IBP is a business planning process that extends principles of S&OP to the rest of the supply chain, customer demands, products, and service profiles to deliver one’s seamless process. When it is done properly then an organization can predict and respond to different conditions quickly. However, since it can require a long implementation process, you want to not get bogged down by some common pitfalls.
Not Including the Right Players
Many IBP journeys begin with the supply chain. To succeed, it’s necessary to make sure you link all functions of the organization together and not just rely on the VPs of the supply chain. The ownership should belong to the CEO. Having ownership and leadership from the CEO helps to get an output of the process. For IBP to be done right, it requires some decisions about margins and risk mitigation and this is something that leadership is not able to delegate and avoid.
Not Having Clear Goals
IBP is the third step in an S&OP plan. Each stage has a different goal and each phase is going to build on what came before. It’s important to ask what the goal is, how you are making decisions, and what do you measure?
No Dedicated Portfolio Management Review
Companies that rely on sales and operations planning are usually focused on demand and supply balancing. However, this will cause gaps when it comes to product portfolio management. When you have dedicated portfolio management, it then helps to have a consolidated view and make integrated decisions on product segmentations, offerings, and resources. Many tools don’t incorporate the abstract data that is necessary for this stage and you aren’t able to account for new products that don’t exist in master data.
Demand Is Not Owned by Marketing and Sales
Another common issue that can stall IBP initiatives is having the supply chain teams own the demand plan. Marketing and Sales should be in charge of this part of the process. Give the marketing and sales teams more visibility to see if they can meet their target and budget requirements and how to best use resources effectively. During this part of the process, teams can struggle with bad expectations and a lack of transparency. Supply chain teams want certainty in a demand plan, but unfortunately, demand is volatile. This can lead to marketing and sales teams not participating or exaggerating numbers.
Not Including Finance
Not including financial teams in IBP can be detrimental. The information that the team needs should come from the same stakeholders.
Not Recognizing Assumptions Drive Numbers
Assumptions are the foundation that will support your numbers, so it’s necessary to be transparent about them if you want IBP success. For example, when it comes to COVID-19, everyone has different assumptions about how long disruptions last and their impact. Team members with different functions should have conversations about these assumptions in order to arrive at a common view. It’s also important to pinpoint if the assumptions are changing and make the necessary changes to the plan.
Having Too Much Detail
To have success, you can’t lose focus on the big picture. Insights from the market should be translated into some rough numbers and then discussed at the correct level of aggregation to avoid getting bogged down with too many details.
Not Aligning with the Strategic Growth Plan
Many organizations lack the processes to actually successfully deploy the strategy and very few will regularly check to make sure they are delivering on the strategy. Focusing on the end goal is important and having the right tools to help you assess is key.