So you’re starting an Integrated Business Planning project – Part 2
In our last conversation we discussed the imperative of change management, without a program to ensure this is done effectively there is no point in getting started.
But there is more than just managing change. As they say, a key prerequisite from change is knowing what to change to. That’s the topic of this bog, part 2 in this series.
In “The Seven Habits of Highly Effective People”, Steven Covey includes “Begin with the end in mind”. Though he was not discussing an iBP project, he might have been, as knowing what you want to achieve from the start is our second imperative. Note that we’ll see in part 3 that we may not realize the full vision in phase 1, managing scope is another critical task.
But it is vital to have a blueprint for the total project, so that the foundation model design and integration processes can be put in place right from the start.
There are five key deliverables from an Integrated Business Planning process, and thus from an implementation:
- Reaching consensus on a robust, achievable plan that meets business objectives
- Expressing the plan in a set of defined KPI’s that clearly communicate the plan parameters in a measurable way
- Ensuring a process to the plan outputs in a way that informs your execution systems ( ie, ERP) to implement the plan
- Capturing operational results during the execution period to enable comparison of plan vs. actual relative to the KPI’s noted above, and making adjustments as necessary
- When unexpected challenges or opportunities significantly impact achievement of the plan, leveraging the model and baseline plan to explore alternatives and reset expectations
The ability of the IBP system to deliver on these objectives on a consistent and timely basis is one of the most important enablers of business value, and comes from a combination of the technology used and the design of the model.
The latter is up to you, and fortunately it is a straightforward task. An IBP model provides the structure to capture input data and calculate a variety of outputs. We call these variables Key Figures, and determining the necessary set is how we “begin with the end in mind”
You’ll be working with four main types (this is not a necessarily a technical distinction, but is it useful in design brainstorming):
- Inputs – the data that will be sourced externally and provided to the IBP model to enable calculation of plan outputs and KPI’s. Inputs may be plan (ie, external forecasts) or actual data (ie, deliveries). We’ll talk more about this is a future blog in this series.
- Outputs – key figures calculated by the model that, when the result of an approved and release plan, are passed back to your operational systems to drive execution. Supply or demand shared with ERP as planned independent requirements is perhaps the best example (see https://blogs.sap.com/2017/01/03/consuming-ibp-generated-pirs-in-erp/ ), but component requirements (shared with suppliers), inventory or financial targets may also be included.
- Intermediate variables – most of the key figures in your model will fall into this category, representing values that will be of direct interest to some stakeholders, and are part of the calculation chain that leads to the Outputs but are not themselves passed elsewhere for execution. For example, planned movements of materials from a plant to a DC must be determined to enable calculation of plant level supply (an output), but in execution will be driven by transfers based on actual DC demand.
- KPI’s – Key Performance Indicators that enable assessment of the plan prior to approval, and evaluation of actual performance to the plan during execution. KPI’s may be calculated from any of the preceding KF types, including the very common example of plan to actual. For example, the bullet above notes planned transfers. A KPI might be employed to compare transfer orders in ERP against the IBP planned KF to ensure events are unfolding as expected.
Remember, it’s simple to add new KPI’s at any time as long as they are dependent on existing key figures and potentially incrementally provided actual data.
So it’s valid to consider deferring implementation of some KPI’s until later phases. But you do want to have a sense of the total requirements from all stakeholders to ensure you get the planning level structure correct.
Without getting too technical, Planning Levels are the frame upon which Key Figures are defined, and establish the levels of detail available. This is important to understand going in, thinking about things like:
- Do we need to comprehend inventory at a dealer or distributor level?
- Do we sell on a project basis and need to comprehend projects?
As inferred, the most important variations from the standard SAP demo models are generally related to your distribution model. This is an area you’ll want to get right the first time, while changes over time are not impossible, they can take time.
The work done in this part of the startup will inform many subsequent aspects of the project. That’s why it’s important to “begin with the end in mind…” Even if you defer some of the implementation to subsequent phases, you can be comfortable that the model foundation will enable continuous improvement while delivering value in the first go live.
Now get out that whiteboard and assemble the team!