17 May 2022
There has been consistent debate over the years with regards to the difference between Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP). In this blog, we clarify exactly what IBP is, its evolution, and what differentiates it from S&OP.
Put simply, IBP is advanced or next-generation S&OP, and represents the evolution of S&OP from its production planning roots into the fully integrated management and supply chain collaboration process it is today.
When Oliver Wight pioneered S&OP in the 1980s, it was primarily about balancing supply and demand over a one to 12-month horizon, with a focus on inventory control. S&OP became the standard, and as Oliver Wight began to introduce new elements to S&OP in the 1990s it was clear the term had become a restrictive nomenclature; it no longer accurately described what the process was capable of.
The transition towards IBP had begun, and the term was first officially coined by Oliver Wight in 2005. It is important to understand that the move from S&OP to IBP was not simply a name change, neither did it herald the invention of a new process, but rather, it reflected a substantial change to an existing one.
Characteristics of IBP
The key characteristics of IBP include:
IBP review meetings
The monthly review meetings are a crucial component of IBP, as they allow senior management to identify material changes and their impact with regards to plans and strategic projects. If these plans are found to be misaligned, they are reassessed and reconciled so the entire organisation is ‘pulling in the same direction’.
Subsequently, the plan is compared to the organisation’s commitments, which includes annual plan/budget, performance goals and strategy. If gaps are identified, the process teams concentrate on pinpointing gap-closing actions. If approval is necessary, the solutions are presented as recommendations at the Management Business Review, and decisions are communicated back to the organisations in the form of the latest approved IBP plan.
This monthly ‘check and correct’ activity enables the leadership team to monitor progress and adjust plans accordingly as new information becomes visible, steering their organisation towards their committed plans, objectives and strategy.
The integration of financial plans with operational plans is a key feature of IBP, ensuring that the financial implications of the bottom-up plans and the overall health of the business are understood. By driving collaboration across all departments, the entire business works from one set of numbers that are underpinned by clear assumptions and activity plans.
By implementing IBP, driving its development and maturity and utilising the process to its full potential, you will improve your business performance significantly, reap the benefits and move ever closer to achieving business excellence.
Ultimately, what you decide to call the process outlined above doesn’t matter; it is what you do with it that counts. So, for those still preoccupied with the S&OP vs. IBP debate, I recommend taking the advice of the great management thinker Elvis Presley; “A little less conversation and a little more action.”