Integrated Business Planning
Often times, there are problems that arise between the financial and supply chain operations. This can be due to many factors. Some of those can be due to different ideas on forecasts and budgetary problems. The corporate budget often becomes something that supply chain managers want to extend as much as possible while the financial process managers want to keep costs as low as possible. Enter: integrated business planning. Integrated business planning should be what solves the issues that arise between the finance departments and supply chain processing departments.
Integrated business planning, also referred to as advanced S&OP, is a strategic plan that “extends the principles of S&OP throughout the supply chain, product and customer portfolios, customer demand and strategic planning, to deliver one seamless management process” (Cheater, 2018). It is the future of business models, because it is a more inclusive and collaborative planning process in which everyone works together to discuss the exact needs and budgets of the firm. You can read more about it at the first link below, which is from a recent blog speaking about the newest findings about this revolutionary process.
It is a difficult concept to understand. It is hard to realize exactly how many moving parts there are to a business. There is marketing, R&D, pricing, planning, and more. To better understand what IBP is, it is attached in a YouTube link at the bottom, which takes you through the basics of integrated business planning. It also asks pertinent questions. These questions include things like what is happening right now, what is going to happen, and what to do about it?
Another thing that integrated business planning does is enable greater flexibility and improve timing. It allows budgeting and forecasting to be more accurate when the company works as a whole. Another very informational video that I have found on this new and improved form of sales and operations planning is also attached at the bottom. It discusses many areas of this. Following with the difficulties of connecting the financial aspects with the strategy aspects, it talks about the specific parts that each sector is trying to perfect. Here is a photo of that part of the video:
It also goes on to discuss the exact reason that integrated business planning does this, and to discuss the differences between regular S&OP and the actual IBP. A graphic of that part of the video is also here below. It encompasses all the different moving parts to this cyclical work engine that is integrated business planning. While regular S&OP does not have all this, IBP includes a myriad of ways in which the company needs to follow that function. Here is that image below:
Both the finance and supply chain process managers in a firm have their own goals. Finance is very focused on the bottom line while supply chain professional are trying to get their products to their customers as fast as possible while still turning a profit. Even though it is not easy to implement these integrated processes, and they can become complex, it is pertinent to keep moving forward with conducting a harmonious business where every one in the firm is on the same page, and they have similar goals. Both the finance department and the supply chain professionals in the firm must create realistic and sensible projections. If the firm can master this special skill, they will have a much higher chance of being profitable.
Finance and supply chain operations: Can IBP bridge the gap?
https://www.youtube.com/watch?v=I_mRXrDrPDM
https://www.youtube.com/watch?v=p9bpSoovUFI
Connor,
This new hybrid of a deeper form of S&OP Planning is truly interesting. In my opinion, nothing will ever be perfect, and therefore, there is always room for improvement. I think that is the mindset that Integrated Business Planning holds. Online I found a handout that EY, a well-known accounting and consulting firm, released about how they handle Integrated Business Planning from a consulting standpoint.
EY discusses that with such a flexible market and rapidly changing global trends, the old model of S&OP was too rigid to adapt quickly enough. Without this flexibility, a business will then find itself losing touch with their market. Integrated Business Planning is basically the new model for a new and globalized market.
EY outlines 5 traits of an ‘effectively led’ Integrated Business Plan.
1. The plan should not undermine a firm’s purpose, but instead compliment it. EY listed strong statistics in favor of companies that held true to their purpose versus those that didn’t. I believe this is an important factor to take into account, especially when people today have strayed away from solely quantitative investing, towards a more holistic approach that looks at all aspects of a company in order to analyze it.
2. Integration must be done at all levels of the management cycle. Connor, I think this is something you talked a lot about in your post. Ensuring this principle allows the firm to keep track of their short-term and long-term strategies throughout the planning process and cohesively tell a ‘story’ with their plan of action.
