The crisis isn’t external — it’s your supply chain planning

Welcome to the mid-2020s. The unpredictable has become predictable. Business leaders are just bracing for the next destabilizing economic or geopolitical disruption to occur, with planning teams being warned they must be prepared to react at the first hint of the next crisis. Easier said than done if your planning processes are broken, a reality for many organizations.

The changes we’ve all experienced have been truly head-spinning. An imminent alien invasion would surprise no one at this point. But the real crisis often lies not with external factors, which are largely out of your control, but with your company's internal planning processes. Poorly adapted processes are compartmentalized to the extent that no one seems to consider the entire organization anymore.

If your integrated business planning (IBP) process is ineffective — or non-existent — your ability to navigate any crisis will be compromised. Too often, different business functions waste valuable time debating forecasts and data analysis rather than focusing on strategies that move the entire organization forward. 

Think beyond S&OP

As outlined in our earlier blog post, IBP is a more mature evolution of sales and operations planning (S&OP). While S&OP focuses primarily on aligning supply and demand, IBP goes a step further by integrating financial and strategic planning into the equation. Think of the equation as S&OP, plus strategy, plus operational reconciliation. What does this give you? Synchronized operational planning with strategic goals, enabling you to reconcile risks against plan and create mitigation strategies.

It sounds good. But despite the advantages of IBP, the transition from S&OP to a mature IBP implementation is often a struggle for some organizations.

Why shift to IBP?

The need for smarter, more connected planning has never been greater. According to Peter S. Goodman, writing for The New York Times, major organizations that once relied on distant manufacturing centers, notably in China, are now shifting their supply chains to be more localized or diversified. This rapid and challenging shift doesn’t just require tactical adjustments but also a transformation in how businesses plan. IBP offers a framework for this kind of transformation.

As supply chains and businesses become more complex, the traditional S&OP processes that worked a decade ago are no longer robust enough to support the level of cross-departmental collaboration and data consolidation required today. Without introducing a mature IBP process, you become vulnerable to missed opportunities, increased costs, and delays as you scramble to adjust to unforeseen changes in the market.

Three best practices for implementing IBP

To ensure your IBP is working hard enough to allow you to react fast enough, consider these three IBP best practices, as outlined by McKinsey in a recent report.

1. Design for the P&L owner, not individual functions

Designing the IBP process with the P&L owner in mind helps senior leaders make decisions that benefit the overall business. This requires senior-level participation from key functions, so decisions can be made in every meeting, focusing on major issues while handling minor decisions outside formal meetings. The goal is to generate a unified, risk-assessed business plan that guides midterm strategy, accounting for product launches, portfolio performance, and uncertainties like demand and supply constraints.

Decisions on revenue, margins, or costs are made by the person responsible for P&L at the appropriate level — local for local, global for global. Senior leaders should actively participate in the IBP process, support team training, and take responsibility for decisions and outcomes.

2. Processes must be built for purpose, not from generic templates

Companies often use a one-size-fits-all approach to IBP that doesn’t address their unique challenges. Instead, McKinsey suggests designing IBP from scratch to meet specific business needs, focusing on providing decision-makers with the right information to evaluate scenarios. Standardized templates can help streamline this process by organizing key data and analyses.

Consistency in data, methods, and systems is vital for forecasting, managing constraints, and optimizing production. Planners must ensure accurate simulations and alignment between planning and execution. The IBP cycle’s frequency is also crucial, with major decisions reviewed monthly or quarterly, and weekly adjustments for short-term changes. 

3. Empower people to make consequential decisions

Each step in the IBP process needs decision-making power to solve problems within its scope, with clear guidelines for escalating issues when necessary. The process should define who has the authority to make decisions, when those decisions should be escalated, and how to do so. Teams should be trained to make decisions effectively, and it’s important that everyone involved participates fully. If key people don’t engage, the whole process can fail.

This decision-making freedom is also important for short-term planning and execution. Success depends on spotting problems early and fixing them quickly. A good system should classify potential issues and provide clear steps for resolving them, including when to escalate decisions based on the size and impact of the problem.

Addressing the supply chain crisis within

The secret to a high-performing supply chain is mature planning and fulfillment processes supported by advanced systems and tools. This requires a collaborative culture that spans all timeframes, with integrated processes connecting commercial, planning, manufacturing, logistics, and sourcing teams at every level.

IBP is a crucial framework for navigating today’s complex and rapidly changing environment. Businesses that treat IBP as a strategic, company-wide initiative rather than just another planning tool will see the greatest benefits. 

So, next time a new crisis looms on the horizon, remember that the real crisis isn’t what’s happening outside your company — it’s whether your planning process is equipped to handle it. With a robust IBP process, you’ll be ready for whatever comes next.

Want to learn more about how IBP can help you achieve your industry-specific business goals? 
Check out our collection of white papers below for more IBP expert guidance and actionable insights:

• Automotive suppliers – Creating impact and value with IBP
• Consumer products – Supercharge revenue growth management with IBP
• Life sciences – Creating impact and value with IBP
• Pharmaceuticals – From concept to adoption — and value