Industrial Engineering

Take a Look at Integrated Business Planning
Institute of Industrial and Systems Engineers – Volume: 49    |    Number: 4

Integrated business planning (IBP), which is becoming a cornerstone discipline for visionary companies by aligning strategic plans into operational plans. IBP can generate a single holistic plan that seamlessly connects corporate performance management, financial planning processes and operational planning systems. This increases business alignment by sharing performance strategies and quantifying business risks so enterprises can adapt rapidly.

While sales and operations planning (S&OP) is a journey, IBP is a defined business process. Typically it begins with an improved demand signal to provide adequate reaction time for shifting sales opportunities. The next stage connects and aligns demand, supply and capacity plans for improved service levels. The last stage extends the process to include key customers and suppliers and provide executive “what-if” scenario modeling for operational decision-making. What-if analyses allow users to evaluate alternate strategies, policies, risks and supply chain constraints.

Cross-functional analyses allow managers to approach planning from multiple business angles (e.g., availability, demand, product, supply), including upside and risk scenarios. This helps quantify key trade-offs and reach a consensus. For demand and sales planning, best practices would include the below elements of IBP. First, devise a preliminary what-if analysis of the sales forecast. Examples include executing a trade promotion campaign or providing special deals for customers. Once the scenario is entered, users re-create the plan considering system constraints. Optimizing the supply plan for profit and cost can compare results to multiple scenarios to discern the best outcome. This saves significant time and allows for more realistic evaluations than simulation-based strategies.

Root cause analyses help determine key performance drivers. For example, capacity availability may inhibit how well demands are met, or force overtime and build-ahead (resulting in higher cost and lower campaign profitability). Business is more than just aligning supply to demand, and IBP helps ensure that corporate assets align capital investment and human investment to a long-term strategic objective. IBP aligns those processes that set the business differentiators and strategic initiatives. S&OP may raise long-term positioning opportunities, but IBP puts the capital investment behind them to get complex projects completed.