Better forecasts and better access to SAP
Escapo reduces storage costs ánd improves service level
Every year, thousands of new products arrive on the pharmaceutical market. This makes it extremely difficult for distributors to manage stock levels cost-effectively. Yet, Escapo Group succeeded in reducing its stock value by 1.2 million euros in only six months. At the same time, the Group boosted its service level to 97.5 percent. The key to this success is the demand forecasting solution based on SAS technology and developed by 4C Consulting.
Escapo Group is a Belgian wholesaler/distributor of pharmaceutical and parapharmaceutical products. It offers over 100 local pharmacies and 50 homecare shops an assortment of 80,000 products from 600 suppliers. Escapo Group, however, operates differently than its competitors. "We are a cooperative organization. All of the pharmacies that we service are Escapo Group shareholders. Consequently, they demand top-level service from us," explains Koen Ceulemans, CFO at Escapo Group. "Our shareholders/customers want to be able to choose from virtually every product available on the market and at a favorable price. This means that we have to manage our stocks in an extremely cost-effective way. Accurate demand forecasting is indispensible towards this goal."
SAS enabled us to enhance our demand forecasting accuracy. As a result we reduced our central stock value by 15 percent as well as handling costs, saving approximately 1.2 million euros.
Looking for a highly accurate demand forecasting tool
Previously, Escapo Group had been using a self-developed Excel sheet to forecast product demand. However, it was no longer manageable for a number of reasons. First, the tool could only be used by two key users. Their insight was required for the accurate interpretation of the forecasts. Secondly, it was a very time-consuming way of working. Every month, the two users needed to dedicate an entire weekend to reviewing all of the articles in stock. Thirdly, the Excel tool was at its limits and could no longer cope with the thousands of new — mostly generic — products that enter the market every year. Therefore, Escapo Group decided to look for a partner that could build them a new and improved demand forecasting tool.
Analytical strength of 4C Consulting makes the difference
Escapo Group teamed up with 4C Consulting, a preferred SAS partner. "They had already realized a similar project at another cooperative organization, making them the ideal partner for us," says Ceulemans. "The 4C consultants also have a strong analytical background, which is a crucial factor for improving our forecasting accuracy."
Ever better forecasting accuracy
4C Consulting used SAS technology to create an online tool that automates every step of the demand forecasting process. The tool no longer requires the specific knowledge of the two key users; it uses the stock data in the central SAP database to detect trends and seasonal patterns. This not only results in highly accurate demand predictions, it also identifies opportunities to negotiate discounts with the supplier; for instance, when large quantities need to be purchased.
In addition, the tool continuously improves its forecasting accuracy. "Every week it compares the actual demand with the forecasts. The solution registers any deviation and takes it into account in its future forecasts," exclaims Ceulemans.
Excellent results in harsh conditions
The demand forecasting solution is designed to maximize Escapo Group's service quality while minimizing shelf and handling costs. After the first six months, the tool had already delivered astonishing results. "In only six months time, we succeeded in increasing our service level up to 97.5 percent. This two percent improvement was achieved under difficult market conditions, such as strikes at some of the major pharmaceutical companies," acknowledges Ceulemans.
In addition, the new solution made it possible to cut rotation time by 32 percent, from 28 to 19 days. At the same time, Escapo Group was able to reduce the central stock value by 15 percent. "We were even able to reduce the stock value of our top 100 products by 27 percent," illustrates Ceulemans. "In short, we realized an overall cost savings of 1.2 million euros, freeing up resources that we can invest in the growth of the Group."
Multilevel forecasting, up to local pharmacy stocks
The new demand forecasting solution has already proven its capabilities. However, Escapo Group sees room for further improvement. The solution is designed to operate on multiple levels. Today, it is operational on the Group level, but in the future, it is perfectly capable of also managing stocks on the individual pharmacy level. The organization has already made plans with 4C Consulting to start a pilot project with 50 pharmacies. "In short, SAS helps us be more than just a distributor," concludes Ceulemans. "It helps us become a true partner with our customers."
Further service level improvement through easy SAP access
Escapo Group has also discovered how the business intelligence capabilities of SAS can help improve its service quality. "We started four new projects that use SAS technology to inform our shareholders/customers about their business activities. For instance, we can inform them about their return per article or the success rate of marketing campaigns. SAS enables the generation of this information directly from the SAP system and makes it available online. A major advantage is that all of this can be accomplished without the pharmacists having to install any additional software," states Ceulemans. "It is certainly an easier way for our business users to get the critical information they need from the operational SAP system."
Enhancing service level, while minimizing shelf and handling costs
- Improved service level: implementation of the SAS-based demand forecasting solution improved product availability. This boosted the service level up to 97.5 percent, a 2 percent improvement after only six months.
- Significant cost reduction: the enhanced forecasting accuracy enabled a 15 percent reduction in the central stock value, a cost saving of 1.2 million euros.
- Reduced workload: the demand forecasting solution automates the entire process, freeing up valuable time for the CFO and the Supply Chain Manager.