Managing Demand Uncertainty in Biologics Production
Author: Steve Lam, Senior Vice President, Biologics & John Ward, Vice President, Engineering
Friday, June 30, 2017
When a biologics company prepares to launch a new product, it must forecast the manufacturing capacity it will need. To create this forecast, it must factor in its
estimate of the size of future sales, the timing of the launch, the dosage of the product, its strategy for building its market and a host of other variables. Variations in any
one of those factors can lead to drastically different demand scenarios. If a company overestimates demand, it may end up investing in too much capacity, and therefore find
itself paying more per unit of the product than it needs to, thus impacting its margins. If it underestimates demand, it risks not being able to satisfy demand, therefore losing revenue.
Forecasting demand is a complex endeavor. For instance, it’s not unusual for the forecasted and actual dosage of a product to vary by a factor of as much as three.
Obviously, that makes a big difference to a demand forecast. If a manufacturer has built capacity in anticipation of a new product and its clinical trial is delayed (for any number of reasons), that manufacturer’s capital is tied up in a fallow facility. For a small company for which liquidity is critical, that can be catastrophic.
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