Integrated business planning (IBP) is a complex practice. It can be overwhelming for people who are unfamiliar with it. It is best to break IBP down into its components when introducing employees to the practice. The main parts of integrated business planning are the enterprise model, integrated planning, and enterprise optimization. These parts can be broken down into different components to further simplify integrated business planning. Read on to learn more about the components of integrated business planning.
There are three aspects of the enterprise model: the finance model, the supply model, and the demand model.
A finance model
An enterprise model is not complete without a finance model. The finance model is a predictive system that forecasts your business’s income and expenses. The finance model itself is composed of several processes like budgeting and price forecasting.
A supply model
Your business must be able to forecast the supply of its goods or services. This forecast needs to be quite accurate because it can affect your finance model. Your business needs to be able to accurately predict supply for 12 months or more.
A demand model
Coming up with a reasonably accurate demand model is one of the most difficult components of integrated business planning. However, many businesses struggle with demand planning because they did not put enough emphasis on it in the first place. After your business adapts to the increased importance of demand planning in integrated business planning, the accuracy of your demand model will increase.
Integrated planning is composed of both planning across multiple processes and creating plans that are accurate as well as collaborative.
Planning across multiple processes
Integrating plans across multiple processes is the signature component in integrated business planning. Your business should be prepared to spend several months integrating plans across multiple departments. Many employees will need to be retrained, as they will be unaccustomed to the level of communication required.
Forming both collaborative and predictive plans
Several businesses make the mistake of focusing only on their plans being collaborative. Integration is one aspect of integrated business planning, but the plans still need to provide accurate forecasts. If your forecasts were already accurate, your business can focus only on making its plans more collaborative. If your organization’s forecasts were not accurate, focus on accuracy before moving onto integration.
Enterprise optimization is composed of financial integration and the creation of flexible plans.
Financial integration is the big-picture integration of all aspects of your business’s expenses and income. Financial integration should be handled by the CEO. It is arguably the most important component of integrated business planning.
Creating flexible plans
Plans need to be both accurate and integrated for an organization to function efficiently. However, the best-run organizations add another aspect to their plans: flexibility. You should only focus on flexibility after your organization has successfully integrated and improved your plans. It can take years for a business that has moved toward integrated business planning to get to this stage.