INTEGRATED BUSINESS PLANNING

What is “Integrated Business Planning” (IBP)?

The IBP is an evolution of the Sales & Operations Planning (S&OP) process, but the IBP offers greater visibility to supply restrictions, allowing the company greater reaction capacity, it is a monthly process that seeks to create a single operations plan for the company, agreed between departments or areas that considers internal demand, supply, the development of new products, strategic projects, and financial plans.

What is “Sales and Operations Planning” (S&OP)?

It is a management tool that improves communication within companies, and this continuously achieves focus, good alignment between departments and synchronization between them. Some of the benefits are:

• ·      Improvement of horizontal communication between the departments of the company.
• ·      Reduction of operating costs by reducing excess inventories
• ·     Greater inventory control
• ·    More efficient management processes by generating hypothetical situations that allow detecting in advance possible problematic situations.
• ·  Better control of performance and results of new products and promotions as part of the development of a global strategy. 

What are the similarities between IBP and S&OP? Mention and describe them.

Both need backup data, help align forecasting with capacity, and guide senior management in their planning decisions.

What are the differences between IBP and S&OP? Mention and describe them.

The main difference between S&OP and IBP is that IBP starts at the executive level. Each month or planning cycle, the IBP process culminates in a Business Management Review in which the executive team reviews the latest projections,

Potential gaps in achieving business and strategic goals, gap-closing options, and the projections of resources to execute the plan.

These are the characteristics of IBP with which we can differentiate it from S&OP:

• ·      Ownership and leadership of senior executive management
• ·      Integration of strategic plans, initiatives, and activities.
• ·      Product and portfolio review integration
• ·      Integration of financial planning
• ·      Enhanced simulation, modeling, scenario planning, and analysis
• ·       Gap identification and gap closure analysis
• ·   Easy and efficient translation of aggregated plans to detailed plans, up and down the data hierarchy
• ·       Greater confidence in a cross-functional team

How does the IBP process work? Describe in detail.

It is a process in which decision-making is made to realign tactical plans in all business functions, which leads to supporting the business objectives and goals of the company. A main objective of IBP is to reach an agreement on a single operating plan, to which the executives of the management team take responsibility and allocate the resources: (of people, equipment, inventory, materials, time, and money) to be able to satisfy the clients in the most efficient and profitable way

What are the challenges of IBP?

·      Attract the main customers and suppliers

• ·     Model finances in an agreed upon way to handle complexity: discounts, discounts, exchange rates, prices, etc.
• ·      Consider business objectives: market share / growth, channels, impact
• ·      Business language (EBIT, revenue, cost, margin) instead of supply chain KPIs (OTIF, DOH, CTS)
• ·      Shift focus from 1 number plan to risk and opportunity management
• ·      Include project management to maximize the business impact of new product introductions (NPI)
• ·       From data to insights

Which are the most common difficulties/problems when implementing IBP? Mention them and provide examples. 

• ·       Lack of Customization
• ·       It’s very expensive
• ·       Security: The movements are going to be registered, so there is no time for make mistakes.
• ·      Loss of Control of Software and Services: Every movement realized in the software would not be erased. 
• ·        Software Updates: You need to adapt to the software. 
• ·        Integration: Every part of the company is going to be integrated into the same software

What are the advantages and disadvantages of IBP?

PROs

• ·       Demand volatility has increased considerably for most companies.
• ·      Supply complexity has increased with options such as subcontracting manufacturing and logistics operations — both of which are more common.
• ·       Supply chains are broader in scope, including goods that are distributed across worldwide supply chains.
• ·     Input cost volatility is a constant, increasing challenge for profitability. No matter the commodity (e.g., aluminum, gas, or petrochemicals), all experience sudden market changes.
• ·      Non-linear connection between costs and volume fluctuates with a mix of fixed and variable costs; some costs vary by volume and others by time, making it more difficult to understand the financial implications of business decisions.

CONs

• ·    Technology and process structures don’t allow integration. Traditional software solution designs differ in structure, hindering integration.
•           Complex skill set required
•       Optimization solutions present barriers within barriers: modeling a complex supply chain often requires difficult coding and provides no visualization.
•     Different cultures within the organization. Business units within the enterprise usually have a culture of its own; the undertaking of understanding another unit’s goals while striving to reach its own seemed impossible.
•   Use of spreadsheets as a primary planning tool. Maintaining the status quo use of spreadsheets presents an inflexible resource unable to integrate and align business goals.
•     Inflexible solutions prevent data quality, access, and management. Solutions are designed to operate a specific way, and often unlike the business, meaning that the access to data or its quality and management are reliant upon the system.

What is the importance of IBP nowadays?

It is very important for a company to implement IBP that allows companies to focus on making better informed decisions. It is a tool that facilitates the collection of data, it also helps in the analysis and creation of reports, which makes it less tedious to carry out the tasks, since they will not be carried out manually. The IBP also provides us with information on the supply chain, strategic and financial plans in real time.