Integrated business planning (IBP) is a business-focused evolution of traditional sales and operations planning (S&OP) that aligns sales, business strategy, and operations with enterprise-wide financial performance.
While S&OP exists in some form in most organisations today, few have implemented an S&OP process that fully integrates all aspects of the supply chain. Companies have implemented an S&OP process with a primary focus on demand forecasting, with less focus on demand supply synchronization due to operational change considerations, logistics, and enterprise financial goals.
A common reason for this disconnect is inadequate alignment between executive leadership, senior managers, and other people handling detailed operations.
IBP improves the effectiveness of S&OP processes by working to enhance organisational alignment and synchronization across all functions to deliver end-to-end enterprise value. This planning approach supports an enterprise-wide demand plan, balance of supply and demand, and the integration of both financial and operational planning. IBP also links high-level strategic plans with day-to-day operations.
According to Gartner, many companies are challenged with developing an effective IBP strategy due to:
- A lack of strategic direction, or poor communication of value messaging
- Poorly structured or loosely integrated business processes
- Poor management of lead times in the planning cycle
- Fragmented, isolated systems and excessive use of Excel
Siloed system architecture and disconnected data sets do not provide the data integrity and breadth of decision support required to plan today’s complex, end-to-end supply chains.
Moving from traditional S&OP to IBP
While S&OP delivers significant value to businesses, namely in demand management, it has often been constrained and limited as an operational tool. This is because it is not an integrated process for the whole enterprise with all its strategic business units. S&OP provides the greatest value to an enterprise when linked and aligned with both its strategic and financial outcomes.
S&OP considers supply chain processes in isolation for local business units, while IBP builds on S&OP to ensure business focus, alignment, and synchronization across all functions of the enterprise. Traditionally, it has been challenging for S&OP solutions to link day-to-day operations with the broader strategic objectives of the company. With IBP, a wider range of stakeholders are involved in the strategic and operational supply chain decisions so that the supply chain can truly drive the financial success of the entire enterprise business.
- Integration with financial and budgeting processes
- Inclusion of strategic initiatives and planning activities
- Improved simulations and “what-if” scenario modeling
In the next article, we will discuss about the IBP framework.