At first glance, IBP (Integrated Business Planning) and S&OP (Sales & Operations Planning) may seem to mean the same thing, but in reality they do not. IBP differs from S&OP by taking a holistic view of a company’s business and looking to the future. Integrated business planning and modelling the future are more important than ever before. To meet today’s business planning challenges, the difference between IBP and S&OP needs to be understood.

S&OP is focusing on supply and demand alignment

S&OP is the management and monitoring of material flows and expenses. Its purpose is to ensure that production meets demand as seamlessly as possible. Sales and production work together to create a production plan designed to meet the company’s strategy. The goal of S&OP is to meet demand at the lowest possible cost.

However, S&OP is only one part of the overall business and therefore cannot address how the business as a whole is performing It turns a blind eye to the cost structure of the business when it comes to ensuring that customers get only what they need. While S&OP is responsible for the smooth running of the supply chain and the movement of goods from the company to the customer, IBP takes a position on whether it is worth doing what the customer wants.

IBP is a holistic approach to business planning

The core idea of Integrated Business Planning (IBP) is to model the future of all key aspects of a business, integrate the plans of these aspects, and optimize the whole. It is actually a continuation and extension of S&OP that aims to take a holistic view of both the internal and external issues affecting the business.

Main differences between S&OP and IBP

Scope and Focus:

• S&OP: Focuses on matching supply and demand in the short to medium term, with an emphasis on sales, operations, and finance.
• IBP: Takes a comprehensive approach that aligns financial, strategic, and operational plans across all business functions with a long-term view.

Objectives:

• S&OP: Ensures that production efficiently meets demand by optimizing inventory levels and production capacity.
• IBP: Aligns operational plans with strategic goals, focusing on overall business performance, profitability, and growth, incorporating risk management and scenario planning.

Ownership:

• S&OP: Is owned by the supply chain.
• IBP: Is sponsored by executive management and driven by the commercial and/or the finance organization.

Connectivity within the organization:

• S&OP: Siloed system derives decisions with little or no disaggregation/connection
• IBP: Unbounded and connected to operational planning (S&OP) and long-term strategy. Drive the business at the business planning level based on real-time signals and insights.

The advantages of modern planning and forecasting processes are evident. Our specialized planning and forecasting advisory services bring expertise, insight, and strategic guidance to empower your financial and operational planning.

The transition from S&OP to IBP

The biggest challenge in moving from S&OP to IBP is getting the different units of the company to speak the same language. The sub-areas are like a Rubik’s cube, where different departments see the part of the data that concerns and interests them in their own “language”. It is therefore worthwhile to make the transition in small steps, so that value can be gained at each step.

Technology is needed to collect, manage and create scenarios for data covering all the activities across the company. Technology also allows you to go back in time to examine what decisions were made and why. A comprehensive planning platform can be complemented by machine learning to process large data sets and provide higher quality suggestions to support planning.

The transition to IBP is not instantaneous, but it will result in a significant increase in business visibility and the ability to make big decisions more quickly. In this way, Integrated business planning provides a competitive edge.