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What should be “Integrated” in Integrated Business Planning (IBP)

Feb. 27 2014 by Dean Sorensen, Founder and Management Consultant - IBP Collaborative

Budgeting & Planning

Integrated Business Planning (IBP) is a topic that is dominating discussion among supply chain professionals – particularly those that seek to make Sales and Operations Planning (S&OP) more financially focused.  

If I were shopping for a system to support IBP, my list of requirements would obviously include the basics, such as planning bills, demand planning, etc.  However, beyond these requirements are a number of others that would be included in my RFI / RFP:

  • Full P&L, balance sheet and cash flow forecasts
  • Working capital forecasts – inventory, A/R, A/P
  • Direct cash flow forecasting
  • Foreign currency forecasting and hedging
  • Project portfolio cash flow and ROI forecasting
  • Capacity planning in all parts of the business
  • Forward looking cost per output (eg cost per order)
  • Strategic sourcing planning – determining the economic impact of doing business with vendors globally
  • Forward looking activity-based profits and process volume
  • Scenario planning that incorporates capacity constrained cash flow forecasts

This may seem like an unrealistic list but it actually is not.  As a vendor neutral consultant practicing in this space, I can confirm that there are solutions out there that can address all of these requirements.  These tools, along with others (such as CPM) provide the basis for integrated S&OP / IBP / Rolling forecast processes that align operations with strategy and financial performance.

Such capabilities also provide the basis to replace budgeting with an integrated rolling forecast.  In my view, there should be little difference between more mature forms of IBP and financial forecasting.  If supply chain and finance professionals can work together on this it can essentially eliminate the need for separate operational and financial budgeting processes in many organizations. The key is to get supply chain and finance together to engage in a conversation about the joint benefits of IBP.  That is my mission.

What do you think?  What are your experiences in trying to move towards IBP?

Tagetik unified budgeting, planning and forecasting

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