- What is integrated business planning?
- Why put your planning processes in a broader perspective?
- Unmatched benefits of integrated business planning
- IBP vs S&OP: different names for the same process?
- How to create real value? Four pillars of fully integrated business management
- A framework for IBP success
“We plan, God laughs”. True. However, planning is not about knowing the exact outcome. It’s more about gearing up for what-if scenarios, in case something goes awry.
To adapt successfully to evolving market needs and work around economic turbulence businesses need the collective effort of the whole organization — from finance to marketing.
But how can you align the mashup of a company’s strategy, operations, and financial performance? Enter an integrated business planning process.
Once a legacy of Fortune-500 companies, the IBP strategy can be leveraged to transform businesses of all sizes. IBP solutions help both industry giants and young companies manage growth-related risks and help establish disruption-tolerant processes.
What is integrated business planning?
An integrated business planning (IBP) process refers to scaling and connecting the planning activities across each business function, silo, and department. Hailed as the enabler of an innovation-ready environment, IBP also syncs business targets, budgets, operations, and business units across the entire organization. At its core, IBP includes technology and applications that connect the planning and operational functions of the company.
Why put your planning processes in a broader perspective?
According to McKinsey, businesses that have fully integrated business management are in the minority, with only a handful of companies implementing IBP to its fullest. Two-thirds of companies confine unified strategic planning to occasional business reviews.
This means that most companies leave their business decisions to the mercy of siloed planning solutions with limited process visibility and one-sided insights. Conversely, integrated business planning solutions cast their nets wide to deliver value across the entire business and help battle ever-growing business challenges.
In a world of interconnected economies, each company can be affected by the overall market resonance. This is why the pandemic’s disruptions to logistics in China have echoed through global supply chain operations, resulting in a shortage of components. International political uncertainties can reduce the trade openness of a given country, destabilizing the whole world. It means that the success path of a single company depends on a whole lot of political and economic levers involved in internal management.
Holistic data analysis
At least 2.5 quintillion bytes of data are produced every day. However, instead of generating actionable insights, around 95% of companies are unable to make sense of unstructured data — a fundamental building block of business decision-making. The growing amount of big data and its complexity also prevents companies from landing new growth opportunities.
Focus on a customer is a beacon for successful companies and higher profits with over 70% of consumers considering it a basic expectation. However, isolated planning doesn’t factor in all touchpoints. Unable to create a unified customer image, companies struggle to deliver personalized services and initiatives.
Short product life cycles
Along with granular offerings, customers expect new products to be released faster in regular cycles. However, rolling out new products like a conveyor belt is not enough. To keep up with quickly-changing customer preferences, companies require robust analytical capabilities that consider an entire landscape of opportunities and predict current demand areas.
The world? Volatile, to say the least. Over the last few years, shrinking margins have made a comeback driven by cutthroat competition, market saturation, and inflated costs. Since 2020, margins have been falling down the curve with a negative of at least 0.04%.
As a result, the traditional supply and demand balancing has been rendered ineffective, jolting companies into optimization based on a patchwork of metrics, market trends, and forecasts.
Despite ample opportunities, border-free supply chains have exposed businesses to the ripple effect of global bottlenecks and equipment availability. Differences in standards and regulations, harder planning, and budget constraints require unmatched agility from companies.
To pivot and flex, an organization requires an integrated business planning process flow that eliminates communication lags and steers the whole organization towards its goals despite global instability.
Unmatched benefits of integrated business planning
According to KPMG, integrated business planning best practices stand to increase ROE up to 14 points, reduce costs by up to 10%, and ramp up revenue by 4%. But besides core metrics, what is the true value of IBP solutions?
Being ready for ‘what-if’ scenarios
‘How would the pandemic affect my company? Can I slash the costs to battle the recession?’ Within traditional business management, the answer to your questions is left to guesswork and historical analysis at best.
Paired with robust data analysis, integrated business planning software enables you to simulate the effects of potential actions and changes across the whole organization — from capital expenditures to workforce availability.
You can also mold your growth objective into different market opportunities based on the resources owned or quickly re-allocate the current assets for any transformation with no ad hoc firefighting.
Collaborative and decentralized decision-making
With data sourced across all operations, the decision-making authority is distributed throughout a cross-functional team. Enterprise-wide activation of purpose promotes greater accountability and decision ownership where business units work collaboratively towards a general business goal.
At the same time, consolidated enterprise planning applications eliminate version control and spreadsheet complexity.
Enhanced customer experience
It is stated that agility improves customer experience by up to 30 points. A shared purpose and vision embodied across the organization are some of the qualities required to have agility. Besides enterprise adaptability, a bird’s-eye view and corporate alignment deliver a more unified customer image sourced from across the organization. As a result, customers are served more granular messages, desired products with on-time delivery, and customer-centered services.
Make your business future-proof
IBP vs S&OP: different names for the same process?
The difference between S&OP and IBP is challenging to spot as integrated business planning is generally considered an exercise of sales and operations planning. However, an integrated business planning framework makes evidence-based thinking more comprehensive, while S&OP prioritizes supply chain planning as the main benchmark.
Moreover, integrated business planning consultants devise a proactive plan that responds to challenges with the most benefits and least losses, while S&OP is more about satisfying customer needs at all costs.
