Performance Management

Five good reasons to move from traditional S&OP to IBP by Benoit Clauss

Since it’s more important than ever to serve customers in a timely fashion and without disruption, companies have higher expectations with regards to end-to-end integration and good execution of their strategic plan.
Traditional Sales & Operations Planning (S&OP) was originally developed to align sales forecast with production capacity to essentially ensure high service levels to customers. Integrated Business Planning (IBP) goes beyond and focuses on:

• the impact of Demand & Supply variations on financial results
• the agility to address new business opportunities and risks
• an effective governance model that favors decision-making at the appropriate level and in line with strategic orientations.

IBP represents the highest level (5) in the S&OP maturity levels.

Maturity levels of IBP

There are 5 benefits to move your Sales & Operations Planning into a truly Integrated Planning process :
1. IBP provides robust financial integration; any changes in Product Portfolio and Demand and Supply assumptions, are monetized and reflected in the P&L and in the Balance Sheet (DSO & DSI). This allows the Executive Leadership Team to understand the impact of these changes against previous plans and budget to better anticipate the necessary gap-closing actions.
2. IBP is fed by the Strategic Plan (typically 3-10 years) and ensures that its execution is flawlessly embedded in the tactical horizon activities (typically 24 or 36 rolling months).
3. IBP enables a comprehensive review of the Product Portfolio, i.e. not only the product launches but also the full life cycle management of all products ranges, including phasing-out, divestment, portfolio rationalization, etc.
4. IBP integrates the concept of monetized scenario-planning (“what if”) and addresses the major Business Risks & Opportunities; this is probably one of the major benefits of IBP: Upsides and Downsides to the business plans are owned, monetized and documented with assumptions, so that they will drive best decisions.
5. and last but not least : IBP relies on a strong governance model, led by the Executive Leaders and focused on decision-making.

How does IBP work practically?
IBP is performed through a monthly cycle and relies on a 5-step sequence of reviews.
Step 1 : Product Management Review ; main purpose is to validate the Product Portfolio Plan based on latest assumptions
Step 2 : Demand Review ; main purpose is to validate the revised Demand Plan (revenue & volume) and the Demand Upsides & Downsides
Step 3 : Supply Review ; main purpose is to validate the revised Supply Plan (including Distribution & Inventories) to meet the revised Demand Plan and to address all identified Risk & Opportunities across the end-to-end Supply Chain
Step 4 : Reconciliation Review ; its aim is to capture all changes validated at steps1-2-3, to value their impacts to P&L & Balance Sheet and to prepare the escalations to step 5 (Management Business Review)
Step 5 : Management Business Review ; main purpose is to validate the revised plans and their impacts to Business Plans (Strategic Plan, P&L, Balance Sheet), to make decision on the escalated issues and to assign any necessary gap-closing actions to the teams.

What are the efforts to implement IBP?
It depends on the maturity of your fundamental activities (Product management, Demand Planning, Supply Chain, Finance) in terms of process robustness, data quality, and systems support, and also on your ambition with regards to Automated Finance Integration (which requires important system efforts). There are different paths to get to a best-in-class IBP and it is good to have in mind that many companies have reached, within 6 months, very positive results in terms of business decision-making and P&L improvements with elementary financial integration (for instance relying on XLS based set-up). But, one must be aware that the biggest contributors for effective IBP are:

1. the cross-functional collaborative mindset between the participants
2. the commitment of Leadership Team to own and drive IBP
3. the sense of accountability of all stakeholders.

This is why IBP implementation programs always encompass solid training & education plans and Change Management support. At Dobilo we propose a robust methodology and also a unique tool, AchieV, to successfully move from S&OP to IBP.

With regards to our methodology, our approach consists in:

• assessing your IBP maturity level, through interviews with your key stakeholders based on a thorough questionnaire
• identifying gaps and opportunities in your current process
• helping to design the IBP process that fits your strategy and your key business challenges and expectations
• supporting your IBP implementation with a team of experts.

How to align the S&OE (Sales & Operation Execution) with IBP?

Proper short-term execution is critical for a successful IBP. In other words, IBP can’t achieve its full objectives without a strong, consistent and focused S&OE process with clear Roles & Responsibilities.

Concretely, S&OE translates the outcome of the tactical IBP plan into the required level of details that drive the short-term actions in the end-to-end supply chain.

The S&OE process covers the short-term horizon, commonly the 3 first months, which are handled at weekly buckets and at SKU level - whereas IBP stays at monthly buckets and at family product level. S&OE is focussing on the operational issues at the master production schedule (MPS) level of detail and it is the forum where the deviations in demand (customer orders vs. demand plan) and in supply (actual productions/purchases vs. plan) are identified and addressed in a way that keeps the stability of planned activities while minimizing impacts to customer service level.  Typical processes, tools & indicators such as Demand Control, Available-to-Promise, Schedule Adherence…etc… will be part of the arsenal for an effective S&OE process.

At Dobilo we will help you to implement a solid S&OE aligning with IBP by monitoring the actual demand and supply at the appropriate level, in order to provide the early signals that helps business stakeholders make the right decisions and keep the demand & supply chain out of firefighting mode that would ruin all the benefits from IBP.

At Dobilo, we are proud to propose AchieV, a dedicated tool aimed to reinforce discipline and accountability in every stage of your IBP process. The development of AchieV was based on our experience of IBP implementations where the lack of visibility on keys elements such as:

• completion on time of assigned activities: revised Plans, Up & Downsides, revised P&L and Balance Sheet, etc
• attendance trackers
• underperforming KPIs gap-closing actions
• progress on assigned follow-up actions, etc

reduced the overall effectiveness of the IBP process and endangered its sustainability.
Concretely, AchieV is a web-based tool that will be the framework to run your IBP reviews content-wise and in the right sequence. It will allow each participant to get a comprehensive view of his/her duties and deliverables throughout the IBP reviews.

AchieV includes:

• KPIs on all level of the organization
• the content of all IBP reviews & pre-reviews (plans, variance analysis, P&L & Balance Sheet)
• all Escalations & Actions
• KBIs (Key Behavior Indicators), such as attendance, time-adherence and satisfaction level, which are key to a successful IBP process.

AchieV will help strengthen your teams ability to collaborate with much more accountability & discipline.

Below some visual examples of what AchieV can manage:

Interested to know more about IBP and AchieV?

We would be more than pleased to have a conversation and demonstrate our approach and the web-based tool that supports it.