Chances are high that your company has just closed this year’s planning and budgeting season. Did you easily access all the information you needed to draft an accurate budget? Does the financial plan connect with the corporate strategy and its operational plans? By providing a holistic view of the business, integrated business planning (IBP) helps CFOs produce more well-rounded budgets and forecasts.
IBP: the next generation of planning
Companies have been planning and scheduling production based on available materials, labor and plant capacity since the 1990s. In the past, calculations usually drew on static data from inventories, bills of material and databases. As demand became increasingly volatile, enterprises started to focus on predictions of the future. Yet the complexities of today’s markets – the speed of change, greater volatility and globalization – demand a more collaborative, end-to-end approach: integrated business planning.
It’s about the business
IBP is a holistic plan that connects sales and operations planning (S&OP) with strategic plans and financial budgeting and forecasting. It balances the demand and the availability of resources (inventory and capacity planning) with the financial objectives of the business.
“Many companies still operate in siloes that each have their own objectives, like cutting lead times, optimizing capacity or lowering costs of raw materials or suppliers, and their own KPIs,” says Lander Vanmeenen, Finance Manager at delaware. “Integrated business planning is no longer about the supply chain or the finance team, but about the business as a whole. So, rather than the traditional bottom-up planning approach, IBP starts from the corporate strategy to define objectives and targets. For example: if your corporate strategy is to boost sales and your financial plan budgets for a 20% sales increase, you can then calculate what that means for capacity planning, inventory planning, etc. If the corporate strategy is rather to drive volume or to retain an edge by delivering the highest-quality products, that will impact demand, inventory and capacity planning.”
6 reasons to embrace IBP
IBP processes are supported by IBP solutions that help monitor and analyze data, swiftly simulate demand and supply scenarios, develop what-if scenarios, set up targeted alerts and bring all different data sources together. When implemented successfully, IBP will deliver the following benefits:
- Simplify planning: most companies use a plethora of Excel sheets, templates and other tools to plan and forecast. IBP replaces them all with a single platform that everyone uses and knows.
- Speed up planning and budgeting: IBP makes it easy to gather data, combine and analyze it and create reports, thus minimizing manual tasks – to win time (and, by the way, reduce errors).
- Improve transparency: IBP provides real-time insights from the supply chain, as well as from financial and strategic plans.
- Boost alignment and accountability: instead of spending time and energy debating which plan to follow or which KPIs to focus on, everyone in the organization agrees to use a common platform and understands its role in accomplishing goals.
- Link strategy to objectives: IBP uses the corporate strategy as the starting point, so that metrics, risks, and initiatives always tie back to the bigger picture.
- Enhance decision-making: as IBP translates the organization’s strategy into tangible objectives and measures, it provides a consistent foundation of insights that help management make better decisions.
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A gradual evolution
IBP introduces a new way of planning that stands apart from divisional siloes. That implies a step-change difference for everyone involved in planning and budgeting. Processes as well as roles will need to be redefined. Are you afraid that that might have too big of an impact on your organization? Integrated business planning doesn’t need to happen overnight. It’s easy to start small and gradually evolve towards fully-fledged IBP. Read our blog ‘How IBP helps finance add true business value' to discover what steps to take, how technology can be an enabler and how delaware can offer value at every single step.
Interested in discovering how IBP can benefit your organization? Contact one of our experts today.