Integrated Business Planning (IBP) – A key to future competition in businesses that are heavily dependent on supply chains

Depicting the Integrated Business Planning (IBP)

Integrated Business Planning (IBP) is the business planning process that unfolds the principles of S&OP (Sales & Operations Planning) throughout the extended Supply Chain, Product Portfolio, Customer Demand and Strategic Planning. The aim of the process is to deliver one seamless management process.

Integrated Business Planning is the result of the industry´s best practices. It is led by the senior management, and it is a common sense practice for aligning the company Annual and Quarter Plan every month, helping in the optimization of the company´s most critical resources (like HR, Infrastructure, Working Capital, Time and Money) to attend the customers in a profitable way.

The Integrated Business Planning processes provide early detection of any potential gaps in business performance, and they make possible that organizations predict and respond in a positive manner to the constantly changing conditions.

The IBP also emphasizes the importance of having strong extended Supply Chain, as in the future the competition will not be between rival companies, but between extended rival chains of companies that will be aligning their individual plans to achieve the optimal integrated results.

Typical phases of an IBP Project

The most common mistake made by companies is to initiate the IBP process design starting in the Supply Chain areas.

This first step could lead to an initial momentum, but after few steps, the IBP discussion would probably fall in the trap of Forecast Accuracy and Inventory reduction discussions, not evolving to the “real” IBP. In these first steps, it is very important to align the business interests of all stakeholders, including the Top Management team of Finance, Commercial, Marketing and HR areas, in addition to Industrial and Supply Chain areas. Having the Finance area sponsoring the process change, together with the CEO could be a better strategy aiming at a successful and complete implementation.

Further down the road, the following phases for a broad and unified IBP implementation are:

  1. Process Design
  2. Implementation
  3. Process evolution
  4. Maturity Assessment
  5. Further process evolution

In the design phase, the critical points to be considered are: the designing of a detailed and feasible activities flow, the devising of a clear and complete input/output information map, and the establishment of a calendar with event length, participants and ‘to be discussed’ subjects.

Although the design framework could be common to different companies, each enterprise has its own specifies, and those details would be captured in interviews with the stakeholders and following on-site meetings (ideally, of course).

During the implementation phase, each event (that could be daily or weekly in the Operational IBP) is a “moment of true” as the IBP process has to conquer the trust of all participants, many times from different “silos” within the companies.

After some months of implementation, it is, then, highly recommend having a maturity assessment to guide the continuous evolution of the process.

The IBP in the beverage industry and lessons learnt during the Covid crisis

All industries need to have cross-functional alignment between the areas, which integrates the long-term objectives to the short-term decisions, including: client prioritization, product mix definition, client service level agreement, investment definition and other crucial day-to-day operation decisions.

To respond to the market variations in a fast and orchestrated way, not losing sight on the main objectives set by the company Strategical Planning, we believe that a mature IBP process is key to competitiveness.

Recently, we had the valuable chance to aid our client (a large beverage producer) to find its way in a very challenging environment, with the market change caused by Covid19. With all restaurants, bars and the like closed, “single serve” bottles pretty much stopped selling, and the “multi serve” family sized bottles increased drastically.

At the same time, alcoholic beverage like beers increased as the social isolation period was lengthening. Who would have forecasted all this change?

How a company faces such sudden demand variation in a short period, with tons of uncertainties, without losing market share or it´s margin? How fast can we change the direction of a double-deck bus in high speed? Communication with the extended supply chain also makes the difference.

What we knew by previous experience, and was more than corroborated in this precious practice was that the IBP success is dependent on:

  1. A process designed around decisions
  2. Driven by business leaders
  3. With a Demand/Supply balance at the basis
  4. Realizing the strategic ambitions
  5. Linking the volume planning to the financial planning

We still don´t know for sure about all impacts we will face in a post pandemic world, but we are sure that the quick adapters will have a very strong advantage over the market.

We learnt that the correct implementation of the IBP concept into a cross industry discussion can bring very creative and effective competitive advantage to our clients.

About the authors
Peter Shimizu is BSc in Electrical Engineering. Senior Engagement Manager at ALG
Guilherme Esmanhoto is BSc in Civil Engineering and MBA. Principal at ALG
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