The Progression from Traditional S&OP to a Strategic IBP Process

Evolving traditional Sales and Operations Planning (S&OP) to a more strategic Integrated Business Planning (IBP) process has become critical to thrive in an increasingly complex and volatile global market. The shift from S&OP to IBP is not merely a change in terminology; it represents a fundamental transformation in how companies approach planning, decision-making, and collaboration across the organization.

Historically, many departments operated in silos, with supply chain, finance, merchandising, and other functions working independently. In our recent webinar: Aligning Strategic and Tactical Supply Chain Planning with Finance, our panel of supply chain experts discussed how these silos have to be broken down, and all stakeholders need to move together, not in isolation. IBP is the catalyst for this transformation, as it encourages a collaborative approach to planning that spans the entire organization.

The more advanced IBP process empowers companies to break down the barriers between different departments to foster a holistic understanding of the business landscape. This encourages cross-functional collaboration, enabling supply chain planners, finance experts, merchandisers and other key stakeholders in the organization to work synergistically towards common organizational goals. By improving alignment across the business and involving input from different perspectives in the planning process, companies benefit from more robust and resilient strategies.

What are the Key Differences Between S&OP and IBP?

When discussing the key differentiators between S&OP and IBP during the session, Richard Herrin, industry leader in advanced S&OP and IBP strategy, underscored a significant limitation of S&OP. He affirmed the traditional approach often fell short because it primarily focused on volumes and short-term objectives, while neglecting financial considerations. Richard noted: “9 out of 10 S&OP implementations never really delivered on the full promise, because it was just a volumetric exercise every month.” He then explained how IBP emerged as the solution to bridge these gaps, recognizing the need for a more comprehensive approach that integrates financial impacts into the decision-making process.

Rebecca Haerter, Vice President of Supply Chain at Full Compass Systems, elaborated on this, highlighting the tactical nature of S&OP, where the focus was on checking boxes without considering the broader consequences. In contrast, she said IBP promotes “great strategic discussions across the organization, with the key decision makers involved and aligned.” She added that in this process, the key decision-makers understand that the plan is only as good as its adaptability to changing circumstances.

The agility that IBP brings to the table is vital for businesses to adapt and remain competitive. It allows companies to shift inventories as market conditions change, avoiding the worst-case scenario where inventory is stuck in a declining segment while the business's growth drivers remain underfunded. The ability to adjust strategically and promptly to industry shifts is a game-changer, ultimately elevating revenue and margin.

In essence, IBP is all about collaboration. It brings together diverse teams and departments, fostering open and transparent discussions that allow for the best decisions to be made. As Rebecca mentioned, it's a process where individuals challenge each other's thought processes, bringing different perspectives to the table. This collaborative approach ensures that organizations can make the most informed decisions, adapt to change swiftly, and navigate the complexities of the modern business landscape successfully.

Watch the webinar to learn how your peers are making the most of advanced supply chain planning software to align operations across a robust IBP process: Aligning Strategic and Tactical Supply Chain Planning with Finance (johngalt.com)