integrated business planning for dummies

By Whitney Gillespie     April 16, 2024

Complete guide to integrated business planning (ibp).

Integrated Business Planning, or IBP for short, is a strategic management process that connects various organizational departments to align business operations with financial goals. How? By integrating business functions – such as Sales, Marketing, Finance, Supply Chain and Operations – to create a holistic view of the company's performance and future direction. This blog post offers a comprehensive guide to discuss what precisely IBP entails and how Finance can drive business results and collaboration within the organization via a robust and comprehensive IBP process.

What Is Integrated Business Planning?

While the business world and Finance have always had shared language and acronyms, some new (and reimagined) acronyms may now be flooding your feed. One such topic you may be hearing a lot about lately is Integrated Business Planning (IBP). Yet the concept of IBP isn't new. In fact, it's related to Sales & Operations Planning (S&OP) , a concept that's been around awhile.

Still, IBP may seem overwhelming in the context of all the different acronyms related to financial and operational planning floating around lately. For example, IBP, S&OP, eXtended Planning and Analysis (xP&A) and others are just a few acronyms muddying the waters. But this comprehensive guide to all things IBP aims to help demystify the process.

So what, exactly, is IBP?

IBP ultimately aims to unify business strategy with planning, budgeting and forecasting activity for all business lines and functions – providing one version of the numbers. In turn, a trusted, common view of the numbers provides a robust baseline for agile decision-making. That common view also keeps all teams collectively trying to achieve the same corporate objectives while staying focused on specific KPIs. In other words, the different teams maintain their independence while working in unison to achieve corporate success by leveraging the same trusted and governed data.

The bottom line? IBP is about aligning strategy intent, unifying planning processes and bringing the organization together.

How Integrated Business Planning Works

The IBP process is a framework to address the C-suite needs and help implement the business strategy and manage uncertainty to improve decision-making. So what's the secret sauce of IBP to make all of that happen? A collaboration between the different teams under a single view of the numbers that must unequivocally be tied to financial performance. That's how the C-suite gets value from IBP. Consequently, Finance plays a central role in the IBP process.

IBP typically focuses on horizons of 24-60 months, as opposed to the short term. That focus equates to Integrated Tactical Planning or Sales and Operations Planning and Execution. Since the process must be fully integrated, it removes the departmental silos. Plus, the IBP process must adapt to the organizational construct of every business (IBP isn't a one-size-fits-all type of process).

A typical IBP process involves several stages:

• Data Collection and Analysis : Gathering relevant data (e.g., sales forecasts, production capacities, inventory levels and financial projections) from different departments.
• Demand Planning: Predicting future demand based on historical data, market trends, customer feedback and sales forecasts.
• Supply Planning: Determining the resources and capabilities (e.g., materials, production capacity and distribution channels) needed to meet the forecasted demand.
• Financial Planning : Developing financial plans and budgets aligned with the demand and supply forecasts, considering factors such as revenue targets, cost structures and investment requirements.
• Scenario Planning: Creating alternative scenarios to assess how different strategies, market conditions or external factors impact business outcomes.
• Management Business Review : Collaborating across departments to make informed decisions on resource allocation, investments, pricing strategies and operational adjustments.
• Execution and Monitoring : Implementing the plans, tracking performance against targets, and continuously monitoring key metrics to identify deviations and take corrective actions.

The most efficient way to foster this collaboration is through a unified solution and data model that caters to the needs of the various agents involved on each review. In fact, Figure 1 shows how one solution gathering all the capabilities in the greyed area under a unified data model is the most efficient approach to IBP.

Figure 1: A Unified Data Model for IBP

Core Elements and Stages of the Integrated Business Planning Process

The IBP process includes the following core elements:

• Governance Structure : Establishing a cross-functional team with representatives from key departments to oversee the IBP process, define roles and responsibilities, and ensure alignment with organizational goals.
• Data Integration : Integrating data from different systems and sources to create a single source of truth for decision-making, using technologies such as enterprise resource planning (ERP) systems, Corporate Performance Management (CPM) tools, business intelligence (BI) tools and data analytics platforms.
• Collaborative Planning : Encouraging collaboration and communication between departments to share insights, align objectives and develop consensus-based plans that support overall business objectives.
• Continuous Improvement : Implementing feedback loops, performance reviews and process refinements to enhance the effectiveness and agility of the IBP process over time.

Key Performance Indicators (KPIs) for Integrated Business Planning

Some key KPIs to measure the effectiveness of an IBP process include:

• Forecast Accuracy : Comparing actual sales or demand with forecasted figures to assess the accuracy and reliability of forecasting models.
• Inventory Turnover : Calculating how often inventory is sold and replaced within a specific period indicates efficiency in inventory management.
• Customer Service Levels : Monitoring metrics like on-time delivery, order fulfillment rates, and customer satisfaction scores to measure service performance.
• Financial Metrics : Evaluating financial KPIs such as revenue growth, gross margin, operating profit, and return on investment (ROI) to gauge overall business performance.
• Supply Chain Performance : Assessing metrics like lead times, supplier performance, inventory levels, and supply chain costs to optimize supply chain operations.

Technological Enablers for Integrated Business Planning

Several technological enablers support a robust IBP process:

• ERP Systems : Integrated ERP systems consolidate data from different departments, automate processes, and provide real-time visibility into business operations.
• BI and Analytics Tools : Business intelligence tools and analytics platforms enable data visualization, trend analysis, scenario modeling, and predictive analytics for informed decision-making.
• Collaboration Platforms : Cloud-based collaboration tools facilitate communication, document sharing, and workflow management among cross-functional teams involved in IBP.
• Advanced Planning Software : Specialized IBP software solutions offer capabilities for demand planning, supply chain optimization, financial modeling, scenario planning, and performance monitoring.
• AI and Machine Learning : AI-driven algorithms and machine learning techniques can enhance forecasting accuracy, identify patterns, optimize resource allocation, and automate repetitive tasks in IBP processes.

By leveraging these technological enablers, finance professionals can streamline the IBP process, improve decision-making, and drive business growth.

In conclusion, Integrated Business Planning (IBP) is a strategic approach that aligns business functions, integrates data-driven insights and fosters collaboration to achieve operational excellence, financial stability, and competitive advantage. By implementing a robust IBP process supported by technology and focused on continuous improvement, finance professionals can effectively drive sustainable growth, mitigate risks, and adapt to evolving market dynamics.

Want to learn how you can maximize the benefits of your IBP process and get leadership on board with the plan? Check out our eBook Unifying Integrated Business Planning Across Finance and Supply Chain . You'll learn how to unify IBP across Finance and Supply Chain teams and read about use cases as proof points. Plus, you'll gain an understanding of the unique capabilities OneStream's Intelligent Finance Platform brings to unify Finance and Supply Chain planning activities.

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The Ultimate Guide To Integrated Business Planning

Are you looking for a way to streamline your business planning process? Integrated Business Planning (IBP) is the perfect solution. It’s an approach that combines all aspects of business planning into one comprehensive strategy, allowing you to make decisions quickly and accurately. This guide will help you understand how IBP works and how it can benefit your organization.

With IBP, you can save time by having all of your data in one place, making it easier to identify trends and opportunities as they arise. You’ll also be able to make more informed decisions based on real-time data analysis instead of relying on outdated information or guesswork.

What Is Integrated Business Planning?

Integrated business planning (IBP) is a powerful process that could become central to how a company runs its business. It is one generation beyond traditional sales and operations planning (S&OP) and combines financial and operational data from across the organization to create an aligned, cross-functional plan for the future. IBP enables businesses to make decisions based on key assumptions that are documented and updated regularly, helping them to achieve corporate goals.

IBP solutions help align financial and operations plans, giving companies greater planning accuracy and operational performance. This process also incorporates forecasting and demand response , demand-driven supply management, inventory optimization, production scheduling, transportation optimization, and more. With business planning processes in place, companies can make better decisions faster by leveraging real-time data from across their organization.

What Is the Difference Between Sales & Operations Planning and IBP?

Sales And Operations Planning (S&OP) and Integrated Business Planning (IBP) are two different integrated processes used to manage the supply chain. S&OP is a cross-functional process that focuses on aligning demand forecasts and supply in volumes in a tactical range, while IBP has a broader scope that looks at aligning all aspects of the business to ensure better decision-making.

Sales and operations planning processes typically have medium-term planning horizons that rarely extend beyond 18 months, while IBP naturally has a longer time scale. Additionally, IBP starts at the executive level, and each month or planning cycle culminates in a performance review against plans.

Both S&OP and IBP are important for managing the supply chain and ensuring successful operations. However, it’s important to understand their differences to choose which process best meets your needs.

What is an example of an integrated business model?

An example of an integrated business model is a supply chain management system. This type of system links different parts of the organization, from the production and inventory to customer service and sales. It leverages data to streamline operations, improve efficiency, and reduce costs. By integrating processes across departments, businesses can gain greater visibility into their operations and make better decisions faster than ever before.

Benefits Of Integrated Business Planning

The main benefit of implementing IBP is increased revenue, followed by forecast accuracy and improved Perfect Order Delivery. Other benefits include creating transparency between strategic goals and financial and operational activities, unlocking P&L performance through coordinating strategies and tactics across traditional business functions, creating more collaborative decision-making, providing higher agility in responding quickly to the business environment and market volatility, and generating insights on developments in the market.

IBP is important because functional and technical silos across organizations can result in flawed decision-making. Transitioning to IBP can help companies enhance their performance by improving their ability to respond quickly to changes in the market.

Challenges Of Integrated Business Planning

Integrated Business Planning (IBP) is a powerful process that can revolutionize how companies run their business. However, it is not without its challenges. IBP requires an organization with the right technology, processes, and people to succeed.

One of the biggest challenges of IBP is getting all departments within an organization on board with the process. It requires buy-in from all levels of the organization, including executives, operations, and finance teams. Without this unified approach and skilled and experienced employees, getting everyone working together towards a common goal can be difficult.

Another challenge of IBP is data integration. In order for IBP to be successful, data must be collected from multiple sources and integrated into one system. This can be difficult due to different systems used by different departments or even different countries within an organization. It also requires a high level of accuracy and consistency in order for the results to be meaningful and actionable.

Finally, IBP requires constant monitoring and adjustment as market conditions change over time. Companies must stay up-to-date on changes in demand, supply chain disruptions, and other factors that could affect their plans. Without regular monitoring and adjustments, companies risk making decisions based on outdated information, which could lead to costly mistakes down the line.

Why Is Integrated Business Planning Important?

Integrated Business Planning (IBP) is an important process for businesses to align their goals with their financial, supply chain, product development, marketing, and other operations. It helps companies to create a unified plan that can be used to make better decisions and reach corporate objectives.

IBP is a powerful tool that allows businesses to consider all the different elements of their operations when making decisions. This means they can make more informed choices about allocating resources, developing products and services, and managing their finances. By taking into account all these factors, IBP enables companies to make better decisions and more informed strategic plans that will lead them toward success in the long run.

Another benefit of an Integrated Business Planning process is that it helps businesses become more agile and responsive to changes in the market. With IBP in place, companies are able to quickly adjust their plans based on new information or changing customer needs. This allows them to stay ahead of the competition and remain competitive in an ever-changing business landscape.

Overall, Integrated Business Planning is essential for businesses looking to stay ahead of the competition and reach their goals. By considering all aspects of operations when making decisions, IBP provides companies with a unified plan that can help them succeed in the long run.

Elements Of Integrated Business Planning

The three main parts of integrated business planning are categorized as “Plan,” which involves creating a strategy, “Execute,” which involves carrying out the plan; and “Monitor and Adjust,” which involves reviewing and making changes as needed.

The Plan element involves the initial step of creating a strategy. This includes identifying key goals, objectives, and expectations around the company’s products and services to understand better how those should be used in an overall strategy. Additionally, it includes developing plans for specific initiatives that will help advance those goals.

The Execute element is about carrying out those plans. This includes everything from setting timelines, allocating resources, and developing procedures to ensure the plan is implemented properly.

Finally, the Monitor and Adjust element involves reviewing progress on the strategy and business performance and making any necessary changes or adjustments. This could include changing timelines for certain initiatives, modifying business processes, or introducing new initiatives to stay ahead of competitors. This element is important to ensure the plan remains up-to-date and relevant in an ever-changing business environment.

The Integrated Business Planning Process

To be successful, integrated business planning needs to occur on a regular basis, usually every month or every quarter. This strategic planning process should be undertaken to align the different parts of the business and create a unified plan that everyone can work towards.

1. Product Management

A cross-functional team meets monthly to review the status of all product-related projects. This includes managing the entire product portfolio, identifying any new risks or opportunities, prioritizing high-value products, and aligning them with business goals. The ultimate aim is to ensure that raw materials and manufacturing floor capacity are available as needed. Whenever necessary, product managers update and publish a master plan that outlines the required resources for delivering the changes.

2. Demand Planning

Demand planning is a team effort that involves members from sales, marketing, and finance. Its goal is to meet customer demand and reduce excess inventory while avoiding supply chain operations issues. Improving profitability, customer satisfaction, and efficiency are all benefits of demand planning. The team works to create a demand plan that accurately estimates future demand, tailored to the right markets and methods. KPIs such as sales forecast accuracy, inventory turns, fill rates, and order fulfillment lead times are used to measure success.

