Forecasting at Segix, Italia: A Pharmaceutical Company (1996)

Q. Could you first give some background about your company, products you produce, number of people work and sales volume? A. Segix Italia is a pharmaceutical company, started in November 1995 after the merger of Glaxo-Wellcome. This was the result of management buy-out. This new company is the main supplier of products of Glaxo-Wellcome as well as Sigma Tau, Warner Wellcome and Aesculapius. It exports products to many European countries such as Belgium, Holland, Germany, Austria, Greece and United Kingdom. Despite selling products manufactured by other companies, we manufacture some semi-finished products which are exported to Nigeria, South Africa, Pakistan, Indochina and Peru. The Italian pharmaceutical market has been greatly affected by the tangentopoli (corruption). Today the industry no longer has the certainty it had before when doctors in public service used to prescribe drugs which they genuinely felt are needed. But the market is undergoing radical changes, as more and more firms are merging and/or acquiring to gain the larger share of the market. At present, the market share of Glaxo-Wellcome is about 6-7%. The industry may soon reach a point where there are maximum of 10 firms, operating on a global level. At that point, the competition will become intense. Segix employs 250 people and has three operational divisions: (1) Marketing Department (to which I belong) sells certain Glaxo-Wellcome products; (2) Production Department which produces products previously produced by Wellcome (these products are sold to Wellcome); and (3) Service Department, with administrative and information systems, offers consulting services to other pharmaceutical companies. Segix produces seven main prescription drugs which are: (1) Aponil (anti-hypertensive), (2) Acivir(anti-herpes), (3) Emovate (ointment for dermatitis), (4) Curoxim (intramuscular antibiotic), (5) Semprex (for colds and allergies), (6) Branigen (for alterations in the central and peripheral nervous system), (7) Lefcar (for carnitina). In addition, we manufacture antileukaemia drugs which are not advertised. For 1996 we have forecasted sales revenue of $ 1.6 billion, excluding purchases by Glaxo-Wellcome. In addition, the company has set itself the goal of entering the market of generics, drugs whose patents have expired but can be manufactured and sold under another brand name. This practice is not common in Italy, even though it is quite common overseas. Q. Where does the forecasting function reside? How many people are working in this area? What percentage of time do you spend on this function? A. We are a new company, so our organizational structure is still undergoing a process of adjustment. The forecasting function is conducted by me and by another person in the sales department, which is within marketing section. We spend about 2-3 days per month. Q. How many products do you forecast? A. We market seven products which we constantly monitor. As such the process is primarily based on SKUs. Q. How do you forecast? Do you first forecast total sales and then break it down into categories and SKUs or you first forecast SKUs or categories and then sum them up? A. We usually begin with the historical data for a product unit and from that we build a first forecast hypothesis. Obviously, a total budget must be respected, as such forecasts are adjusted to keep them in line with the budget. We also prepare a per capita forecast, that is, what a sales target a given sales representative must achieve during the course of a year. We also try to establish quarterly targets based on forecasts. Q. How far ahead do you forecast? A. At present, first we prepare monthly forecasts which are latter added up to arrive at the annual number. Q. Can you briefly explain your forecasting process: (i) who first prepare forecast, (ii) who participate in the process, (iii) whether judgment is allowed, and so on? …