Figure 2: Typical Benefits of Integrated Business Planning
Growing pressures to manage costs, expand product portfolios and enter new markets are driving the need to better understand the financial implications of decision making in the supply chain. Traditional sales and operations (S&OP) planning is insufficient to provide business leaders with insight into the financial tradeoffs of critical supply and demand management decisions. Top performing companies are moving beyond traditional S&OP to more integrated business planning (IBP) to meet this challenge.
At its core, Integrated Business Planning (IBP) is a collaborative decision-making process that links strategic, operational, and financial goals, and plans to improve overall business performance (see Figure 1). It relies on the participation and contribution of all facets of the organization, including supply chain, finance, sales and marketing, as well as the contribution of customers.
When implemented effectively, integrated business planning can support sales growth, reduce service costs, and improve working capital (see Figure 2).
Yet despite all of the potential benefits of IBP, many companies remain stuck in the early and middle stages of IBP maturity and fail to develop critical IBP practices that help unlock those benefits. An effective IBP is motivated by the successful implementation of a range of IBP best practices. Developing integrated planning processes throughout the organization, ensuring that the right people are in place and responsible for executing the planning, and that the necessary tools and systems are available to fully support the IBP process are elements fundamentals that drive IBP performance.
The list below presents examples of best practices used by top performing companies:
- Formal targets with accountability are in place.
- The IBP process is up to top management.
- A formal and defined IBP process is in place.
- The team that implements IBP is cross-functional.
- IBP watches over a period of more than 18 months.
- Tools are in place to provide simulation modeling support for IBP decisions.
- IBP plans feed directly into major enterprise resource planning (ERP) and enterprise project management (EPM) systems.
- Tools are in place to provide IBP reports and performance dashboards.
Implementing and achieving the best capabilities and benefits of IBP requires dedicated and committed resources, and perhaps more importantly, it takes time. The most successful IBP implementations consist of three main phases:
- Preperation. Start by running a current state assessment, leveraging best practices and benchmarks.
- Pilot. Pilot cycles allow organizations to pressure test the new design and make any necessary improvements or adjustments along the way.
- Continuous improvement. After the pilot phase is over, companies traditionally focus on how best to measure performance in the future.
IBP is an iterative process that improves over time. While it may not be perfect on the first try, if implemented and executed effectively, IBP can be a powerful tool in driving dramatically improved business results and creating lasting competitive advantage over the world. the market.
The full research described is available, with registration, here. Download the full report to learn more about trends, best practices, and metrics that are helping organizations develop their integrated business planning capabilities.