For years, finance professionals have heard about Integrated Business Planning’s (IBP) promises. In practicality, the dream of bridging siloes and empowering real-time collaboration across all departments and business units has often ended there: a dream.
Today, IBP is more important than ever. A mature process enables the highly responsive scenario planning necessary to respond to volatile market dynamics. Further, IBP will allow CFOs to allocate critical resources in the most profitable way—it is a direct inflation fighter. By gaining consensus on future demand and supply response aligned to management objectives and financial budgets, IBP provides an effective tool to reduce working capital in inventory and increase margin by allocating constrained supply to the most profitable channels.
Consider these eight essential benefits of IBP as you navigate the complexity of business alignment.
1. Steer the ship more effectively
CFOs need accurate forecasts and real-time reporting to effectively guide finance controllers, supply chain planners, sales teams and other stakeholders. Deploying predictive intelligence and advanced modeling to forecast demand, plan for inventory, and create supply and production plans will provide insight into the financial impacts of those decisions.
2. See further, sooner
Finance needs to see more than just one future. After all, what happens when best-laid plans change? Using a combination of real-time actuals, historical information, budgeting and supply chain data, CFOs can automatically forecast and reforecast supply chain units—and the resulting financials—across future time periods. Now, planners can analyze different scenarios and create rolling forecasts that are nimble enough to react to uncertainty.
3. Improve resiliency and agility
To truly prepare for uncertainty, planners need to be aligned (just like their data). CFOs should run scenario analyses together within a singular communication channel, helping the entire organization immediately recognize the financial impact of decisions. In turn, management can make better-informed decisions based on a range of probable values. Also, cross-functional communication is key to helping stakeholders optimize their plans.
4. Level up technology
Typical one-dimensional spreadsheets often lead to miscommunication and planning inefficiencies. Integrated business planning establishes robust connections between demand planning, inventory optimization, supply planning, production planning, S&OP and finance. These powerful relationships enable financialized time series reporting. Integrate inventory strategies with financials frequently to optimize results.
5. Manage margins
Central to the purpose of IBP is the ability to produce to meet a certain margin. Use real-time data to see how changes to one plan ricochet across the entire chain of plans and how they will ultimately populate financial statements. By leveraging improved forecasts, supply chain planners can reduce planned inventory levels and improve fill rates. Dynamic, connected plans can help to maximize available revenue opportunities.
6. Leverage artificial intelligence
Even with all of the data in the world at their fingertips, business planners are bottlenecked by their ability to interpret it. AI-based predictive intelligence, automation and consensus-based forecasting go a long way toward mitigating the “middleman of interpretation.” Leverage probabilistic predictive forecasting for demand, inventory and supply balancing with financial impact. AI-based solutions provide real-time views to allow your teams to focus on making informed decisions.
7. Change the culture
IBP is more than a set of tools; it’s a business transformation process designed for effective decision-making through all levels of a business. Consensus decision-making requires a cultural shift that is long overdue in most organizations. CFOs can help streamline this transformation by aligning functional influencers and supply chain KPIs with an income statement, balance sheet and cash flow elements. Raise the visibility of supply chain impact on financial plans to support consensus decision-making.
8. Embrace finance-forward supply chain planning
CFOs need a platform solution to create a business case for IBP and increase visibility to leadership, as well as an open platform that provides a central repository for IBP. This native cross-functional integration shows the impact of supply chain decisions on the balance sheet, income statement and cash flow. Align strategic, financial and operational plans to optimize profits.
Today, regression-based forecasting coupled with rigid or slow-moving supply response capabilities is a recipe for disaster. As inflationary pressure increases, leading organizations have already established effective IBP processes to enable both predictive capabilities and responsive movements to inevitable changes.
Financial leaders today should be uniquely positioned to champion the type of process change necessary to achieve IBP excellence, as it has a direct impact on free cash flow, revenue and margin.