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Home Products Operation Management for Dynamics NAV Integrated Business Planning Process

Integrated Business Planning Process

Fotolia_19693721_XS_IBP_Process_150Integrated Business Planning (IBP) has evolved from Sales and Operation Planning activities and has become a methodology widely used both by manufacturing and distribution companies. But what is Integrated Business Planning and what transforms the classical S&OP into next level activities?

First and foremost IBP is the Process whose main objective is to maximize results from the company’s strategic objective point of view while S&OP is just a process with the objective of balancing supply and demand. Company strategic objectives can be defined as Maximizing Revenue, Maximizing Profit, Increasing Geographical Coverage or Providing Products with most Features. Traditional S&OP cannot link day-to-day operations to the strategic objectives of the company. The Integrated Business Planning Process was designed to fill this gap in the company planning and execution process. The following flowchart shows three levels of Integrated Business Planning Process activities:  

 

Integrated_Business_Planning_500

The IBP Process has tree levels and starts with the strategic planning and development of the company operational business model. This business model cannot be developed in one day – it should evolve with the company as more factors affecting company performance are recognized. Business Model has to be built at an aggregate level and should integrate a Strategic Plan, a Product Plan, a Sales & Marketing Plan, a Financial Plan and a Supply Chain Plan. Even though a company can model their operations using Excel spreadsheets, such models are not linked to actual day-to-day operational data to provide feedback and are difficult to maintain. Modern IBP systems use parameterized Business Modeling Tools linked to the various data sources and provide live feedback for the model and company performance. Such Business Modeling tools are optimized for upward looking “What If” simulations and exception identification and handling thus saving companies thousands of hours every year.

The second Level of the IBP Process is the Sales & Operations Planning extended with a review of other company plans. Changes in Sales & Operation Planning have to be linked back to company strategic plans and trigger exception “Red Flags” whenever any limitations can be identified. For example, an unexpected increase in demand should trigger revisions in financial and capacity plans and as earlier as possible to allow taking corrective actions.

The third level of the IBP Process is the actual execution level. IBP Model has to be linked to the operational ERP system and provide feedback to the model about company actual performance. And once again “Integrated” is the key term describing the execution level of the IBP Process. Information has to be automatically fed back to the Business Model to adjust key model parameters. Feedback has to initiate model revisions and corrective actions which will help the company maintain visibility of the performance and align actions with strategic objectives.       

 

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