Make Better Decisions with Integrated Business Planning
By Leah Smith
Integrated business planning (IBP) is a process that has evolved over the past 30 years and is now poised to surpass sales and operation planning (S & OP) in terms of popularity and effectiveness. IBP makes it easier for organizations to take control over the supply chain process by empowering everyone involved to make better decisions. This is especially evident in annual planning. In the past, creating the annual budget or company plan required significant time and resources. Because IBP incorporates a monthly process, it is better able to align tactical and strategic plans from individual business functions into one that is entirely integrated.
IBP Helps Supply Chain Leaders Meet Pressing Business Challenges
While the national economy has bounced back well from the recession at the end of the last decade, it can still be unpredictable. That means businesses must find a way to operate successfully in an atmosphere of uncertainty and increased risk. This can put tremendous pressure on organizations to grow and earn large profits for their shareholders. Supply chain capabilities such as cost-to-serve analysis and segmentation help to improve the performance of management as well as improve the way that companies monitor and manage risk.
The most effective IBP programs are fully automated. This helps to prevent and reduce many problems associated with the supply chain, such as quality issues, product disruptions, and supply shortages. An automated IBP program enables supply chain managers to leverage the power of programs such as cost-to-serve and segmentation, which in turn leads to greater profits.
Eliminating Information Silos
The term information silo describes parts of a supply chain that operate as separate functions rather than an integrated whole. This was common practice before IBP first came on the scene in the mid-to-late 1980s. Integrating an IBP program makes it possible to eliminate these information silos and build greater collaboration among colleagues involved in supply chain decisions. With these barriers gone, supply chain managers will realize greater value at every stage in the process.
By receiving input from dozens of people involved in the progression of the supply chain, IBP makes it possible to remove information from isolated silos so it is available to anyone in the business. Increased input also allows for greater efficiency in establishing a selling price, revising products, and expanding the geographic reach of the organization.
The Danger of Leaving Finance Out of the IBP Equation
As IBP integrates with or replaces S & OP, some supply chain managers are realizing that they are not reaping the full benefit of it. That is because they failed to take some or all of the following financial controls into consideration when developing their program:
- Not tracking progress closely enough
- Inventory valuation and disclosure
- Accurate volume and revenue forecasts
- Not allotting enough time or resources to meet reporting mandates
The good news is that when done correctly, IBP enables informed decision-making in financial matters along with strategic planning for the entire operation. Integrating the financial element is often the final step in removing barriers that keep valuable information siloed.