GOOD STORIES

Building a Capital Expenditure Projection Framework to Improve Spending Forecast for a Large Pharmaceutical Company

To improve spending forecast, Emendo Inc. partnered with a leading pharmaceutical client to build a capital expenditure model. This solution would significantly enhance the client’s capabilities in business and financial planning.

Industry:Pharmaceutical
Year:2023

The Opportunity

Improve Budget Accuracy to Anticipate Spending

The client was facing challenges when allocating capital and anticipating their spending.  After significantly missing their target throughout the years, they wanted to build an annual projection model to help forecast expenses and R&D spending, allowing them to allocate budgets appropriately.

They had previously tried to use various methods to forecast, with a lot of trial and error, which led to a consistently high forecast of spending – resulting in a huge gap between the forecasted and the actual numbers. 

The team at Emendo Inc. responded to this challenge with a solution to build a capital expenditure projection model that produced accurate forecasts – bridging the gap between the forecasted and the actual numbers, ensuring the client would not miss any targets.  

The Approach

Leveraging Insights from Historical Data Analysis

To gain the necessary overview, an analysis of historical data from the client was initiated to identify existing patterns and systems. The data was then used to create numerous forecasting models, which were each vetted for their accuracy. 

The best approach to developing a projection model capable of producing precise figures involved analyzing historical data, encompassing past trends, projections, and actual spending.

Data normalization was employed to ensure accurate comparisons of all previous years. By incorporating normalized data, this model was used to identify low, average, and high trends in projections. These trends served as the basis for forecasting future spending patterns. 

The Impact

Precise Forecasting and Efficient Budget Allocation

Using the capital expenditure framework, the client has achieved highly accurate forecasts, with results within 1% of projected figures, made possible by data normalization.

This success has enabled a streamlined forecasting process, significantly reducing manual effort. Emendo Inc. has effectively bridged the gap between forecasted and actual spending, assisting the client in achieving improved planning and budget allocation. 

Understanding the Process

“Creating this capital projection framework has been crucial for the client and it was important for us to understand the ‘why’ behind it before we decided to take on this challenge. After a lot of trials and errors, we were able to produce a system that our client can trust and rely on.” – Tyler Ronken, Project Lead

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