Leaning Towards S&OP/ IBP

Leaning Toward S&OP and IBPMany companies have high hopes when they set out to implement a Lean improvement program. But if the program ultimately fails to yield expected results, it can be difficult to pinpoint where the problems lie.

A growing body of knowledge and experience indicates that Integrated Business Planning (IBP) may be the key ingredient for lean success. Lean is all about creating a physical environment that enables material to flow efficiently from raw through finished product to the customer. Lean success requires eliminating waste and wasteful practices, reducing costs and cutting lead times, while synchronizing all partners and activities in the value chain. Fortunately, there is a process and a technology that focuses directly on ensuring a continuous alignment between demand, inventory, supply and manufacturing plans, and between tactical and strategic business plans. The perfect enabler for Lean success is called Integrated Business Planning.

A recent trip to the optometrist provided insight into the relationship between IBP and Lean. I was informed by my optometrist that my eyesight is at the point where I need different lenses for near and far sight. Since I already wear contacts, my options for improving my eyesight to 20/20 vision were to wear reading glasses or wear different contact prescriptions in each eye-one for close up and one for distance.

Just like my need for different lenses, a business needs different tools to effectively manage operational, tactical, and strategic planning processes. Businesses need the ability to focus on the horizon, to anticipate and plan for changes (IBP). They also need the ability to focus up-close, to efficiently execute manufacturing and supply chain operations (Lean). Integrated Business Planning provides the clear vision to identify demand and supply issues far into the future while Lean allows companies to focus on removing waste throughout their extended operations and providing their customers with the best value.

IBP and Lean are as mutually complementary to business vision and success as my two different contact lenses are to my vision and success.

If you create a manufacturing environment where material flows with minimum waste, but you can’t predict capacity and material availability problems in time to avoid them and maximize operational performance, you will revert to firefighting and finger-pointing, with poor results. Even if you do an excellent job of future planning, poor near-term material flows result in higher inventory levels, longer lead times, and lower profitability.

Remember the commonalities between IBP and Lean, they truly work hand-in-hand! Both strive to streamline internal processes and eliminate waste, which may come in the form of excess warehousing and distribution space, inventory buffers created to hedge against erratic demand signals, or misaligned tactical and strategic planning.

A best practice is to consider Lean and IBP to be one combined improvement program. They are both important tools for running a business. By using IBP and Lean together, you can rationalize supply chain assets based on clean demand signals and prevent unnecessary supply chain expenditures.