Integrated Business Planning is the next step of business planning after implementing S&OP, which helps integrate all the different departments in the planning process. This helps in aligning every department and employee of the company to work towards attaining a single goal.
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The business planning process is essential to running a successful business. Earlier, the business planning strategies across the supply chain were disjointed, as disparate spreadsheets and standalone business intelligence solutions provided limited knowledge, due to which companies lacked unification across the entire organization. Due to a lack of interdepartmental synchronization between the planning of the activities that impact the financial bottom line, silos were created, leading to more resource utilization and less productivity.
The traditional business planning process lacks a collaborative approach, and hence there was no accountability for overall results; every division focused on their activities rather than considering a part of one business team. Integrated business planning was introduced to overcome the problems of traditional business planning. The organization uses that to create an agreed dependable market plan to which every department has contributed.
Integrated Business Planning (IBP) is the business planning process that uses financial and operational data from across the organization. In other words, IBP is an amalgamation of supply chain management, financial planning, and operational best practices. One of the primary benefits of integrated business planning is optimized output by linking strategic plans with sales, operations, and finances to provide better visibility of the relationships between results, resources, and capabilities. It aligns business goals and financial targets with decisions and execution across the entire business. Since this planning gathers data from across the enterprise, organizations are better at predictive analysis. Thus, if the analysis forecasts a parts shortage, supply and operations adjust and prevent customers from getting affected.
Most of the time, the argument arises that IBP is just an extended form of S&OP that includes finances and operations. While there are some similarities between IBP and S&OP, it is wrong to say that IBP is an extension of S&OP. Let’s discuss it further.Similarities Between IBP and S&OP
Regarding the similarities between IBP and S&OP, both processes need extensive supporting data to make correct forecasts. Both align forecasts with the capabilities, and both techniques help senior management make the right planning decisions. While there are similarities between IBO and S&OP, there are certain things that cannot be attained through S&OP alone, and to bridge that gap, IBP is used.Differences Between IBP and S&OP
One of the significant differences between IBP and S&OP is that IBP aligns the different departments of an organization towards a single goal. IBP measures the performance in terms of finances, which helps in planning the business activities according to the financial target of the organization. S&OP tends to focus on medium-term planning targets, whereas the IBP process supports long-term, short-term and medium-term strategies.
Integrated business planning is ideal for any company to improve the forecast through IBS, maximize profits and reduce the risks associated with the company’s growth. Companies that adopt this planning obtain several practical benefits, such as reduced holding costs, proactive customer service, demand fulfillment, less time to market for new products, and better collaboration between demand planning and completion. It makes planning and operations more transparent. Thus, companies moving to just-in-time manufacturing find it ideal. IBP is also predictive, so once the company builds up some data, it will improve customer satisfaction. Seeing the future of IBP is expected to help companies to work on strategy planning, modeling, and M&A activities with great confidence. It will also allow companies to inform stakeholders of unanticipated events that affect the business using advanced technologies like machine learning pattern recognition.
There are mainly six steps towards integrated business planning process flow.
Once the company has appropriately implemented the S&OP processes, the next step is to implement integrated business planning, where the finance is integrated with all other departments involved in planning. Integrating finance may sound like a simple task, but it is not easy. A major challenge companies face while implementing the components of IBP is interdepartmental communication about the IBP elements and their importance. People involved in the physical side of the supply chain use a different form of language than that used by the finance people. Mostly, supply chain people talk in terms of units, product groups, and products, whereas finance people talk in terms of currency and money. This results in different KPIs used for measuring performance, creating a silo-like situation among the departments.
Other than that, communicating the goals with every company employee and maintaining the same motivation to reach that goal is another major challenge for the company management.Common Pitfalls When Implementing IBP
When a company adopts integrated business planning to improve forecasts and enhance productivity, there are some risks the company must be aware of. Below are some of the pitfalls that companies need to avoid while implementing IBP.
Research revealed that the major impacts of implementing integrated business planning are increased revenue, accurate forecast, and improved order delivery rates which signify the importance of IBP. Besides, there are several other factors of integrated business planning that ensure better performances across the business; some of the factors are discussed below:
As we discussed earlier, incorporating technology is the best way to consolidate and analyze big chunks of data more accurately and implement integrated business planning more efficiently. As advanced analytics technologies such as Artificial Intelligence have evolved and have been out of the lab, they are helping businesses in various ways. The benefits of using AI in business planning are proven by customer behavior analysis or business operation automation. At 3SC, we provide integrated business planning consulting services and supply chain management solutions tailor-made for businesses. We analyze the challenges faced by supply chains of different industries and find solutions to those challenges that can make business processes smooth and seamless. Our comprehensive AI/ML-based solutions, such as Visilog and Carbonex, not only optimize supply chain management and business planning but also help reduce businesses' carbon footprint and promote environmental sustainability in business.
The application of integrated business planning makes operation and planning in different departments in a company more transparent which helps in better forecasting and implementation of data to ensure better customer satisfaction and lower business costs.
One prominent example of integrated business planning is the Uponor Group, which implemented IBP and brought down the number of SKUs from 120,000 to 10,000, bringing down the inventory costs by 50% and a 30% increase in one-time in-deliveries.
Another US-based technology company, Juniper Networks, implemented IBP, which helped them attain 55% lead time and reduce inventory costs by 15%.
An integrated business planning tool is an AI-based software that collects big chunks of data from different departments, analyzes it, and gives demand forecasts that help in the seamless and efficient planning of business processes.