Leverage Data to Move From Silos to Whole System Planning

Move beyond S&OP to integrated business planning.

Analyst perspective

A successful integrated business planning (IBP) implementation begins with an IT strategy.

Integrated planning provides organizations with a unified approach to decision-making. Organizations have a variety of integrated planning approaches to utilize to build out a unified planning organization where each approach has varying degrees of maturity, complexity, and value to add to the organization. The key factor that underlies each type of integrated planning approach is the data that supports the process.

The integrated planning approach this research will be focusing on is integrated business planning (IBP), which is an evolution of sales and operations (S&OP) and how organizations align their strategic and operational goals. IBP breaks down silos and provides a holistic approach to planning and decision-making, enhancing the agility and responsiveness of the organization. As businesses face increasing volatility and competition in the marketplace, the adoption of IBP is not only beneficial but essential to maintaining a competitive advantage.

Successful IBP implementations require a committed executive sponsor, a robust technology foundation with a focus on data, to shift the business to a data-driven, collaborative decision-making organization. Organizations that plan and invest in integrated tools that provide data visibility across the business will see the best success.

Donnafay MacDonald
Research Director, Retail
Info-Tech Research Group

Executive summary

Info-Tech Insight

Integrated business planning provides a holistic view of the organization’s financial, buying, and inventory strategy and, when underpinned by a solid data strategy and systems that support the process, allows for impactful cross-department collaboration through efficient and informed decision-making from forecasting to production planning and inventory management.

Sales and operations ecosystems must align to improve decision-making

Sales and operations (S&OP) is a cross-functional monthly planning process that aligns a company’s sales forecast to its operational capabilities. The result of an established S&OP process is an aligned and unified plan that balances demand with supply and results in a more agile and responsive organization. It enables improved demand forecasting, better inventory management, and a clearer understanding of the financial implications of operational decisions.

Technology’s rapid evolution is why S&OP is no longer sufficient

S&OP has been around as a consolidated process since the 1990s and has evolved as new technology emerged. In addition to the evolution of S&OP due to new technology, the recent digital disruptions have added additional pressure on retailers to be operationally efficient and, more than ever, position themselves to expect the unexpected and adapt with speed to stay relevant and competitive.

Consumers are more technologically connected than ever as they shift their buying priorities, driven by price, toward curious consumerism, barrier-breaking product, experiential personalization, and convenience. This new consumer, driven by the impact of inflation, is using technology to cross-shop across retailers in search of best price, where 46% of shoppers are using AI to help them find the best deals (Statista, Sept. 2023).

Retailers must be as efficient as possible in running their business and must look to adapt and elevate their S&OP processes and start working toward more integrated planning processes within their organizations.

The integrated planning processes that enhance the S&OP process include integrated business planning (IBP), demand excellence (DE) and collaborative planning, fulfilment, and replenishment. This research piece will focus on IBP.

Sources: Info-Tech, 2023; Statista, Sept. 2023; Statista, 2023.

Integrated business planning (IBP) transforms operations

Sales and operations planning (S&OP) is most likely to come to mind as a strategic planning process over IBP. To put this into perspective, based on a survey completed by APQC, over 64% of respondents are either exploring or using S&OP, whereas 29% are exploring or using IBP as a process. Retailers who use either S&OP or IBP as their main process for aligning the business are seeing better customer benefit outcomes, resulting in improved financial performance; however, there are key differences between IBP and S&OP.

The objective of S&OP is to determine the overall production plan and associated activities, such as capacity planning, scheduling, resourcing, inventory management, supplier coordination, cost management, etc., to effectively meet planned sales targets while achieving the broader business goals of profitability, productivity, and competitive lead times that are part of the overall business objectives.

IBP is a comprehensive business planning process that advances S&OP principles across the entire organization with greater emphasis on integration with business planning and financial forecasting. IBP is a strategic management process that aligns and unifies the organization across functional areas, including product, sales, finance, operations, and marketing. The aim of IBP is to optimize planning, forecasting, and buying activities of an organization through a real-time feedback loop and, unlike traditional planning activities that operate in silos, IBP encourages collaboration through data-driven decision-making by providing a dynamic and holistic view of the business. The integration of financial, product, and operational plans allows companies to quickly respond to market changes and customer demands.

Ultimately, both processes improve transparency across the organization, leading to better alignment and decision-making across the organization. However, IBP is the winner over S&OP due to the significant advantage it delivers to an organization’s bottom-line by allowing it to fully integrate across the business and to better anticipate and respond to market conditions.

Over three out of five companies are currently using or planning to use S&OP, versus less than two out of five companies who use or are planning to use IBP.
Source: SDC Executive, 2023

Evolution to integrated business planning

Through the evolution of integrated business planning, the underlying theme is collaboration across the entire organization, where additional data points and functional departments are added to the process of traditional S&OP; the culmination being the present iteration where technology helps organizations link their enterprise resource plans (ERP) to their IBP process.

CIOs are in a unique position to help their organizations adopt IBP and the technology that underpins the process by being a partner to the business, educating and communicating the benefits of IBP, and freeing up budget for technology that supports the IBP process.

“Disconnected plans and strategies breed sub-optimal performance in companies. For more than 30 years, business leaders have used Integrated Business Planning to connect strategy to portfolio, demand, supply, and resulting financial plans. The result: Improved business and financial performance. The foresight to adapt to changing business conditions. Leadership and management teams operating with unity.”

– “Integrated Business Planning,” Oliver Wight, n.d.

Reconcile the differences between S&OP and IBP

Info-Tech Insight

Integrated business planning is a process that aligns functional teams across the organization, aligning plans and speaking the same language. Sales and operations planning works as siloed functional teams, focused on tactical plans of aligning supply and demand.

Representation of the key components underpinning IBP

IBP is a holistic business planning process that aligns business objectives across functional areas. The term IBP was coined by Oliver Wight in 2005 and has been around for years. Its purpose is to break down functional siloes across the organization through a collaborative process of decision-making and information sharing. The outcome of a successful IBP implementation is a nimble organization that can anticipate, rapidly respond, and optimize their operations, maximizing profits while minimizing risk.

Ensuring alignment in the implementation, planning, and execution of an IBP process within an organization involves the following elements where critical factors include a strong executive sponsor and cross-functional collaboration that is predicated on robust data and analytics capabilities:

The ultimate goal of IBP is to create a cohesive, integrated, and agile planning environment that improves the financial performance of an organization while maintaining a level of quality and excellence expected by its customers.

Underpinning IBP success is the consolidation of data

At its core, IBP compels the consolidation of data from multiple sources, and it is here that IT leaders can help transform and support their organizations’ change management toward improved planning by aligning data governance with business strategy, employing master data management best practices, and defining a data practice that moves the organization toward an autonomous enterprise.

Working with data brings big rewards along with challenges. Only seven percent of businesses are set to fully utilize the data available to them due to a lack of data competence within the organization.

Source: Statista, Feb. 2024