The power of integrated business planning (IBP) comes in helping companies align financial, sales, production, procurement and marketing information into a single plan, grounded in modern-day reality.
No one should be surprised that consultants, pundits, marketers and academics have found ways to argue about the definition and ultimate business value of integrated business planning (IBP). Indeed, it would be surprising if they agreed. (Can you imagine adding economists to this already potent mix?)
IBP is a series of coordinated processes and supporting technologies to translate desired business outcomes into financial and operational resource requirements. The outcomes, for example, can be expressed in terms of balanced achievement across the following:
- Revenue and demand
- Service levels
- Inventory levels
- Profits and margins
- Cash flow
Early challenges to IBP included a lack of an accepted academic definition, the absence of a governing body and a bias toward supply chain applications. But research suggests the most widespread and stinging criticism of IBP was that it was just mature Sales & Operations Planning (S&OP) by any other name. These critics sensed a sinister “rebranding” ploy designed to get companies to purchase technology and services they already own but perhaps have not fully implemented.
Gartner appeared to lend credence to the idea that IBP is just “Black Belt S&OP” in a research note titled Introducing the Five-Stage Sales and Operations Planning Maturity Model for Supply Chain Leaders.
As for rebuttals, an Industry Week column penned by Dean Sorenson argued that complex manufacturing environments can benefit from IBP, which he framed as Enterprise Performance Management tools (excellent for long-term goal-setting and full financial picture, weak on supply chain details) coupled with S&OP (excellent tactical solution, but often lacks the ability to do scenario planning on a full set of financial statements that are explicitly reconciled to operational plans).
Rather than jump into the fray with more arguments and more acronyms, consider this: the most recent of the sources cited above is seven years old! With the passing of time has come more complicated and interdependent global operating environments and higher expectations for IBP; the latter driven by skilled practitioners demanding more capabilities from technology vendors.
The Future of IBP is Now
It’s time to move beyond the ‘emperor’s new clothes’ argument. Down here on the ground where real people are trying to run real businesses, there’s little time for semantic subtleties.
IBP will continue to sound similar to sales and operations planning (S&OP). But there are new expectations in this realm, and they are focused on creating speed, trust and resiliency. Specifically, your organization must embrace the value of a granular view of the extended enterprise. Can you analyze trends at the SKU level and drill into constraints on the shop floor? If so, then pronouncements from the War Room will be ‘virtually vetted,’ and not the result of panic or guesswork.
Challenge yourself to think beyond the traditional Available-to-Promise metric and ask if an action meets the criterion of Profitable-to-Promise. You need to examine revenue, cost and margin impacts of every scenario under consideration. Some of these decisions will be automated, others will require exception-based intervention.
Logility defines IBP as multi-horizon strategic business planning that combines volumetric and financial data into a single, highly visual, comprehensive planning platform that delivers greater global visibility, more powerful multi-scenario analysis over multiple planning horizons, tighter collaborative workflow, and a wider spectrum of alerts.
Unfortunately, most companies still use multiple disconnected planning processes managed by different people using different data sets and assumptions. In these fragmented planning environments, strategic planning is based on outdated data and often unrealistic supply chain capabilities, and tactical planning is a constant firefight with no regard for strategic goals and objectives.
The Very Real Power of Integrated Business Planning
What is needed is a single, integrated planning solution that unites short-, medium-, and long-term planning under one system. Adopting a unified planning and decision support system that covers strategic and tactical horizons empowers near-term S&OP and long-range business planning in one integrated solution. That’s the power of integrated business planning, and according to industry research comparing the performance of companies that follow an IBP approach versus those that don’t, IBP users are:
- Better able to align supply and demand over the entire horizon
- More effective at collaborative planning and building real trust between groups
- Able to reserve capacity at key suppliers earlier and more efficiently
- Faster to react to unexpected disruptions in the supply chain
- More likely to use alert-driven response and adjustments
- Better at handling promotional demand
- More likely to use “what-if” analyses to evaluate and prepare for contingencies
- Better at using KPIs that reveal the truth about enterprise performance across all planning horizons
So get started on your journey to realizing the power of integrated business planning. Markets and competitors aren’t waiting for you. Don’t end up like the proverbial “two bald guys arguing over a comb.” There are real insights and lasting business benefits to be had from managing strategic, tactical and operational planning with one platform.
Take a look at this short video to see how Logility’s IBP solution supports accelerated planning and decision-making across the enterprise.