Integrated business planning (IBP) is a process for translating desired business outcomes into financial and operational resource requirements, with the overarching objective of maximizing profit and / or cash flow, while cutting down risk. The business outcomes, on which IBP processes focus, can be expressed in terms of the achievement of the following types of targets:

  • Revenue and demand
  • Service levels
  • Inventory levels
  • Profits and margins
  • Cash flow

Integration elements

Integrated Business Planning is defined in different ways. One challenge in developing a common definition of IBP is that there is no universally agreed way of describing different degrees and forms of integrated processes. Mature IBP processes enable organizations to bring together different elements of planning into a single process. This includes, but is not limited to, the following:

  • Supply and demand
  • Finance and operations
  • Functions and business processes
  • Strategy / Outcomes and business processes
  • Financial and non-financial measures
  • Cash flow, costs and revenues

The role of IBP is to balance these different objectives in a way that achieves the best overall result. One way of accomplishing this is with prescriptive analytics. These tools are often employed in these processes to mathematically optimize parts of a plan, a classic example of which is inventory investment. The most mature IBP processes try to mathematically optimize all aspects of a plan.

History

The history of integrated business planning can be traced back to sales and operations planning (S&OP), a process that balances demand and manufacturing resources.

According to Gartner, there is a 5-stage maturity model for S&OP, and in this model, integrated business planning is denoted as Phased 4 & 5.[1]

Over time, IBP has evolved, combining Enterprise Performance Management (EPM) and S&OP to enhance planning capabilities for financial and operational professionals.[2] IBP platforms leverage predictive analytics.[3] and machine-learning technology to optimize plans across multiple constraints.[4]

Components

Key components of Integrated Business Planning include:

a) Enterprise Model:

  • Demand chain model
  • Supply chain model
  • Finance chain model

b) Integrated Planning:

  • Creating collaborative plans across multiple functions

c) Enterprise Optimization:

  • Generating optimized plans considering various constraints and financial integration

Applications

IBP has been used to model and integrate the planning efforts in a number of applications, including:

All of the above can be summarized as Enterprise Optimization use cases.

Criticism

Some argue that IBP is not any different from S&OP. Patrick Bower has described IBP as a marketing hoax, ⁣[5] a name developed to create confusion and sell consulting and system services. The main proponents of IBP are consulting companies. In response to this criticism, it has been asserted that IBP is not a marketing hoax, ⁣[6] but an important part of Enterprise Performance Management (EPM) system.

Another criticism is that IBP is not academically defined[7] 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, ⁣[8] 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 to the lack of academic and industry standards, there has been an attempt to create an open source definition for 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.

— Supply Chain Trend, 2015[9]

See also

References

  1. ↑ "Gartner - Introducing the five-stage Sales & Operations Planning maturity model".
  2. ↑ "IBP Industry Week cite web".
  3. ↑ "Integrated Business Planning (IBP) - Camelot - Management Consultants". www.camelot-mc.com. Retrieved 2017-07-17.
  4. ↑ "SAP Integrated Business Planning (IBP)".
  5. ↑ http://www.jaguar-aps.com/wp-content/uploads/2019/06/IBP-is-a-Hoax.pdf
  6. ↑ "Integrated Business Planning Is Not Just a Marketing Hoax". industryweek.com. Retrieved 2022-06-25. Manufacturers can achieve step change improvements to how they plan and manage their business by developing strategies that combine EPM and S&OP.
  7. ↑ "The rise and fall of S&OP". 27 February 2015.
  8. ↑ https://supplychaintrends.files.wordpress.com/2015/12/supply-chain-trend-sop-pulse-check-2015.pdf
  9. ↑ "A new definition for Integrated Business Planning". Supply Chain Trend. 2015-11-25. Retrieved 2022-06-25.
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