3. Choose a couple of critical measures to use as your benchmark to measure success and use those consistently. I think today with a growing financial system, it is so easy to get caught up in the little changes that we overlook relative success. By choosing a couple key metrics to focus on, management is able to hone in on actual progress and not get caught up in trivial day-to-day changes, which are certainly inevitable.
4. Our value drivers, meaning key aspects of the company that drive its bottom-line, should be a bridge between operational strategy and this business plan. The example given in the report is that if your first tier drivers are operating income and average capital employed (used), then your outcome measure should be Return on Average Capital Employed. This make sure you truly are measuring your day-to-day operations and not fluctuations in something else.
5. Lastly, whenever possible, old strategies should be enhanced and overlapped instead of developing completely new strategies. This stems from the idea that all of these areas of business have already set goals and strategies for themselves. There is no sense in recreating the wheel if you just need to switch the direction that the current wheel is moving in. This allows different tiers of the business to remain knowledgeable about their work.
I think this idea of Integrated Business Planning is extremely logical and just a step up from what we learned in class about S&OP. In an ever changing business world, it never hurts to be prepared and flexible. I think EY has outlined a great argument for the use of this planning model and I strongly believe, with you, that this planning model is the future.
http://www.ey.com/Publication/vwLUAssets/EY-Integrated-Business-Planning/$FILE/EY-Integrated_Business_Planning.pdf
Hey Connor,
This is a great topic you’ve decided to focus on, and is one that is relevant to all fields of business. Within large companies there are often agency problems. Because different positions within a firm have different criteria for success there may arise a conflict of interest between an employee in one position and another when they each try to act in their own self interest.
The topic which you have written about; Integrated Business Planning, allows a company to realign their processes from top to bottom in pursuit of a goal. By bringing together operational planning and financial departments who often approach marketing goals from opposing viewpoints, all facets of a company are able to work together to reach sales goals in an efficient manner.
We have thoroughly discussed S&OP in class and know that this process is essential for a firm to run smoothly in a lean manner. However, Integrated Business Planning manages to improve upon existing Sales and Operations Planning methods. By introducing aspects of financial planning to existing S&OP methods a more integrated viewpoint is created which more accurately reflects the internal state of the firm. This allows executives to make better decisions and be more profit-oriented when planning their processes.
This is a great topic that addresses a holistic problem within any business, and am eager to see how IBP is discussed in relation to S&OP in the future.
https://www.logility.com/blog/hank-canitz/december-2016/what-is-integrated-business-planning
Connor,
Thanks for your explanation of Integrated Business Planning. You outlined a really important problem that a lot of firms face: how to get all business areas and departments to work together and achieve a few overarching goals. I briefly did a Google search for IBP just to see what else I could find quickly, and I was able to learn a bit from KPMG.
The intro line to the post mentions risk management in relation to successfully implementing one of these systems. This summer I will be working in the risk management department of a bank in New York, so this was something by which I was particularly struck. It’s great to see how this class ties in so many business functions and can help to improve each.
IBP is definitely something worth thinking about for businesses that find themselves using different systems in different departments. The ability to consolidate and synergize operations is key in driving the bottom line.
https://advisory.kpmg.us/managementconsulting/function/finance/integrated-business-planning.html
Connor,
Your post sparked my curiosity to find out how companies are changing and evolving in order to adapt to these new trends in management. It seems like in order to be an order winner in an industry the company must be ahead of the game and ready to face new challenges in management. To be one step ahead of the competition, enterprises need to improve their S&OP management.
One tool to improve management processes is through the utilization of Integrated Business Planning, just as you mentioned. But since we are in the 21st century and we have technology on out side, we can use a software to help us out with this. Doing some research I found that SAP offers an Integrated Business Planning software. This software allows companies that install it to store all their information in a cloud, run real-time scenarios and simulations as well as creating supply plans based on prioritized demands and supply chain constrains.
