As one of the world’s leading manufacturers of diabetes products, Novo Nordisk sets very high standards for itself. It strives to be innovative and have a positive impact on people’s lives. To maintain and build on its current market position, it is important that the company has access to reliable forecasts for future sales for its products and that these figures are used for strategic planning.
Centralizing disparate sales forecasts
Until recently, the Novo Nordisk sales planning process was distributed over the whole company. More than 50 offices spread all over the world produced their own sales forecasts at different times. The offices used a variety of solutions to do this, such as Excel tables, and other local solutions which were not integrated. Individual departments such as Sales, Marketing, Accounts and Production also carried out their own planning. This represented an enormous hindrance to an enterprise-wide planning policy.
Three times a year the financial budget was updated. This update was not integrated with the planning that was used for logistical planning. There was no planning cycle for the logistical update and not a fixed point in time where all countries had submitted their plans. Another drawback in the sales planning process was the fact that the company headquarter had no insight into how the individual planners had come to the final plan.
“This was why it was necessary to centralize the systems and introduce global standardized solutions”, explains Henrik Thygesen, Project Manager, at Novo Nordisk. “In the final analysis, we wanted to make better use of our IT systems.” To achieve this, the company set up the “Global Sales Forecasting” project and decided to implement a new planning instrument because the existing disparate solutions were not suitable for a centralized sales planning process. Novo Nordisk opted for SAP Strategic Enterprise Management (SAP SEM). The company had already been using a variety of SAP R/3 components for five years and had also been using SAP Business Information Warehouse (SAP BW) since the middle of 2001. “SAP SEM could not only be easily integrated into the existing software landscape but could also be flexibly adapted to our particular requirements, including statistical forecasts”, says Thygesen of the decision in favour of the SAP solution.
Faster and more reliable planning
The full SAP-SEM solution went live in the headquarters in spring 2002. This was followed by a roll-out in Europe and the USA and subsequently in the other offices by November 2002. As a result of SAP SEM and SAP BW, the company now has access to common master data and has a single point where planning data is stored and can be reported on. This enables Novo Nordisk for the first time to gather sales forecasts in an enterprise-wide system and implement a consistent monthly planning cycle. The starting point for the forecasts is SAP BW. Using the SAP Data Warehouse solution, Novo Nordisk prepares the data for forecasting including the latest month’s sales. The company uses SAP SEM to produce a new sales forecast. The final forecast numbers are then integrated into Demand Planning within the SAP R/3 component Material Requirement Management where the forecast is compared to Stock values and used to generate orders for production.
In its sales planning process, Novo Nordisk makes particular use of the SAP SEM components Business Planning and Simulation (SAP SEM-BPS) and reporting is done via a Business Warehouse reporting solution. Using Business Planning and Simulation, implemented in November 2001, Novo Nordisk generates standardized statistical forecasts for its more than 1400 product group / country combinations in the company headquarter on a monthly basis. Headquarter then has an option to adjust the statistical forecasts with events. The individual offices use these forecasts to produce their own detailed logistical plans which they adjust with country specific information such as new product launches or special marketing campaigns. As a result of the 3 steps in the forecast process, it is possible to compare 3 different forecasts. A pure statistical forecast, a forecast with HQ knowledge added and finally the official final forecast with the country specific knowledge included.
“It wasn’t easy to bring together the right people with specialist knowledge about our internal processes in order to build a good system. Changing the views of staff throughout the company involved a lot of time and effort but it was essential that a central system for reporting and forecasts for more than 50 countries was put in place”, states Thygesen when describing the particular challenges that had to be overcome in implementing the project. “Considerable work had to be done to convince every one of the advantages of the new system.” More than 1000 users are relying on our BW solution for their information needs, out of which more than 300 benefit from the planning information from the Global Sales Forecast solution. More than 100 users are using it for ongoing forecast adjustments.
Ad hoc forecasts for monitoring purposes
Novo Nordisk also generates customized plans using Business Planning and Simulation. This can be utilized, for instance, to scale down sales figures from a product group to an individual country specific product or to calculate planned turnover and planned cost of goods sold. As a very open and flexible tool it was relatively easy to adapt SEM BPS to specific Novo Nordisk needs.
As well as statistical forecasts, Novo Nordisk also prepares ad hoc forecasts as and when required. One example is that an aggregated forecast is executed on a European level. This forecast can then be used to challenge or verify the sum of the detailed forecast for each countries. Having three steps in the forecast process also makes it possible after comparing this to actual sales to identify where the value is added in the process. E.g. if the pure statistical forecast for some product groups is more accurate than the final forecast, then it can be used in a dialogue with local planner to direct their efforts to other product groups where they can ad more local knowledge and improve forecast accuracy.
Using SAP BW helps Novo Nordisk to improve the consistency of its data and approach in the planning process. All the offices access the same master data and the same system. The integration of software solutions has also improved because SAP R/3 Demand Planning is closely linked to SAP SEM and SAP BW. When the company continuously updates the central statistical forecast, there is no need for a completely new plan to be drawn up, a process which used to take much longer. Novo Nordisk planners now simply adjust the existing plan when there is a need to make corrections. The process from a new forecast is executed until it is used for production planning now only takes 4 working days.
Optimized logistical processes
The company is now able to respond faster to fluctuations in demand. This because the forecast data is integrated into Demand Planning, logistical capacities can be planned better and logistical processes can be optimized. This means that the customer receives products quicker and stock levels can be controlled better.
The new solution landscape also makes it easier for Novo Nordisk to compare the statistical forecast with the financial plan and thus to carry out more realistic budget planning. Currently, the company is rolling out a Global solution for Financial Planning within SAP SEM-BPS. Together with the Global Sales Forecast solution the company now has an integrated and efficient IT solution for Profit and Loss Planning.