3. Supply Chain Planning

Supply chain professionals aim to find a cost-effective way to meet expected demand efficiently. To achieve this goal, having visibility into complex supply chains is crucial. One way to accomplish this is through a formal supply chain optimization project, which helps identify and fix potential weaknesses, such as low inventory levels or order fulfillment challenges. The ultimate goal of supply chain management is to reduce the cost of goods sold (COGS) .

Supply chain leaders should deeply understand the production process from raw materials to finished goods. By understanding upstream and downstream processes, supply chain professionals can better anticipate customer needs, uncover new opportunities for cost savings, and mitigate risks. Additionally, they should build relationships with key suppliers and develop strategies to ensure a consistent flow of materials.

4. Financial Planning

Financial planning involves setting short-term and long-term goals for a company that are achievable through the best use of resources. This includes understanding financial trends, managing budgets, monitoring cash flow , financial forecasting, and making decisions about investments.

Financial planning gives organizations an understanding of their current economic environment and helps them create plans to achieve their objectives. It also helps to reduce risk and maximize profits. Ultimately, financial planning is essential for success in any organization.

Integrated planning can be challenging for organizations used to a traditional budgeting process. However, companies can improve their overall financial performance and better meet customer needs by taking a more strategic approach. This requires data-driven insights to inform decisions and the ability to quickly shift resources in response to changing market conditions. The finance team’s influence is driven by their ability to analyze and recommend quickly.

5. Customer And Channel Plan Development

Customer and channel planning are integral components of a successful business. These plans involve researching customer needs, segmenting target audiences and creating strategies to reach them. Additionally, customer and channel plans help determine the most effective marketing tactics for each target audience with the goal of increasing sales and brand loyalty.

This includes selecting the best delivery channels (offline or online) that suit certain markets and target audiences and considering customer preferences when designing products or services. Through customer and channel planning, organizations can create a more successful marketing strategy and reach their desired goals.

4. The Integration Team

The integration team, which is usually composed of individuals from the finance organization, combines the initial product, demand, and supply plans into a single strategic plan that covers a 24- or 36-month period. As necessary updates are made, significant changes are identified by the teams. Decisions that require higher-level approval are prepared for executive review.

The integration team also leads scenario planning . This process involves considering different potential business plan outcomes and helping identify risks. The teams then help develop strategies to mitigate risk, thereby ensuring the success of the overall planning process.

5. The Executive Team 

The executive leadership team addresses disagreements and shares the revised plan with the entire organization. This management team is responsible for making final decisions on the plan and ensuring it reflects the organization’s objectives. Additionally, they review progress made against the plan and make adjustments as needed.

The executive team also considers external factors such as market conditions, customer expectations, competitive environment, and other factors to ensure the organization is on track to reach its desired goals.

6. Supporting Software

Many organizations use software to support their IBP process. This software may include budgeting and forecasting tools , customer relationship management (CRM) systems, financial analysis programs , and inventory tracking applications. Such software assists in streamlining the process of gathering data from multiple sources and increasing overall efficiency within the organization. It can also assist with scenario planning.

7. KPI Assessment

At regular intervals, organizations assess the performance of their plans using key performance indicators (KPIs). These KPIs provide a snapshot of progress and help determine whether or not the plan is on track to achieve its desired outcomes. By evaluating KPIs on an ongoing basis, organizations can identify areas that need improvement and adjust their plans accordingly.

Software To Support IBP

Software solutions are available to support Integrated Business Planning processes. These enterprise performance management solutions provide a comprehensive view of the entire business, allowing you to analyze financial data in real-time data analysis from multiple sources. This helps organizations make informed decisions based on accurate information and forecasts. Additionally, software solutions can automate many of the manual processes associated with IBP, such as data collection and analysis, which helps streamline operations and reduce costs.

Organizations looking to transition to Integrated Business Planning should consider investing in cloud based technology and software solutions supporting their IBP initiatives. Many software solutions can support financial forecasting processes with new tools like predictive analytics ,and feed right into your financial plan.

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FP&A Leader | Digital Finance Advocate | Small Business Founder

Mike Dion brings a wealth of knowledge in business finance to his writing, drawing on his background as a Senior FP&A Leader. Over more than a decade of finance experience, Mike has added tens of millions of dollars to businesses from the Fortune 100 to startups and from Entertainment to Telecom. Mike received his Bachelor of Science in Finance and a Master of International Business from the University of Florida, laying a solid foundation for his career in finance and accounting. His work, featured in leading finance publications such as Seeking Alpha, serves as a resource for industry professionals seeking to navigate the complexities of corporate finance, small business finance, and finance software with ease.

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Imagine a symphony orchestra where each musician plays their own tune without listening to others. The result would be chaotic and dissonant, right? Similarly, in the business world, when decision-making happens in silos and planning processes are disconnected, it’s like having a group of individuals playing their own instruments without any coordination. The harmony is lost, and the organization becomes inefficient, misses opportunities, and struggles to keep up with the fast-paced market.

Integrated Business Planning (IBP) addresses these challenges by providing a comprehensive framework that integrates strategic, operational and financial planning, analysis, and reporting to drive better business outcomes.   A retail company experiences a sudden surge in online sales due to a viral social media campaign. Integrated planning incorporates supply chain planning, demand planning, and demand forecasts so the company can quickly assess the impact on inventory levels, supply chain logistics, production plans, and customer service capacity. By having real-time data at their fingertips, decision-makers can adjust their strategies, allocate resources accordingly, and capitalize on the unexpected spike in demand, ensuring customer satisfaction while maximizing revenue.   This blog explores the significance of IBP in today’s modern business landscape and highlights its key benefits and implementation considerations.

Integrated Business Planning (IBP) is a holistic approach that integrates strategic planning, operational planning, and financial planning within an organization. IBP brings together various functions, including sales, marketing, finance, supply chain, human resources, IT and beyond to collaborate across business units and make informed decisions that drive overall business success. The term ‘IBP’ was introduced by the management consulting firm Oliver Wight to describe an evolved version of the sales and operations planning (S&OP process) they originally developed in the early 1980s.

1. Strategic planning

Integrated Business Planning starts with strategic planning. The management team defines the organization’s long-term goals and objectives. This includes analyzing market trends, competitive forces, and customer demands to identify opportunities and threats. Strategic planning sets the direction for the entire organization and establishes the foundation for subsequent planning roadmap.

2. Operational planning

Operational planning focuses on translating strategic goals into actionable plans at the operational level. This involves breaking down the strategic objectives into specific targets and initiatives that different departments and functions need to execute.

For example, the sales department might develop a plan to enter new markets or launch new products, while the supply chain department focuses on inventory optimization and ensuring efficient logistics. The key is to align operational plans with the broader strategic objectives to ensure consistency and coherence throughout the organization.

3. Financial planning

Financial planning ensures that the organization’s strategic and operational plans are financially viable. It involves developing detailed financial projections, including revenue forecasts, expense budgets, and cash flow forecasts. By integrating financial planning with strategic and operational planning, organizations can evaluate financial profitability, identify potential gaps or risks, and make necessary adjustments to achieve financial targets.

 4. Cross-functional collaboration

A fundamental aspect of IBP is the collaboration and involvement of various functions and departments within the organization. Rather than working in isolation, departments such as sales, marketing, finance, supply chain, human resources, and IT come together to share information, align objectives, and make coordinated decisions.

5. Data integration and analytics

IBP relies on the integration of data from different sources and systems. This may involve consolidating data from enterprise resource planning (ERP) systems, customer relationship management (CRM) systems, supply chain management systems, and other relevant sources. Advanced analytics and business intelligence tools are utilized to analyze and interpret the data, uncovering insights and trends that drive informed decision-making.

6. Continuous monitoring and performance management

The Integrated Business Planning process requires continuous monitoring of performance against plans and targets. Key performance indicators (KPIs) are established to measure progress and enable proactive management. Regular performance reviews and reporting enable organizations to identify deviations, take corrective actions, and continuously improve their planning processes.

By integrating strategic, operational, and financial planning organizations can unlock the full potential of IBP and drive business success and achieve their goals.

Enhanced decision-making

IBP facilitates data-driven decision-making by providing real-time insights into various aspects of the business. By bringing together data from various departments, organizations can develop a holistic view of their operations, enabling them to make better-informed decisions.

Improved alignment

By aligning strategic objectives with operational plans and financial goals, IBP ensures that every department and employee is working towards a common vision. This alignment fosters synergy and drives cross-functional collaboration.

Agility and responsiveness

In the rapidly changing business landscape, agility is crucial. IBP allows organizations to quickly adapt to market shifts, demand fluctuations, and emerging opportunities. By continuously monitoring and adjusting plans, businesses can remain responsive and seize competitive advantages.

Optimal resource allocation

Integrated Business Planning enables organizations to optimize resource allocation across different functions. It helps identify bottlenecks, allocate resources effectively, and prioritize initiatives that yield the highest returns, leading to improved efficiency and cost savings.

Risk management

IBP facilitates proactive risk management by considering various scenarios and identifying potential risks and opportunities. By analyzing data and conducting what-if analyses, companies can develop contingency plans and mitigate risks before they materialize.

Implementing an effective IBP process requires careful planning and execution that may require substantial effort and a change of management, but the rewards are well worth it. Here are some essential strategic steps to consider:

1. Executive sponsorship

Establish leadership buy-in; gain support from top-level executives who understand the value of Integrated Business Planning and can drive the necessary organizational changes. Leadership commitment, led by CFO, is crucial for successful implementation.

2. Continuous improvement

Continuously monitor and adjust; implement mechanisms to monitor performance against plans and targets. Regularly review key performance indicators (KPIs), conduct performance analysis, and generate timely reports and dashboards. Identify deviations, take corrective actions, and continuously improve the planning processes based on feedback and insights.

3. Integration of people and technology

To foster cross-functional collaboration, the organization must identify key stakeholders, break down silos, and encourage open communication among departments. Creating a collaborative culture that values information sharing and collective decision-making is essential.

Simultaneously, implementing a robust data integration system, encompassing ERP, CRM, and supply chain management systems, ensures seamless data flow and real-time updates. User-friendly interfaces, data governance, and training provide the necessary technological support. Combining these efforts cultivates an environment of collaboration and data-driven decision-making, boosting operational efficiency and competitiveness.

4. Technology

Implement advanced analytics and business intelligence solutions to streamline and automate the planning process and assist decision-making capabilities. These solutions provide comprehensive functionality, data integration capabilities, scenario planning and modeling, and real-time reporting.

From a tech perspective, organizations need advanced software solutions and systems that facilitate seamless data integration and collaboration to support IBP. Here are some key components that contribute to the success of integrated business planning:

1. Corporate performance management

A platform that serves as the backbone of integrated business planning by integrating data from different departments and functions. It enables a centralized repository of information and provides real-time visibility into the entire business.

2. Business intelligence (BI) tools

Business intelligence tools play a vital role in analyzing and visualizing integrated data from multiple sources. These tools provide comprehensive insights into key metrics and help identify trends, patterns, and opportunities. By leveraging BI tools, decision-makers can quickly evaluate financial performance, make data-driven business decisions and increase forecast accuracy.

3. Collaborative planning and forecasting solutions

Collaborative planning and forecasting solutions enable cross-functional teams to work together in creating and refining plans. These planning solutions facilitate real-time collaboration, allowing stakeholders to contribute their expertise and insights. With end-to-end visibility, organizations can ensure that plans are comprehensive, accurate, and aligned with business strategy.

4. Data integration and automation

To ensure seamless data integration, organizations need to invest in data integration and automation tools. These tools enable the extraction, transformation, and loading (ETL) of data from various sources. Automation streamlines data processes reduces manual effort and minimizes the risk of errors or data discrepancies.

5. Cloud-based solutions

Cloud computing offers scalability, flexibility, and accessibility, making it an ideal choice for integrated business planning. Cloud-based solutions provide a centralized platform where teams can access data, collaborate, and make real-time updates from anywhere, at any time. The cloud also offers data security, disaster recovery, and cost efficiencies compared to on-premises infrastructure.

6. Data governance and security

As organizations integrate data from multiple sources, maintaining data governance and security becomes crucial. Establishing data governance policies and ensuring compliance with data protection regulations are vital steps in maintaining data integrity and safeguarding sensitive information. Implementing robust data security measures, such as encryption and access controls, helps protect against data breaches and unauthorized access.

IBM Planning Analytics  is a highly scalable and flexible solution for Integrated Business Planning. It supports and strengthens the five pillars discussed above, empowering organizations to achieve their strategic goals and make better data-driven decisions. With its AI- infused advanced analytics and modeling capabilities, IBM Planning Analytics allows organizations to integrate strategic, operational, and financial planning seamlessly. The solution enables cross-functional collaboration by providing a centralized platform where teams from various departments can collaborate, share insights, and align their plans. IBM Planning Analytics also offers powerful data integration capabilities, allowing organizations to consolidate data from multiple sources and systems, providing a holistic view of the business. The solutions’s robust embedded AI predictive analytics uses internal and external data and machine learning to provide accurate demand forecasts. IBM Planning Analytics supports continuous monitoring and performance management by providing real-time reporting, dashboards, and key performance indicators (KPIs) that enable organizations to track progress and take proactive actions.  As the business landscape continues to evolve, embracing Integrated Business Planning is no longer an option but a necessity for organizations. To succeed in this dynamic environment, businesses need an integrated approach to planning that brings all the departments and data together, creating a symphony of collaboration and coordination.

