If you’ve been in the supply chain game for long enough, you may remember when sales and operations planning (S&OP) became the next big thing. Even if you’re a relative newcomer, you know that S&OP is a longstanding and highly trusted way to increase alignment and collaboration throughout the supply chain.
You’re probably waiting for me to say that S&OP is somehow flawed—or to make a bold proclamation that S&OP is dead. Well, it’s not. But every great business strategy eventually evolves into something even better as the industry’s sharpest minds find ways to enhance it.
S&OP is no exception. In recent years, supply chain leaders have used the basic principles of S&OP as the foundation for a new business approach: integrated business planning (IBP).
What is Integrated Business Planning?
Carrying the torch from S&OP, IBP helps manufacturers and distributors take the next step forward. Whereas S&OP typically helped companies enhance their supply chain processes in isolation, IBP seeks to involve a wide range of stakeholders in every supply chain decision. Implement IBP successfully, and you’ll use your supply chain to drive the success of your entire business.
Another key difference between S&OP and IBP is that whereas S&OP has typically been driven by people who participate directly in supply chain processes, IBP is led by senior management. Each month, executives will evaluate and revise time-phased projections for demand, supply, product, and portfolio changes, strategic projects, and financial plans. Their planning horizon typically spans 24 months or longer, giving them an excellent perspective on the long-term direction of the business.
Five Steps to IBP
We at Demand Solutions believe there are five steps that are essential to IBP. Learn more about these steps, and you’ll have a solid understanding of how you could implement IBP in your company.
Step 1: Sense
In the Sense step, you’ll build your demand plan at the local and global company level. You’ll seek to understand, or sense, how your plants and supply chain will need to respond to demand for your products and services.
You can’t avoid the two extremes of inventory shortages and overstocked items without sensing demand. And once you’ve developed a demand plan, you’ll need to be sure that the plan is being fulfilled at least at the departmental level of your organization. Your demand planners or analysts will then review your forecast against customer service levels and inventory levels at the beginning of each month. This will help your decision-makers sense challenges from more angles so that you can update your forecast accordingly.
Step 2: Shape
Next, you’ll develop a forward-looking aggregated and optimized demand and supply plan at the local and global level. You’ll optimize demand with supply so that you can address mismatches before they affect your customers. The goal here is to build a strategic demand plan at the family or sub-family level of your product line with at least 18-24 months of future visibility.
Step 3: Collaborate
Your next priority will be to build strong alignment between your local, regional, and global teams. By collaborating with key stakeholders across your enterprise and beyond, you can greatly improve your demand plans and supply forecasts. This collaboration should involve your sales organization, trading partners, suppliers, and customers.
Step 4: Integrate
Your optimized demand, supply, and financial plans can’t take effect until all your internal and external stakeholders have approved them. During the first three steps, you worked hard to establish a single view of the truth. Now, in step 4, you’ll bring everyone together to work with the same numbers and assumptions as they strive to produce a single, optimized plan. This plan will then factor into all your supply chain management decisions.
Step 5: Orchestrate
Your final step is to publish your optimized plan and adapt it to changes in your business as you strive for continuous improvement. You’ll need to disseminate your plan across your extended supply chain to optimize the flow of materials in ways that fulfill demand. The goal here is to achieve global cooperation with all your trading partners, so that your highly responsive supply chain can meet virtually any fluctuation in demand.
Think You’re Ready for IBP? Try Our Assessment.
Integrated business planning doesn’t happen overnight—but it won’t happen at all if you don’t get started. The best way to determine whether you’re ready for IBP is to assess your current operations.
Demand Solutions offers a free, 5-minute supply chain assessment that can help you gauge the maturity of your current planning processes and determine whether now is the time to get started with integrated business planning. You can complete the whole assessment online.