Integrated business planning
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Integrated Business Planning is a planning process that integrates across two or more functions in a business or government entity referred to as an enterprise to maximize financial value.
The specific functional areas in a company as well as the industry domain associated with the company defines the specific type of IBP process. Examples of IBP processes are:
- Sales and Operations Planning
- Healthcare Analytics
- Strategic Corporate Performance Management
- Planning and scheduling across multiple plants in a factory
The key requirement for IBP is that two or more functional process areas must be involved and maximizing (optimizing) of financial value should be done.
Corporate executives, business unit heads and planning managers use IBP to evaluate plans and activities based on the economic impact of each consideration.
Bridging Corporate Performance Management and S&OP
There has been a lot of focus on Integrated Business Planning in the context of Sales and Operations Planning. Gartner (www.gartner.com) refers to a 5-stage
S&OP Maturity model wherein IBP is referred to as the Phased 4 & 5.
Integrated Business Planning however is more broader than S&OP. It is an approach that combines Enterprise Performance Management (EPM) and sales and operations planning (S&OP) to provide incremental capabilities that neither provides individually. In so doing, IBP platforms address long-standing challenges that financial and operational professionals have struggled to overcome. The result: opportunities for step change improvements to how manufacturers plan, manage and govern their business. Here, the focus is on strengthening the financial integration and reconciliation of plans, as well as increasing the responsiveness of the supply chain using ad-hoc reports and what-if scenario analyses.
Integrated Business Planning requires the following capabilities to be enabled:
a) Enterprise Model
- Ability to create a demand chain model
- Ability to create a supply chain model
- Ability to create a finance chain model
b) Integrated Planning
- Ability to create a plan across multiple functions
- Ability to create predictive and collaborative plans
c) Enterprise Optimization
- Ability to create optimized plans across multiple constraints
- Ability to create financial integration across optimization
IBP has been used to model and integrate the planning efforts in a number of applications, including:
- Product profitability
- Customer profitability
- Capital expenditures
- Manufacturing operations
- Supply chain
- Business processes (human and information-based)
- Business policy
- Market demand curves
- Competitive strategy
All of the above can be summarized as Enterprise Optimization use cases.
Some argue that IBP is not any different from S&OP. See article by Patrick Bower where he calls IBP a marketing hoax, a name developed to create confusion and sell consulting and system services. The main proponents of IBP are in fact consulting companies. In return to this criticism, it has been pointed out that IBP is not a marketing hoax, but an important part of Enterprise Performance Management (EPM) system.
Another criticism is that IBP is not academically defined and is supply chain biased in its definition. The lack of academic standard leaves room for interpretation to what IBP is, which is confusing practitioners. In a 2015 S&OP survey, 32% of participants answered that there is no difference between S&OP and IBP, 20% "did not know", and 71% of participants answered that there is a need for more industry standards around S&OP.
It has been called out that IBP has a lack of governance and in need of an industry group to create a unified definition. Due this lack of academic and industry standards, there has been an attempt to create an open source definition for IBP. This definition is as follows:
Integrated Business Planning (IBP): A holistic planning philosophy, where all organizational functions participate in providing executives periodically with valid, reliable information, in order to decide how to align the enterprise around executing the plans to achieve budget, strategic intent and the envisioned future.
- https://www.gartner.com/doc/2587021/introducing-fivestage-sales-operations-planning. Missing or empty
- "IBP Industry Week cite web".
- "Integrated Business Planning (IBP) - Camelot - Management Consultants". www.camelot-mc.com. Retrieved 2017-07-17.
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