believe no real difference exists between sales and operation planning (S & OP) and integrated business planning (IBP). That only proves the need for a stronger definition of IBP. While several definitions currently exist, they fail to focus on the need for system thinking. That concept is more readily apparent in the following definition:
“The IBP strategy connects planning capabilities of each department in order to align strategy and operations with the financial performance of the organization.” With this in mind, more organizational leaders are pausing to consider the many benefits of using IBP instead of S & OP.
Reasons Behind the Shift to IBP
S & OP has been the standard way of running supply chains since it first came on the scene in the 1980s. While it does allow supply chains to operate more efficiently, it is limited in its benefits because managers who employ it fail to involve other departments until it becomes absolutely essential. This is known as a siloed approach to supply chain management.
IBP software makes it possible for companies that operate supply chains to incorporate feedback from a greater number of people with a stake in the product’s performance. Managers at the senior level consider supply and demand as well as financial goals, development of new products, and strategic planning when creating new operating instructions. In summary, IBP allows for the following functions when used correctly:
- Make supply chain data available to more areas of the business by moving it out of silos.
- Incorporate the input of numerous collaborators to create a better business plan.
- Take advantage of the collaboration between departments to add features, lower prices, and enter new markets.
IBP Offers Different Types of Benefits
When making the transition to IBP, organizations consider both hard and soft benefits. The first area has to do with financial and service concerns. These include increasing the amount of working capital, allowing employees to be more productive, accurately forecasting inventory levels, and creating an excellent customer service experience. However, hard benefits are often not obvious until softer benefits have been achieved. Examples of soft benefits include empowering supply chain managers to make decisions, increased trust and collaboration among employees, and improved communication across the board.
IBP Offers Proven Results
IBP has been evolving as the better way to run a supply chain ever since S & OP became widely used more than 30 years ago. While the latter has always been effective at aligning supply and demand, it overlooked the importance of incorporating input from human resources (HR), information technology (IT), finance, logistics, operations, and research and development (R & D). Companies that have been proactive about switching to IBP have seen impressive results, such as an average 20 percent increase in gross margins.
Not only does IBP simplify the supply chain planning process, it eliminates the inevitable waste of time and resources from using multiple plans. In a rapidly changing market that strives to stay ahead of customer demands, IBP is the way of the future.