Integrated Business Planning - Introduction
This is blog 1 in a series of 9 on the topic Integrated Business Planning (IBP). In these blogs we will detail our IBP Framework, the importance of a proper IBP implementation and the benefits it can bring organisations. The topic of this blog: introduction to IBP.
Introduction
In our work as Planning Consultants, we see that companies are struggling with the new normal. The number of disruptions in Supply Chains seem to increase and do follow one and another more frequent. Shortages of raw materials, increased cost of transportation (due to Red Sea blockade), increased costs of labour & energy, a fluctuating demand from customers (inflation). Not only the external factors play a role, also internal factors are of importance. Supply Chain processes have not evolved much over the last years and we see companies struggling with the same issues as by teh end of the last century. To name a few: siloed planning, low forecast accuracy, inaccurate stock levels. We need to improve, especially in times the world has become more agile, more volatile.
Integrated Business Planning
Integrated Business Planning (hereafter: IBP) is a well known term in our Supply Chain world, but not well understood. Based on preparation work for this series of blogs, I asked several people to give me their understanding of IBP. And to no surprise, everyone gave me a different explanation. There are different views , different understandings of what IBP is. In this series of nine (9) blog posts, I want to explain what we at Planadigm see as Integrated Business Planning. Based on our experience, discussions with clients and IBP literature, we created our vision on IBP and we want to share this vision we you as a reader.
You might think “why another version?” or “why this effort if there is no consensus on IBP?”. We believe that IBP, with the right model and implementation, can make the difference between leading the Supply Chain and dominating the market or following the leader and running behind. With the right vision, shared across all departments within your organisation, you can make the difference. Indeed, IBP is not purely a Supply Chain or Finance exercise. It starts with the strategy of the organisation. This strategy needs to be fully understood by all departments like Sales, Marketing, Finance, Procurement, Supply Chain, HR. If one department is not aligned, you will get the very familiar discussions on the value of specific KPI’s. For example: Finance might want to lower the levels of inventory, it frees up cash! But if the strategy of the organisation is to become more Customer Intimate, the focus should be on the Service Level Agreements (SLA) and therefor you need to keep certain levels of stock.
As you can see by this simple example, a shared vision on IBP and the implementation across all organisations is essential for IBP to take full effect. With our IBP Framework we want to shed some light on what is needed for a successful implementation to reap the benefits. Based on the strategy of your organisation, you want to become the leader in your business, to be able to be proactive and to dominate the market…instead of follow the rest. The leader defines the market and therefor gains the most benefits, the rest needs to follow and has to share the remaining benefits.
IBP Framework
The implementation of IBP in your organisation is not an easy exercise. You need C-level commitment, a long term focus, commitment from all departments and regular check ups on progress. It is a journey your company will take, but implemented well, it will give you long term benefits! Like better margins, higher returns, increased productivity, aligned departments. Our IBP Framework consists of several parts:
- Main components
- Strategy
- Finance
- Operations
- Processes
- Drive
- Align
- Verify
- Control cycle
- Plan
- Do
- Check
- Act
- Resources
- People
- Processes
- Tools
- Analytics
- External forces
- Competition
- Social & Economics
- Risks & Opportunities
- Laws & Regulations
- IBP Maturity level
Each will be explained in more detail in the next blogs, so I advise you to follow our website and LinkedIn page to keep track of our updates. We will post our IBP blogs in a biweekly cadence for the next weeks (including this blog post) based on these topics:
1. Introduction IBP (this blogpost)
2. Strategy
3. Finance
4. Operations
5. Plan – Do – Check – Act
6. People – Process – Tools – Analytics
7. Competition – Social & Economics – Risk & Opportunities – Laws & Regulations
8. IBP Maturity
9. IBP Roadmap – closure
Resilience
The main components of our IBP Framework (topics 2 – 4) are covered first in this blog series. This is the core of the IBP Framework and involves all departments within your organisation. It is a logical breakdown from strategic level (Strategy) to tactical level (Finance) to operational level (Operations) and the link back to strategic level. The outcome of the process (Operations) need to be checked and verified with the strategic direction. This mechanism guarantees a constant adjustment of of the actions to be taken to stay on course of the strategic direction. The continuous improvement loop (Plan – Do – Check – Act) makes sure the organisation stays on track and learn from previous actions.
The IBP Framework start with the strategy. A clear vision of the direction the company needs to go, enables the organisation to make decisions on all levels (strategic – tactical – operational). Is the decision we need to take in line with the strategic direction? If so, we can move forward, if not, we stop stop any related activities. The corporate strategy becomes a beacon in times of disruptions, turmoil and uncertainty and guides all actions and decisions in an organisation.
The power of a well implemented IBP Framework and adherence is unprecedented. In times of greater supply chain uncertainties, more agility across organisations, more disruptions, you need to become resilient. Resilient means you are able to respond quickly to what happens in the market (agility) and bounce back better compared to you previous state. This means your organisation needs to be a very well organised, aligned and work as a focused and well organised machine. This can be done by implementing the IBP Framework. The implementation is a journey and might take a while, but the benefits are worth the investments. This framework provides a first high-level insight in the approach to get started and implement a true IBP way of working.. The earlier you will start, the sooner you will start to reap the benefits.
And the benefits can be huge. Companies that took on the IBP journey report many advantages like:
- Improved bottom-line results: +6%
- Optimised inventory levels: -25%
- Increased forecast accuracy: +20%
- Improved on-time delivery: +10%
Let’s go! Our next blog will cover this topic: Strategy.
