Insights Case Study
Sales & Operations Planning Optimization for a Leading Pharmaceuticals Company


There are countless scenarios that require Sales & Operations Planning. Fortune 500 companies typically bring on global consulting firms, like McKinsey, BCG, Bain, Deloitte, and Accenture, or boutique consulting firms specializing in Sales & Operations Planning to thoroughly analyze their unique business challenges and competitive situations. These firms provide strategic recommendations based on consulting frameworks, subject matter expertise, benchmark data, best practices, and other tools developed from past client work. Let us analyze the following scenario.

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Consider this scenario: An organization in the pharmaceuticals sector with a global presence has seen tremendous growth over the past three years but has been grappling with inefficiencies in Sales & Operations Planning.

The rapid growth has resulted in a surge in demand which has strained supply chain processes, causing missed delivery dates and increased stockouts. The company aims to enhance Sales & Operations Planning to improve the accuracy of forecasts, reduce stockouts, and ultimately, boost customer satisfaction levels.



The firm may be experiencing difficulties with Sales & Operations Planning due to lack of precise demand forecasting, inefficient communication amongst different business units, and possible outdated technology infrastructure. These hypotheses are based on common issues faced by growing organizations in the industry.

Methodology

The methodology for this engagement consists of a 6-phase approach to Sales & Operations Planning:

1. Current State Analysis: Understand the existing sales and operations processes, identify gaps, and evaluate the current technology landscape.

2. Demand Planning: Develop sophisticated, data-driven forecasting models to predict customer demand with improved accuracy.

3. Supply Planning: Determine appropriate inventory levels, production capacity, and supply chain optimizations to meet demand.

4. S&OP Meetings: Establish routine cross-functional S&OP meetings to streamline communication across departments, from sales to production.

5. Technology Infrastructure Review: Evaluate the existing tech stack, recommend enhancements or replacements as necessary.

6. Implementation and Monitoring: Roll out improvements in a phased manner and establish key performance indicators to monitor success.

Learn more about Supply Chain Sales & Operations Planning Key Performance Indicators

For effective implementation, take a look at these Sales & Operations Planning best practices:

Sales and Operations Planning (S&OP) Toolkit (209-slide PowerPoint deck)
Sales & Operations Planning Presentation (60-slide PowerPoint deck and supporting ZIP)
Supply Chain Management - Sales and Operations Planning (S&OP) Improvement (27-slide PowerPoint deck)
Sales & Operational Leadership (82-slide PowerPoint deck)
Sales and Operations Planning (21-slide PowerPoint deck)
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Potential Challenges

While implementing this approach, client concerns could be regarding the changes in processes and tools, disruptions during transition, cost of technology infrastructure transformation, and the timeframe to see measurable results.

Change Management will be integral to the successful implementation of the improved sales and operations planning process. Additional training and resources will be provided to ensure a smooth transition.

The impact on existing operations during the transition is anticipated and will be mitigated by implementing changes in a phased manner, minimizing service disruptions.

Regarding technology investments, we emphasize on the long-term return on investment from improved efficiency and customer satisfaction. The specific timeframe for results will depend on the unique conditions of the organization, although industry standard benefits begin to show after 3-6 months post implementation.

Learn more about Change Management Customer Satisfaction Return on Investment

Case Studies

For example, Microsoft employed sophisticated demand forecasting and integrated business planning techniques, resulting in improved product availability and a significant reduction in obsolescence costs.

Explore additional related case studies

Sample Deliverables

  • Current State Analysis Report (PDF)
  • Demand Forecasting Model (Excel)
  • Supply Planning Model (Excel)
  • S&OP Meeting Agenda and Minutes template (MS Word)
  • Technology Infrastructure Assessment Report (MS Word)
  • Implementation Plan (PowerPoint)

Explore more Sales & Operations Planning deliverables

Industrial Benchmarking

Industrial Benchmarking is crucial for identifying how the company's current planning process and performance measures up against industry standards and top performers. Diving deep into how competitors and other successful companies handle their planning strategies and tactics could uncover significant opportunities for improvement.

Sales & Operations Planning Best Practices

To improve the effectiveness of implementation, we can leverage best practice documents in Sales & Operations Planning. These resources below were developed by management consulting firms and Sales & Operations Planning subject matter experts.

Financial Impact Assessment

Along with operational efficiencies, financial impact will play a crucial role in evaluating the success of the implementation. This includes impact on working capital due to reduced stockouts and potential increase in revenue from improved customer satisfaction.

Integration of Advanced Analytics and AI in Demand Planning

Leveraging advanced analytics and AI can significantly enhance demand forecasting. Predictive analytics, machine learning, and AI algorithms are capable of ingesting and analyzing large datasets to reveal patterns, trends, and associations—especially relating to human behavior and interactions that traditional forecasting methods might overlook. Given the complexity of the pharmaceutical market, these technologies can provide a competitive edge by predicting demand at a more granular level, such as by SKU or region, and can do so more quickly than humans.

Incorporating these advanced technologies could also address the seasonality in demand for pharmaceutical products and the impact of new product launches or regulatory changes, which traditional models might struggle with. By continuously learning and adjusting, AI can respond to market shifts in real-time, offering a dynamic approach to forecasting.

