From breakthroughs to profit margins: How IBP is transforming pharma

Your challenges are shaped by the unique and critical nature of the pharma industry’s end goal, and the breakthroughs you seek must be carefully balanced with achieving commercial success. With only a short window to recoup your investments and a complex distribution network, your planning processes must be robust enough to protect your profit margins in a volatile marketplace. Success depends on consistently and accurately managing your supply chain.  

Integrated business planning (IBP) is the gateway to a new era in pharmaceutical planning. And, as we will explore in this blog, when you apply the principles of Connected Planning to your IBP, you can realize faster decision-making, increased efficiency, and a more robust supply chain.

As you start your journey, how do you ensure you’re taking the right approach to planning transformation?

Why traditional planning doesn’t work for pharma

Traditional sales and operations planning (S&OP) practices don’t facilitate proactive planning as well as they need to. The use of multiple spreadsheets falls short in helping depict the balance between demand and supply and can also result in wrong formulas being applied, or worse, siloed decision-making done without all the necessary information.

Integrating diverse data sources into vast spreadsheets, combined with inconsistent internal reporting, requires labor-intensive data clean-up efforts that take precious time away from the planning process and yields poor decisions. This, in turn, extends the time required to address risks and promptly respond to shifts in the market. Departments using traditional S&OP practices struggle to collaborate seamlessly across organizational divisions.

Can you confidently answer yes to all the questions below?

• Do you have a clear view of the profit level for products in your portfolio?
  
• Do you know the impact to the P&L, and can you forecast for multiple scenarios?
• Can you respond quickly to supply or demand shocks?
• Do you know the right time to make production capacity changes across all functions?  

If the answer to any of these questions is no, you may be one of the organizations held back by disconnected processes and siloed planning. 

The future is integration

The primary objective of IBP is to achieve organization-wide consensus on a unified operational plan. This is achieved by critically assessing and refining projections related to demand, supply, product, portfolio alterations, and the resulting financial plans.  

IBP seamlessly integrates current data sources from research and development, finance, manufacturing, supply chain, procurement, and commercial operations, empowering swift, precise decision-making and enhanced modeling capabilities. This makes you more adaptable to potential risks, fortifies profit margins, and propels essential business outcomes.

IBP allows you to create dynamic scenario plans so you can decipher and pinpoint the most favorable demand and supply forecasts related to your P&L. It provides a centralized view of business data that serves as a singular source of truth for all stakeholders.

This approach grants near-real-time visibility, so you can proactively prepare for the future and ensure uniform alignment across all functions regarding current plans and their execution.

Enabling smart decisions  

IBP delivers significant value in three essential areas: 1) driving increased growth, 2) fortifying supply chain resilience and efficiency, and 3) optimizing working capital utilization.

Let’s look at each of the three areas and how IBP helps:

Growth and agility: IBP ensures you have enough inventory to support demand across various geographies and can appropriately manage spikes. You also gain the ability to model P&L impact into key pricing decisions, for example price elasticity in different markets and managing margin. You’ll gain R&D portfolio optimization with improved accuracy in forecasting future supply and demand needs of drugs nearing approval.

Supply chain efficiency: IBP offers improved accuracy of demand forecasts which drives a cost-effective supply chain, reducing freight, warehousing, inventory holding costs, and write-offs from expiring products.

Optimized working capital: IBP helps you reduce the amount of inventory in your system, freeing up working capital to be used and drive ROI in other areas. You can improve your view of demand and have the right amount of product and materials at the right time, reducing overall inventory levels and lowering carrying costs.

Across each of these three areas, industry benchmarks suggest customers utilizing Anaplan to support IBP see, on average, a 5 to 20% improvement in service levels, a 10 to 15% reduction in supply chain costs and a 10 to 20% improvement in working capital.  

The power of Connected Planning in IBP

Leading pharmaceutical companies are utilizing Connected Planning to integrate individual financial processes, advancing their organizations from segmented S&OP to IBP. This enables them to undertake continuous planning with near-native processing speed and helps teams spend less time manipulating data and more time analyzing the data.

There are five key ways that integration helps your planning processes.

1. Portfolio planning allows you to assess and manage product portfolio health —from the life cycle of current drugs to the entrance of new modalities — while making sure decisions align to the broader goals and strategy and are viewed through a P&L lens.
2. Demand planning helps you understand the latest unconstrained demand plan gaps versus target and align on action plans to bridge those gaps.
3. Supply planning develops the fastest supply chain response to unconstrained demand plan and other alternative scenarios. You can model out various scenarios to identify what will maximize the P&L and optimize the supply chain process — all while taking input and data from key partners.
4. Integrative alignment allows you to define and analyze plans to achieve P&L targets based on supply and demand forecasts.
5. Management business review enables you to align on one forecast plan that integrates data inputs from across the business to improve P&L.

With these five steps in place, you can realize huge bottom-line benefits like these two leading pharma companies:

• A Fortune 40 multinational pharma company has seen 32% revenue growth since transforming its financial planning into strategic planning by aligning supply chain, commercial, and financial forecast to become truly integrated.
• One leading pharma company reported 50% revenue growth since creating a global forecasting and demand planning solution.

Proactive planning to ensure resiliency

The complexity of the pharmaceutical supply chain, combined with long lead times in both R&D and manufacturing and a complex portfolio of drugs, means your supply chain needs to be resilient. It’s not enough to react to risk and opportunities — you need to proactively plan.

Pharma companies are years behind other industries in IBP and are slowing their R&D and profit potential because of it. With IBP in place, powered by Anaplan’s Connected Planning platform, you can realize huge process benefits and boost your revenue growth.

Anaplan is perfectly positioned to help you catch up with other industries and your peers in the pharmaceutical sector who are one step ahead of the game.