Over the last year, many of our clients have taken leaps in the IBP space, using the latest technology to integrate tactical planning all the way through Marketing, Sales, Supply Chain and Finance – in a single IT solution.
One of my colleagues recently said that there has never been a more interesting time to work with supply chain. I couldn’t agree more! The last couple of years, with first Brexit, then the pandemic, climate change and now military conflict, have caused multiple disruptions and impacts for most companies. Larger-than-normal demand swings, supply disruptions, additional costs and new sustainable legislation are adding an unprecedented pressure to the value chain.
There are a number of ways to mitigate these changes – or better, to get on top of them – but the most effective is without doubt the concept of Integrated Business Planning (IBP), which has moved to the top of the strategic agenda for many of our clients.
Now is the time to act
Having worked with supply chain planning for many years, I know that it’s an area where many companies have struggled for a long time to create the necessary transparency, agility and resilience.
Firstly, many companies still build their commercial, operational and financial plans in isolation, working off separate data sources. These plans may be aligned conceptually, but not truly integrated. So promotional plans get disconnected from inventory plans; sales and production forecasts might not line up; or strategic goals may be achieved without reaching the financial targets, to name a few examples.
Secondly, some companies have confused IBP with just expanding the S&OP process with revenue and gross profit estimation. But IBP is also about identifying risk and opportunities, assess scenarios and make pro-active decisions for the entire company. Therefore, IBP also involves participants from Innovation, Marketing, Procurement, Logistics and even HR. As an example; one thing, among others, that you should be discussing in your June cycle of IBP, is how you deal with the risk of many employees once again becoming sick with COVID, hence potentially leaving your production lines empty as we enter autumn. Or how you deal with possible restrictions on energy consumptions if Russia completely stops the gas export to Europe.
Finally, many organisations struggle to get value out of their S&OP and IBP process despite significant investments. Of course, Integrated Business Planning can be complex, but it shouldn’t be over-engineered if that means being inefficient and losing sight of the purpose. If the strategy gets ‘lost in translation’, you’re essentially losing the opportunity to become agile and resilient.
The problems are not new, but there is a new way to solve them
Building on a strong desire from top management to gain transparency and become agile and resilient for future disruptions, many companies are taking huge leaps in the IBP space right now.
Companies are approaching the challenge from two angles. Many companies are using the latest technology to integrate tactical planning all the way through Marketing, Sales, Supply Chain and Finance in a single IT solution – and thereby aligning the entire organisation behind one optimised plan.
Other companies have decided to approach it from the process side and are looking to transform their S&OP process into IBP, zooming in on risk and opportunity identification, scenario planning and decision making.
In both instances, Integrated Business Planning is a collaborative process where tactical plans across portfolio, customers, production- (or service-) resources are aligned and calibrated against business targets. At the same time, risk and opportunities are identified and evaluated in scenarios, providing the executive team with a transparent overview of the company’s situation and thus the opportunity to make the appropriate decisions to keep the company on track and aligned with strategic goals.
The upside is clear. Companies running Integrated Business Planning answers “strongly agree” to the following statements:
For companies still thinking about how to start the IBP journey, and regardless of coming from a process or technology angle, here are some tips to get started:
In companies with mature IBP processes leaders typically achieve agility and build resilience.
By working with risks and opportunities proactively and collaboratively across functions, appropriate mitigative action plans are ready for execution, and ‘plan Bs’ are ready for unforeseen events. This means that the company can achieve a higher growth rate, be more profitable and deliver better return on invested capital.
Who knows what the next 12 months will bring? Hopefully peace in Ukraine and a pandemic that doesn’t once again get out of control. What’s sure is that agility in adapting to changed conditions, managing risk and being proactive in making the right decisions are some of the key differentiators between winners and losers in the marketplace. There are certainly many challenges in the global supply chains, but also many opportunities to forge a better, more enlightened future.