Integrated Planning (IBP)
The ability to timely react to changing demand is essential for sustainably aligning the supply chain.
Challenge – dynamic adaption of the supply chain
In an increasingly dynamic world, organizations face the challenge to rapidly identify changing trends and to accordingly adjust their value chain processes. The ability to timely react to changing demand is essential for sustainably aligning the supply chain from product development to procurement, production and distribution. Different influence factors thereby play a role, such as customer demand and requirements, sustainability aspects, competition activities, supply and production capacities.
Solution – Integrated Planning (IBP)
Integrated Planning (Integrated Business Planning – IBP) combines strategic planning, finance, product development, supply chain management, marketing and sales in a consistently aligned planning model, for proactively making business decisions and improvement measures. IBP harmonizes the economic and operative processes with the customer demand and allows organizations to collaborate optimally and cross-functionally. IBP integrates the volume planning (Sales & Operations Planning – S&OP) with the financial planning (Financial Planning & Analysis – FPA), to plan and monitor the operative parameters based on financial parameters. Key benefits of IBP are improved service levels, sales increase, cost and working capital reduction as well as enhanced financial predictability (Return on Equity – ROE). Besides these rather quantitative-economic benefits, IBP also provides ecosocial advantages through a systematic and cross-functional anchoring of sustainability goals within the organization. Thus, the environment can, for example, be preserved by manufacturing products only at the demanded quantity. Such accurate forecasting is a particular challenge for new product introductions.
Approach – steps for implementing Integrated Planning
SustainNet Consulting supports businesses in solving their cross-functional target conflicts and planning their supply chain activities in an integrated way.
Is-Analysis & Derivation of Measures
Initially, it is important to understand the current planning processes and the planning organization, as well as to analyze potential target conflicts, planning deviations and related key figures. A holistic view and the interaction with the different functions and (external) stakeholders is thereby essential. The aim is to identify current issues and gaps and to derive respective improvement measures, concrete actions and target figures. This not only applies to the economic but also the ecologic and social aspects of sustainability. In this phase it is key to get the commitment of the different stakeholders and to create a common understanding for the upcoming changes.
IBP Conception / Design
The measures and targets identified in the first phase are subject to be transferred into an amended operating model by the cross-functional project team. This phase includes the design of the future processes and responsibilities, organizational and governance structures, the (technological) infrastructure and the key performance indicators (KPIs). When designing these elements, not only economic but also ecologic and social, thus all aspects of sustainability should be considered. The classical IBP concept foresees a series of meetings, which are supposed to result in an improved reconciliation between demand planning and supply planning together with financial planning. It is crucial to not frustrate the organization with multiple meetings with numerous participants and a large variety of KPIs to be tracked. Finding the right balance is key, where only essential meetings are predefined in a structured way in terms of agenda, cross-functional participants and selected KPIs.
IBP Implementation & Lessons Learnt
This phase is aimed at realizing and anchoring the concept of integrated planning in the organization. Here it is important, that the different functions and stakeholders have early been involved in the change process, and that they have been familiarized with the new processes, structures and potentially systems as part of trainings. It is also crucial, that the defined KPIs and related targets become adequately included in the stakeholders’ target agreements. It is recommended to initially conduct three test cycles, in which the new integrated planning concept is being evaluated by the parties involved, where adjustments are being made and results in terms of KPIs and targets are being analyzed, before transitioning into the daily business.