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Your Complete Starter Guide to Understanding Integrated Business Planning

Integrated business planning gives you a 360 degree view of the business by connecting all your business applications. Here's how to get started.

Create flexible and predictable sales forecasts

Integrated Business Planning (IBP) has emerged as the hallmark of businesses undertaking concentrated digital transformation efforts.

While business planning has been a standard part of every organizational strategy, it has been a disjointed process until recently. Different departments ended up formulating their own strategies which impeded the organization's growth potential. Without a cohesive planning process in place, companies were unable to get a 360° look at the business and were unable to plan for the future.

Realizing the bottlenecks created by disjointed business planning, companies are now migrating to IBP as their default strategy.

What is Integrated Business Planning?

Integrated Business Planning (IBP) can be described as a process that offers management a 360° view of organizational functions like sales, marketing, finance, accounting, and others. These insights enable decision makers to prepare a comprehensive strategy to carry the business towards a promising future marked by enhanced growth potential.

Integrated Business Planning (IBP) has been a buzzword in the corporate sector for quite a few years, but its importance has increased exponentially in the last decade. IBP can be considered as a refined mashup of financial planning, operational best practices, and supply chain optimization to not only mitigate the risks but also deliver savings, responsiveness, and speed for the company and improve customer experience .

What is an Integrated Business Strategy?

Integrated Business Strategy (IBS) is a set of processes that companies can employ to bolster their efficiency and competitiveness in the market through expansion in different avenues.

These areas could include logistics, distribution, or competition. Businesses can use the IBS to enhance their sway in the distribution network to forge ahead of the competition and have a strong market presence. When compared, IBP is more focused on creating a cohesive business strategy that is in harmony with organizational objectives, while IBS is more about executing the IBP to achieve the desired goals.

What’s the difference between Sales & Operations Planning (S&OP) vs. Integrated Business Planning (IBP)?

There is a constant debate amongst experts if there is any difference between IBP and S&OP. While some argue that these strategies are complementary, there is a slight difference between these two integral tactics. 

S&OP is described as a cross-functional planning process undertaken to maintain the balance between supply and demand through the communication of changes in market demand to management. Finance, production, and supply chain departments utilize this data to optimize their production planning and purchasing decisions. S&OP empowers the organization with shorter lead times, improved management control, better customer service, and superior supply chain management. 

In comparison, it is evident that IBP is an extension of S&OP. Where S&OP is more inward-looking, IBP attempts to strike a balance between internal and external factors. After an organization has achieved a higher maturity level in S&OP, it must embark on the journey towards incorporating IBP as a standard business process. 

What are the key benefits of integrated business planning?

In the modern business environment, management must ensure alignment across cross-functional groups to maintain a competitive edge. IBP helps an entity overcome challenges posed by disjointed business planning to augment the decision-making processes. Some of the noteworthy benefits of IBP are:

• Accountability : Departmental teams are aware of the impact of their actions on other departments and the entire organization. Managers can fix individual responsibilities of employees to determine employee accountability.
• Transparency : IBP offers a consolidated view of data that enables departments to undertake scenario planning for different possible situations in sync with other departments. Such transparency in operations bodes well for the company's future.
• Alignment: With IBP, departments can understand the overall organizational objectives and then align their operations with syncing with those objectives. 
• Optimization : Management can ensure optimal resource utilization by addressing common bottlenecks that impede the operations of multiple departments. 

What is the purpose of integrated business planning?

IBP is a process designed to enhance the efficiency of the decision-making process for the entire organization. It enables management to lay down a detailed plan for managing the enterprise with a long-term horizon. Some of the key aspects that IBP addresses are allocating crucial resources, supply chain management, personnel requirement, financial analyses, and time management to ensure a balance between profitability and customer satisfaction.

IBP is the next step in the evolution of S&OP which in itself originated in the 1980s from supply and demand balancing processes. IBP ensures alignment of all departmental functions to prepare the entity for possible scenarios through accurate strategy deployment and better cooperation between key stakeholders.

Why do you need integrated business planning?

Whether you are a start-up looking to establish a strong presence in the market or an established enterprise interested in consolidating your market position, IBP must be an integral part of your strategy. Companies need IBP to devise a set of concrete actions to achieve different objectives. 

• Quality of inputs, outputs, and processes : Companies can maintain a uniform demand and supply plan that is in sync with the financial goals by attending meetings attended by cross-functional decision makers.
• Organizational capabilities : IBP promotes cross-functional collaboration across multiple layers of the organization to encourage functional excellence and problem-solving.
• Accountability and Performance : IBP helps design incentives to encourage transparency and accountability of performance. Shared metrics made available promote collaboration between key stakeholders. 
• Data systems : IBP promotes integrating data systems across departments to deliver a single point data source for all requirements. Automated data flows and system detection promote real-time decision-making. 
• Process design : IBP helps bridge the gaps left by short-term and long-term planning by enabling flexible strategies for addressing issues arising between these two time horizons. It also promotes strategy via management-level operational planning and target setting. 

How do you implement integrated business planning for your company?

Many companies struggle with implementing IBP as crucial responsibilities and metrics are not aligned across functions. This might pose difficulties with steering the operations collaboratively. Thus, it is important to clearly understand implementing IBP for your company. 

Integrations

To save crucial time and resources for different departments, it is important to select an IBP platform that seamlessly integrates with your existing tech stack. This will help eliminate data transfer errors and reduce data consolidation time, as well as maintain critical data security standards. Therefore, the first and foremost requirement for implementing IBP is to ensure seamless integration of the IBP software with your tech infrastructure, including ERP software, CRM software, Billing Systems, Data Warehouses, and more. 

Consolidating data sources into a single source of information 

Duplicate and inconsistent data sources pose challenges for an organization at multiple levels, leading to a waste of precious resources and impacting the bottom line. It is, therefore, important to have a single source of information that can act as a reference point for multiple departments. After integrating the IBP software with your tech stack, your next focus should be ensuring accurate data collection and aggregation in real time. This approach would provide a single source of truth for all the departments, eliminating errors due to omission or duplication.

Building forecasting models

Forecasting in IBP is used for demand sensing in the short, medium, and long term. To create a forecast model with your IBP software, you must define the algorithms and key figures related to outputs and inputs. A forecast model features three steps, i.e., pre-processing, forecasting, and post-processing. But a forecast model only works as a container of functionality, and it is you who must define its aggregation level and timing of running.

Financial forecasting methods

There are different financial forecasting methods that you can opt for per specific requirements according to different situations.

• Straight Line Forecasting : - This method is used to get a simple view of continued growth at a consistent speed to derive predictions for guiding financial and budget goals.
• Moving Average Forecasting : - This method calculates average performance for different metrics in a specified time frame. Companies use this method for the identification of underlying patterns for varied financial metrics.
• Simple Linear Regression Forecasting : - This method helps create a trend line based on the relationship between an independent and dependent financial variable. 
• Multiple Linear Regression Forecasting : This method uses two or more financial variables to make a projection. This forecasting model helps understand the relationship between different financial parameters and possible outcomes.

Scenario planning

Use your IBP platform to eliminate being caught off guard while executing your strategies. You can run multiple “what-if” scenarios within minutes to analyze the aspects affecting your business. You can create new scenarios using existing scenarios and compare different scenarios per your requirements. Representations like line charts, bar diagrams, tables, and other visualizations can be used for easy understanding of data for informed scenario planning. This allows you to improve the accuracy of predictions based on a single source of truth.

Scheduled imports

With the option of scheduling data imports built-in, IBP platforms are taking the hassle out of data collection and consolidation. With the scheduling option, you can define the import requirements and get all the data presented to you in a consolidated manner. With access to real-time data, you can ensure higher data integrity and accuracy, as well as data access autonomy. You circumvent investing heavily in setting up IT infrastructure, as cloud-based IBP software solutions can operate seamlessly on your existing infrastructure.

Analytics and data visualizations

Why stick to cells, rows, and columns for data analysis when you can access stunning data visualization solutions with your IBP software? Visual analytics helps draw meaningful insights from data by offering multiple ways to look at the same dataset. IBP platforms allow you to clean and enrich your data in seconds, allowing you to spend more time on data analysis and exploration rather than on manual data collection and consolidation.

Building beautiful presentations 

The true value of data analysis lies in the decisions it enables leaders to take. Storytelling, by incorporating the data and visualizations in a beautiful presentation, is essential to reaping the benefits of an integrated planning and analytics platform. You can use your IBP platform to import and export your data from sources including Google Sheets and create impressive presentations that drive positive impact.

Measuring ROI and impact on the business

Always ensure the measurement of return on investment (ROI) with key metrics depending on the use case. For example, your Finance team might have spent several days on data preparation before achieving actual insights from financial reporting. An integrated business platform has the potential to reduce this data prep time by 80% — metrics like this can be a great way to measure your team’s efficiency post implementing an IBP.

Integrated business planning by the department

The best part of an integrated business planning platform is its ability to support a wide array of business use cases - Sales, HR, Marketing, Finance, RevOps, CX, and more:

Finance and FP&A teams 

IBP platforms empower finance teams to build, maintain, and visualize data in real-time to deliver informed forecasts. Finance teams can save considerable time and resources as they can clean and enrich data in seconds and run models in hours instead of days with up to 20x fewer formulas than Excel. 

Revenue and Sales teams 

IBP platforms enable revenue and sales teams to unlock revenue growth potential through flexible financial modeling options. Therefore, teams can spend more time on strategy by reducing planning cycles for non-productive tasks. 

Executives 

Management teams and key executives are empowered to deliver well-rounded business results as the IBP platforms offer a single data source for all stakeholders. With a 360° view of the business, informed decision-making becomes the new standard practice.

Choosing the best business planning software 

To avail the complete benefits of IBP, selecting the best business planning software is essential. When compared based on power, flexibility, and design, Pigment emerges as the clear leader and is trusted by industry leaders across domains.

Pigment is one of the most feature-rich and user-friendly business planning softwares that offers you a one-stop solution for all your planning requirements. 

Pigment allows your teams to be more efficient as they gain single-point access to enriched data and can spend more time on data analysis to draw meaningful insights.

You can quickly create impressive models with real-time previews to bring all the decision makers at speed quickly. You create a seamlessly shared understanding of numbers across multiple departments, breaking down the silos affecting operational efficiency.

Pigment removes the element of surprise from all your decisions as you can forecast and run multiple scenarios to identify suitable opportunities and risks for your business.

Book a demo today and experience the unparalleled power of Pigment for yourself.

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What Is SAP IBP (Integrated Business Planning)? (+ Examples)

This is about SAP IBP (Integrated Business Planning).

You’ll learn:

• What IBP is
• How SAP IBP is structured
• The features of SAP IBP

So, if you want to know what SAP IBP is and what it can do for you, you are at the right place.

Let’s jump right in!

What Is SAP IBP (Integrated Business Planning)?

Did you ever wonder how big companies manage their most important processes?

For example, how does a multinational company with more than 50,000 employees, 5,000 retail stores, and thousands of warehouses manage its payroll, inventory, supply and demand, and production?

Years ago, these companies conceded a certain level of inefficiencies and disjointed planning, but today’s companies are powered by digital transformation. 

Today businesses can find insights into data on their financial, operational, and sales plans thanks to smart software solutions and modern planning processes. This allows them to make more informed decisions and come up with better overall strategies.

To do this, companies can use Integrated Business Planning—a digital platform that helps them organize all of these processes.

SAP IBP is one of the most popular such platforms. Let’s take a look at SAP’s Integrated Business Planning solution:

• Its history
• And much more

What Is Integrated Business Planning?

Integrated business planning is an advanced approach to business organization that merges operational and financial data across the whole business. It allows organizations to maximize results by connecting sales, financial, operational, and other sectors. It also gives businesses greater visibility of their whole process, from the entire supply chain to sales operations.

You can use Integrated Business Planning to manage different parts of a company such as:

• Finance and operations
• Supply and demand
• Cash flow, cost, and revenue
• Business strategy
• Inventory optimization

An IBP process is used to balance all these (and more) objectives so that the company achieves the best results going forward. 

To ensure this happens, IBP uses prescriptive analytics, which is the application of mathematical sciences and statistics to suggest business decisions based on data.

This goes one step further than predictive analytics which uses mathematical data to predict what’s going to happen.

Simply put, using prescriptive analytics, IBP tries to answer the question of what is likely to happen, tells you why it’s going to happen, and suggests actions you can take to benefit from these predictions.

While IBP is an organizational approach, it can also be referred to as software. In this case, we’re talking about a digital platform that uses advanced analytics to help you manage all these processes like:

• Supply planning
• Supply chain management
• Operations planning

Before IBP: Sales & Operations Planning (S&OP)

As a process, Integrated Business Planning is an heir to Sales and Operations Planning (S&OP) . 

In fact, IBP has been criticized for not being all that different from S&OP—it’s even been called a marketing hoax . 

