Integrated Business Planning (IBP), as mentioned in the What Is S&OP? article, is a process that Executive Management frequently uses. Also, it ensures that the company allocate sufficient financial resources to each operational unit of a corporation; in order to supports the overall strategic direction of the company. IBP also ensures that the supply chain and operations plans fit with the corporate financial plan.
What Are the Differences Between IBP and S&OP?
We characterized both IBP and S&OP by a regular set of structured meetings between organizational stakeholders designed to break down barriers and facilitate effective decision making.
Key components of S&OP:
- focuses on capturing accurate customer demand
- incorporates historical demand for existing products
- incorporates new demand for recently introduced products
This accurate forecast is used as part of a structured, repeatable process to create production plans that will drive manufacturing efficiencies and ensure sufficient inventory is produced to meet all customer demand until the next production run. Implementing a mature S&OP by following the 7-Step Business Process has few significant benefits.
Business executives frequently plan and manage based on financial information.
Key components of IBP:
- communicates a firm’s strategic direction in financial terms.
- easier to measure a company’s performance relative to financial targets
Moreover, CEO, COO or CFO usually Spreadhead S&OP; S&OP is usually led by someone in an operational role, like a Supply Chain Director.
How Does IBP Make S&OP More Effective?
Each business unit strives for positive financial performance. IBP makes it easy for every business unit to understand how their individual Key Performance Indicators (KPIs) contribute to the financial success of the entire organization. IPB measures the performance of each business unit against the same financial criteria. Thus, it increases the organizational transparency and that fosters trust among cross-functional teams.
Finally, by measuring supply chain performance in financial terms, Integrated Business Planning (IBP) helps determine the financial costs of supply and planning decisions. Fixing the value of currency across years (barring changes to the value of a dollar) provides a common metric for short, medium, and long-term planning. Executive Management likes to plan in financial terms because it provides a common reference point for internal employees, Boards of Directors, and financial markets.
On the same topic:
S&OP: A 7-Step Business Process
Advantages of S&OP for Supply Chain Management
