It is said that a picture is worth a thousand words. The one above captures a key objective that Integrated Business Planning (IBP) should support. Especially in global manufacturers (GMs) that must cope with ever increasing complexity. That being, to help GMs optimize performance by avoiding unintended consequences arising from siloed and disconnected decision-making. The problem is that IBP is not supporting this objective in GMs.
My views in this article are a departure from those contained in most articles that have been written about IBP. I believe there is a gap between the theory and reality of IBP. The consequence being that GMs aren’t fully realizing the benefits and value of integration. This gap reflects the difference between [what I call] tactical and strategic IBP, which is the strategic element that’s been missing. The key points of the article are as follows:
-
-
-
- While IBP can create value for any organization, this potential value is particularly significant for GMs. But GMs often fall short of realizing it. Primarily because IBP – as we know it today – doesn’t effectively cope with complexity, the cost of which can approach 5% of sales.
- One of the primary reasons for this value shortfall is that the market continues to define and view IBP processes and technologies through outdated and siloed lenses. A better way of defining IBP is a process for planning, managing and governing outcomes. Its primary objective being to optimize profits by aligning strategic, financial, operational, and commercial outcomes.
- Mature IBP requires three critical business capabilities that most GMs lack: cross functional alignment that eliminate silos; accountability for delivering strategic, financial, and operational outcomes; and scenario planning that provides forward visibility into the consequences and risks of decisions.
- Establishing these capabilities in GMs is more involved than in smaller manufacturers. What’s required are four incremental management capabilities that arise when strategic, financial and operational processes are fully integrated. They are cost matrices, productivity management, trade-off management and integrated scenarios. I discuss the actions needed to achieve these capabilities.
-
-
The full version of this article can be found in the winter 2020 edition of Foresight Magazine, which can be found here. Included in the article were several exhibits, further details about which are provided in the links below:
I welcome comments and opportunities to discuss these points of view. To this end, please feel free to connect with me and join the IBP Collaborative LinkedIn group, a key focus of which is on planning and performance management innovations and interconnected (strategic, financial and operational) issues in companies that manufacture and distribute goods. Also, check out our YouTube Channel for further details about the perspectives contained in this and other LinkedIn posts.
