ASSIGNMENT 22: INTEGRATED BUSSINESS PLANNING

 

Ekateryna Calderón Hernández                                                                                               NUA: 391880

INTEGRATED BUSINESS PLANING (IBP)

 

What is “Integrated Business Planning” (IBP)?

Is a strategy for connecting the planning functions of each department in an organization to align operations and strategy with the organization’s financial performance.

Is a process for aligning a company’s business goals with its finance, supply chain, product development, marketing and other operational functions, powered by a companywide culture that’s all about delivering the speed, savings and responsiveness today’s consumers demand while managing risks.

 

What is “Sales and Operations Planning” (S&OP)?

It is a planning tool for the management of the logistics chain that gathers in a platform the demands of marketing, of the sales area, for example, with production budget planning.

Supports supply chain management with IBP, the company's real-time cloud-based supply chain planning platform supporting demand response, supply planning and inventory management oriented features, with supply chain analytics to support decisioning.

 

What are the similarities between IBP and S&OP? Mention and describe them.

They’re two work planning methodologies that both seek to unify and plan the business from sales to operations. And both require supporting data, which helps to align forecasts with functions and guide managers to make planning decisions.

What are the differences between IBP and S&OP? Mention and describe them.

IBP is the evolution of the S&OP. It seeks to improve alignment and collaboration throughout the business by using the financial element as a continuous review and validation mechanism throughout the process.

The key difference between S&OP and IBP is that IBP starts at the executive level.

There are differences on various levels: Objectives, focus, affiliate department (Owner), features and finally connectivity. IBP starts with the organization’s financial forecast. As a tool to move the organization forward, it is completely different from S&OP, which originates from the supply chain and its main goal is to adjust production and sales.

While S&OP is seen as a process of helping to manage the demand and supply of manufacturers by creating a single production plan in cooperation with the sales and operations department. In turn, the IBP is similar to a business planning process that extends the principles of S&OP throughout the supply chain, product and customer portfolio, customer needs and strategic planning to provide a seamless management process.

 

How does the IBP process work? Describe in detail.

The IBP process considers a time horizon that ranges between 18 and 24 months, since it brings together strategic aspects of the business and includes the following steps:

 

1. Product management review: It focuses on the review of the life cycles of the products and the market strategy around each one of them and also includes their profitability.
2. Demand review: Your objective is to develop an unrestricted demand plan that incorporates financial elements such as the cost of serving different customers and channels.
3. Supply Review: Focuses on developing long-term capacity plans and short-term production requirements, as well as production and distribution costs.
4. Integrated reconciliation: Evaluates the scenarios proposed, as well as the financial impact of the agreements reached between the areas of marketing, sales and operations. A final agreement is also reached regarding the supply chain plan.
5. Business Review: This meeting seeks to present to the top management of the organization (general management level) the agreed plan and its financial effects on the business plan of the company.

What are the challenges of IBP?

• Working to eliminate unplanned events (often known as ‘fighting fires’ in our day-to-day work lives) that are caused by a lack of focus on detail in the plan itself.
• Building trust across different business functions, especially in larger organisations. Demonstrating the benefits of sharing plans can be a difficult task.
• Correctly managing product lifecycles, and a willingness to take them out of the product portfolio when they are no longer contributing to the bottom line.
• Not utilising complex ERP systems when they are available

Which are the most common difficulties/problems when implementing IBP? Mention them and provide examples.

• Lack of commitment in some of the necessary departments.
• If the S&OP process is not yet in place or stable, IBP is too big a step.
• The objectives and the forecasts are mixed.
• Information not available.
• Discussion of numbers rather than underlying assumptions.
• Discuss only a short horizon rather than a period in between.
• Plans and discussions too granular.
• A deep understanding of trade-offs is lacking.

 

What are the advantages and disadvantages of IBP?

PROS:

• Solid financial integration.
• Inclusion of strategic plans, initiatives and activities.
• Solid product and portfolio review.
• Improved simulation, modeling and scenarios.
• Improved visibility and management of operational risk.
• Identification of gaps and better decision making.
• Easy and efficient translation of added plans to detailed plans and viceversa

 

CONS: Before commencing with a technological solution, it's important to consider an integrated theory and methodology first. Transitioning from a vertical to a horizontal organization has profound implications; leadership is bound to face strong opposition to radical change. Also:

• Errors handling
• Needs more data entry flexibility.

What is the importance of IBP nowadays?

• Alignment and accountability. Instead of spending time and energy debating which plan to follow, all stakeholders agree on one plan—and understand their role in accomplishing the goals of that plan.
• Better decisions and actions. The structured process that comes from a well-built IBP approach enables companies to focus on making better-informed decisions and taking the best action based on those decisions.
• Increased visibility. IBP enables companies to incorporate insights from supply chain projections, financial projects, and strategic plans. And the more insights incorporated into projects, the better informed a company’s decisions will be, which, in turn, will be more likely to contribute to business goals like profitability and efficiency.

References:

• ·         Ali, R. (march 16, 2021) ORACLE NETSUIT. What Is Integrated Business Planning and Why Is It Important? https://www.netsuite.com/portal/resource/articles/business-strategy/integrated-business-planning.shtml
• ·         Slimstock (december 11, 2021). IBP VS S&OP: ¿CUÁL ES LA DIFERENCIA? https://www.slimstock.com/cl/ibp-vs-sop-cual-es-la-diferencia/
• ·         Martin, M. (october 20, 2017) Conexión Esan. Planificación de la cadena de suministros: desde el S&OP hasta el IBP. https://www.esan.edu.pe/conexion/actualidad/2017/10/20/la-planificacion-de-la-cadena-de-suministros/
• ·         Barba, J. Anaplan. How to succeed at integrated business planning. https://www.anaplan.com/blog/succeed-integrated-business-planning/
• ·         SCMDOJO. (february 2021) S&OP Vs IBP – What is the Difference? https://www.scmdojo.com/sop-vs-ibp/
• ·         Gunn, L. SIX DEGREES. IBP - challenges and best practice. https://www.sixdegreesexecutive.com.au/blog/2014/10/ibp-challenges-and-best-practice