RF Supply Chain Expertise CEO Reto Fuhrer discusses S&OP, IBP, why they matter – and is there a difference?
The distinction between Sales and Operations Planning (S&OP) and Integrated Business Planning (IBP) can sometimes appear more academic than practical.
The traditional definition of S&OP is as a five-step process that reconciles sales and production targets into one coherent plan. The originators of the term, Oliver Wight and Dick Ling, summarised the steps as follows:
- Gathering data;
- Sales or demand planning;
- Production and supply planning;
- A review meeting; and
- S&OP approval at an executive meeting.
Integrated Business Planning (IBP) is an extended version of S&OP that involves more long-term financial planning for a business. While S&OP is mainly focused on balancing customer demand with manufacturing and supply, IBP considers mid- and long-term investments based on the current state of the business. The terms are sometimes used interchangeably, but IBP includes more financial planning and analysis for future growth and success.
For businesses in Australia, particularly those importing raw materials and packaging materials with long lead times, having a solid IBP in place is crucial. It allows for better planning and communication with suppliers, ensuring that the right supplies are available at the right time.
For the purposes of this article, I’ll focus on IBP and why it’s essential for business success.
Where are we now?
Unfortunately, the state of IBP in Australia is not very advanced, especially among small- and medium-sized businesses. This is changing, as disruptions in the supply chain have become more frequent and businesses are realising the importance of having a solid plan in place. But much work needs to be done in order to deliver on the ‘Six Rs’ of logistics: right product, right time, right quantity, right quality, right place, and right cost.
Challenges and opportunities
One of the major challenges in implementing IBP is getting all departments on board – especially the sales team. Sales is no longer just about selling products, but also building relationships and bringing valuable information into the organisation.
To align all departments and goals, regular communication and collaboration is necessary. There is no room for isolated or siloed thinking; all stakeholders must be at the table and sign onto a plan for it to be effective.
This is where IBP comes in, as it allows all stakeholders to convene and make joint business decisions in real time.
Why modern technological support is a must
Modern technological support is essential to implementing IBP because using AI and machine learning to drive historical forecasts with sophisticated algorithms is quicker and more accurate than the work of a human could ever be.
Additionally, working with spreadsheets is never in ‘real-time’ and consolidating data manually is not only hard but very inefficient. A strong tech platform means all information can be reflected in real-time and all stakeholders can make smart business decisions.
Not only that, but tech platforms allow for sophisticated scenario planning and deciding what solution works best in the event of any given circumstance. With all of today’s supply chain disruptions, this is essential.
At RF Supply Chain Expertise, we believe in identifying and solving the common planning problems businesses face.
Ask yourself the following questions: Do you frequently argue with your colleagues over conflicting goals? Is your production schedule constantly being revised due to inaccurate forecasts or late deliveries? Are you tired of using Excel spreadsheets to manage your supply chain activities?
If you’re facing any of these issues, IBP can help. And we can help you implement IBP to address these problems, allowing you to focus on higher value-added tasks and improving your bottom line.
For more expert insights from RF Supply Chain Expertise, check out the links below:
Integrated Business Planning (IBP)
Sales and Operations Planing (S&OP)