Integrated Business Planning (IBP) is the upgraded and expanded version of traditional Sales & Operations Planning (S&OP). If S&OP focuses on a few compartments of a companies’ planning processes, IBP spans across its end-to-end value chain.
IBP often ties cross-functional strategic, profitability-related goals with short- and mid-term planning horizons. Besides, IBP offers companies the opportunity to integrate several aspects of their business-supplier collaboration, demand shaping, marketing, product growth/development, and more-and back their decision-making.
IBP is ideal for companies to fully align them with growth and innovation metrics, transforming S&OP into a complete strategic business partner.
This process integrates companies’ operational decisions with financial performance planning across multiple timeframes. Besides, a full-fledged IBP software is able to provide visibility on complex trade-offs, constraints, and real-time business scenarios.
Though aware of the benefits it delivers, businesses, even big enterprises, haven’t been able to adopt integrated business planning completely. Not to mention a non-trivial amount of enterprises are operating in the absence of effective S&OP Tool.
Why are companies struggling to take on IBP?
So, what are the hindrances that prevent companies from fully incorporating IBP into their operations? Here are the three main reasons.
- Conflict of interests among business divisions and units. This creates barriers to the adoption of processes and technologies.
- Existing technology designs are still in good shape. This makes management classes neglect the need for upgrades.
- Traditional methods of doing business are binding the management classes’ mindset, turning them into risk adversaries and shy away from innovation.
Yet, companies are unaware of the smoldering problem below: Their existing tools are usually spreadsheets-based. This system is inflexible and doesn’t allow much cross-functional collaboration.
Also, spreadsheets serve more or less like a record of data and lack the ability to compile forward-looking insights— which is an essential requisite for IBP.
Instead, spreadsheets blur the vision of planners, lead to unrealistic and infeasible plans. This lengthens the lead time and resources which could have been otherwise utilized in other processes.
Furthermore, the business world’s developments entail the scale-up of planning capabilities, which involve multi-scenario planning. Spreadsheets may work for isolated scenarios, yet it is powerless when companies need an overview of all opportunities their decision-making may elicit.
Hence, they cannot solve one common goal (meeting demand) while aligning with strategic objectives (e.g., recognizing additional profit opportunities). Without the obtainability of this goal, integrated business planning is rendered futile.
Other barriers to implementing Integrated Business Planning software
Technology and process structures don’t allow integration.
Legacy software solution designs differ in structure and thus usually incompatible with new systems. Supply chain software was built from scratch with a data model that latches on to individual areas like demand, supply, logistics, etc.
Other functions, like financial planning and analysis tools, follow a different approach. This opposition bars supply chain planning and financial planning departments from integration.
Complex skill set required
To be effective, IBP would need to replicate a complex supply chain digitally, and companies need to employ complicated coding, which is hard to obtain.
Different cultures within the organization.
As a result of the silo mentality, business units within one enterprise differ in their culture; this lowers the probability of reaching consensus in decision-making.
Linear scenario management tools
Traditional scenario management tools weren’t able to replicate real-world complexities, nor realize that what-if scenarios follow a non-linear trend. This ignorance is common in systems that rely on historical data.
Incapable solutions prevent effective data processing and management.
Many solutions on the market were designed to operate a specific way and lack the ability to aggregate and process data from multiple internal and external sources.
No C-Suite awareness
Understanding the meaning and feasibility of IBP is extremely important. Unfortunately, the decision-makers/C-Suite lack the insights to facilitate their adoption. And failing to realize the essential changes assure oversights of these opportunities.
Currently, many companies are implementing IBP for their planning processes. Besides IBP for S&OP, these vendors offer aid for other procedures such as demand forecasting software, or for supply planning, new product introduction (NPI), etc.
What companies need to do, is to choose the correct solutions for their growth. The age of complete digital transformation is coming fast, and only by making the right choice can they achieve significant benefits from capitalizing on the potential these solutions offer.
