People have a natural tendency to stick with what they know. Put people inside an organization and they will naturally work within their departments to achieve their own local objectives. So when people talk about working in silos, this is a completely natural reaction.
Play all the Right Notes…
The problem for organizations is when different departments with different objectives are not working together effectively. You’ve got the Sales team out trying to hit targets by selling any product to hit the numbers. Whether it’s in stock or not isn’t their problem. The Marketing team is planning the next big thing that’s going to revolutionize the industry. They’ve not told anyone it launches in 8 weeks and the packaging isn’t going to arrive for 12 weeks. Operations are trying to improve efficiency by doing long production runs and minimizing the number of tooling changeovers. HR are trying to work out how many people are going to be needed on the shop floor for the next 12 months. And Finance are trying to make sure that the company ends up with a profit at the end of the day. Playing all the right notes, just not in the right order!
… in the Right Order!
Integrated Business Planning (IBP) is the way of working to agree & align the objectives of the business. It’s aim is to have a common, agreed plan across sales, marketing, product development, operations, finance & the rest of the business. All departmental activities are working towards achieving that plan. Playing all the right notes, in the right order!
The plan encompasses both the volume and financial plans and the two must be aligned. Too often we see companies working on two (or more) sets of numbers that bear little relation to each other. Sales opportunities and risks might appear in the financial plan, but due to the technical complexity of including them in the operational plan they are added to the ‘too difficult’ pile and left out. It’s then reliant on Operations to remember them and adjust the production and procurement plans accordingly. The same is true of new products that don’t yet have complete master data. They will be included in the financial forecasts as an expected sale, but they aren’t in the operational forecasts and so haven’t been included in capacity and material plans.
Mis-aligned plans end to unhappy customers, lost sales opportunities, excess & waste stock and ultimately lost profit.
Not to mention the explanation and justification of differences to the Executive Team is a headache for all involved, and obviously has a serious impact on meeting performance targets.
IBP as a Single Music Sheet
So in simple terms IBP is about having a common plan across the entire business where the operational and financial plans are aligned, agreed and actioned by everyone in the organization. To achieve that goal takes work in terms of people, process and systems. In the next blog posts we will explore more on why it’s important and how you can improve your IBP process.