Integrated business planning is a holistic, cohesive, (ideally monthly) senior management process for evaluating all cross-organizational plans to ensure they are still aligned, and if they are not aligned, to initiate steps to revise or reconcile them. One way to look at this process is that the goal is to achieve a “one consensus plan” across all teams and departments. Additionally, the IBP process helps ensure the entire organization is still on track to meet overall company goals and commitments. If the management team determines that there are shortfalls in meeting pre-established goals, the team can then make decisions and take actions to help ensure everyone is back on track.
The individual steps of the IBP process will be discussed below. Let’s also address a common question relating to integrated business planning, particularly relevant to those familiar with the sales and operations planning (S&OP) process.
This is a question that has sparked significant debate among business leaders, consultants, and educators. Integrated business planning and sales and operations planning can both be defined in stringent or inclusive terms, and the processes and definitions are somewhat fluid depending on whom you’re asking.
The key steps of the S&OP process usually include:
Similarly, the individual steps of the IBP process may be defined or ordered differently by various organizations, but in general they include:
You can see the obvious similarities and overlaps between the S&OP and IBP processes, but also note that IBP may be considered more expansive in scope.
The essential goal of the S&OP process is to achieve the ideal balance of supply and demand, and the initial development of understanding of the S&OP process centered primarily on the manufacturing and supply chain areas of the business, without necessarily focusing on issues relating to workforce management, research and development, or capital expenses, for example. Using this definition of S&OP as a basis, integrated business planning has a much wider scope, covering all aspects of the business, focusing on making operational and financial decisions that impact the business as a whole, while not necessarily focusing on specific day-to-day requirements of a particular business function.
Some have argued that the finance team should own the IBP process and maintain a philosophical separation from the manufacturing/supply chain team, since IBP is strongly integrated with the financial health of the company, and helps determine the ultimate financial performance and goals of the company. Others point out that many successful COOs and CEOs have owned and implemented the IBP process, and since the goal is to have a single, cohesive plan, it makes more sense that IBP be the wheelhouse of the CEO and senior management team.
Regardless of who is appointed to coordinate and manage a company’s integrated business planning, it is necessarily a collaborative process with multiple team leads and executive team participants, rather than a task performed by a single person.
Some recent sources treat S&OP and IBP as essentially equivalent, depending on how company leadership defines each process. Experts argue that the modern S&OP process should take into account financial performance and business goals (also incorporating data and input from marketing, sales, and management teams), and that therefore S&OP and IBP are essentially the same thing, or at least that the S&OP process is a fundamental last step that enables effective IBP as the final, overarching management review/revision process.
Generally, those who distinguish between S&OP and IBP agree on the following areas of difference between the two processes.
Scope or focus: S&OP Primarily focuses on aligning supply with demand, integrating sales forecasts with production and inventory planning to ensure that the organization can meet customer demand efficiently. IBP has a broader scope that encompasses S&OP but also includes financial planning, strategic planning, and cross-functional collaboration across the entire organization. It aims for overall business alignment with strategic objectives and Big-Picture decision-making.
Time horizon: S&OP usually focuses on a period encompassing the following 3 months, generally pushing out to 18 months, specifically dealing with monthly or quarterly cycles, and incorporates tactical planning to meet immediate operational needs. IBP can include longer-term strategic planning from 3 months out to 3 years into the future, aligning it with the overall business strategy.
Decision-making parameters: In S&OP, decisions are often made based on current operational constraints, supply chain disruptions, and immediate market conditions. IBP decisions balance broader strategic goals, long-term scenarios, and financial implications, enabling more comprehensive decision-making.
Performance metrics: S&OP metrics often focus on operational efficiency, such as demand forecast accuracy, inventory management performance, managing temporary disruptions, and service levels. IBP metrics will encompass overall financial performance, market positioning, and long-view business success.
It could be argued that a modern, comprehensive S&OP process should account for the essential elements necessary for effective IBP, and that businesses that utilize all the modern technological tools available for S&OP will effectively be performing the integrated business planning process. However, it’s perhaps more useful to think of S&OP and IBP as differing in their overall scope or perspectives, even if many of the actual tasks performed are similar or even identical.
Business leaders have also been debating the question of whether IBP should replace S&OP, or in other words, that organizations should start thinking about “changing from S&OP to full IBP.” In these discussions, S&OP is obviously considered a fundamental part of IBP but falls short of the wider scope and implementations of the latter, so these thought leaders feel IBP should effectively take the place (and incorporate the functions) of the S&OP process.
The ORI Excellence Platform is the only software and AI tool purpose-built to help you achieve top-tier sales and operations planning and execution in one place. Reduce risk, manage uncertainty, and increase resilience with ORI.
Get a free demo and find out how ORI’s 30 years of experience and best-in-class technology can help you.