IBP, however, is a broader term than Sales & Operations planning. It combines S&OP with EPM (Enterprise Performance Management) to give companies both a financial and an operational overview of the business. 

IBP allows organizations to create what-if scenarios that boost the responsiveness of the supply chain and improve the way that manufacturers govern and plan the business.

Source: Semantic Scholar

Here are some ways in which IBP differs from S&OP:

• Financial performance management: IBP helps you express business goals in financial terms. So you can set financial targets and see how well your company is doing relative to those targets. It helps you measure the impact of different scenarios through a financial lens.
• Supply chain planning: With IBP, you can not only plan your supply chain, but also measure its performance. This means you can use IBP to find those decisions that increase your profitability and create production plans based on valuable information.
• Long-term planning: S&OP usually supports medium-term planning (for around two years). IBP aligns with long-term strategies while also supporting shorter-term operational plans. Also, since you can use it to measure financial performance, you can also use it to determine long-term budget needs.

What’s Wrong With Traditional Planning? 

Before we get into SAP IBP and its features, let’s answer one important question: 

What’s wrong with traditional business planning? 

In other words, why do companies need IBP software at all?

First, without IBP there is only the bare minimum of information about how each department is functioning and the corresponding impact on the bottom line.

Second, in traditional planning, there’s often a disconnect between your strategies and operations. This results in lower competitiveness because the business is slow at reacting to market changes.

Third, IBP promotes collaboration. Without it, departments tend to only focus on their own activities and results, rather than feel like part of a larger company team.

Overall, IBP promotes a holistic approach that helps you see the bigger picture and make smart decisions with all aspects of your company in mind.

Who Is SAP?

Let’s get to the details: SAP SE and its IBP platform.

SAP SE, simply known as SAP, is an international software company based in Germany . They make ERP (Enterprise Resource Planning) software that helps companies manage and gather data from all parts of their business.

The definition of SAP is:

SAP (Systems, Applications, and Products in Data Processing) SE (Societas Europaea) is a European worldwide operating software company that makes software for the management of business processes suitable for organizations of any size and industry.

It’s the largest software company outside of the U.S. by revenue.

What Is SAP IBP?

Let’s take everything we’ve learned and put it all together: SAP IBP is an Integrated Business Platform developed by the company SAP SE. 

Like most other business applications from SAP, the platform runs on SAP HANA.

SAP IBP lets you plan all kinds of business activities. 

Thanks to the in-memory processing functions of SAP HANA, their IBP platform provides companies with end-to-end visibility of: 

• Supply chain data

This helps departments such as sales, finance, and C-level management to create plans and business strategies.

Source: SAP

Let’s put it like this: companies conduct periodic reviews of their supply, demand, sales performance, budgeting, and other processes to identify potential issues that can affect their business targets. 

SAP IBP lets companies do more frequent reviews, compare planned figures to actual ones, and take a more active approach to planning.

Furthermore, SAP HANA’s processing capability allows companies to run what-if scenarios with real-time data in order to get statistical input and make smarter decisions.

The Capabilities of SAP IBP

More specifically, SAP IBP allows you to do the following:

• Predict and meet customer expectations: You can use SAP IBP’s predictive modeling and demand sensing to improve your responsiveness and forecast accuracy. The platform makes it easy to react to demand changes and promise deliveries based on commitments.
• Make better planning decisions: As mentioned, SAP IBP uses advanced analytics and machine learning algorithms. You can use these to do effective top-down and bottom-up forecasts. You can also leverage supply planning and set inventory targets.
• Align planning processes: IBP’s simulations and analytics can help you manage planning processes at operational, strategic, and tactical levels. What-if scenarios enable you to make better decisions and increase business predictability.
• Improve supply chain visibility: IBP gives you actionable insights from your entire supply chain that enable you to make timely adjustments. You can take into account data like risk, weather, and sustainability. The platform also allows you to work with your suppliers and manufacturers for easier planning.

The Structure of SAP IBP: The Five Components

SAP Integrated Business Planning is composed of four key components, plus a fifth that serves as a centralized visual interface. Each component is an independent component so you can just use what you need.

Source: Salt-solutions.de

This is a quick overview of those components:

• Sales and Operations: Provides a sales plan to help you get the best business results according to your corporate strategy. You can align your short-term and long-term strategies to increase sales, improve market share, or achieve any other financial goal.
• Demand: Predicting product demand is one of the most important success factors in business planning. The SAP IBP for Demand allows you to leverage machine learning to get demand forecasts, including temporary fluctuations.
• Inventory: The Inventory component sets forward-looking inventory targets across your supply chains. You get real-time data so you can see where your products are in the supply chain at any time. You can optimize the stock targets for your whole supply chain.
• Response and Supply: This module lets you react to any ad-hoc changes. Using what-if scenarios and simulations, you can predict changes and make adjustments accordingly. Response planning calculates demand variability and helps you meet your fill rate while keeping track of your costs.
• Supply Chain Control Tower. The Tower acts as your dashboard—an analytics platform that gives you real-time data. It provides end-to-end supply chain visibility. The module also allows you to set up alerts when there are potential interruptions in your supply chain.

Now, let’s dig into each of these modules or component:

SAP IBP for Sales and Operations

SAP Integrated Business Planning for S&OP is at the very core of the whole platform. It’s also a starting point for many companies using SAP IBP—in many cases, companies start out with long-term sales planning which they then need to synchronize with the rest of the organization like:

• Procurement

This module provides a holistic view of your supply chain network by simulating financial, supply, and demand models. 

You can see everything in the supply chain, from manufacturing and suppliers to customers and distribution units.

The S&OP component also provides you with all the tools you need to create supply plans across all departments. You can use it to balance your product mix, service levels, inventory, and financial operations.

The module uses the familiar Microsoft Excel interface, so that everyone feels comfortable with the system. Supply chain management is usually handled through spreadsheets, so this is a natural transition for most managers.

SAP IBP for Demand

This module combines demand sensing models that use real-time data with traditional demand planning tools. 

Using machine learning, historical data, trends, and seasonal patterns, the demand planning module excels at long-term demand forecasting.

Like the previous module, this one also uses a Microsoft Excel interface. 

Besides that, you can also access some other apps based on the SAP HANA database like the SAP ERP and SAP APO. These can be useful if you want to access transactional and master data.

The SAP IBP for Demand module also has demand sensors. The sensors monitor your incoming data on a regular basis and notify you when a forecast target isn’t being met. This way you always have the latest info and can adjust your approach accordingly.

SAP IBP for Inventory

SAP IBP for Inventory component lets you to model your whole inventory network, from your supplier to your customers. It gives you inventory management tools and lets you identify key drivers so that you always have the right amount of inventory.

So, how does that work in practice?

For example, let’s say a company is working in a multisourcing environment—they have multiple suppliers and multiple warehouses all over the country. 

The IBP for Inventory component would use all the transportation costs, targeted service levels, and fill rates to determine how much of each product’s inventory it should have in each location.

Like other components in the SAP IBP suite, this one uses real-time data, so you’ll always know where your products are in the supply chain.

You can also use inventory planning simulations that take into account economic shifts, changes in demand, and differing customer expectations. This technique uses real-time what-ifs to help you figure out where your weaknesses are and how to strengthen them. 

SAP IBP for Response and Supply Planning

This component helps you simulate and evaluate planning scenarios so that you can achieve a balance between supply, demand, and capacity. It also considers inventory, procurement, production, and warehousing costs so you can get a financial insight into your supply planning as well.

The keyword here is response, meaning that the Response and Supply Planning component enables you to adapt quickly to your supply chain model. You can use what-if analyses to predict potential uncertainty and plan for it.

This module takes into account the demand variability and helps you allocate supplies to achieve the highest service level and fill rate. 

Since you can use SAP IBP to get measurable financial outcomes, the Response and Supply Planning module can help you perform all of these actions while keeping costs as low as possible.

The component has pre-made templates for what-if analysis to make things easier, but you can make your own in no time. 

SAP Supply Chain Control Tower

The last component is an analytics tool, a dashboard that allows for a real-time, end-to-end overview of your entire supply chain. 

Not only can the component alert you any time there’s a potential supply chain disruption—it can dig deep and tell you where it came from.

Source: Mccoy partners

The Supply Chain Control Tower provides what-if analyses to help you make quick, informed decisions. This data isn’t only available to you: partners in your supply chain can also have access to real-time alerts that might lead to delivery delays or exceptions.

All the tools in this component are highly visual, so you can share the tables and charts with others without them having to be great at numbers or tables.

Ultimately, the Control Tower ensures your company can make timely deliveries with better inventory management and fewer operational risks.

The Benefits of SAP IBP

Here are a few reasons companies might consider using SAP IBP for supply chain management, inventory optimization, production planning, and other processes:

• Better data collection: Companies using old S&OP technology often have to collect data manually from sources like third-party applications and spreadsheets. SAP IBP lets you collect data more quickly and more efficiently, saving you and your team time.
• Managing fluid data: The biggest challenge with Integrated Business Tools, in general, is that inventory levels change constantly—they’re fluid. SAP IBP lets you view those levels as dynamic data, rather than just static data about how many items you’ve got in stock.
• Better data presentation: Many old S&OP tools present data in tables that can be confusing to make sense of. SAP IBP offers dashboards and similar analytics tools that make it easier to interpret data in moments. These tools also make it easier to share data across departments.
• Quick installation: SAP IBP is a cloud solution, which means that you don’t have to order hardware or have data warehouses. SAP IBP implementations typically don’t take more than a few days.

SAP IBP Implementation

Let’s see what SAP IBP implementation methodologies you can use:

The go-to model for SAP implementation has been ASAP (Accelerated SAP). This methodology uses the waterfall model which employs a linear structure where the deliverables in each phase depend on the previous one.

The model has five stages:

1. Project Preparation: at this stage, it’s important to identify goals and get stakeholder support. SAP and the client also work together on establishing a reliable process for making decisions.

2. Business Blueprint: at this point, SAP needs to get relevant information about the company. These blueprints come in the form of questionnaires to determine the company’s future business goals and processes.

3. Realization: the SAP team configures what’s called the baseline configuration, which is the basic setup based on the business blueprint the company delivered. Then, the company’s implementation team fine-tunes the system to make it perfectly suited to their business needs.

4. Final Preparation: preventative maintenance checks are performed to make sure the SAP system performs as it should. Now is the time to do workload testing (daily load, peak volume, and similar types of stress testing), along with integration or functional testing.

5. Go-Live and support: the final stage is less important—going live is just a matter of minutes. However, ensuring that the Go-live stage goes smoothly and without any hiccups will depend on the attention you paid during the previous phases.

A possible problem with this model is that all of the documentation goes on earlier in the process, culminating in the business blueprint document. This means that the company gets to see and use SAP IBP later in the process, which can lead to a mismatch between the company’s expectations and the actual implementation.

To overcome this, some companies use an adaptive planning model like the agile methodology to implement SAP IBP. This is a more iterative process, in which the SAP team engages the company to share its business requirements (called user stories in Agile). They then capture these stories and deliver them iteratively (called sprint cycles ) in SAP applications.

You can use a hybrid approach to IBP implementation, where the five stages are combined with Agile methodology.

Frequently Asked Questions About SAP IBP

Finally, here are some frequently asked questions about SAP IBP:

What Is The Difference Between SAP IBP and SAP APO?

SAP IBP is a much more advanced solution that addresses some of SAP APO’s weaknesses and is meant to replace the solution. Standard support for SAP APO will be maintained until 2025 .

SAP IBP is superior to SAP APO for multiple reasons. For example, in SAP IBP, the data is presented in a more coherent way, with graphs and dashboards. It also has a Microsoft Excel interface that makes it easier for planners to perform familiar actions.

SAP APO also doesn’t have demand sensing and multi-echelon inventory optimization that are included in the SAP IBP for Demand and SAP IBP for Inventory, respectively.

Is SAP IBP Available as an on-Premise solution?

According to the SAP Answers forum , SAP IBP as a whole is restricted to the cloud only. On the other hand, the Sales and Operation Planning module is available as an on-premise solution.

However, the SAP Support seems to suggest how implementation on an on-premise system is possible.

To get the most accurate information, you’ll want to contact SAP directly and ask them about your particular business and its needs.

What Are SAP IBP’s Competitors?

There are several software solutions that offer similar solutions to SAP’s Integrated Business Planning platform.

Here are some of them:

• Oracle S&OP Cloud. This cloud-based solution from Oracle aligns supply, demand, and product plans with the financial targets of a company.
• Kinaxis RapidResponse S&OP. This S&OP platform allows you to create a sales and operations plan that you can collaborate on. You can also align that plan with your financial goals.
• NetSuite. The software from NetSuite lets you set up your inventory storing locations and improve your on-time delivery metrics. 
• Demand Works Smoothie. This solution is browser-based, which makes it easily deployable. Much like SAP IBP, they use a highly graphical and interactive interface.

The ERP market is incredibly competitive. There are dozens of other solutions that do what SAP IBP does: 

• Production planning
• Statistical forecasting
• Scenario planning
• Inventory management

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Integrated Business Planning: A Complete Guide

Do your sales teams push for continuous promotions? Meanwhile, does your supply chain struggle with stock levels as finance grapples with margins? This familiar scenario often arises from operational silos within an organization. It leads to missed opportunities, operational inefficiencies, and uninformed decision-making.

