It is often a common practice for businesses to think about Sales and Operations planning (S&OP) and Integrated Business planning (IBP) as terms that can be reflected interchangeably, however there are very distinct differences that are important to understand and are more than just nuances. These differences can have important implications on how an organization approaches deployment with respect to ownership, accountability and how data is constructed for visibility and decision making. Let’s compare these differences:
| Characteristic | S&OP | IBP |
| Purpose | Balancing demand and supply to align appropriate capacity and resources | Understand the consequence of integrated plans with respect to long term business ambition |
| Planning Horizon | 6-12 months | 24+ Months |
| Functions involved | Sale and marketing / supply chain/ finance | Product planning, sales and marketing, supply chain, finance |
| outcome | Balanced supply plan, input for financial forecast | Gap closing actions to strategic ambition, optimized profit and loss statement |
| ownership | Supply chain | Business leader |
Although IBP and S&OP both align plans between demand and supply chain, IBP involves an entire business perspective which requires the most senior business leaders to evaluate the consequences of integrated plans on a full Profit and Loss statement (P&L) for optimization and the achievement of long -term strategic ambitions. These differences are important to understand because implementing IBP when the business only wants S&OP can be a frustrating experience.
Things to consider for an IBP implementation include understanding the business organization structure and where the P&L accountability resides. Where in the organization accountability for long term strategy exists or who own gap closing to those long-term plans? What level of aggregation is required for the leadership team to make appropriate decisions? How will finance integrate a full P&L within IBP? In an S&OP implementation it is largely focused balancing demand and supply and contributing to the financial forecast and IBP is fundamentally changing the way the business is managed from the top.
