Six signs your business needs Integrated Business Planning
07 Feb 2020
Written by Kirsty Braines, COO at Oliver Wight EAME
1. Supply chain has ownership of your business planning process
Many businesses make the mistake of making supply chain operations the driving force behind their business improvement programme. This leads to a disproportionate emphasis on operational issues, with too much focus on capacity, inventory and other supply-chain led activities over deployment of the overall business strategy. IBP places the CEO or MD at the heart of the process. Through an IBP Management Business Review (MBR), or Corporate Business Review (CBR) the CEO can constantly check on the progress of plans against the business strategy to ensure that it is functioning as intended. By leading its implementation and owning the process, the CEO brings momentum and allows it to become the way the organisation operates.
2. Your business is using ‘out of the box’ processes
We have found that a lack of understanding and expertise within organisations often leads to overly complex business planning processes. This in turn leads to inefficiency and slows down decision-making. While the basics of IBP can add value to any organisation, for a fully realised process, it should be tailored to fit the specific needs and structure of the individual business. At Oliver Wight, we spend a lot of time working with clients to ensure their IBP process is the right fit for their organisation and that accountabilities are in place and decision rights have been clarified and articulated for maximum effectiveness.
3. Supply is driving your business planning processes
By definition, best business practice should be demand driven. Organisations can streamline the supply chain to be more cost-effective and responsive, but this alone does not align them to deliver growth in line with the overall strategy. The most effective IBP processes have an outside-in focus, which means key business decisions are driven by what is expected to sell, with external factors like customers, markets, competitors, regulation, technology and the geo-political outlook informing plans. Having a fully integrated demand planning process, driven by consumer analytics and market insights, is key to delivering business growth.
4. The financial team is only involved in ‘cashing-up’
We find in many organisations that the finance team is not involved in the business planning process until the final review and ‘cashing up’ stages. Yet understanding the financial implications – costs, risk, benefits and margins – across the full horizon of the planning process is essential to identifying gaps early enough so cost-effective action can be taken to get back on track. IBP involves the active participation of the finance team in monthly reviews, contributing to the testing of various scenarios and adjusting plans accordingly to safeguard the integrity of the financial projections.
5. Too much time is spent ‘debating the numbers’
One of the most common and destructive issues in organisations is time spent arguing over numbers. Without one cross-organisational collaborative method of working, individual teams will inevitably come up with different sets of figures, where nobody knows which is correct. The information is useless unless there is one set of ‘true’ values which can be used to produce forecasts and inform strategic decisions. IBP enables an organisation to create an aligned plan based on assumptions that come from a single empirical set of numbers. The data comes from analysis of past organisational performance and external streams of customer and consumer information that are assessed by data analysts. These insights allow for assumptions to be recalibrated with the objective of optimising customer experience and reducing the cost of delivery.
6. Your business planning process is fixed
In an era of rapidly-changing markets, a business planning process that is robust and fixed soon becomes outdated and causes its participants to lose motivation. The secret to a successful IBP process is applying a set of key principles to inform business processes but then continuously re-evaluating them based on learnings from monthly reviews and data available about the market. This is something we have seen over our five decades of helping organisations implement and improve their S&OP and IBP processes. Every monthly cycle provides more data for the organisation about its ways of working, and how its customers and competitors behave, so assumptions can be made and plans changed accordingly.