How do you achieve seamless coordination across all departments? The answer lies in Integrated Business Planning. IBP is not merely a strategy; it transforms processes. It aligns your teams, enhances collaboration, and ensures every department works towards the same goals.

Are you ready to streamline your operations and improve decision-making across your organization? Dive into our comprehensive guide to discover how IBP turns your business challenges into opportunities for growth. Keep reading!

What is Integrated Business Planning?

IBP is a strategic approach that transcends traditional planning methods. It integrates diverse business processes to enhance overall corporate performance. IBP aligns departments such as sales, operations, finance, and marketing. This ensures every unit works towards unified goals. Such harmony is crucial for retailers facing rapid market changes and evolving consumer demands.

IBP operates on a rolling horizon, typically spanning 24 to 36 months. This enables retail leaders to make proactive decisions based on long-term forecasts and analyses. This forward-thinking approach aligns strategic and operational plans. It ensures that tactical decisions support the business’s overarching goals.

Consider a national retail chain planning to expand its product line. IBP coordinates new product development with sales forecasts . It aligns with supply chain capabilities and financial budgets. This strategic alignment prepares all departments to support the launch effectively.

Why is Integrated Business Planning Essential?

Before diving into Integrated Business Planning, we acknowledge its core, Sales and Operations Planning. S&OP traditionally focuses on balancing demand and supply within a shorter-term horizon. It establishes the operational groundwork necessary for effective integration. In retail, adapting quickly to market trends is crucial. S&OP ensures your operational capabilities align with immediate market demands. IBP builds on this foundation. It incorporates strategic elements like financial forecasting and long-term market analysis. This broadens the scope from merely operational to strategic.

IBP offers a cohesive approach to decision-making. It ensures that all business facets, from inventory to finance, are in harmony. Here’s why embracing IBP is crucial for your retail operations:

• Enhanced Visibility Across Departments: IBP integrates data and goals across various departments. This provides a clear overview of business operations. Such transparency lets you see how decisions in one area impact others. It leads to more informed decision-making. For instance, a decision to launch a new product line will involve input from the supply chain, sales, marketing, and finance. This ensures that all aspects are aligned and supported.
• Improved Forecast Accuracy: With IBP, you use advanced analytics and collaborative insights to refine forecasting. Insights come from various departments. This accuracy is vital in retail. It predicts market trends, consumer behavior, and potential disruptions. Accurate predictions directly influence stocking and marketing strategies. Better forecasting lets you adjust inventory levels more precisely. This avoids both overstock and understock situations, which erode profits.
• Strategic Resource Allocation: IBP links strategic goals with operational planning, ensuring efficient resource allocation. This strategic alignment drives investments in personnel, technology, and inventory. Investments are based on a deep understanding of business goals, market demands, and financial constraints.
• Faster Response to Market Changes: Market conditions shift rapidly due to factors like consumer trends, economic changes, and technological advancements. IBP allows swift responses to these changes. You adjust plans in real time, ensuring agility and resilience. For example, if a sudden fashion trend emerges, IBP lets you quickly increase production or distribution in targeted areas. This quick action enables you to capitalize on the trend.
• Increased Operational Efficiency: IBP breaks down silos within the organization, fostering collaboration and coordination. This approach boosts efficiency by getting departments to work together. They optimize workflows and reduce redundancies. Whether streamlining the supply chain or synchronizing marketing and sales, IBP ensures smoother, more cost-effective operations.
• Risk Mitigation: IBP incorporates proactive risk management, anticipating disruptions, and formulating strategic responses. This preparedness is crucial in retail, where supply chain issues significantly affect availability and sales. With IBP, you identify risks and weave risk management into your planning. This ensures your business stays strong against unexpected challenges.
• Sustained Competitive Advantage: IBP’s comprehensive nature provides a competitive edge. You stay ahead of the market and even shape future trends. This forward-thinking lets you innovate continuously. It also enables you to meet customer expectations effectively. Thus, you distinguish your business from competitors.

Integrated Business Planning Process

IBP is a strategic process that aligns demand, supply, new product development, and financial strategy into a cohesive plan. Here’s how you implement IBP effectively in your retail business, ensuring each step contributes to your overarching strategic goals:

• Strategic Review: Start by assessing your long-term business goals and market strategies. This foundation ensures that all IBP efforts align with where you want your retail business to be in the next three to five years. You examine trends, consumer behaviors, and potential disruptions that might affect your market.
• Demand Planning: This step involves forecasting customer demand for your products. You analyze historical sales data, market trends, promotional activities, and seasonality. This forecast forms the basis for all other planning activities. It ensures that you match your inventory and resources to anticipated demand.
• Supply Planning: Once you have a clear forecast of customer demand, you plan your inventory and procurement . This step involves scheduling deliveries from suppliers. You manage inventory levels and ensure logistics handle incoming and outgoing products efficiently.
• Product Portfolio Management: Manage your product portfolio by analyzing existing product performance. Plan the introduction of new products to keep your offerings competitive. Ensure your products stay relevant in the market. Base your decisions on lifecycle management, customer preferences, and profitability analysis.
• Financial Integration: Align your financial plans with operational strategies. This step involves budgeting, profitability analysis, and setting financial targets. Ensure these targets match your operational capabilities and constraints. Optimize all financial resources to support business growth and sustainability.
• Collaborative Reconciliation: In this crucial step, you reconcile all plans across different functions. These include demand, supply, product, and financial plans. Collaboration involves regular meetings with all stakeholders. This ensures every department understands and supports the integrated plan. Resolving conflicts between different areas is vital. Ensure the strategy is achievable and aligned across the organization.
• Execution and Monitoring: Implement the integrated plan across your retail operations. This step demands effective communication and the planned deployment of resources. Continuously monitor performance against the plan. Use key performance indicators and real-time data to ensure execution stays on track and meets expected outcomes.
• Continuous Improvement: The final step in the IBP process involves regular reviews of the outcomes. You analyze what succeeded, what failed, and the reasons. Continuous feedback loops adapt the planning process. This adaptation enhances accuracy and efficiency over time. Ongoing evaluation and adjustment maintain agility and responsiveness to market changes. These actions drive continuous improvement in business performance.

💡Fact McKinsey reports that companies with mature IBP processes reduce delivery penalties and missed sales by 40-50 percent.

S&OP primarily balances supply and demand. IBP extends beyond this. It integrates financial planning and product development into its framework. This makes it a broader, more strategic approach. It encompasses long-term goals and focuses on profitability.

Challenges of Integrated Business Planning

• Complex Data Integration: IBP synthesizes large volumes of data from sales, operations, finance, and marketing. Integrating and harmonizing this data presents significant challenges. If you rely on disparate systems that do not communicate seamlessly, the task becomes more complex. Ensuring data accuracy and consistency requires robust IT support. You also need sophisticated software solutions.
• Cross-Functional Collaboration: IBP requires ongoing collaboration across your company’s departments. Siloed operations and misaligned departmental objectives hinder effective IBP execution. Encouraging a culture of teamwork and aligned goals is crucial. Achieving this culture is challenging. It involves changing organizational behaviors and mindsets.
• Change Management: Shifting to integrated planning demands significant changes in your business processes and systems. These changes affect every organizational level, from top executives to operational staff. You must manage these changes effectively. Securing buy-in from all stakeholders often proves challenging. Overcoming resistance to change is crucial. Everyone must understand the benefits and their roles in IBP clearly.
• Skill Gaps: IBP demands advanced analytical capabilities, strategic thinking, and operational expertise. Combining these skills poses a significant challenge. You must find and develop talent with these cross-functional skills. Training and hiring new talent are necessary but require time and resources.
• Consistent Execution and Monitoring: Once implemented, applying IBP principles consistently across all business units is challenging. You must continuously monitor its performance. Ensuring the IBP process is dynamic and adaptable to market changes is crucial. This requires ongoing attention and refinement.
• Technology Adoption: Implementing the right technology to support IBP is crucial. Selecting, customizing, and deploying enterprise planning software to fit your specific needs is daunting. Additionally, technology alone is not a solution. You must align it with your business processes and train your team to use it effectively.
• Balancing Strategic and Operational Focus: Maintaining a balance between strategic objectives and operational realities is key. You ensure that long-term strategic goals do not overshadow immediate operational needs. This balancing act requires sophisticated forecasting. It also demands effective scenario-planning capabilities.

Embracing Integrated Business Planning positions you to manage your resources smartly. It keeps your business agile and aligned with market demands and growth objectives. It promotes sustained business success and differentiates your company in a competitive market.

Take the Next Step

Embrace Integrated Business Planning today with the right means and unlock the full potential of your business.

Elevate your forecasting strategies with integrated business planning that seamlessly integrates with your operations for synchronized decision-making, enhanced collaboration, and optimized resource allocation. Ensure success across every facet of your organization.

Frequently Asked Questions

What are the key differences between s&op and integrated business planning.

S&OP primarily focuses on balancing supply and demand and aligning production and inventory levels with sales forecasts. In contrast, IBP integrates these operational planning activities with strategic and financial planning, providing a more holistic view and a longer-term focus.

Is Integrated Business Planning adaptable to various industries or business models?

Yes, Integrated Business Planning is highly adaptable and can be tailored to meet the specific needs of different industries and business models. By adjusting the focus on key metrics, processes, and strategic priorities, IBP can effectively support unique operational and strategic requirements across sectors.

What metrics do companies use to evaluate the effectiveness of their Integrated Business Planning initiatives?

Companies assess the effectiveness of their Integrated Business Planning initiatives through various metrics: improved forecast accuracy, increased revenue, enhanced customer satisfaction, and reduced inventory costs.

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SAP IBP for Dummies

Arunabh Bora

An introduction to SAP IBP for the uninitiated.

Introduction

This article is inspired from a recent experience. I am sure there are many people who have heard about IBP and are interested to learn it but don’t know where to begin. I say this because I was at the same place once. There was no place where I could receive any formal training. While the best way to learn IBP is to be hands-on, in this article I will try to explain the software in layman terms but do note that some parts might get a bit technical.

What is IBP?

In very simple terms, IBP (Integrated Business Planning) is a supply chain planning application. It has 6 modules inside it.

• Demand Planning
• This module helps businesses forecast future customer demand using advanced algorithms and machine learning. It consolidates historical data, market trends, and other relevant information to produce accurate demand forecasts.

2. Sales and Operations Planning (S&OP)

• The S&OP module integrates sales and operational planning into a unified process. It aligns the business’s strategic goals with its operational capabilities, and enables teams for better decision-making.

3. Inventory Optimisation

• Inventory Optimization aims to maintain the right balance of stock. It minimizes excess inventory while avoiding stockouts, ensuring that products are available when and where they are needed.

4. Response and Supply Planning

• This module focuses on the execution of supply plans and the response to real-time changes. It ensures that plans are agile and can be adjusted quickly to address disruptions or changes in demand.

5. Demand Driven Replenishment (DDMRP)

• DDMRP is an approach to material control and replenishment that improves on traditional MRP by making it sensitive to real-time fluctuations in demand.

6. Control Tower

• The Control Tower provides a centralized view of the entire supply chain. It offers real-time visibility and analytics, helping businesses monitor performance, identify issues, and make informed decisions.

What make IBP so special — Pros and Cons

Before IBP, companies were using something called APO (Advanced Planning & Optimizer). I will show a table which shows the difference between APO and IBP.

There are some functionalities like Production Planning and Detailed Scheduling (PP/DS) and global Available to Promise (gATP) which are present in APO but not in IBP. These modules can be used in S4HANA.

What makes IBP special is, I believe, the excel based interface which enables real time collaboration. Also, it maintains stickiness since users do not have to transition from their excel sheets.

Key components in IBP

This part can get a bit technical but it is necessary to understand the structure of IBP. A planning model describes the structure of the system in terms of data and calculations. It defines how data is stored, calculated and aggregated in the system. All planning models are based on the following entities.

• Attributes: describe an individual field and data type that is used in the planning model. The product ID is an example for an attribute.
• Master data types: groupings of attributes.
• Time profiles: time periods in which planning data can be managed (for example, weekly, monthly, and so on) and the hierarchy of these time periods make up a time profile.
• Planning areas: structures consuming the elements required in the planning process (attributes, master data types, time profiles).
• Planning levels: combination of attributes and a time period.
• Key figures: essential metrics used to measure and monitor various aspects of business performance.
• Versions: refers to a specific instance or snapshot of a plan, forecast, or set of data at a particular point in time. Versions are used to manage and compare different planning scenarios, track changes over time, and support decision-making processes.
• Planning operators: functions that are associated with a planning area used to perform specific operations.

Let’s do a deep dive into the various components

1. Attributes

Attributes are characteristics of master data types, for example, an attribute of the customer master data type might be country or region. Attributes can be either numeric or non-numeric. Attributes can be of the following datatypes — string, decimal, integer, timestamp.\

2. Master Data types

Master data types represent categories of information, for example, customer, location, product, or resource. It is used to segment planning data.

