CFOs at most companies encounter a common set of challenges in their business planning. With conventional planning, companies’ planning, forecasting and business intelligence applications can be disconnected, and their tools not integrated. Companies’ models are frequently too rigid, lacking the flexibility required to connect to planning measures or to adjust in a dynamic business environment. Strategy-level planning may not link up with day-to-day, field-level outcomes, or financial perspectives may not align with sales and operations planning (S&OP).
Integrated Business Planning, or IBP, addresses all of these challenges. IBP connects strategy, finance, and operations into an integrated planning process: a combination of the S&OP, demand planning, and supply planning processes in a single, holistic planning optimization of the supply chain. IBP is also dynamic and adaptive, and it is a continuous planning process.
A recent study by the Institute of Management Accountants found that the best-performing companies take a more rigorous approach to financial planning and analysis, or FP&A, than their competitors. The IMA report, through a survey of 734 global financial executives and managers involved in FP&A, showed that the most successful companies have more tightly integrated and coordinated FP&A components. They translate their strategies into actionable plans, and they build resources needed to deliver plan results into their budgets. These companies also merge operational and financial planning, and they have a deeper understanding of how their operational metrics drive their financial results, the IMA report stated. Integrated Business Planning directly addresses many of the principles identified in the IMA report. As a unified planning, analysis, and reporting platform, IBP maintains a strategic focus on business goals.
IBP is driver- and outcome-based, and it focuses on the whole process. It keeps up a strict connection between S&OP and the finance perspective. IBP provides forecasts, what-if simulations, and embedded predictive analytics, and it provides workflow control through a high degree of automation.
Another defining characteristic of IBP: It breaks down silos—not only those between departments, but within the planning process. IBP fosters collaborative decision-making, breaking traditional divisions between business intelligence, corporate performance management and predictive analytics. IBP aligns the top-down process, which aims to bring strategic key performance indicators down to the operations level, with the bottom-up process that aims to collect operational plans from the field.
While the concept of Integrated Business Planning has been around for more than a decade, new technologies have dramatically expanded the scope of capabilities under IBP in recent years. Cloud computing takes the new IBP advantages to a new level.
In the rapidly changing markets of today’s digital world, companies that can’t adapt quickly are left behind. Reputable business consultants such as McKinsey & Co. point out that this environment favors companies that can “radically” simplify their processes, break down their organizational silos, and implement end-to-end operating models. IBP is a key enabler for each of these.
For more information on IBP, visit www.board.com.