Integrated Business Planning (IBP) is a management process that aims to bring together different business functions to plan and execute an organization’s strategies. IBP goes beyond traditional Sales and Operations Planning (S&OP) by including functions such as finance, marketing, and human resources in the planning process. While IBP can provide many benefits, such as increased visibility, better decision-making, and improved alignment, it also comes with several lesser-known challenges or rather taboo sensitive challenges that can make implementation difficult.
- Basic supply chain capability is lacking in any ability to execute the plan. There is a misconception that if you build it, (S&OP, or IBP) performance will follow without fixing any of the fundamental execution processes that underpin this capability. Many implementations experience frustration when they put in the review cycles of IBP, but delivery performance does not improve and inventory remains high, and it is often blamed on the demand plan when there are significant supply chain operational issues exists. For example: managing orders with unrealistic promise dates driving significant back orders, Inventory record accuracy at 60-70%, no clear to build schedules, production schedules created outside planning systems, receiving dock with a week’s worth of backlogs, plants prioritizing build plans to maximize revenue, no formal supply planning process and rough-cut capacity planning using theoretical capacity as opposed to demonstrated and many more. All of these issues will negatively impact your ability to have an effective IBP or S&OP process and require focused effort with leadership understanding and support to improve.
- Although most IBP implementations include extensive education on all aspects of IBP, what it doesn’t do is ensure that the employees in the different functional areas have the capability to understand what good looks like functionally. On some occasions people in leadership positions have obtained these roles not because they are credentialed to be there but are selected for other reasons. These reasons may include the following factors, legacy time with the company, part of a development roadmap, or known for heroic actions in getting things done. The challenge with this approach is that many issues identified in the IBP process are related to supporting process deficiencies and the ability for these leaders to drive the necessary change in their functional supporting processes are difficult and is often met with significant resistance. There was an old saying often conveyed, “we improve quality one retirement at a time” to articulate the slow rate of improvement in the organization and this will frustrate the IBP process from realizing the benefits that it wishes to achieve.
- One of the primary challenges of IBP is integrating data from multiple sources. Often, the data is scattered across various systems, making it challenging to bring it together into a single, coherent view. Integrating data requires a significant investment of time and resources, which can be a barrier to implementation. Many organizations significantly underestimate the time and extent required to clean the data from all these systems nor are they excited to hear that the millions of dollars spent on “new” systems are insufficient for the business requirements. I have even had a leader in one organization exclaim in frustration, “I don’t want to hear any more on data issues, we have been making decisions on bad data for 20 years, we can keep doing so.” Although we can all agree that perhaps the comment is not rational, but it does clearly articulate the frustration that leaders experience when faced with these issues and as result, many in the organization will not report it or prefer not to discuss altogether which is problematic in implementing IBP.
- Often heard amongst IBP leaders in many organizations include the statement, “I can’t get the business to look past the current year.” Since one of the key benefits of IBP is its focus on the longer term, than this is an obvious challenge. Early in the implementation reasons for this may include insufficient data, systems not integrated yet, etc. however, two years later and the business still has not moved past the one-year horizon and as a result frustration settles. There may be other legitimate reasons for this, however one critical issue that many organizations don’t like to accept or discuss is that no one is accountable for longer than a one-year horizon. Leaders in an organization will manage to the level of which they are being held accountable for, and if that is only a budgeted year than that is what will be discussed. Many organizations have an annual strategic planning process however this is often not used to drive the business but rather placed on a shelf and next year a new strategic plan is developed. Comments I have heard from leaders, “we don’t need to gap close to that strategic plan we created last year we will plan better next year.” I suppose they were right the following year they sandbagged the strategic plan and all gaps that previously existed disappeared over night. The benefit of IBP is that it allows you to align your plans and assess gaps relative to the business future long term ambitions but if this is a constantly moving target then the IBP process will disregard the long-term plans which compromises the IBP process and intent.
In conclusion, IBP offers many benefits to organizations, but it also comes with several taboo challenges that can make implementation difficult. These challenges include supply chain foundational capability, people capability, data integrity and accountability of the strategic plan. Overcoming these challenges requires strong leadership, collaboration, and a willingness to embrace difficult conversations. Organizations that can successfully navigate these challenges can reap the rewards of IBP and improve their overall business performance.
