Operations Management

Demand Forecasting in
Pharmaceutical Supply Chains:
A Case Study
Presentation by Group 5(MBA)-
Today's
Discussion
Outline of Topics

01 Intro

02 About the Case Study

03 Forecasting Experiments

04 Our Analysis
05 Conclusion
Demand Forecasting
(A Predictive Analysis)

Aim: used to obtain an estimate of future demand

for a product/service
Why Demand
Forecasting?

Forecasts of demand form the basis of all the managerial

decisions pertaining to logistics and supply chain
management.
 Push Process Pull Process
Products are pushed from production process to These processes are driven by actual demand rather
retailers based upon the forecasted demand. than being based merely on predictions.

Used to anticipate customer needs. Used to plan necessary levels of activity and
inventory.
Related Studies

Source: Prest, R.“Real Demand Forecasting” used in

Research paper

Demand in the pharmaceutical market is a complex

combination of push and pull driven
demand and regulatory and pricing pressures.

pharmaceutical companies use

lawyers, managed care, detailing, and direct-to-
consumer campaigns to influence the Food
and Drug Administration (FDA), pharmacy benefit
providers, doctors and patients to
prolong the patent, promote on the formulary, prescribe
and request their products
Why did pharmaceutical industry pay less
attention to supply chain?

Initially, less attention was paid to developing supply

chain technology because sales of original products
brought in high margins and hence the industry
neglected the costs attached with improper supply
chain management.
CHALLENGES

1. Expiration of patents
2. More number of generic production companies
3. Entering emerging markets
4. Overstocks and Oversupplies
BARRIERS TO SUPPLY
CHAIN PERFORMANCE

1. Supply chain complexity

2. Large distances between emerging markets and
distribution centers (long delivery lead times)
3. Errors is estimation of market size
4. Errors in forecasting (high error rates)
OVERSUPPLIES
AND
OVERSTOCKS

Oversupply & Overstock: when there is a product

(inventory) surplus but the demand is low.

These may occur due to errors in demand forecasts.

Incurs high costs and can be resolved by either

discounting or halting the production process.
TYPES OF DEMAND
FORECASTING TECHNIQUES

Qualitative Quantitative

• Executive opinions • Historical Data Forecasts (Naive

• Delphi technique method, Trend & Time-series
• Sales force polling Analysis)
• Associative Forecasts (Simple,
Forecasts are generated based upon multiple, symbolic regression)
judgements and opinions
Forecasts are generated based upon
relations bw variables.
 Demand forecasting depends upon the product
lifecycle also and based upon that:

• At product development stage: judgemental

DF IN PHARMAmethods are used to forecast demand because it is
difficult to estimate the size of the markets.

INDUSTRY • For in-market products: it is crucial to estimate the

potential market share taking into consideration,
the future market growth/decline and hence
quantitative or mixed models are used.
THE CASE
Pharma_Log (wholesaler)
It creates a link between EU & CIS (the markets) and
distributors of Central Asia.

Pharma_Dis
It is the affiliated distributor of Pharma_Log.
Challenges faced by
Pharma_Dis
• It is just a startup and hence has no scm system in place.
• There is a lack of historical data as it has only been in operation
since less than a year.
• Volatility exists in the emerging market environment.
• There is shortage of data range and hence high fluctuations in the
available population data.
CURRENTLY AT
PHARMA_DIS
• Regional distributors project the demand based on sales data

and stocks available at the distribution channel to generate the

purchase orders.
• The wholesaler is responsible to perform the forecast using

market sales data the received from the distributor.

• Weekly forecast is performed using moving average of the last

13 weeks of sales.
 APPROACH USED

Steps of the algorithm used:

• trends of historical datasets are studied to examine market
and product performance
• effects of ex-trend events are applied (it is a difficult
process)
• the trended data is converted in forecast outputs (like using
a project/trend line): this step allows integration of supply
and demand data
 Analysis
Source of data
• https://statisticstimes.com/economy/
country/india-gdp-per-capita.php
• CIPLA annual report
Steps:
We have taken revenue figure of CIPLA from
and Results
their balance sheet FY 2000-2021 and used the
following methods to calculate the Forecasted
values and other parameters:
SMA, WMA and Linear regression model (We
have taken independent variable as per capita
income of India)
 Demand Forecasting Experiments

• The symbolic regression with an application of genetic programming showed the lowest absolute
error and mean absolute deviation values across all forecasting scenarios and experiment
• Symbolic regression based forecasting has been selected as the most appropriate method in the
study
Related Studies

Research Paper: Demand Forecasting In Pharmaceutical

Industry by Using Neuro-Fuzzy Approach - Gökçe
CANADIAN, Mehmet Fatih TAŞKIN2 Harun Reşit
YAZGAN

ANN(Artificial Neural Network) is being used widely

to predict efficient results. In the production planning
department, the predicted values are considered as
production quantity to achieve with taking into
consideration of technical production constraints.
Related Studies

Research Paper: Demand Forecasting Models for

Medicines through Wireless Sensor Networks Data and
Topic Trend Analysis - Wooju Kim, Jung Hoon Won,
Sangun Park, and Juyoung Kang

The method involves topic trend Analysis using

LDA(Linear Discriminant Analysis) and demand
forecasting through VARX models.
Group 5(MBA)
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Thanks!!