First, let’s begin by stating the definition of integrated business planning (IBP). While used across vast industries, it also can’t be denied that it’s not exactly the most popular term in the business sector. To set it straight this early on, IBP is an enhanced form of Sales & Operations Planning (S&OP) that includes the entire value chain of the business that uses it.
The whole premise of IBP is that it ties together profit-related and strategic business objectives with short and mid-term operational planning decisions through a cross-functional scenario analysis.
Despite its importance, so many businesses still struggle to get started with IBP. Likewise, once they’ve created it, the struggle may not end there since they may find it challenging to integrate it into their entire operations.
To further convince you that it’s definitely worth giving business integrated planning (IBP) a second look. Here’s a brief guide to help you get started as you enrich your knowledge with more information and realize that it’s ideal and feasible for your business.
What business Integrated Planning (IBP) Does
Compared to S&OP, business integrated planning has various advantages. To begin, one of its most significant benefits is that it assists in aligning all of an organization’s different divisions and activities toward a common purpose. This results in ‘soft’ benefits such as increased trust and confidence.
Companies using IBP in their system can expect the following benefits:
1. It Supports Business’ Long-Term Strategy
S&OP methods are most commonly used to support medium-term planning strategies with a maximum period of 18 months. IBP, on the other hand, operates for a longer time to coincide with long-term strategic planning. This includes budgetary planning, as information is entirely compatible with budgets.
2. It Increases Visibility
The term ‘visibility’ refers to supply chain and strategic plan projections. Cross-departmental visibility will improve, allowing those projections and plans to be consolidated into a single corporate strategy, both on your own and with the help of professionals such as a business development consultant. This has the additional advantage of potentially generating better and more robust financial ventures.
3. It Measures Performance In Financial Terms
IBP can evaluate financial performance goals and achievements, mainly when they’re applied from a financial standpoint. This proves to be a significant advantage for firms because it allows them to track their financial objectives. Keep in mind that when your business has that information, effective business management can now be within reach.
4. It Consistently Delivers Outstanding Results
IBP leaders have consistently shown timely and well-delivered outstanding results. This brings in improvements in both the bottom-line and top-line customer service of a company.
5. It Fosters Better Supply & Planning Decisions
Supply chain planning is one of the most critical components that firms must understand. Poor supply chain planning can have disastrous consequences, affecting corporate operations.
You can’t meet client requests if you don’t have enough supplies at any particular time. Not only will you lose economic potential, but you’ll also lose consumer satisfaction. On the other hand, if the supply is overabundant, there will be a lot of waste and surplus storage. This can cause unduly high warehouse operating expenses.
Additionally, if you’re finding it challenging to have optimal supply chain operations, that’s when IBP will come in handy. The information it carries can help support supply chain planning. Now, it’s possible to identify decisions that can improve the bottom line, influencing supply chain planning while enhancing profits.
6. It Improves Accountability Throughout The Organization
Accountability means that you can immediately identify failure to deliver and unsatisfactory performance. That way, they may be addressed before the problems worsen. Better accountability is a natural result when each department has a better knowledge of its plans and responsibilities.
What Are The Basic Elements Of Business Integrated Planning
IBP’s ability to integrate its finances with its business operations is critical. Other fundamental requirements, on the other hand, are as follows:
1. Marketing & Sales Strategy
This is what closes the loop with strategic planning and market research. The sales strategy can be considered successful when the products and services are sold at the expected level.
2. Demand Forecasting & Predictive Analysis
This refers to the use of qualitative methodology, which is regularly checked against the actual sales results.
3. Market Research & Strategic Planning
With this, all documents needed to develop the research and planning methods are available to all employees who need them. Moreover, goal-setting and strategy processes are also well-achieved, without any exceptions.
4. Profitability Analysis
The profitability of a business is shaped by specific financial metrics identified as the cost of goods sold (COGS), net and operating profit margin, and the business’ cash flow. Furthermore, a more accurate profitability analysis can be achieved when all this information is adequately identified.
What Are The Common Pitfalls
A discussion on business integrated planning can’t be complete without discussing the pitfalls and risks when applying it to your business. In addition, awareness of those risks can give you an idea of what needs to be avoided for your IBP efforts and pursuit to be successful.
To start, here are some of the common risks related to business integrated planning:
- A lack of commitment comes from the departments responsible.
- A thorough understanding of what the trade-offs may be lacking.
- Targets and forecasts can be mixed.
- Decisions and plans may be too granular.
- Information may not be readily available as you expected it to be.
Business integrated planning may be highly technical, but it’s not hard to master, especially when you make it a clear-cut goal to learn and adapt for your business. In essence, it combines classic planning, cloud-based solutions, and modern machine-learning heuristics to make better predictive functions.
If you’re keen on applying IBP in your business, it would be best to consult the experts to guide you through the right process. When you have an expert team working to implement this, you can be sure how IBP can benefit your business and yield exemplary results in the long run.