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By Oliver Wight EAME Partner, Anne-Marie Kilkenny, and Oliver Wight Asia-Pacific Partner, Stuart Harman
In our last blog, Part 1 of our ‘How to recognise real IBP’ series, we revealed that ‘true’ IBP is always owned by the CEO and that it’s a highly adaptable process which is always tailored to suit each individual organisation. In today’s blog, the discussion focuses on emphasising IBP’s role as the vehicle for strategy deployment, and why businesses need to be driven by demand to deliver growth.
Strategy deployment What it is: a focus on deploying the strategy What it isn’t: agreeing a forecast so Supply & Operations can plan production
IBP’s purpose is not to drive a better forecast, with which Supply Chain can plan. Its role is to deploy business strategy and provide the framework for effective decision-making, so that businesses can continue to deliver growth. It is the process which connects the strategy to the business plan and ensures the delivery of both. This means it cannot be confined to the constraints of an annual budget – it is impossible to plan effectively for the future if you’re looking no further ahead than the end of the financial year.
IBP works through a 24 to 36-month rolling horizon, allowing the early identification of issues and opportunities, as well as confirming the organisation’s capability of delivering the expected results. Conversations are about margin growth and the optimisation of the business, with growth best generated by meeting and exceeding customer expectations. In turn, this gives opportunity for reinvestment and a reinvigorated focus on continuous business improvement and sustainable progress.
Customers are king What it is: customer focused & demand driven What it isn’t: internally focused and supply driven
By definition, best business practice must be demand driven. Organisations can streamline the supply chain to be more cost-effective and responsive, but this alone doesn’t make them positioned to deliver growth for the business in line with the overall strategy.
A true IBP process is primarily driven by the strategic goals of the organisation, and in many cases growth is a strategic imperative. Understanding changes in the external environment in areas including customers, markets, competitors, regulation, technology and the geo-political outlook, on a month-to-month basis, is essential to allow adjustment in the organisation’s plans to deliver that growth.
Demand planning is much more than simply producing a ‘forecast’. Many key business decisions are driven from what we believe we will sell. Organisations need a fully integrated demand planning process, with multiple inputs based on both volume and value, driven by demand analytics and market insights. Even today there are still organisations that view the demand plan as a supply chain task – this is a big mistake.
Having a good understanding of what generates customer and consumer demand is the key component to developing the most reliable demand plan possible. Consequently, those who are closest to the customer and have the greatest understanding of activity at the point of consumption – sales & marketing – must take ownership of the demand plan. This is one of the identifying characteristics of true Integrated Business Planning.
In Part 3 of the ‘How to recognise real IBP’ series, we’ll explain why financial integration is crucial for a functioning IBP process, and how IBP enables businesses to create a plan for the future based on key assumptions.
This extract was based on our white paper: ‘Don’t fall Fake News: A buyers guide to Integrated Business Planning’, which you can download for free here.