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2013/08/08

Making Integrated Business Planning a Reality

Making Integrated Business Planning

By Richard House, Managing Director, FuturMaster UK

For a select few companies, Integrated Business Planning (IBP) is a reality in which all business functions are involved in making business decisions based on a collaborative future view of business activity.  For the majority, IBP is currently a distant dream which stretches them well beyond the Sales and Operations Planning (S&OP) processes they are currently struggling to master.

For the select few, the benefits of regular, multi-functional meetings to consider the profit impact of anticipated demand and supply scenarios are clear.  Resources are aligned to demand, activities are planned to maximise profit generation opportunities, responsiveness improves.  In short, the business is ready and able to handle changes to demand in the optimal way and maximise profit as a result.

Considerations

So, if the benefits of IBP are so intuitively clear, then why does it remain a distant dream rather than a current reality?  In order to understand this conundrum more, we need to consider some of the practicalities of IBP.

IBP is a multi-functional process.  Typically, organisations have struggled to implement processes that cut across the functional silos of Finance, Sales, Operations etc.  Successful implementations often require the intervention of 3rd parties or consultants to coordinate the functions and to make the total process happen.

IBP is a people process.  The ability to foresee alternative demand scenarios and assess upsides, downsides and business risk lies in the people of the Sales & Marketing department.  A collaborative forecast is weakened if the participants are not willing or able to provide the information needed by others for effective decision-making.

IBP is a high-level process.  Strategic decisions with business impact are not made at an item code, production line or shift level.  They are made at a high level, affecting many elements in a single decision.  Enabling senior management to make well-informed decisions at a family level generally requires software support to present the data accurately and in a format that can be cross functional.

IBP is a financial process.  A key feature of IBP is the extension of conventional S&OP beyond volume and stock level information into key financials such as gross margin, working capital, trade spend etc.  This increases the complexity of the information being presented and may include data which is not normally shared across different functional groups.

IBP is a scenario-driven process.  Executives make better decisions when they are presented with alternative scenarios to evaluate and decide upon.  The ability to generate scenarios of different demand situations  and then to process these alternatives (often multiple times) through alternative supply scenarios is a major challenge for many companies.

Setting up for Success

Implementing IBP is a top-down process, driven by a board seeking better quality, more up-to-date information to inform their strategic and business level decisions.

Supporting this objective is the need for software solutions with the capability to rapidly process collaborative, scenario-based demand forecasts through the organisation’s production and supply network.  In addition, the translation of the volume demand and supply scenario into financial forecasts and plans suited to decision making requires levels of data integration which are now available for those organisations  keen to move forward in IBP.

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