Integrated Business Planning

By Demand Solutions

In most manufacturing and distribution industries, it is assumed 50% of forecast errors are unavoidable. What if we could reduce that number to 20%? What difference would that make to the bottom line?

To achieve these results, companies are following the lead of consulting firm Oliver Wight (inventors of the S&OP concept) and are embracing a new approach called Integrated Business Planning (IBP).

IBP is a strategy that involves not only stakeholders but the entire supply chain within the planning process and all of the business decision making.  For example, if Product Development is changing a design in a way that will make parts obsolete, the supply chain team will contribute to those discussions and will receive information that helps them plan for the impact.  If Marketing is running a special promotion which will likely increase sales, the supply chain team can give its input on expected use of raw materials to meet the demand.

IBP is about seeing challenges from more angles to enable better decision making.  Supply chain problems aren't just "supply chain problems", they are "business problems".  As such, all decision-makers need to be accountable for solving them.

What Integrated Business Planning Requires of Us

With IBP, the goal is to develop a single operating plan for which the management team will be held accountable. This plan is created based on information about demand, supply, new product development, strategic projects and financial plans.
This, of course, calls for a technical transformation as well as a strategic one:

• Information needs to be easily accessible throughout the IBP process.

• Business plans need to have input and review from many collaborators.

• Partners must do more than react; they need real-time demand in order to adjust their own chains to meet it.

In these and other ways, IBP differs from the S&OP approach that has delivered so many noticeable productivity benefits to supply chain companies over the past 20 years. It's time for a change.

For more interesting reading, download our latest free white paper: "Achieving Supply Chain Excellence."