What is Integrated Business Planning (IBP), and what does it mean for your business? IBP is the logical evolution of sales and operations planning (S&OP), an approach that gained popularity in the 1980s as a way to increase alignment and collaboration throughout the supply chain.
S&OP has done much to enhance the efficiency and profitability of supply chains in virtually every industry. IBP helps manufacturers and distributors take the next step forward. Rather than enhancing supply chain processes in isolation, IBP seeks to involve a wide range of stakeholders in every supply chain decision so that the supply chain can truly drive the success of the entire business.
The 5 stages of Integrated Business Planning
Plan Your IBP Process
IBP is a process led by senior management that evaluates and revises time-phased projections for demand, supply, product, and portfolio changes, strategic projects, and the resulting financial plans. This is done at the aggregate level on a monthly basis, typically over a 24-month or greater rolling planning horizon.
Like every process, IBP has distinct steps. Here are the steps that Demand Solutions considers essential in the IBP process:
Step 1: Sense
The Sense step is the process of building the demand plan at the local and global company level. You’ll seek to understand, or sense, how your plants and supply chain will need to respond to demand for your products and services. Sensing demand is a key step in avoiding both inventory shortages and overstocked items. Once you’ve developed a demand plan, you’ll want to be sure that the plan is being fulfilled at least at the departmental level of your organization. Your demand planners or analysts will then review your forecast against customer service levels and inventory levels at the beginning of each month. This will help your decision-makers sense challenges from more angles so that you can update your forecast accordingly.
Step 2: Shape
The Shape step is the process of building a forward-looking aggregated and optimized demand and supply plan at the local and global level. In this step, you’ll optimize demand with supply, identifying gaps and analyzing alternatives for addressing mismatches—before they affect the customer. You’ll focus on building a strategic demand plan at the family or sub-family level of your product line, aiming for at least 18-24 months of future visibility. By the end of the Shape step, your optimized demand and supply plan will be complete.
Step 3: Collaborate
During the Collaborate step, you’ll build strong alignment between your local, regional, and global teams, including the customer and suppliers. Your demand plans and supply forecasts can both be improved through active collaboration with your key stakeholders—across your enterprise and beyond. This collaboration should include the sales organization, trading partners, suppliers, and customers.
Technology is the collaboration enabler. Many leading firms are already using social media to enhance collaboration—and the trend will only ramp up in the future. In the Collaborate phase, you’ll establish departmental coordination as well as ongoing collaboration outside the four walls of your company.
Step 4: Integrate
The Integrate step is the process bringing together all executives and stakeholders to approve the optimized demand, supply, and financial plans. Don’t forget: IBP requires buy-in across the organization as well as the extended supply chain. At this point, there’s a single view of the truth. Everyone in the extended supply chain is operating with the same numbers and the same assumptions.
Don’t underestimate the challenge of integration. While it’s true that automated workflow and other technologies can help, integration requires process discipline. At the end of the Integrate step, you’ll end up with a single, optimized plan—and your financial plans will factor into all your supply chain management decisions.
Step 5: Orchestrate
The Orchestrate step is the process of publishing the integrated plan and adapting to the changes in the business, thus allowing for continuous improvement. It’s here we see that building the plan isn’t enough. Organizations are systems of people and interrelated functions and processes. You must operationalize and disseminate the IBP plan across your extended supply chain to optimize the flow of materials in ways that fulfill demand.
Leveraging a single, integrated IBP platform can dramatically simplify your orchestration process. By the end of the Orchestrate step, you will have achieved global cooperation with all your trading partners. You’ll have a responsive supply chain that meets sudden and short-term fluctuations in demand.