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By Oliver Wight EAME Associate, Anne-Marie Kilkenny, and Oliver Wight Asia-Pacific Partner, Stuart Harman
At Oliver Wight, we’ve been growingly increasingly concerned that people are being sold Integrated Business Planning (IBP) when what is delivered is simply traditional S&OP under a different name. Advertisements for ‘IBP’ roles go on to describe candidates who can “develop and establish Sales and Operations Planning (S&OP) to drive for world-class supply chain performance”, and workshops are marketed with the aim of teaching attendees how to ‘implement an operational business planning strategy for the business’.
It’s symptomatic of a worrying trend, and one which we will address in a four-part blog series aimed at clarifying exactly what is IBP, and what isn’t.
What’s in a name?
Firstly, IBP is not a supply chain process; it has a much broader reach. Oliver Wight is the pioneer of both S&OP and IBP. They are two very different processes; the latter representing the modern-day evolution of the former, which was first developed by Oliver Wight in the 1980s. Our concern is not about the name – it doesn’t really matter what you call the process –it’s about what it does and, crucially, the value it adds.
IBP doesn’t just facilitate improvement, it helps creates transformation. By failing to fully recognise IBP’s potential, organisations often set the ambition too low by limiting ‘success’ to aims such as a reduction in inventory; process improvement or cost efficiency. The true purpose of IBP, however, is to achieve sustainable, business growth and this should be the primary goal.
Ownership of the process What it is: owned by the head of the business What it isn’t: owned by supply chain
All too often, it’s supply chain that has ownership of the IBP process – either because they are the instigators of its implementation, or the business leadership mistakenly believes IBP is a supply chain responsibility. This typically results in a disproportionate emphasis on operational issues rather than strategy deployment, with IBP used to provide updates on capacity, inventory and other supply chain led activities. Supply chain may well have the passion to push improvement, but it doesn’t have the influence or power to instigate company-wide participation – that’s the business leader’s responsibility.
The CEO or MD is the ultimate decision-maker for the organisation, and they are the driving force behind improvement, providing the vision for the future and establishing the ambition against which all forthcoming success will be measured. CEOs are also responsible for setting the organisation’s strategy, articulating it through specific business objectives to deliver the company goals. IBP enables the deployment of the business strategy. So, by definition, the CEO must own and lead the process.
Furthermore, by claiming it as their process, the CEO or MD is inextricably intertwined with IBP’s success and consequently, is usually more committed to realising its full potential as the means for true transformation. The owner of the business must be the champion of the IBP process, and to truly feel it is their process so it can function as intended. Through the IBP Management Business Review (MBR), or Corporate Business Review (CBR) the CEO can constantly check on the progress of plans against the business strategy.
One size doesn’t fit all What it is: a process designed and adapted What it isn’t: an ‘out of the box’ process or software solution
The principles of IBP properly applied work and add value in any organisation; large and small; public and private; manufacturing and service. There are core principles that apply to IBP regardless of the nature, size or shape of the enterprise. However, it is essential the process is tailored to fit the specific needs and structure of the individual organisation. A lack of true understanding and expertise often leads to an IBP structure that is overly complex, resulting in inefficiency and delayed decision-making.
Often, organisations try to bridge the gap with systems, but IBP is not a software tool. It is a process, which incorporates a number of key operating principles in a design ‘owned by’ the process participants, and embedded in the organisation as ‘the way we do things here’. Software plays an important part in enabling an effective IBP process, but it is not a solution in isolation. Without people engagement in an IBP process design, adapted to suit the specific organisation, IBP will fail. No amount of investment in software will prevent this.
There is a common misconception that IBP is a supplementary aid to an already healthy business, and that it’s incompatible with unstable or overly dynamic markets. This is fundamentally wrong. Unpredictable environments are the very markets in which IBP can demonstrate its full capabilities, as it allows organisations to execute an effective strategic response to any and every situation, using tools such as analytics and scenario-planning to create contingency plans when circumstances change. This applies to high growth as well as emerging markets. Although the nature and scope of volatility may be unknown, there is a certainty in uncertainty and there should be an expectation that things will change.
In Part 2 of the ‘How to recognise real IBP’ series, we’ll explain strategy deployment vs. forecasting, and demand driven vs. supply driven.
This extract was based on our white paper: ‘Don’t fall for Fake News: A buyers guide to Integrated Business Planning’, which you can download for free here.