This plan should take into account a series of different variables including previous actuals for volume and sales, previous forecasts, pricing changes, the statistical unit demand forecast, and known organisational initiatives. The next step in the process is a series of final reconciliation meetings between demand, supply and finance. This annual planning exercise also often takes place under significant time pressure, with reviews taking place at various levels (eg local, regional, global) and with considerable effort required to achieve a common and aligned view on the business outlook across these levels before a final plan can be agreed. Corporate financial planning processes typically share common templates, milestones, high-level assumptions and top-down targets. Most companies are attempting some form of IBP today, but few have truly mastered the process. Most of the gaps should have been resolved prior to this meeting. However, a clear understanding of how to identify and implement the correct process improvements to truly harness this power is much more elusive. The criticality of cross-functional collaboration in S&OP/IBP is also often overlooked. Role of the finance organisation in the integrated business planning process. IBP addresses this problem by creating a company-wide standard for financial planning. The next step in the process is a series of final reconciliation meetings between demand, supply and finance. These initial forecasts should take around one week to produce and will form the basis of the initial conversation and meeting with the operations team. This meeting, the executive IBP meeting, is a forum to present the aligned forecasts to the organisational leadership team, receive recommended top down adjustments, and provides an opportunity to resolve any high level gaps that could not be resolved in the pre-IBP meeting. IBP is too often thought of as just an operational process. A sound IBP process is a key enabler for this business partner role in several ways; Participation in IBP provides Finance with a deep understanding of the business issues across commercial and supply chain functions. Josh Peacher is a manager at The Hackett Group. Prior to meeting with the demand planning group each month, the finance organisation is responsible for the creation of a first cut gross and net revenue plan looking out around 18 to 24 months. The finance organisation’s participation in the IBP process is critical to the realisation of desired benefits and results. 3. The cross-functional forums of IBP raises the level of discussion of these cases to an enterprise level. The more perplexing question many organisations still struggle with is. It has … Registered Address: Radius House 51 Clarendon Road 4th Floor Watford WD17 1HP, 3 Reasons why Finance Embrace Integrated Business Planning (IBP). The Benefits for the Finance Team – Business Partner Impact. However, the best place to start this inquisition is the spot where organisations have most commonly stumbled in the past. The word is out that IBP can be a very powerful tool. Following this meeting, the aligned set of financial and operational forecasts will be presented at the second and final reconciliation meeting of the planning cycle. However, a good S&OP/IBP process offers major benefits outside the supply chain function. If IBP is on your organisation’s 2015 initiative list, start by taking a long, hard look at how the finance organisation is integrated and whether they are owning the correct elements of the process. Input into the unconstrained demand plan. The sales and marketing team will have created a first draft of what is called an unconstrained consensus demand plan. Generation of a consolidated financial plan. The sales and marketing team will have created a first draft of what is called an unconstrained consensus demand plan. This depth of understanding (and the partnership formed from regular collaboration) is critical to support effective and timely influencing across the business and is simply not attainable from the traditional annual planning set-piece, IBP also provides the Finance team with an ongoing mechanism to gain insight on both current performance and foresight on the medium-term outlook of the business. My previous post highlighted the key outcomes for Commercial leaders and here I extend these observations to the Finance function based on my experience as a commercial leader deploying S&OP/IBP in a global pharmaceutical company. A sound IBP process is a key enabler for this business partner role. The first reconciliation meeting, the pre-IBP meeting, is designed to bring together demand planning, sales and marketing, supply planning and finance representatives in order to discuss gaps and issues between projected future demand, available supply and the consolidated financial plans. For example, a commercial decision to shift promotion from one brand to another may have positive benefits on revenue and margin but may create negative consequences for inventory or operating expense. However, IBP builds a number of enterprise capabilities which drive competitive advantage. However, IBP is not a new concept. This design, supported by regular cross-functional discussion at various levels in the IBP meeting cycle, ensures that the financial plan derived from IBP outputs is already aligned and balanced across the commercial and supply chain teams. Therefore, companies are continuing to triage and refine their IBP programs in hope of greater adoption, improved performance and increased financial returns. It is also very common for financial planning/budgeting to be run as a major enterprise activity on an annual cycle. An increasingly important role for the Finance function is that of business partner. An important part of this role is to model alternative solutions in order to illustrate their impact on a balanced set of enterprise-level KPIs (eg market share, revenue, margin, working capital, supply chain flow etc). Identifying, triaging and correcting these issues will take time, an attentive eye, a collaborative spirit and a lot of patience. Integrated Business Planning (IBP) - and its forerunner Sales and Operations Planning or S&OP) - have traditionally been perceived and managed as tactical, supply-chain centred processes. Integrated business planning (IBP) continues to be a hot item on the 2015 key initiative lists of organisations across every industry. Following this meeting, the finance organisation is responsible for the development of a final 18 to 24 month financial plan. Firstly, an effective IBP process can drive substantial financial benefits for an organisation, including increased revenue, reduced COGS, and lower overall inventory levels.
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