Below, you’ll find the main differences between IBP and S&OP:
|Objective||Achieve the right capacity and stock levels||Maximize profit with minimal risks|
|Focus area||Balancing demand and supply to align appropriate capacity and resources||Identify the connection between integrated plans and long-term business goals|
|Planning horizon||6-12 months||24+ Months|
|Stakeholders||Finance, supply chain, sales and marketing||The entire organization|
|Owner||Supply chain||Business leaders|
|Results||Balanced supply plan, input for financial forecasts||An agile organization, where purchasing, production and inventory rally around sales and financials to meet the demand|
How to create real value? Four pillars of fully integrated business management
According to McKinsey, ineffective consolidated strategic planning is the collective result of three factors. First, if an organization doesn’t include IBP in its regular decision-making process, the added value of unified orchestration tapers off. Secondly, some companies delegate unified planning to junior staff, who, naturally, often lack vision and authority for the function. Lastly, if the executors do not have a single vision of critical decision enablers, they won’t be able to navigate business thinking as a whole.
Yet, despite common reasons, there is no ultimate integrated business planning template that caters to all businesses with unique needs. However, some practices can bring your organization closer to the desired outcome of SAP integrated business planning.
Prioritize the P&L owner
In most cases, the owners of P&L at your company have a great read of the existing drivers of revenue and spending. Unlike the supply chain or production management, a P&L-focused integrated process has the most practical requirements based on a broad outlook.
When designing your planning regimen, make sure the groundwork also includes input from upper management so that decisions can be made regularly. This way, the footprint of decisions can be checked against financial thresholds.
At the same time, this business plan allows the P&L owner to align the trade-offs between perils and prospects with the affected area, be it local or global. To unlock this level of visibility, companies should employ robust data governance practices and tools which enable real-time data processing.
Decide on the apt design and cadence
To make the most of unified strategizing, companies need to design an IBP flow with a focus on better visibility and critical data sourcing. The main objective of this fit-for-purpose IBP design is to equip the P&L owner with the right output that is clean, standardized, analysis-ready, and can be easily injected into templates. However, even industry-best design practices can fail if the initial input isn’t sifted through an established data infrastructure and effective processing systems.
Adopting the right reviewing rhythm is another salient part of a holistic IBP framework. Analysis-intensive initiatives, such as product releases, should be subject to regular reviews, while urgent issues such as material shortages or insufficient space should be resolved within a weekly agenda.
To facilitate regular feedback loops, companies also need to establish the right technology infrastructure that promotes seamless and real-time communication between business units.
Apply consequential thinking to facilitate decision making
The right integrated business planning example also stimulates an organizational shift within the company. Therefore, when adopting integrated planning, companies should factor in decision-making power, the value of the decision-making variable, and reporting hierarchy as well as giving key stakeholders more authority in the process.
In practice, collaborative and autonomous thinking can be supported with event classification and pre-defined troubleshooting guidelines based on the root cause approach. Also, the autonomous structure should dwell on the scope of operational thinking as well as the escalation mechanism to bring decisions to the appropriate level of responsibility for adequate resolution.
Support IBP with appropriate technology
The right technology infrastructure allows each business function to keep its language and still collaborate effectively with each other. Since the operational data becomes paramount in this case, the technology suites have to be easy-to-use interfaces that demonstrate digestible, real-time insights — all within one platform.
From a technology standpoint, the building blocks of an IBP-friendly ecosystem include but are not limited to:
- Real-time data and visual management
Plotting the business course is impossible without seamless and real-time data flows. To enable collaborative thinking, your tech ecosystem should also support easy integrations among the modules and enable modeling of the supply chain in real time.
- Big data, analytics, and KPI control
KPIs dashboards allow your departments to monitor the performance, report the number of open opportunities, and share insights for other business units. Robust analytics, in turn, allows your dedicated team to drill down into specific metrics and initiate corrective actions for those metrics. Predictive analytics also accelerates your planning by improving assessments of your capacity, generates dynamic forecasts as well as supports scenario planning and optimization.
- Cloud technologies
By moving applications into the cloud, companies can more easily integrate them at a process level. Following a single data model, integrated business planning managers can cover all aspects of planning and arrive at the ‘single number’. Cloud technologies also enable better business continuity and drive down the costs of analytics.
- Machine learning and artificial intelligence
Injected with expert systems, planning systems offer advanced optimization techniques. The latter, in turn, automatically generates replenishment strategies, inventory optimization, and other response measures needed to embrace the volatility of the market. AI-based stress test simulations also help organizations model the scenarios of combined workloads.
A framework for IBP success
A synergy of strategy and execution is what prevents companies from veering off the rails in chaotic times. This synergy is manifested in integrated planning and allows you to create a link between all business operations, uniting them into a cohesive whole driven by the same goal. Unlike traditional S&OP-enabled planning, IBP allows you to go beyond capacity levels and gain a broader foresight of possible business scenarios.
To achieve IBP excellence, you need to look beyond the internal processes and enable visibility into all pivots, from supply chain leaders to customers. Combined with agility, high visibility levels promote business resilience and maximized profits without low-risk exposure.
Data is also the pinnacle of this visibility, making a technology infrastructure critical to IBP success. That’s why the choice of the right technology partner can advance your planning and fine-tune the planning pathways to your unique business needs, making it a critical step in ensuring success.
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