Why IBP is the next big thing
Integrated Business Planning (IBP) is a management process, which enables effective decision-making and control throughout an organisation. Although the leading organisations have been using IBP for the last 15 years many businesses are only now discovering the process. So why is IBP the next big thing?
1. It is a proven process
IBP has evolved over more than 30 years. Rooted in sales and operations planning (S&OP), which coordinates the commercial and supply processes and as a result is often referred to as Advanced S&OP. However, there is a difference. It doesn’t just align demand and supply, but aligns all the key functions of an organisation – marketing, R&D, operations, logistics, finance, HR and even IT – in one overarching plan.
2. Those who already use IBP are seeing significant returns
According to an Aberdeen research study (July 2010), enterprises that strategically deploy S&OP programs outperform, by an average gross margin of 20%, companies whose approach to S&OP is more tactical and less integrated. Evidence illustrating the benefits of IBP in large corporations, as well as small and medium sized enterprises, abounds.
For example, Melbourne, SME meal delivery service, Community Chef, reduced lead times by 20%, refined its manufacturing model and substantially improved its value proposition.
3. IBP simplifies annual planning
The annual plan or budget requires time and resources, and is daunting to all, particularly those in Finance. IBP forms one integrated operating plan and by aligning the strategic and tactical plans of individual business functions, on a monthly rather than annual basis, it provides a starting point for the next financial year. By the fourth quarter of the current financial year, business plans for the next will have been seen nine times. This familiarity removes much of the guesswork, cutting cost and stress and reduces the burden on the finance department.
4. It eradicates the waste that arises from multiple plans
In an organisation where silo mentalities exist, there will inevitably be waste. By encouraging communication, discussion of the truth ‘as we know it’ and establishing a single plan, IBP discourages games-manship. Using a top-down bottom-up approach, IBP helps the company pull in one direction to achieve targets.
5. IBP is the perfect platform for innovation
In the age of the consumer, innovation is key but requires control, flexibility and visibility. With a 24-36 month rolling horizon, IBP unlocks a holistic view of the market and customer demand, allowing an organisation to anticipate long-term trends and provides the fundamental integration required between product, demand and supply teams.
6. The tools now exist to support the process
More software providers are introducing solutions designed to support IBP. By implementing IBP using an integrated approach – and in the correct order: people, processes and tools – the software can provide massive competitive advantages. Supported by data integrity, software tools enable enhanced scenario planning in the extended planning horizon, managing risk and contingency and providing a powerful mechanism for driving the business towards business excellence.
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