Different types of master data:

• Simple master data: For example, product, customer or location
• Compound master data: Combines two or more master data types. For example, Customer Product (say which product is sold to which customer i.e. a customer product mapping).
• Reference master data: References another master data type so that you do not have to upload the same data more than once. For example, you can create the currency master data type as a reference master data type that uses the currency to master data type.
• External master data: master data from an external database.
• Virtual master data: s used to create joins between two (or more) master data types that otherwise have no connection to each other.

3. Time profiles

Time Profiles define a time interval used for managing planning data. A time profile is made up of time profile levels (e.g. months, quarters, or years). Each level is made up of periods, which are identified by a number, and describe the start and end time of the time period. These periods form a hierarchy which is then used to aggregate or disaggregate data along a time horizon.

4. Planning areas

A planning area is a model entity that defines the structure and forms the backbone of the planning process. A planning area consists of its assigned time profile, attributes of master data types, planning levels, key figures, and versions.

Planning areas can contain multiple versions — the base version and additional versions. Versions can share master data with the base version or can be based on independent sets of version-specific master data. A company can have multiple planning areas to enable the processes of SAP IBP in different business units.

5. Planning levels

A planning level is a set of attributes that identify and label key figure values, and forms part of the definition of a planning area. The attributes assigned to the planning area are available to form planning levels, as well as the time profile levels, and the attributes assigned to the time profile levels. A planning level enables you to analyze and plan at a specific aggregation level.

A planning level can be used as the base planning level of a key figure. The base planning level specifies the most granular level at which the value of the key figure is defined.

6. Key figures

Key figures are series of numbers over time, where each number corresponds to a particular time period value.

Key figures are associated with a key, which is a combination of attributes from one or more master data objects. They represent variables that are associated with attributes (master data types), and can be imported into the SAP Integrated Business Planning system, calculated, and/or manually edited.

Types of key figures:

• Key figure: The key figures that end users view in the planning views or in Analytics.
• Helper key figure: used for intermediate calculation results in a regular key figure or in another helper key figure. They are not visible to the user and do not have a base planning level.

7. Versions

A version is a separate set of key figure data used to manage alternative plans. A baseline version is automatically generated after the initial configuration of the planning area. Additional versions can be defined to include a subset or all key figures of the planning area. Versions can share master data with the base version or have independent master data.

8. Planning operators

A planning operator uses an algorithm to compute large amounts of key figure data within a planning session.

All right, that was a ‘bit’ about the configuration part. Now let’s move on to the modules.

More on Demand Planning

Demand Planning is the first module in IBP. This is where the cycle begins. Demand can be independent (from outside the org) or dependent (inside the org). We usually try to forecast the independent demand because it is the type that is actually customer facing. In demand forecasting, we usually perform these functions in order — cleaning the historical data, consider internal and external factors, perform initial forecasting, refine the forecast and measure the forecast accuracy.

Demand planning offer the following functionalities:

• Statistical forecasting
• Manual forecasting
• Promotion integration
• ABC/XYZ segmentation
• New product introduction
• Time-series analysis
• Driver based planning
• Machine learning capabilities

More on Inventory Optimization

Inventory optimization helps manage uncertainty in the supply chain by determining the amount of safety stock to hold at stocking locations within the supply chain. It determines the lowest stocking cost possible to different inventory locations across the supply chain. It can provide stocking targets at an item-location-time level granularity.

Inventory optimization help lower the ‘Bullwhip Effect’ which refers to uncertainties across the supply chain due to the interdependency between suppliers, plants, warehouses, and customer sites. Too much safety stock can cause high holding costs or too low safety stocks can cause stock-outs.

Determining the optimal safety stock level depends on the following factors — customer demand, demand uncertainty, forecast error, lead times, replenishment frequency, lot sizes and target service levels.

More on Sales and Operations Planning

This module is geared towards enabling collaboration and increasing the speed and agility of planning. S&OP evaluates time-phased projections for demand, supply, product and portfolio changes, strategic projects, and the resulting financial plans over the mid- to long-term planning horizon.

It is essentially a re-planning process to manage organizational changes effectively. It involves all functions of the company, making it a cross-functional process and it is driven by demand and strategy.

SAP IBP S&OP has the following functionalities — process orchestration, scenario creation and management for what-ifs, performing multi-level supply planning heuristics, creating a rough-cut capacity plan.

More on Response and Supply Planning

With Response and Supply, we can create a rough-cut capacity plan or a constrained supply plan. It can create a master production schedule and form procurement plans based on exploding the Bill of Material. It can create planned orders, purchase requisitions and stock transfer orders (STOs). It helps us gain visibility for projected shortage at relevant levels of aggregation.

Through its detailed model configuration capabilities, IBP allows businesses to create tailored planning models that meet their specific needs.

By leveraging baseline and additional versions, companies can ensure a dynamic and responsive approach to supply chain planning. This flexibility is crucial in today’s rapidly changing business environment, where agility and foresight can make a significant difference.

Planning operators facilitate essential functions like simulation, demand-driven replenishment, and inventory optimization, ensuring that businesses can maintain optimal inventory levels and meet customer demand effectively.

Written by Arunabh Bora

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SAP Integrated Business Planning Functionality and Implementation

• Configure and use SAP IBP for S&OP, demand, response and supply, inventory, and analytics
• Incorporate demand-driven MRP into your supply chain planning
• Deploy SAP IBP and set it up in your landscape

In this book, you'll learn about:

Getting started.

Understand the scope of SAP IBP and plan your implementation! Learn how to navigate the system, load data, and use the basic planning model.

Configuration

Follow comprehensive steps for configuring SAP IBP, starting with the baseline functionality common to all planning applications. Then, delve into application-specific setup.

Functionality

Learn to balance demand and supply, perform demand forecasting, use order simulation, optimize inventory levels, manage buffer levels, monitor KPIs, and more!

Highlights include:

• Planning model
• Planning areas
• Sales and operations planning (S&OP)
• Demand planning and forecasting
• Supply planning
• Response planning
• Inventory planning
• Demand-driven replenishment
• SAP Supply Chain Control Tower
• Implementation methodology
• Case studies

Sandy Markin has more than 40 years of experience in manufacturing and supply chain management.

Amit Sinha is an expert in SAP supply chain processes and digital technology with more than 16 years of experience in leading supply chain transformation projects.

Sanchit Chandna is a supply chain leader with more than 11 years of experience developing supply chain strategies and delivering digital business transformation programs.

Jay Foster is the director of solution management at SAP for SAP IBP. As a supply chain and manufacturing veteran of more than 30 years, Jay brings a wealth of practical experience and logical insight to solving today’s business challenges.

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SAP Integrated Business Planning: Functionality and Implementation, 3rd Edition, Updated and Revised 2021

• Amit Sinha, Jay Foster, Sanchit Chandna, Sandy Markin
• Rheinwerk Publishing Inc.

Take your supply chain to the cloud! Walk through the SAP Integrated Business Planning applications―S&OP, demand, response and supply, demand-driven MRP, and inventory. Then learn to monitor and control these processes. See how to set up and use your SAP IBP system, from planning areas to key figures. With coverage of intelligent visibility, SAP IBP for demand-driven replenishment, and more, you can be sure you’re getting the latest information on supply chain planning with SAP!

• Configure and use SAP IBP for S&OP, demand, response and supply, inventory, and analytics
• Incorporate demand-driven MRP into your supply chain planning
• Deploy SAP IBP and set it up in your landscape

Getting Started

Understand the scope of SAP IBP and plan your implementation! Learn how to navigate the system, load data, and use the basic planning model.

Configuration

Follow comprehensive steps for configuring SAP IBP, starting with the baseline functionality common to all planning applications. Then, delve into application-specific setup.

Functionality

Learn to balance demand and supply, perform demand forecasting, use order simulation, optimize inventory levels, manage buffer levels, monitor KPIs, and more.

• Planning model
• Planning areas
• Sales and operations planning (S&OP)
• Demand planning and forecasting
• Supply planning
• Response planning
• Inventory planning
• Demand-driven replenishment
• SAP Supply Chain Control Tower
• Implementation methodology
• Case studies

About the Authors

Sandy Markin has more than 40 years of experience in manufacturing and supply chain management. He began his career in operations management in the consumer products industry and subsequently worked for several software providers. In 1994, he joined SAP, where he is now the senior director for the digital supply chain. During his tenure at SAP, he has been instrumental in bringing to market several industry-leading supply chain solutions, including SAP Advanced Planning and Optimization (SAP APO) and SAP Integrated Business Planning (SAP IBP). Sandy is a lifelong Chicago-area resident and received his BS from the University of Illinois and his MBA from Loyola University of Chicago.

Amit Sinha is an expert in SAP supply chain processes and digital technology with more than 16 years of experience in leading supply chain transformation projects. He has worked extensively with different industry sectors across the globe in the areas of sales and operations planning (S&OP), demand planning, supply planning, inventory optimization, manufacturing, and supply chain analytics. He is an expert in SAP IBP and other SAP supply chain applications. Amit has authored multiple books and research papers on supply chain management and digital technology applications for creating intelligently automated supply chains. He has been a speaker at global supply chain conferences and serves as a board member for two nonprofit organizations focused on manufacturing organizations and supply chain education. Currently working as a leader in the supply chain Strategy & Transformation team at Microsoft, Amit has also been active with the teaching, research, and spreading knowledge about digital supply chains for helping students, professionals, organizations, and related ecosystem partners.

Sanchit Chandra is a supply chain leader with more than 11 years of experience developing supply chain strategies and delivering digital business transformation programs. He has worked extensively across consumer, chemical, and hi-tech industries, helping clients design and implement SAP supply chain planning solutions in the areas of demand management, master production scheduling, inventory planning and optimization, and S&OP. Sanchit has worked with multiple SAP IBP customers

In this Book

• Introduction
• Planning Data
• Building Blocks of a Planning Model
• Configuring an SAP IBP System
• Sales and Operations Planning with SAP IBP
• Implementing SAP IBP for Sales and Operations
• Demand Planning and Forecasting with SAP IBP
• Implementing SAP IBP for Demand
• Response and Supply Planning with SAP IBP
• Implementing SAP IBP for Response and Supply
• Inventory Management with SAP IBP
• Implementing SAP IBP for Inventory
• Implementing SAP Supply Chain Control Tower with SAP IBP
• Demand-Driven MRP with SAP IBP
• Implementing SAP IBP for Demand-Driven Replenishment
• Unified Planning and User Roles
• Implementation Methodology
• Customer Case Studies

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SAP Integrated Business Planning FAQ

The purpose of this document is to cover common questions that come up prior to purchasing integrated business planning applications. if you have technical questions related to an implementation, please see: sap integrated business planning faqs for implementations., general questions.

The term “IBP” is an industry standard term referring to the process of integrating sales forecasts, inventory targets, supply plans, and financial plans into a single operational plan for the business or business unit, agreed by all parties (sales, operations, logistics, finance) and “blessed” by business leadership.

In SAP terms, “IBP” is the next generation SAP supply chain planning applications that sit on SAP HANA and support the above Integrated Business Planning process.

SAP IBP for supply chain: 1 Page Product Overview

There are 5 applications in SAP IBP:

• SAP Integrated Business Planning for sales and operations: “One set of numbers”

1 Page Product Overview | YouTube Demo

• Balance demand and supply while providing organizational visibility and alignment
• What-if scenarios, using “real time” information
• JAM embedded communication, and analytics
• SAP Integrated Business Planning for sales and operations

2. SAP Supply Chain Control Tower: “Visibility”

1 Page Product Overview

• Achieve end-to-end visibility in the extended supply chain
• Integrate Data from various Systems
• Drive visibility and action with configurable Analytics & Alerts and Case Management
• Pre-delivered Supply Chain Performance (SCOR) metrics.

3. SAP Integrated Business Planning for inventory “Master Uncertainty, use inventory efficiently”

• Efficiently position inventory to best respond to forecast error, demand variability and supply uncertainty
• Multi-echelon (multi-stage) inventory optimization to solve the science of postponement
• Drive S&OP decisions to inventory target recommendations for Planners (item-location-timeframe specific)

4. SAP Integrated Business Planning for demand: “Forecast Better”

• Demand Sensing (predict and reforecast, pattern recognition)
• Forecasting statistical techniques
• Collaborative Demand Planning

5. SAP Integrated Business Planning for response and supply: “Master supply planning and response intelligence”

• Plan production, procurement, and distribution
• Respond to daily disruptions through what-if analysis to change supply plans and reschedule demand
• Manage allocations where supply is scarce

Comparison of each of the SAP IBP solutions and their capabilities: LINK

SAP IBP Overview Blog: Getting started: What is SAP Integrated Business Plannin g

SAP IBP Overview Webinar: SAP IBP Overview Webinar

SAP IBP adds important functionality to SAP APO and other Advanced Planning software, but the true answer depends on YOU!

Every customer is different. That being said there are different ways of adopting the solution.

Even if you have SAP APO DP, you can leverage demand sensing (part of SAP IBP for demand), to obtain better short-term forecasting based on pattern recognition and multiple forecast inputs.

SAP APO SNP vis a vis SAP IBP for inventory

SAP IBP for inventory is a planning tool, taking in factors around risk and uncertainty (forecast error, supply uncertainty) to most efficiently absorb risk using the lowest amount of inventory to meet customer service levels. It accomplishes this by setting most-efficient safety stock targets across the supply chain.

