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Unlocking Business Growth by Transforming from S&OP to IBP

In today's market environment where strategic priorities revolve around the diverse business objectives of exploring growth in untapped markets, lowering costs and working capital levels, keeping long-term growth intact, and strengthening the extended supply chain, it is vital that organizations perform inclusive integrated business planning (IBP). The "inclusion" considers multiple angles – partners in the supply chain, business functions like finance and product management, end consumers and digital capabilities. -Rich Sherman, Senior Fellow, and Ankit Tiwary, Engagement Director, Global Supply Chain Practice, Tata Consultancy Services

Unlocking Business Growth by Transforming from S&OP to IBP

Sales and operations planning was developed as far back as the 1960s and while it has served some companies well, it has never proliferated in the market due to well documented reasons. Integrated business planning, more encompassing than S&OP and leveraging digital technologies, is a senior leadership-driven process that evaluates and revises the time-phased outlook for demand, supply, product phase-ins and phase-outs (product life cycle management), strategic projects, and financial plans on a periodic basis, at an aggregate level.

It is a decision-making process that delivers insights to maintain alignment of the operational plans for all business functions in all geographies based on the company’s business goals and financial targets. A primary objective of IBP is to reach consensus on a single operating plan, to which executives of the management team hold themselves accountable, and allocates critical resources to most effectively satisfy customers in a profitable way.

A secondary objective of the IBP process is to arrive at aggressive and conservative plans to ensure responsiveness in the supply chain arising from unforeseen changes in the business outlook. The horizon for planning is typically a rolling horizon of 24 months or more, but may vary based on company requirements. IBP is executed by way of five review meetings: Product Management Review, Demand Management Review, Supply Management Review, Integrated Reconciliation Review, and Management Business Review. Broadly, these five are enabled by underlying product, demand, supply, financial planning processes and governed by the P&L level financial goals.

While IBP enables organizations to lay down and maintain an annual plan, aimed at strategic goals, using its predictive capabilities, the analytics component adds responsiveness and agility to decisions and allows the organization to deliver Plan B from unplanned business scenarios, by enabling optimized scenario planning and simulations from product, demand, supply, and financial perspectives.

Maturity, in IBP, is an enriching journey that sets the organization on the path of continuous improvement. An organization’s growth in maturity is governed on seven distinct vectors – People, Metrics, Process, Technology, Data Analytics, Strategy and Culture.

In transforming to IBP, the variables in the IBP framework are significant and so important, that an incremental improvement approach to implementation works best. In our experience, we use a phased approach that includes a Maturity Assessment, Generations Definition to advance to higher maturity levels, Research and Design to achieve the next generation of maturity and a Build phase to take us there. The multi-generational nature of the program will address the organizational, process, technology, metrics, and capabilities aspects and will enhance the maturity of IBP as part of each generation throughout the transformation.

The Outlook

In 2018, expect companies to leverage foundational digital technologies to integrate cross-functional planning and implement advanced analytics across their organization to resolve the problems of silo management. Integrated business planning by way of its cross-functional, comprehensive and collaborative perspective will provide the impetus to “digitalize” the enterprise to improve the organizational performance and financial health holistically.

Sales and operations planning was developed as far back as the 1960s and while it has served some companies well, it has never proliferated in the market due to well documented reasons. Integrated business planning, more encompassing than S&OP and leveraging digital technologies, is a senior leadership-driven process that evaluates and revises the time-phased outlook for demand, supply, product phase-ins and phase-outs (product life cycle management), strategic projects, and financial plans on a periodic basis, at an aggregate level.

It is a decision-making process that delivers insights to maintain alignment of the operational plans for all business functions in all geographies based on the company’s business goals and financial targets. A primary objective of IBP is to reach consensus on a single operating plan, to which executives of the management team hold themselves accountable, and allocates critical resources to most effectively satisfy customers in a profitable way.

A secondary objective of the IBP process is to arrive at aggressive and conservative plans to ensure responsiveness in the supply chain arising from unforeseen changes in the business outlook. The horizon for planning is typically a rolling horizon of 24 months or more, but may vary based on company requirements. IBP is executed by way of five review meetings: Product Management Review, Demand Management Review, Supply Management Review, Integrated Reconciliation Review, and Management Business Review. Broadly, these five are enabled by underlying product, demand, supply, financial planning processes and governed by the P&L level financial goals.

While IBP enables organizations to lay down and maintain an annual plan, aimed at strategic goals, using its predictive capabilities, the analytics component adds responsiveness and agility to decisions and allows the organization to deliver Plan B from unplanned business scenarios, by enabling optimized scenario planning and simulations from product, demand, supply, and financial perspectives.

Maturity, in IBP, is an enriching journey that sets the organization on the path of continuous improvement. An organization’s growth in maturity is governed on seven distinct vectors – People, Metrics, Process, Technology, Data Analytics, Strategy and Culture.

In transforming to IBP, the variables in the IBP framework are significant and so important, that an incremental improvement approach to implementation works best. In our experience, we use a phased approach that includes a Maturity Assessment, Generations Definition to advance to higher maturity levels, Research and Design to achieve the next generation of maturity and a Build phase to take us there. The multi-generational nature of the program will address the organizational, process, technology, metrics, and capabilities aspects and will enhance the maturity of IBP as part of each generation throughout the transformation.

The Outlook

In 2018, expect companies to leverage foundational digital technologies to integrate cross-functional planning and implement advanced analytics across their organization to resolve the problems of silo management. Integrated business planning by way of its cross-functional, comprehensive and collaborative perspective will provide the impetus to “digitalize” the enterprise to improve the organizational performance and financial health holistically.

Unlocking Business Growth by Transforming from S&OP to IBP