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Building a Demand Forecasting Solution using IBM FOPM to improve Accuracy and Coverage

Financial & Operational Performance Management

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Agenda

- Introduction

- The Transformation project

- Demand Forecasting

- Challenges in the Status Quo

- Solution

- Benefits

- Way Forward

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About the pharma company – Introduction

- 2 Bn $ Indian Pharma company dealing in generic, branded and APIs

- Growing @ CAGR of 34% since last 5 years

- 6th largest and the fastest growing Top 10 company in the US (by prescriptions),

the only Asian company to achieve that distinction

- Operating in advanced markets such as USA, Europe, Japan, Australia as well

as emerging markets including India,the Philippines and South Africa to name a

few.

- One of the world's largest manufacturers of Tuberculosis drugs.

- Goal of becoming a 5 Bn $ company by 2018

About the company - Globally

6th largest generic globally (by market cap1)

3rd largest Indian Pharma (by total sales2)

Advanced Markets Emerging Markets

Sources: 1 Bloomberg EQS, 31 Dec 2015 2 Based on FY15 sales 3 IMS MAT Sep 15

4 IMS MAT Mar 15 5 IMS MAT Dec 15 4 6 IMS MAT Dec 15

4th largest South Africa generics6

8th India Pharma Market Rank5

9th largest Japanese generics4

5th largest US (by prescriptions3)

#1 in Anti-TB (globally)

9th largest generic company (by sales2)

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The Need for Business Analytics

iv. Ground-level Intelligence

Inclusion of Ground-level Intelligence input from

field sales-force on a single platform

iii. Concensus Forecasting

Inclusion of majority stakeholders

(increase by 1,900%)

ii. Wider SKU Coverage

Increase in coverage across SKUs

(increase by 380%)

i. Increase Forecast Accuracy

Scope for improvement in forecasting accuracy

(increase by 12%)

$2 Billion (2015) $5 Billion (2018)

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How it all started – The Transformation

- Keeping pace with the growth – Excel was not scaling up

- Acquisitions creating complexity

- Group CFO formed a core cross functional team

- The Planning Project

- Consulting study by third party and introduction of demand forecasting

- Demand forecasting Project

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The Planning Process

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Headquarters Mumbai India

Branches DMCC Dubai UAE , Gurgaon India

Management Incorporated in 2011

Employees 50+ Consulting professionals have expertise in IBM Cognos TM1, Cognos

Express, Cognos BI and Cognos Planning.

Offerings Planning | Budgeting | Forecasting | Reporting | Consolidation

Industries FMCG, Manufacturing, Pharma, Retail, BPO, BFSI, Technology, Insurance,

Construction, Aviation and Telecom

Global Presence Middle East and APAC

Our Mission

To maximize the ROI for customers by delivering end-to-end technology

solutions with utmost quality and transparent communications, thereby

building long lasting partnership.

Our Differentiator We stand for honesty in business – Veracitiz

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Awards & Accreditations

Veracitiz at a Glance

-- 1st & only TM1 Gold Accredited Partner in South Asia -- IBM Business Analytics “Partner of the Year” – 2015 & 2016 -- IBM Certified Consultants -- Tech agnostic Consultants with process-oriented approach -- Team of Masters of Computer Applications, Chartered Accountants, MBAs

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The Golden Circle

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Why? Understanding the Need to Introduce

Business Analytics

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The Need for Business Analytics

The Company’s Indian Operations Stockist Universe: 3,875

(Active 2,200)

Total Field Force: 6,814

• Medical Rep: 5,349

• Area Manager: 1,088

• Regional Sales Manager: 304

• Sales Manager: 67

• National Sales Manager: 6

Business Divisions: 16

Invoices Per Month: 300,000

Warehouses: 7

CFA’s: 32

Third Party Manufactures: 77

Loan License Manufactures: 22

Inlicense Vendors: 17

Own Plants: 3

Planning SKU’s: Approx 1400 +

Fragmented transportation sector

Taxation Structure

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The Need for Business Analytics

Demand Forecasting v1.0

3m Historical Sales

Salience

Conference Calls

Best estimate for 200 SKUs

Demand Planner (spreadsheet-based collation) For 4 month forward forecast Reminder mails to

contributors

Meetings

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Limitations of v1.0

The Need for Business Analytics

Human Dependency 200 SKUs out of 1,300 Time-consuming process (2 weeks)

Loss of sale /High Inventory cost

27% gap in forecast

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How? Blueprint for Process Re-engineering

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Blueprint for Re-engineering

+ +

Communication Application Forecasting Engine Data Warehouse

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IBM FOPM Solution (IBM TM1 & IBM SPSS)

Integrated supply chain management

Predictive forecasting

Eliminating ‘stock outs’

Direct integration increases the speed of what if predictive forecasting

Predictive models are done at the lowest-level of granularity per product, but results are shown

as aggregates by TM1 ie: bottom-up forecasting

SPSS + TM1 direct integration is a competitive differentiator

SPSS performs unique algorithm predictive models per product, channel, etc. as each product

behavior is different

Measure of accuracy

Operational external factors can be introduced

Results map directly into dimensional data of a TM1 cube

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Demand Forecasting v2.0

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SKU-Division and Customer- CFA-Region-Division latest

mapping imported from SAP.

Publish Statistical Forecast, on which Demand

Planner performs outlier check to disseminate Baseline Forecast for field user intelligence input.

Forecast data at CFA-level,

SKU-wise week-wise,

published as a feed for SAP.

Every user, in ascending order of hierarchy

(beginning with RSM) reviews the forecast

for each role/region mapped to him, and makes changes to the same, if necessary.

Corporate & field

budget data excel

import into TM 1.

After field users enter inputs upto cut-off date,

DPT will reviewthe baseline and make

changes wherever requried in a top-down

Final data at RSM-CFA level, disaggregated

into weekly buckets on the basis of past 6

months moving avg. sales salience.

Reports

IBM FOPM Solution

SAP BW

Statistical forecast predicted

based on historical sales trend.

Historical data with latest

mappings as well as free

schemes calendar as an

input for IBM Cognos SPSS statistical forecasting.

60 months' historical

data of Normal Sales &

Free Schemes,

imported from SAP, at

a Customer-SKU level.

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What? Benefits of the implementation

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Easy to use 6-step Forecast Control Center

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Thoughtfully Designed Contributor Application

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Additional Offline Connectivity

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IRF

Divisions

Region-CFA

Div-Reg-CFA

IRF

16 Combinations

560 Combinations

16,800 Combinations

Optimizing Turbointegrator Processes

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Optimizing Turbointegrator Processes

Traditional 20 minutes

Improvement 15 seconds

IRF

Divisions

Region-CFA

Div-Reg-CFA

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Marriage of IBM Cognos TM1 & IBM SPSS Statistics

Post-Implementation Benefits

Prior to Implementation Post Implementation

Tool Legacy Excel Sheets IBM FOPM Solution

Stakeholders DPT, GPMs, DHs

(~15 persons)

DPT, GPMs, DHs, SMs, RSMs

(~300 persons)

Method of Collaboration Email, Meetings, Conference Calls etc. 1 Single web-based Application (Contributor)

Single Version of Plan No Yes

Forecast Generation Time ~2 weeks ~2 hours

SKUs forecasted ~200 ~1,300

Forecast-level National-level Lowest-level of granularity

Forecast-Accuracy ~72% ~85%

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The Road Ahead

Demand Forecasting Incentives

Manpower Capex

Manufacturing

Advanced Markets

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Thank You. Your Feedback is Important!

• Roscoe Lobo

– rlobo@veracitiz.com – +91-22-41238916

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