integrated business planning in supply chain

BI, Analytics & Reporting

- 4 min read

Integrated Business Planning in Supply Chain explained

IBP (Integrated Business Planning) is a process for aligning teams within the business to achieve organizational goals. It integrates key business functions, including Finance, Supply Chain, Product Development, Marketing, and other integral operational departments. IBP’s success is determined by strong company culture and the support of executive leadership – who are concerned with managing risk, accelerating delivery, and driving cost management while responding to the demands of today’s consumers and customers. 

For any organization that wants to get the most out of profits and lessen the risks correlated with growth, it deserves a try. It stands to reason that any business unwilling or unprepared to change its culture risk the expense of goods, higher purchase prices, and lower profitability. Meanwhile, willing and ready competitors will move ahead and reap the rewards. 

This article explores why IBP is important, how businesses can map IBP transformation, and how Supply Chain can largely benefit from this approach. 

Why is Integrated Business Planning in Supply Chain important? 

When companies adopt IBP as a culture, they:  

  • find functional benefits 
  • encompass more responsive customer service 
  • reduced the costs of holding costs 
  • improve demand fulfillment 
  • shorten time to market for new products 
  • improve the correlation between demand planning and replenishment. 

Underpinning the process for adopting IBP are emerging technologies that supplement planners with insightful tools to drive understanding and highlight impact via advanced analytics. These technologies offer a reliable, data-driven way to improve business planning and ultimately drive more profitable decisions. 

Consider this example: 

A business that launched in 2018 found a niche in opening a set of restaurants. However, the consequences of the 2020 pandemic slowed operations significantly, and the business suffered. The founders decided to reshape. Instead of shifting existing marketing, the company set out to remodel its business and operations strategy.  

A top-down double-check across its operations led them to realign Research & Development, revenue and profitability analysis, Marketing and Sales strategy, demand forecasting, and Supply Chain planning. Even though the company culture was already robust with innovative thinking, they understood that the link between strategic planning and daily operations could be improved. To guide this final thought, they signed a new Head of IBP to align sales and marketing processes and demand planning while also considering financial resources and objectives. 

Since an IBP model gathers data from across the company, leadership needs to become better at predictive analysis to guide better planning. When procurement predicts material non-availability, supply and operations can fine-tune before this shortage affects the customers. Leaders must watch the longer-range strategy while frequently evaluating and communicating financial and operational outcomes. 

Alignment and accountability 

There are other areas a Head of IBP will want to explore, such as synchronization with financial planning, analytics, and Supply Chain optimization. In doing so, it is more likely to achieve the goals required for business-wide success. If not, they risk aligning to departmental rather than overarching corporate goals. 

A company’s goals should synchronize across Operations, Supply Chain, Finance, HR, Marketing, and Sales. The executive team must evaluate all plans across a single version of the truth to guarantee an alignment with strategy and actual feasibility. This approach accelerates the synchronization of the teams, increases impact, outlines a financial plan of different revenue streams and defines the market-focused goals to execute. 

Companies are adopting IBP to improve Supply Chain and Logistics processes and end-to-end, top to bottom thinking. With IBP, new insight and visibility are delivered at both global and local levels, ultimately impacting the decisions made to achieve financial goals. Design triggers and alert sensors automatically collect and warn when a significant deviation from the plan is detected. 

Departments focus less on their own needs and consider actions through the lens of corporate goals and objectives. The company must turn its data into timely information to guide better, quicker decisions. All departmental leaders participate in monthly business reviews to measure the progress in achieving company goals. 

Success metrics for the IBP process 

First, it is vital to get all participants engaged in the cultural journey the business is on so everyone contributes to the single version of the truth. Responsibilities are clearly defined, and objectives and goals are visualized, measured, and managed. 

Business decisions are based on reliable data to help manage and maintain the right KPIs. These are dependent on the integrated dimensions of finance, product portfolio, demand, and supply functions. 

Each function is responsible for delivering accurate numbers and predictions, representing less risk for the C-Suite and finance team. As a result, decision-making is enhanced, the results accurately measured, and critical accountability created. 

What are the benefits of IBP in Supply Chain? 

An IBP process fosters openness and trust, resulting in a deeper and more confident engagement that encourages employees to shift an established culture to one that incorporates cross-functional collaboration. 

For the organization ready to welcome IBP, there are direct and visible connections between purchasing, production, and inventory to marketing and sales that enable financial objectives and the effective utilization of resources. The main benefit of an IBP culture is that materials are bought at the right price, at the right time, and in just the correct quantity to fulfill market demand while managing costs and corporate expectations. Additionally, a successful IBP model increases collaboration and trust amongst departments, leading to value-added decision-making.

Learn six ways to enhance your Integrated Business Planning with analytics

As businesses look for their Supply Chains to enhance and extend their business goals and objectives in an increasingly competitive marketplace, Supply Chain executives need rapid insight and understanding of trends, constraints, and opportunities for first-mover advantage. Supply Chain visibility is key, and the latest data must be used to deliver predictive insights that are leveraged for timely, profitable decisions. Learn more in our eBook.

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