Maintaining your competitive edge in the future
A practical guide to NextGen IBP for Consumer Products companies
Integrated Business Planning (IBP) has taken centre stage in the world of planning. Leading Practice IBP is a cross-functional process that aligns commercial, operational and strategic plans with financial performance, enabled by streamlined processes and digital capabilities. Driven by current technological developments such as data analytics, Artificial Intelligence (AI) and increased computing power, the Next Generation of IBP (“NextGen IBP”) will further enable Consumer Products companies to create value and deliver great service through effective plans.
- A practical guide to NextGen IBP
- Key challenges faced by Consumer Products companies
- How (NextGen) IBP can help
- Improving the IBP maturity level
- Room for improvement?
A practical guide to NextGen IBP
A well-implemented IBP process is a key component for any organisation to meet customer demand, remain competitive and flexible, and streamline operations accordingly. However, while many companies recognise the added value of IBP, there is still a lot of ground to cover to realise the full benefits. This practical guide offers insight into how IBP can enable Consumer Products companies to anticipate and respond to industry challenges and what actions companies should take to lead the evolution and gain the full benefit of IBP.
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Key challenges faced by Consumer Products companies
The Consumer Products industry is evolving rapidly into the global, digital era, driven by trends such as increasing rates of innovation & customisation, relentless M&A activity, omnichannel retailing and increasingly demanding retailers. These challenges require an inherent vision and the flexibility to dynamically manage a much more customised, customer-focused world.
The industry is under continuous pressure to innovate and customise its products causing proliferation of the production portfolio. E.g. beverages are now offered in an increasingly wide range of flavours, and retailers allow customers to design personalised garments in near real-time. These innovations require planning and managing an increasing number of New Product Introductions (NPIs) with shorter lead times to market, product phase-outs, more diverse product specifications and standards, and the added complexity of multiple distribution and promotion efforts.
Increased M&A activity within the industry means that it is pivotal to not only align your own plans, but also those of newly acquired businesses to fully benefit from economies of scale. At the same time, retailers command more power in the market – impacting price agreements and promotional activities. Competing companies must respond quickly to keep meeting service standards, whilst balancing the risk of overcapacity.
In this digital age, customers expect products to be always available within short delivery times, and have continuous insight into their orders across channels (omnichannel) for product availability and delivery. Placement of any order requires visibility of stock on hand, time to process and ship (the faster the better). Consumer products companies risk substitution and reputational risk following delivery delays or errors.
How (NextGen) IBP can help
Fortunately, as customer demands become more advanced, IBP is evolving into its Next Generation of maturity - enabled by advancements in computer power, AI, and the availability of data. Well-implemented, IBP can offer:
- A better grip on and foresight into future performance; Predictive analytics, ‘what if’ simulation and machine-learning algorithms to help companies steer pro-actively
- Real-time insights that sync during reviews to execute rapid, collaborative decisions; Assisting to optimise the trade-off between service, cost, and inventory
- Holistic planning and operations with inherent root cause analysis and insight-generating capabilities, automated challenge and opportunity flagging; To proactively improve visibility of exceptions and risks and enable organisations to respond
- Dashboards, customer alerts and control towers which markedly improve traceability for both internal operation teams and customers
- Product development and sales functions integrated into the planning and decision-making process; Enhancing the planning and predictability of NPIs and promotions
Improving the IBP maturity level
Although many companies currently run an IBP process only a few have reached the highest levels of IBP maturity. Leading practice IBP requires strong support from leadership as well as a forward-thinking and collaborative mindset to drive success. Although people and process should always be prioritised, a successful IBP process can only be efficient when enabled by state-of-the-art planning software and fed by appropriate master data. For instance, when a geography is short on capacity, aligned processes and data structures will enable an optimised response across borders.
Room for improvement?
Where to start if you want to improve your company’s IBP maturity level?
- Integrate planning processes - although this is a fundamental basis of S&OP it is still not evident in many companies. Ensure that each part of your organisation – commercial, financial and operational – is aligned and works to the same plan
- Align leadership in terms of vision and planning horizons - communication and leading by example is key
- Drive transparency – Business units can be overprotective of their own information and challenges. They need to learn how to share information with other parts of the organisation. This can require a shift in mindset, culture and leadership
- Keep data management close to the business and aligned across geographies – up-to-date and correct master data are crucial
- Reflect critically on KPIs – they should be forward-looking and actionable towards the overall company strategy
Close to leading practice?
What is the next step to prepare for NextGen IBP?
- Perform data-driven and forward-thinking scenario planning: How to close potential gaps towards targets? What to do in case best/worst case scenarios become reality?
- Focus on value: Volume discussions are important for identifying issues and operational planning, but ultimately top-line revenue and bottom-line margin are what counts
- Systemise and automate: Solutions should facilitate and simplify business processes and offer forward-looking insights rather than mere historical data. The more efficient these processes are, the more likely it is that people will use them, and decision-making will improve
- Become more customer-centric: Rather than taking a ‘one-size-fits-all’ approach it is important to segment your operations. Some companies even go to a ‘segment-of-one’ - tailoring their approach for each customer (group)
- From linear to concurrent: When the processes and technologies are agile enough, leading companies move to shorter IBP cycles and in the long term even limit their number of meetings to occasions when exceptions occur that require decisions
- Consider your knowledge management succession plan: Determine key stakeholders within the business who will advocate and drive the change.What is the next step to prepare for NextGen IBP?
On 31 May 2018, Deloitte’s Integrated Business Planning team organised a Round Table: 'Get the most out of IBP in a digital, connected world.'
During an engaged discussion, the leading companies present at this meeting came up with a number of key take-aways on how to make IBP successful.
- The company’s opinion leaders should explicitly embrace IBP and the right processes and people must be in place – before starting with big technology implementations.
- IBP should focus on value and margins, but volume will always be important.
- Automate the regular planning flow, allowing people to focus on the real value-added activities and exceptions such as NPIs, promotions, and customer interactions.
- Planners need a different skill set for IBP – find the right mix of tech-savvy and commercially sensitive planners who can translate data into decisions.
- Dedicating time to IBP meetings ultimately reduces time spent on other meetings and alignment.
- A business case for IBP typically does not target big FTE impact, but is focused on the value levers of better decision making.
How we can help?
We work with our clients to develop strategies, define future solutions built on leading capabilities, and implement process and technology solutions. We are as strong in helping clients execute a plan as we are in crafting it. Because of our experience with the world’s leading Consumer Products companies, we don’t start a project with a blank slate – rather, we know which decisions will drive 80% of the necessary work. We combine and propose these decisions, along with pros and cons behind each lever, to accelerate any IBP project into the Next Generation of maturity and realise the corresponding benefits.