08 Jun 2022
1. It is a proven process
IBP has evolved over more than 30 years. Rooted in sales and operations planning (S&OP), which coordinates the commercial and supply processes, IBP is often referred to as Advanced S&OP. However, it doesn’t just align demand and supply, but also all the other key functions of the organization - marketing, R&D, operations, logistics, finance, HR and even IT - in one overarching plan.
2. Those who already use IBP are seeing significant returns
According to an Aberdeen Research Study, enterprises that strategically deploy S&OP programs outperform companies whose approach to S&OP is more tactical and less integrated, by an average gross margin of 20%. Evidence illustrating the benefits of IBP in large corporations, as well as small and medium sized enterprises, abounds.
Take US Army Materiel Command (AMC); it cut inventory by $4.5 billion, without cutting performance, through implementing IBP. Similarly, in Melbourne, Small Medium Enterprise (SME) meals-on-wheel provider, Community Chef, reduced lead times by 20%, refined its manufacturing model and substantially improved its value proposition.
3. IBP simplifies annual planning
The annual plan or budget requires time and resources, and is daunting to all, particularly those in finance. IBP forms one integrated operating plan and by aligning the strategic and tactical plans of individual business functions, on a monthly rather than annual basis, it provides a starting point for the next financial year. By the fourth quarter of the current financial year, business plans for the next will have been seen nine times. This familiarity removes much of the guesswork, as well as cutting cost and stress and reducing the burden on the finance department.
4. IBP eradicates the waste that arises from multiple plans
In an organization where silo mentalities exist, there will inevitably be waste. By encouraging communication, discussion of the truth ‘as we know it’ and establishing a single plan, IBP discourages gamesmanship. Using a top-down bottom-up approach, IBP helps the company pull in one direction.
5. IBP is the perfect platform for innovation
In the age of the consumer, innovation is key, but it requires control, flexibility and visibility. With a 24-36 month rolling horizon, IBP unlocks a holistic view of the market and customer demand, allowing an organization to anticipate long-term trends and provides the fundamental integration required between product, demand and supply teams.
6. The tools now exist to support the process
More software providers have introduced solutions designed to support IBP. By implementing IBP using an integrated approach - and in the correct order: people, processes and tools - software tools can provide big competitive advantages as long as there is complete data integrity. They enable enhanced scenario planning in the extended planning horizon, helping manage risk and contingency, and providing a powerful mechanism for driving the business towards business excellence.