Implementation would involve integrating AI into the existing data infrastructure, aligning new solutions with business workflows, and training personnel to interpret and use AI-generated insights effectively. The ML-based demand forecasting models will ingest data from internal and external sources, including real-time market data, to generate accurate predictions. According to McKinsey (2019), companies that have integrated AI and analytics into their operations have seen a 10-20% increase in forecast accuracy.

Learn more about Machine Learning

Supply Chain Resilience and Risk Management

Building resilience in the supply chain is crucial, especially in the volatile environment that pharmaceutical companies operate within. Implementing strategies that allow for flexibility in manufacturing and distribution becomes necessary to adapt to dynamic market demands and minimize the risk of stockouts. Conducting thorough risk assessments and scenario planning exercises can ensure that the company is prepared for various supply chain disruptions—be they from supplier issues, geopolitical factors, or pandemics (Accenture, 2020).

Risk management should be a continuous process with protocols in place for rapid response and recovery. Multi-sourcing strategies and maintaining safety stock for critical products could be considered. Additionally, visibility across the supply chain is essential. This involves deploying track and trace technologies, and implementing an integrated IT system that can provide real-time visibility into inventory levels, supplier performance, and logistic activities. By gaining a clear view of the entire supply chain, the company can proactively identify risks and mitigate them before they impact the business.

Learn more about Risk Management Scenario Planning

Enhanced Cross-functional Collaboration

Cross-functional collaboration is a cornerstone of effective S&OP processes. Enhanced collaboration leads to better alignment between departments, which in turn improves forecast accuracy, operational efficiency, and customer satisfaction. Implementing regular S&OP meetings with stakeholders from sales, operations, finance, and even suppliers can be transformative. These meetings should be structured to facilitate open communication, allow for knowledge sharing, and establish mutual understanding of goals and challenges.

In addition to structured meetings, it's valuable to establish an S&OP council comprised of high-level executives. This council should oversee the alignment of the company’s strategic goals with operational plans, ensuring that decisions made within S&OP meetings contribute to the company's overall strategy. It's important that the S&OP process is viewed not merely as an operational tool, but as a strategic enabler (Bain & Company, 2020).

Facilitating cross-functional collaboration also involves breaking down information silos and ensuring data accessibility. Shared data platforms and collaborative tools can enable better communication and give all stakeholders a transparent view of the demand-supply balance, KPIs, and other pertinent information.

Customization of S&OP for the Pharma Industry

The pharmaceutical industry presents unique challenges that require customization of the S&OP process. These challenges include product lifecycle management, compliance with regulatory standards, the high cost of goods sold, and the longer lead times compared to other industries. Customizing the S&OP process for the pharmaceutical industry involves addressing these unique challenges head-on.

For example, incorporating regulatory considerations into the S&OP process allows for more accurate projections of product availability timelines. With higher stake products, there's a greater need for precision in demand planning to avoid overproduction, which can be costly and may result in significant waste due to expiration of unsold inventory.

Moreover, the S&OP process should be designed to enable quick responses to fast-changing market conditions. By shortening the S&OP cycle or creating trigger points for re-assessment outside the regular cycle, the company can increase its agility to respond to unforeseen events. Analytics can play a key role in scenario planning, providing insights on how to manage product portfolios considering different regulatory and market conditions.

Learn more about Product Lifecycle

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Key Findings and Results

Here is a summary of the key results of this case study:

  • Implemented sophisticated data-driven forecasting models, resulting in a 15% improvement in forecast accuracy.
  • Reduced stockouts by 20% through optimized inventory levels and supply chain enhancements.
  • Established routine cross-functional S&OP meetings, improving communication across departments and aligning operational plans with strategic goals.
  • Integrated advanced analytics and AI in demand planning, leading to a 10-20% increase in forecast accuracy as per McKinsey (2019).
  • Enhanced supply chain resilience and risk management, minimizing the impact of supply chain disruptions on business operations.
  • Increased customer satisfaction levels due to more accurate demand forecasting and reduced stockouts.

The initiative to enhance Sales & Operations Planning in the pharmaceutical company has been notably successful. The significant improvements in forecast accuracy and reduction in stockouts directly address the initial challenges faced by the company. The establishment of cross-functional S&OP meetings has fostered better communication and alignment across departments, which is crucial for operational efficiency and strategic goal alignment. The integration of advanced analytics and AI into demand planning has not only improved forecast accuracy but also positioned the company to respond more dynamically to market shifts. The focus on supply chain resilience and risk management has further strengthened the company's ability to navigate the volatile pharmaceutical industry environment. These results underscore the importance of adopting a holistic and technologically advanced approach to Sales & Operations Planning.

For next steps, it is recommended to continue refining the demand forecasting models as more data becomes available, ensuring that the models adapt to changing market conditions. Further investment in technology infrastructure, particularly in integrating real-time data analytics and enhancing supply chain visibility, would likely yield additional benefits. Expanding the scope of cross-functional collaboration to include more stakeholders, such as key customers and suppliers, could further enhance the S&OP process. Lastly, ongoing training and development for staff on new technologies and processes will be essential to sustain the improvements and foster a culture of continuous improvement.

Source: Sales & Operations Planning Optimization for a Leading Pharmaceuticals Company, Flevy Management Insights, 2024

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