Companies like Microsoft, Corning and Monsanto have adopted this system and through the use of the real-time supply chain planning features they were able to respond to the market’s demands and expectations without losing profit or customers.
https://www.sap.com/products/integrated-business-planning.html
Connor,
I enjoyed your post and thought you introduced some very interesting concepts that tie back into class well! When reading your post, I could not help but think about the massive companies all around the country that are able to move forward and grow with so many huge moving parts of the organization. To me, one of the most important pieces of this ever-changing puzzle is a company mission statement. Companies that uphold a sturdy and widely adopted mission statement are able to move as one singular unit despite all the various departments in the hundreds of offices. In one article I read, the author writes, “The mission statement sums up your company’s direction and outlines goals for what you and your management team hope to accomplish, both in the business and the industry you serve” (http://smallbusiness.chron.com/reasons-mission-statements-company-15701.html). The idea of the company having a clear direction and goals is vital to the success of any firm, but especially companies that span multiple continents with hundreds of offices.
One real world example I have experienced was when I was an intern for Cushman & Wakefield, a commercial real estate company. I worked in an office of about 40-50 people, however the company employs 45,000 people all across the world. On my first day, I sat down with the HR director for the office and she walked me through the history of the company, what the company does today, and most importantly, what the future looks like through the eyes of management. This is a universal presentation she delivered to me, which make me think, “How many interns and new workers all across the country and world are being delivered this exact presentation?” At the end of the day, it was incredibly helpful to see where management believes the company can go and how they intend to get there. With so many intricate relationships throughout the business that you pointed out, it is incredible that some of this huge companies are able to utilize their resources as well as they do.
Brian,
This is also a crucial point that my research on Integrated Business Planning upheld. One statistic mentioned that enterprise-wide focus and activation of purpose provides 900% more in shareholder returns over 10 years, relative to the S&P 500.
I personally think it is really special to know where companies started and how they got to where they are today. This is something that seems to be increasingly pushed in interviews as well. Firms will ask you who top leadership for the company is, what the company strives to do, and will even ask you specifically how you would integrate well into this specific company. When preparing for interviews I always make sure to research the purpose and mission of the company to incorporate their main values into what I speak about. As people’s skill sets increase, what begins to set us apart and keep our competitive edge, is our ability to look beyond the numbers and the tasks set before us and embrace WHY we are doing what we do.
Thanks for sharing your personal experience with this!
Connor,
It seems like Integrated Business Planning is one big kaizen event that brings executives from all sectors of a company together to work as one in an effort to meet a common goal. As you said, each department will have their own goals to stress, which is why opening the door for compromise through IBP is so important and the future for business. Check out example 4 in the link below as a prime example of IBP and compromise.
http://www.businessinsider.com/when-to-compromise-2013-10
Compromise works … “When it allows the parties involved to temporarily lower their ambitions and meet each other at a lower but mutual level, from which they can start to build together.” In the example, one manager is in charge of product development while the other manager in the same company is in charge of distribution. When the product development manager is having trouble bringing his product to meet quality standards and needs more time to test, the distribution manager grows uneasy. He needs to push the product out the door as to not upset the customers. Through IBP, both managers are able to reach a compromise and launch an unfinished, test product for select customers. From there, normal operations can resume. Without IBP, a massive miscommunication that could end up hurting the company financially becomes much more likely. As your last line states, if firms can come together and plan as one, they will have a better chance at being profitable.
Thanks for your post Connor, and thanks for this insightful reply Nicholas. It seems that integrated business planning is certainly something firms will want to look into in the future. As we have been discussing in class, S&OP is crucial to a firm’s success. This has begged the question from me of what would happen if these practices went further. I like that Connor brings about a way to interactively bring change to the management processes within the organization. Integrated business planning seems legitimate. However, it seems as if there are some out there who may disagree. Check out this article that explains why IBP is so much more than just a “marketing hoax” (http://www.industryweek.com/software-systems/integrated-business-planning-not-just-marketing-hoax). Playing on the assumption that IBP is “nothing more than a rebranding of S&OP by consultants and software companies,” Industry Week outlines why it is so much more. I think you bring up a good point about IBP being a big event that acts as a catalyst for a particular goal. Thanks for your reply and check out this article is you get a chance.