SAP SNP then uses these SAP IBP for inventory “SS” targets to optimize how to most efficiently supply demand (forecast + demand + any change in SS). This meets both service levels (by supplying safety stock), forecast and existing orders.

SAP APO SNP does have a safety stock optimization function, but this is extremely limited in scope: SAP APO SNP only handles an individual location, essentially considering only demand variability. SAP IBP for inventory considers the entire supply, using multi-stage optimization, as well as considering additional uncertainties like supply timing variability. SAP IBP for inventory can meet the same service level targets using (typically) 10-30% less inventory.

• End to end comprehensive view of supply chain current and historical supply chain performance
• Alerts quickly identify current and future potential supply chain problems
• Collaboration enables the quick resolution of issues across functions
• Real-time scenarios and simulation on entire model
• Demand, supply chain, and financial model at aggregate and detailed levels
• 1%-2% Top Line Revenue Growth
• 5%-15% Better Inventory turns with improved service levels by using inventory more efficiently
• 5-10% better order fulfillment metrics, better service
• Better user engagement, faster planning cycles and consistent planning processes
• Full support for your monthly or weekly planning processes

SAP IBP for sales and operations + SAP Supply Chain Control Tower = Management level strategic control and visibility over the business.

SAP IBP for sales and operations + SAP  IBP for inventory = taking S&OP to SIOP, taking S&OP decisions and applying multistage inventory optimization in near-real-time to drive inventory targets to the Planners the same day the S&OP decision is made.

SAP IBP for inventory + SAP I BP for demand : = A 1-2 punch against uncertainty! Use IBP for demand to improve forecasting and, recognizing that even the best forecast is not 100% accurate (and suppliers aren’t 100% reliable either), position inventory most efficiently to buffer the remaining uncertainty in your supply chain.

SAP IBP for supply and response + SAP  Supply Chain Control Tower = Provides instant visibility to global inventory and capacity utilization. It incorporates the ability to understand exceptions and run what-if simulations on a global level to make decisions and effectively orchestrate fast issue resolution.

Yes - please check out this blog post  for more details.

SAP IBP YouTube channel

Want to try SAP IBP out: https://www.sapstore.com/solutions/60032/SAP-Integrated-Business-Planning-starter-edition%2C-non-production

Please contact L.W.Bryan Charnock if you have any questions with the Starter Edition on the SAP Store. Starter Edition FAQ .

Our sales team would be happy to clarify any questions that you may have regarding SAP Integrated Business Planning and the Onboarding Process.

Contact our SAP IBP Sales experts below:

See our complete list of local country numbers

Customer References

We have a large number of SAP Integrated Business Planning customers from many industries including: High Tech, Consumer Products, Life Science, Chemicals, and Industrial Machinery and Components.

Here are some ways to hear from our customers:

1. Listen to recorded SAP IBP Customer Story Webcasts:

• McCain Foods
• Nature's Way
• Prestige Brands
• Bell Canada
• Lamb Weston

2. Listen to a short customer story video:

• Chassis Brakes

3. Review a case study:

• Blue Diamond Growers
• De'Longhi S.p.A., CP
• Fruedenberg Home and Cleaning Solutions
• German Red Cross
• JTI International
• Viessmann Werke GmbH & Co. KG
• ZF Friedrichshafen

4. Reference Call:

SAP hosts multiple reference live calls where you can ask your questions directly to our customers.

Contact your SAP Sales Team to request a recording of a previous session or to be included in a future session.

Subscription and Services

Starter Edition, Test, and Production systems can be available in as little as 5 business days of completing the order and submitting the completed provisioning checklist.

• SAP IBP – licensed Integrated Business Planning application(s)
• SAP CPI-DS – Cloud Platform Integration - Data Services; CPI-dS gives you the ability to easily load data into IBP and extract data into other systems.
• SAP IAS – Identity Authentication Service- Single Sign On capability
• SAP JAM – SAP JAM is SAP’s collaboration platform (Optional additional license required)
• System operations support
• Standard application support
• Data security
• System monitoring
• Access to subscribed IBP application(s), IAS, and CPI-DS
• Access to the SAP IBP Customer Network

Think about all the IT dollars you will save!

SAP wants to make sure you get the latest and greatest bug fixes and enhancements, therefore we provide our customers with system updates every 2 to 3 weeks.

Updated Releases (with major enhancements) come out 4 times a year.

To find out more about the upgrade process and communication Information, please see this link .

Implementation

Implementations can take as little as 3 months. Of course, implementation timelines can range due to scope, implementation approach, data quality, and resource availability.

Upon request, the SAP Services team and SAP Partners would be happy to provide you with a sample implementation approach and plan.

Please contact L.W.Bryan Charnock for more information regarding SAP Partners for IBP.

Cloud and Security

Through a URL provided by SAP. You can access SAP IBP through Internet Explorer or Google Chrome.

SAP’s proprietary SAP Cloud Integration has prebuilt templates that allow you to load and extract data from many standard SAP systems as well as non-SAP systems.

SAP has very high levels of data center and data security meeting all the key certification and audit requirements.

SAP takes data security and system reliability very seriously. Take a tour of our data centers and learn about data security at the SAP Cloud Trust Center: https://www.sap.com/about/cloud-trust-center.html

SAP commits to a 99.5% system availability SLA for IBP on the cloud:

http://www.sap.com/corporate-en/about/our-company/policies/cloud/service-level-agreement.html

FAQ Articles

New Export/Import for SAP IBP FAQ

SAP IBP Best Practices frequently asked questions (FAQ)

SAP IBP Starter Edition frequently asked questions (FAQ)

SAP IBP for Inventory FAQ

SAP Integrated Business Planning FAQs

SAP IBP Platform Topic - Calendars FAQ

SAP IBP Integration using CPI-DS Mini-Series FAQ

Buying - SAP Integrated Business Planning FAQs

SAP IBP Intelligent User Assistance with SAP Enable Now FAQ

SAP Integrated Business Planning - Learning Hub Digital Enablement for SAP FAQ

SAP IBP Converged Cloud Migration FAQs

IBP Partner Sales Enablement Webinar - IBP for inventory Q+A

IBP Partner Sales Enablement Webinar - IBP for sales and operations Q+A

Statistical Forecasting in SAP Integrated Business Planning for demand FAQ

A better way to drive your business

Managing the availability of supply to meet volatile demand has never been easy. Even before the unprecedented challenges created by the COVID-19 pandemic and the war in Ukraine, synchronizing supply and demand was a perennial struggle for most businesses. In a survey of 54 senior executives, only about one in four believed that the processes of their companies balanced cross-functional trade-offs effectively or facilitated decision making to help the P&L of the full business.

That’s not because of a lack of effort. Most companies have made strides to strengthen their planning capabilities in recent years. Many have replaced their processes for sales and operations planning (S&OP) with the more sophisticated approach of integrated business planning (IBP), which shows great promise, a conclusion based on an in-depth view of the processes used by many leading companies around the world (see sidebar “Understanding IBP”). Assessments of more than 170 companies, collected over five years, provide insights into the value created by IBP implementations that work well—and the reasons many IBP implementations don’t.

Understanding IBP

Integrated business planning is a powerful process that could become central to how a company runs its business. It is one generation beyond sales and operations planning. Three essential differentiators add up to a unique business-steering capability:

• Full business scope. Beyond balancing sales and operations planning, integrated business planning (IBP) synchronizes all of a company’s mid- and long-term plans, including the management of revenues, product pipelines and portfolios, strategic projects and capital investments, inventory policies and deployment, procurement strategies, and joint capacity plans with external partners. It does this in all relevant parts of the organization, from the site level through regions and business units and often up to a corporate-level plan for the full business.
• Risk management, alongside strategy and performance reviews. Best-practice IBP uses scenario planning to drive decisions. In every stage of the process, there are varying degrees of confidence about how the future will play out—how much revenue is reasonably certain as a result of consistent consumption patterns, how much additional demand might emerge if certain events happen, and how much unusual or extreme occurrences might affect that additional demand. These layers are assessed against business targets, and options for mitigating actions and potential gap closures are evaluated and chosen.
• Real-time financials. To ensure consistency between volume-based planning and financial projections (that is, value-based planning), IBP promotes strong links between operational and financial planning. This helps to eliminate surprises that may otherwise become apparent only in quarterly or year-end reviews.

An effective IBP process consists of five essential building blocks: a business-backed design; high-quality process management, including inputs and outputs; accountability and performance management; the effective use of data, analytics, and technology; and specialized organizational roles and capabilities (Exhibit 1). Our research finds that mature IBP processes can significantly improve coordination and reduce the number of surprises. Compared with companies that lack a well-functioning IBP process, the average mature IBP practitioner realizes one or two additional percentage points in EBIT. Service levels are five to 20 percentage points higher. Freight costs and capital intensity are 10 to 15 percent lower—and customer delivery penalties and missed sales are 40 to 50 percent lower. IBP technology and process discipline can also make planners 10 to 20 percent more productive.

When IBP processes are set up correctly, they help companies to make and execute plans and to monitor, simulate, and adapt their strategic assumptions and choices to succeed in their markets. However, leaders must treat IBP not just as a planning-process upgrade but also as a company-wide business initiative (see sidebar “IBP in action” for a best-in-class example).

IBP in action

One global manufacturer set up its integrated business planning (IBP) system as the sole way it ran its entire business, creating a standardized, integrated process for strategic, tactical, and operational planning. Although the company had previously had a sales and operations planning (S&OP) process, it had been owned and led solely by the supply chain function. Beyond S&OP, the sales function forecast demand in aggregate dollar value at the category level and over short time horizons. Finance did its own projections of the quarterly P&L, and data from day-by-day execution fed back into S&OP only at the start of a new monthly cycle.

The CEO endorsed a new way of running regional P&Ls and rolling up plans to the global level. The company designed its IBP process so that all regional general managers owned the regional IBP by sponsoring the integrated decision cycles (following a global design) and by ensuring functional ownership of the decision meetings. At the global level, the COO served as tiebreaker whenever decisions—such as procurement strategies for global commodities, investments in new facilities for global product launches, or the reconfiguration of a product’s supply chain—cut across regional interests.

To enable IBP to deliver its impact, the company conducted a structured process assessment to evaluate the maturity of all inputs into IBP. It then set out to redesign, in detail, its processes for planning demand and supply, inventory strategies, parametrization, and target setting, so that IBP would work with best-practice inputs. To encourage collaboration, leaders also started to redefine the performance management system so that it included clear accountability for not only the metrics that each function controlled but also shared metrics. Finally, digital dashboards were developed to track and monitor the realization of benefits for individual functions, regional leaders, and the global IBP team.

A critical component of the IBP rollout was creating a company-wide awareness of its benefits and the leaders’ expectations for the quality of managers’ contributions and decision-making discipline. To educate and show commitment from the CEO down, this information was rolled out in a campaign of town halls and media communications to all employees. The company also set up a formal capability-building program for the leaders and participants in the IBP decision cycle.

Rolled out in every region, the new training helps people learn how to run an effective IBP cycle, to recognize the signs of good process management, and to internalize decision authority, thresholds, and escalation paths. Within a few months, the new process, led by a confident and motivated leadership team, enabled closer company-wide collaboration during tumultuous market conditions. That offset price inflation for materials (which adversely affected peers) and maintained the company’s EBITDA performance.

Our research shows that these high-maturity IBP examples are in the minority. In practice, few companies use the IBP process to support effective decision making (Exhibit 2). For two-thirds of the organizations in our data set, IBP meetings are periodic business reviews rather than an integral part of the continuous cycle of decisions and adjustments needed to keep organizations aligned with their strategic and tactical goals. Some companies delegate IBP to junior staff. The frequency of meetings averages one a month. That can make these processes especially ineffective—lacking either the senior-level participation for making consequential strategic decisions or the frequency for timely operational reactions.

Finally, most companies struggle to turn their plans into effective actions: critical metrics and responsibilities are not aligned across functions, so it’s hard to steer the business in a collaborative way. Who is responsible for the accuracy of forecasts? What steps will be taken to improve it? How about adherence to the plan? Are functions incentivized to hold excess inventory? Less than 10 percent of all companies have a performance management system that encourages the right behavior across the organization.

By contrast, at the most effective organizations, IBP meetings are all about decisions and their impact on the P&L—an impact enabled by focused metrics and incentives for collaboration. Relevant inputs (data, insights, and decision scenarios) are diligently prepared and syndicated before meetings to help decision makers make the right choices quickly and effectively. These companies support IBP by managing their short-term planning decisions prescriptively, specifying thresholds to distinguish changes immediately integrated into existing plans from day-to-day noise. Within such boundaries, real-time daily decisions are made in accordance with the objectives of the entire business, not siloed frontline functions. This responsive execution is tightly linked with the IBP process, so that the fact base is always up-to-date for the next planning iteration.

A better plan for IBP

In our experience, integrated business planning can help a business succeed in a sustainable way if three conditions are met. First, the process must be designed for the P&L owner, not individual functions in the business. Second, processes are built for purpose, not from generic best-practice templates. Finally, the people involved in the process have the authority, skills, and confidence to make relevant, consequential decisions.

