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Integrated Business Planning (IBP) is a business strategy connecting different elements of planning into a single process. IBP includes:
The goal of Integrated Business Planning is to reshape how organizations strategize and execute their plans by incorporating various functions across the organization. This encompasses several crucial components:
1. Functional Integration: Integrated Business Planning aims to dismantle functional silos that often exist between different departments within an organization. IBP seeks to create a unified planning process that connects R&D, manufacturing, Supply chain management, Marketing, and Sales in order to create a common business plan anchored on a central supply chain planning process incorporating inputs from all these functions. [2]
2. Harmonization of Planning Cycles: Integrated Business Planning goes beyond functional integration by synchronizing planning activities across different time horizons. By aligning monthly, quarterly, and annual planning cycles, IBP ensures a comprehensive approach, eliminating discrepancies arising from disparate starting points and data sets. [3]
3. Integrating across multiple Planning Horizons: Short and Medium-Term Planning: IBP facilitates collaboration between sales and marketing teams to capture demand and create a consensus plan.
4. Medium and Long-Term Financial Planning: Integrated Business Planning aligns demand forecasts with pricing data and inputs from marketing teams to develop financial plans, and also uses the inputs to predict financial outcomes.
5. Long-Term Strategic Planning: IBP integrates New Product Introduction phases by leveraging insights from Product Development portfolios.
6. Capacity Expansion Planning: IBP includes capacity expansion planning by aligning plans with new product development, cost improvement projects, and management of existing product portfolios, with the long-term strategic plan serving as a crucial input. These demand elements are matched against mapped capacity data in the system to conduct gap analysis.
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. [4] 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.
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. [5]
Over time, IBP has evolved, combining Enterprise Performance Management (EPM) and S&OP to enhance planning capabilities for financial and operational professionals. [6] IBP platforms leverage predictive analytics. [7] and machine-learning technology to optimize plans across multiple constraints. [8]
Some argue that IBP is not any different from S&OP. Patrick Bower has described IBP as a marketing hoax, [9] 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, [10] but an important part of Enterprise Performance Management (EPM) system.
Another criticism is that IBP is not academically defined [11] 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, [12] 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 [13]
According to Smith, Andraski & Fawcett, when two programs—Sales and Operations Planning (S&OP) and Collaborative Planning, Forecasting and Replenishment (CPFR)—are integrated, they provide the information we need for decision making. Key success factors and performance outcomes are also discussed. [14]
Teo & King argue that strategic planning for information systems (IS) involves combining IS planning (ISP) with business planning (BP). While this has been talked about a lot lately, there hasn't been much research specifically focusing on it. This study looks at four ways these plans can be integrated, from being separate to fully intertwined. The study looked at how this integration relates to organizational success by surveying both business planners and IS executives. The results show that the more integrated the plans are, the better the IS contributes to organizational success, and the fewer problems there are with ISP as per this paper. [15]
Pal Singh Toor & Dhir highlight the benefits of integrated business planning, forecasting, and process management. The paper focuses on need of advanced business intelligence and the crucial role of integrated business planning, forecasting, and process management. Various case studies are used to highlight benefits. [16]
Manufacturers can achieve step change improvements to how they plan and manage their business by developing strategies that combine EPM and S&OP.
