There’s been a number of articles lately, which we’ll likely discuss in later articles, about the need to move to integrated business planning (IBP) as a means to combat, and minimize, supply chain disruptions. While those articles have a point, there are two things they are missing, at least so far. One, while IBP can minimize certain types of preventable disruptions, it doesn’t help much in mitigating disruptions that are unexpected. Two, it requires end-to-end modelling of, and monitoring of, overall business processes, and without the right representation of the right stakeholders in the process, this never happens.
And the right representation usually doesn’t happen because, as we kind of hinted at in our last article on why You Need A CPO, most organizations don’t have the right C-Suite, and, thus, the right people aren’t included, or at least properly represented, in integrated business planning (IBP), and, as a result, the right processes, or at least the right assumptions and data, aren’t included, and the planning fails.
If you look at the goals of Integrated Business Planning, which include, but are not limited to:
- aligning strategic objectives with operational and financial goals
- aligning product strategy, R&D, and manufacturing with objectives and supply chain
- ensuring demand forecasting is influenced by market research and historical sales data and connected to procurement
- ensuring procurement strategy aligns with demand forecasting, risk management, and the organization’s current supply chain network
- ensuring network and logistics changes and optimization takes into account procurement, risk, regulatory compliance, and ESG goals
- ensuring marketing and sales focusses on current product availability and aligns with the product strategy dictated by market research
- creating an all-inclusive profitability analysis that takes into account true end-to-end lifecycle costs
- ensuring inventory is balanced with logistics times and disruption risk so that overall cost (balanced between inventory cost and losses from stockout) is the most appropriate for the organization
- creating a cash-flow analysis that considers not only all inflows and outflows but the timings so the organization can balance debt/loans, on-time payments, early payments, and investments to maximize the return on every dollar
and the expected results which include, but are not limited to:
- enhanced revenue growth
- faster and better (data-informed) decision making
- improved customer satisfaction
- better product lifecycle management
- faster supply chain disruption responses
- increased target ownership and the ability to rapidly revise, and commit to, plans
- better planning efficiency
- align objectives with goals unless you have the owners of all objectives, impacted operations, and finance involved … and this dictates a complete C-Suite with all the key parties, including, but not limited to the CEO, CFO, CPO, CRO, and, if present, COO, CTO, and any other CXO role NOT fully owned by another CXO
- align strategy without the marketing & sales perspective (CRO), the market research (CRO or COO), the R&D/Manufacturing owner (COO or CSCO), and the procurement perspective (CPO)
- you need the CRO, COO, and CPO to agree on the demand forecast as all parties need to deliver
- … and the CPO needs input from the Risk Officer and the CSCO to finalize the strategy
- the CSCO cannot optimize the supply chain network without the CPO, Risk Officer, Compliance Lead, and ESG Expert
- the CRO needs to continually monitor input from the CPO and CSCO to ensure that products are marketed and sold at the right time as manufacturing challenges, logistics delays, inventory hiccups can change product availability daily
- profitability needs to take into account all organizational costs, which means you need to look at procurement costs (CPO), operational costs (COO), HR costs (CFO, COO, or Head of HR), logistics and tariffs (CSCO), etc. it’s way more than revenue minus COGS minus overhead
- and, while the cashflow belongs with the CFO, the CFO needs insight into organizational wide costs and commitments to figure it all out
and you will not
- reliably enhance revenue without a CRO;
- be able to make better data-informed decisions with missing data;
- improve customer satisfaction without market research, procurement input, manufacturing quality;
- better manage lifecycles without integrated input from market research to warranty repair and all steps in between;
- respond quickly to a disruption without all of the integrated data to make an alternative decision as a mitigation response;
- have all of the target, and task, owners in the same system; or
- plan better with partial data. Never.
So you need all of the key roles, including the CRO and CPO that the majority of organizations are missing and, most importantly, you need the right structure — CRO and CPO at the top with the CFO and (if not done by the CEO) COO — with the other C-Suite roles reporting to the CRO, CPO, CFO, and COO as appropriate. For example, the CMO and VP sales under the CRO, CSCO and Risk/Compliance under the CPO, HR and R&D under the COO, etc.
In other words, all this push towards IBP is great, but you need a fleshed out, well oiled organizational structure, with all key roles filled, to support the processes with a collective holistic data view, or it just won’t work.