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Why Integrated Business Planning Gets Tougher as Complexity Grows

Many organizations have adopted integrated business planning (IBP), but these organizations often don’t realize its full potential. IBP takes sales and operations planning to the next level by incorporating finance and senior leadership. APQC recently asked Dean Sorensen of IBP Collaborative about what prevents manufacturers from adopting fully integrated IBP and how they can move past common mistakes to obtain the full value of integration.

Dean Sorensen will speak on APQC’s supply chain management webinar Thursday, April 21. Dean will present more details on how organizations can fully integrate IBP and benefit from the integration.

What prevents manufacturers from fully integrating strategy, finance, and operations?

To a degree it is tied to the complexity of the organization. In smaller and less complex manufacturers, it is easier to establish integrated processes. This is because manual work arounds can be established that compensate for capability gaps in enabling technologies. But as complexity rises, this becomes increasingly difficult for an organization to accomplish—not to mention that it can be expensive to do.

For complex manufacturers, three factors undermine the ability to establish fully integrated processes. First, the technology has not been there to support it—the applications supporting financial and operational processes are still separate. Second, the design and implementation of financial operations processes and technology have not been well coordinated. This is often a direct result of the fact that the applications are separate. Third, IBP has largely been a supply chain process. As such, no single stakeholder has had the authority to make the kinds of changes required to support a fully integrated process.

Integrated business planning (IBP) has the potential to create significant value, especially in terms of helping S&OP balance supply and demand. Yet in many complex manufacturers, IBP lacks the support of senior executives. What are the keys to getting buy-in for IBP?

The key is linking IBP to the resolution of business challenges. From a strategic perspective, this means showing how the process drives profitable growth and sustainable cost reduction. From a tactical finance perspective, this means showing how IBP can improve forecast accuracy and support rolling forecasts while reducing the cost of finance. Of course, getting buy-in also requires quantifying the value of these solutions. Nothing gets better focus than adding money to the bottom line.

What are the keys to establishing fully integrated processes?

There are four keys to establishing fully integrated processes. The first is to establish a vision for a broader IBP process that is linked to the business strategy. The second is to get a sponsor who has a vested interest in realizing this vision. This could be the CEO, CFO, COO, or some other person in a leadership role. The third is to have the sponsor gain the support of other senior executives. The final key is to develop a change management program to drive IBP through the organization.

What is the most common mistake organizations make when attempting IBP?

There are several common mistakes organizations make when adopting IBP. One is designing their strategic, financial, and operational processes in isolation. Another is not considering that financial rolling forecasts, IBP, and S&OP are all part of the same process. A third is buying separate financial and S&OP software and thinking that the combination will support fully integrated IBP.

Why is it critical to eliminate silo-driven decisions and behaviors?

Ultimately, the value of IBP is based on the organization’s ability to quickly reallocate resources across functions and entities. Because of this, failure to eliminate silo-driven decisions and behaviors undermines the flow of resources and the value of the processes.

To hear more about Dean Sorensen's upcoming presentation, check out the webinar overview.

Stay up to date with APQC's upcoming supply chain management and product development research, webinars, and more by visiting our expertise page.

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