“Now, absolutely everyone’s convinced of the value of our new IBP process!” said the IBP manager to a client where we set up an Integrated Business Planning (IBP) process last year.
This company is gaining a competitive edge by making smart choices related to market segments, customer focus, production capacity and inventory management with a six-month horizon plus an estimation for beyond. “We would never have done this a year ago. Back then, we were spending all our time fire-fighting and constantly playing catch-up. That could have been our downfall in the current coronavirus situation...”
It’s a familiar story. During this crisis, many companies have gone into survival mode. They are focusing on short-term responsiveness and taking action – and rightly so, of course, because it often really is a battle to survive.
This ‘opportunity management’ approach is crucial in times of crisis. It means looking for short-term chances and options, and minimizing risks related to supply, demand, production and logistics.
Unfortunately though, in these hectic and uncertain times, many organizations neglect the tactical planning. After all, there is too much uncertainty and no one knows how things will pan out. Besides that, the stress level is so high and there is so much to do that they don’t have time to think further ahead.
Yet especially at times like these, it is important to not only focus on opportunity management, but also take an integral look at tactical planning. In other words: Integrated Business Planning, also known as IBP. By that, I mean looking between 3 and 12 months ahead during this crisis. Needless to say, the actual horizon varies per market.
IBP in times of crisis calls for a different perspective. Traditional planning and forecasting methodologies aren’t effective enough. But detailed analysis based on historical data alone won’t be enough to win you the battle, of course.
A smarter approach is to analyse the data at a different (and higher) level of aggregation and then to use the results as the basis for scenario planning. This provides visibility into things like:
Based on assumptions, you can make a number of calculations and model various scenarios, which in turn form the basis for better cross-functional decision-making – such as about demand patterns, supply, capacities, inventory, alternatives and working capital.
This obviously calls for some knowledge and understanding of markets, trends and the capacities, risks and opportunities in your supply chain, but an effective and efficient IBP process is the perfect instrument for that, including for modelling and analysing various scenarios.
It enables Sales, Finance, Operations, Supply Chain and Purchasing to make much more solidly grounded trade-off decisions, plus it provides the right insights into the assumptions behind the scenarios. As a result, your organization can significantly outperform your competition, even – and especially – during a crisis. There are plenty of real-life examples of organizations that prove it. So Integrated Business Planning is now more important than ever.
You might be finding it difficult to evaluate what exactly IBP could do for your organization. That’s why it is always advisable to conduct a scan. The Integrated Business Planning roadmap helps you on your way.