Forecasting in pharmaceutical supply planning is particularly challenging. With long lead times, strict regulatory requirements, and the high cost of stockouts or excess inventory, the stakes are far greater than in many other industries. Yet, despite sophisticated statistical models and vast amounts of historical data, one truth remains: the forecast is always wrong.
For pharmaceutical companies, this means supply planning cannot rely solely on forecast accuracy. Instead, the focus must be on risk mitigation, balancing safety stock with expiry risk, and building a flexible supply chain to ensure continuous drug availability without excessive waste.
Key Strategies for Managing Forecast Uncertainty in Pharma Supply Planning
1. Balance Safety Stock with Expiry Risk
Unlike other industries, pharmaceutical supply planners must maintain high service levels to prevent drug shortages while minimizing waste due to expiration. Achieving this balance requires a strategic approach to inventory management:
- Segmented inventory strategies:
- High-value, slow-moving drugs (e.g., rare disease treatments, personalized medicines) require tight expiry monitoring and dynamic stock allocation to avoid wastage.
- High-volume, essential medicines need stable safety stock levels with optimized replenishment cycles to ensure steady supply.
- Short shelf-life products (e.g., biologics, vaccines) benefit from demand-driven, dynamically adjusted safety stock.
- Advanced shelf-life planning: Implement FEFO (first-expiry-first-out) logic across distribution networks and use proactive stock rebalancing to minimize obsolescence.
- Regulatory-aware inventory management: Consider country-specific stability data, import/export regulations, and re-certification requirements when determining safety stock levels.
2. Build Supply Chain Agility Over Static Forecasting
Given the inherent inaccuracy of forecasts, rigid supply planning approaches lead to inefficiencies. Instead, supply chains should be designed for agility and responsiveness:
- Dual sourcing & contract manufacturing: Diversify suppliers and production sites to reduce reliance on single sources, ensuring resilience against disruptions.
- Postponement strategies: Delay final packaging or labeling for multi-market drugs until demand is confirmed to prevent regulatory mismatches and reduce obsolescence.
- Global inventory pooling: Use regional distribution hubs to dynamically reallocate stock across markets before expiry.
3. Use Scenario Planning and Probabilistic Forecasting
Instead of relying on a single forecasted demand number, supply planners should prepare for multiple potential outcomes by incorporating scenario-based planning:
- Best-case, worst-case, and expected demand scenarios: Build adaptive supply plans that accommodate fluctuations in market uptake, regulatory approvals, and competitor actions.
- Supply risk modeling: Assess the impact of API shortages, regulatory delays, or geopolitical risks and develop mitigation strategies.
- Capacity contingency planning: Collaborate with production teams and contract manufacturing organizations (CMOs) to maintain surge capacity for pandemic responses, new product launches, or recall replacements.
4. Align Cross-Functionally to Balance Risk and Cost
Supply planning cannot operate in isolation. Close collaboration with commercial, regulatory, and finance teams is crucial to ensuring supply continuity while controlling costs.
- S&OP (Sales & Operations Planning): Regular cross-functional reviews help adjust supply plans based on evolving clinical guidelines, market feedback, and regulatory approvals.
- Finance alignment: Optimize inventory decisions by balancing working capital constraints, carrying costs, and risk mitigation strategies.
- Regulatory collaboration: Engage compliance teams early to prevent supply disruptions caused by unexpected approval delays or shifting regulatory requirements.
Conclusion: Plan for the Forecast to Be Wrong
In pharmaceutical supply planning, forecasting will never be 100% accurate—but that’s not the goal. The real objective is to build a resilient supply chain that ensures life-saving medicines are available when needed while minimizing excess and waste.
By optimizing safety stock, designing flexible supply strategies, leveraging scenario planning, and fostering cross-functional collaboration, pharma companies can navigate uncertainty while ensuring regulatory compliance, product availability, and financial efficiency.
Achieving this level of supply chain agility is challenging with homegrown Excel models. Investing in a purpose-built supply planning solution with built-in optimization algorithms can help companies strike the right balance between overstock and stockouts, while also providing real-time visibility and scenario-based decision-making—enabling pharmaceutical companies to make smarter, faster, and more resilient supply decisions.
Because it’s not about having the perfect forecast—it’s about making the right supply decisions even when the forecast is wrong.