Design for the P&L owner

IBP gives leaders a systematic opportunity to unlock P&L performance by coordinating strategies and tactics across traditional business functions. This doesn’t mean that IBP won’t function as a business review process, but it is more effective when focused on decisions in the interest of the whole business. An IBP process designed to help P&L owners make effective decisions as they run the company creates requirements different from those of a process owned by individual functions, such as supply chain or manufacturing.

One fundamental requirement is senior-level participation from all stakeholder functions and business areas, so that decisions can be made in every meeting. The design of the IBP cycle, including preparatory work preceding decision-making meetings, should help leaders make general decisions or resolve minor issues outside of formal milestone meetings. It should also focus the attention of P&L leaders on the most important and pressing issues. These goals can be achieved with disciplined approaches to evaluating the impact of decisions and with financial thresholds that determine what is brought to the attention of the P&L leader.

The aggregated output of the IBP process would be a full, risk-evaluated business plan covering a midterm planning horizon. This plan then becomes the only accepted and executed plan across the organization. The objective isn’t a single hard number. It is an accepted, unified view of which new products will come online and when, and how they will affect the performance of the overall portfolio. The plan will also take into account the variabilities and uncertainties of the business: demand expectations, how the company will respond to supply constraints, and so on. Layered risks and opportunities and aligned actions across stakeholders indicate how to execute the plan.

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Trade-offs arising from risks and opportunities in realizing revenues, margins, or cost objectives are determined by the P&L owner at the level where those trade-offs arise—local for local, global for global. To make this possible, data visible in real time and support for decision making in meetings are essential. This approach works best in companies with strong data governance processes and tools, which increase confidence in the objectivity of the IBP process and support for implementing the resulting decisions. In addition, senior leaders can demonstrate their commitment to the value and the standards of IBP by participating in the process, sponsoring capability-building efforts for the teams that contribute inputs to the IBP, and owning decisions and outcomes.

Fit-for-purpose process design and frequency

To make IBP a value-adding capability, the business will probably need to redesign its planning processes from a clean sheet.

First, clean sheeting IBP means that it should be considered and designed from the decision maker’s perspective. What information does a P&L owner need to make a decision on a given topic? What possible scenarios should that leader consider, and what would be their monetary and nonmonetary impact? The IBP process can standardize this information—for example, by summarizing it in templates so that the responsible parties know, up front, which data, analytics, and impact information to provide.

Second, essential inputs into IBP determine its quality. These inputs include consistency in the way planners use data, methods, and systems to make accurate forecasts, manage constraints, simulate scenarios, and close the loop from planning to the production shopfloor by optimizing schedules, monitoring adherence, and using incentives to manufacture according to plan.

Determining the frequency of the IBP cycle, and its timely integration with tactical execution processes, would also be part of this redesign. Big items—such as capacity investments and divestments, new-product introductions, and line extensions—should be reviewed regularly. Monthly reviews are typical, but a quarterly cadence may also be appropriate in situations with less frequent changes. Weekly iterations then optimize the plan in response to confirmed orders, short-term capacity constraints, or other unpredictable events. The bidirectional link between planning and execution must be strong, and investments in technology may be required to better connect them, so that they use the same data repository and have continuous-feedback loops.

Authorize consequential decision making

Finally, every IBP process step needs autonomous decision making for the problems in its scope, as well as a clear path to escalate, if necessary. The design of the process must therefore include decision-type authority, decision thresholds, and escalation paths. Capability-building interventions should support teams to ensure disciplined and effective decision making—and that means enforcing participation discipline, as well. The failure of a few key stakeholders to prioritize participation can undermine the whole process.

Decision-making autonomy is also relevant for short-term planning and execution. Success in tactical execution depends on how early a problem is identified and how quickly and effectively it is resolved. A good execution framework includes, for example, a classification of possible events, along with resolution guidelines based on root cause methodology. It should also specify the thresholds, in scope and scale of impact, for operational decision making and the escalation path if those thresholds are met.

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In addition to guidelines for decision making, the cross-functional team in charge of executing the plan needs autonomy to decide on a course of action for events outside the original plan, as well as the authority to see those actions implemented. Clear integration points between tactical execution and the IBP process protect the latter’s focus on midterm decision making and help tactical teams execute in response to immediate market needs.

An opportunity, but no ‘silver bullet’

With all the elements described above, IBP has a solid foundation to create value for a business. But IBP is no silver bullet. To achieve a top-performing supply chain combining timely and complete customer service with optimal cost and capital expenditures, companies also need mature planning and fulfillment processes using advanced systems and tools. That would include robust planning discipline and a collaboration culture covering all time horizons with appropriate processes while integrating commercial, planning, manufacturing, logistics, and sourcing organizations at all relevant levels.

As more companies implement advanced planning systems and nerve centers , the typical monthly IBP frequency might no longer be appropriate. Some companies may need to spend more time on short-term execution by increasing the frequency of planning and replanning. Others may be able to retain a quarterly IBP process, along with a robust autonomous-planning or exception engine. Already, advanced planning systems not only direct the valuable time of experts to the most critical demand and supply imbalances but also aggregate and disaggregate large volumes of data on the back end. These targeted reactions are part of a critical learning mechanism for the supply chain.

Over time, with root cause analyses and cross-functional collaboration on systemic fixes, the supply chain’s nerve center can get smarter at executing plans, separating noise from real issues, and proactively managing deviations. All this can eventually shorten IBP cycles, without the risk of overreacting to noise, and give P&L owners real-time transparency into how their decisions might affect performance.

P&L owners thinking about upgrading their S&OP or IBP processes can’t rely on textbook checklists. Instead, they can assume leadership of IBP and help their organizations turn strategies and plans into effective actions. To do so, they must sponsor IBP as a cross-functional driver of business decisions, fed by thoughtfully designed processes and aligned decision rights, as well as a performance management and capability-building system that encourages the right behavior and learning mechanisms across the organization. As integrated planning matures, supported by appropriate technology and maturing supply chain–management practices, it could shorten decision times and accelerate its impact on the business.

Elena Dumitrescu is a senior knowledge expert in McKinsey’s Toronto office, Matt Jochim is a partner in the London office, and Ali Sankur is a senior expert and associate partner in the Chicago office, where Ketan Shah is a partner.

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Introduction to SAP Integrated Business Planning for Demand

After completing this lesson, you will be able to explain Demand Planning challenges using SAP IBP for Demand .

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• DSDM Project Framework

Chapter 4: Principles

Previous chapter: 3 Philosophy and Fundamentals

4  Principles

4.1 introduction to the dsdm principles.

The eight principles of DSDM support DSDM’s philosophy that “best business value emerges when projects are aligned to clear business goals, deliver frequently and involve the collaboration of motivated and empowered people”. They also bring the Agile values to life by guiding the team in the attitude it must take and the mindset it must adopt in order to deliver consistently whilst still remaining flexible.

Compromising any of the following principles undermines the philosophy of DSDM and introduces risk to the successful outcome of the project. If a team doesn’t follow all of these principles then it won’t get the full benefit of the approach. The collective value of DSDM’s principles enables organisations to deliver best value business solutions collaboratively.

The eight DSDM principles are: This is Point 4.2 - Principle 1

• Focus on the business need
• Deliver on time
• Collaborate
• Never compromise quality
• Build incrementally from firm foundations
• Develop iteratively
• Communicate continuously and clearly
• Demonstrate control

4.2 Principle 1 - Focus on the Business Need

Every decision taken during a project should be viewed in the light of the overriding project goal - to deliver what the business needs to be delivered, when it needs to be delivered. It is important to remember that a project is a means to an end, not an end in itself. In order to fulfil this principle, DSDM teams will:

• Understand the true business priorities
• Establish a valid business case
• Ensure continuous business sponsorship and commitment
• Guarantee delivery of the Minimum Usable SubseT
• (this is explained in detail in the section on MoScoW prioritisation)

Specific business roles in DSDM, in conjunction with the business products created in the Foundations phase, and key practices such as timeboxing and MoSCoW prioritisation, enable DSDM teams to fulfil this principle.

4.3 Principle 2 - Deliver on Time

Delivering a solution on time is a very desirable outcome for a project and is quite often the single most important success factor. Late delivery can often undermine the very rationale for a project, especially where market opportunities or legal deadlines are involved.

Even for projects without a need for a fixed end date, on time delivery of intermediate or contributing products is still the best way to demonstrate control over evolution of the solution.

In order to fulfil this principle, DSDM teams need to:

• Timebox the work
• Focus on business priorities
• Always hit deadlines
• Build confidence through predictable delivery

Combining the DSDM practices of timeboxing and MoSCoW prioritisation enables DSDM teams to protect deadlines whilst flexing the features, and to build a reputation for timely and predictable delivery. The ability to deliver on time and to meet the prioritised expectations of the business in the short term – the timebox – forms the basis of control over the longer-term deliver y of the project through timely delivery of Increments.

4.4 Principle 3 – Collaborate

Teams that work in a spirit of active cooperation and commitment will always outperform groups of individuals working only in loose association. Collaboration encourages increased understanding, greater speed and shared ownership, which enable teams to perform at a level that exceeds the sum of their parts. In order to fulfil this principle, DSDM teams need to:

• Involve the right stakeholders, at the right time, throughout the project
• Encourage pro-active involvement from the business representatives
• Ensure that all members of the team are empowered to take decisions on behalf of those they represent
• Build a one-team culture

DSDM’s Business Visionary, Business Ambassador and Business Advisor roles bring the appropriate subject matter experts into the project so they can contribute to the solution. The Solution Development Team brings together business and technical roles in a single team. This one-team culture is fostered by the Business Analyst helping to facilitate business agreement on the requirements and the Team Leader taking responsibility for facilitating a high level of collaboration between all Solution Development Team members. Facilitated workshops enable stakeholders to share their knowledge effectively with other members of the project team.

4.5 Principle 4 - Never Compromise Quality

In DSDM, the level of quality to be delivered should be agreed at the start. All work should be aimed at achieving that level of quality - no more and no less.

A solution has to be ‘good enough’. If the business agrees that the features in the Minimum Usable SubseT meet the agreed acceptance criteria, then the solution should be ‘good enough’ to use effectively. In order to fulfil this principle, DSDM teams need to:

• Agree the level of quality from the outset, before development starts
• Ensure that quality does not become a variable
• Test early, test continuously and test to the appropriate level
• Build in quality by constant review
• Design and document appropriately

Ensuring testing is properly integrated into the Iterative Development process, with regular reviews throughout the project lifecycle, helps the DSDM team to build a quality solution. The review and quality control products created as the project proceeds help demonstrate that the quality of the solution is meeting the expected standard.

Using DSDM, everything is tested as early as possible. MoSCoW prioritisation and timeboxing are used to ensure that testing is appropriate and under taken without introducing unnecessary risks. In an IT project, the use of test-driven development techniques can also significantly improve the quality of the solution by ensuring that the acceptability of the solution is understood before development starts.

4.6 Principle 5 - Build Incrementally from Firm Foundations

One of the key differentiators for DSDM within the Agile space is the concept of establishing firm foundations for the project before committing to significant development. DSDM advocates first understanding the scope of the business problem to be solved and the proposed solution, but not in such detail that the project becomes paralysed by overly detailed analysis of requirements.

Once firm foundations for development have been established, DSDM advocates incremental deliver y of the solution in order to deliver real business benefit as early as is practical. Incremental delivery encourages stakeholder confidence, offering a source of feedback for use in subsequent Timeboxes and may lead to the early realisation of business benefit.

• Carry-out appropriate analysis and enough design up front (EDUF) to create strong foundations
• Formally re-assess priorities and informally re-assess ongoing project viability with each delivered Increment

DSDM teams implement this principle through the appropriate application of a project lifecycle, which delivers a solid base of knowledge during Feasibility and Foundations phases before building the solution incrementally during the Evolutionary Development phase.

4.7 Principle 6 - Develop Iteratively 

DSDM uses a combination of Iterative Development, frequent demonstrations and comprehensive review to encourage timely feedback. Embracing change as par t of this evolutionary process allows the team to converge on an accurate business solution. The concept of iteration is at the heart of everything developed as part of the DSDM approach. It is very rare that anything is created perfectly first time and it is important to recognise that projects operate within a changing world. In order to fulfil this principle, DSDM teams need to:

• Build business feedback into each iteration
• Recognise that most detail should emerge later rather than sooner
• Embrace change – the right solution will not evolve without it
• Use iterative development to encourage creativity, experimentation and learning
• Change is inevitable; DSDM allows for change and harnesses its benefits.

Within the constraints of time and cost, change is actively encouraged in order to evolve the most appropriate solution. DSDM uses iteration and constant review to make sure that what is being developed is what the business really needs. Cycles of feedback should form part of the process for evolving all project deliverables e.g. all plans and documentation.

4.8 Principle 7 - Communicate Continuously and Clearly

Poor communication is often cited as the biggest single cause of project failure.

DSDM practices are specifically designed to improve communication effectiveness for both teams and individuals. In order to fulfil this principle, DSDM teams need to:

• Encourage informal, face-to-face communication at all levels
• Run daily team stand-up sessions
• Use Workshops, with a facilitator where appropriate
• Use visual communication practices such as Modelling and Prototyping
• Demonstrate the Evolving Solution early and often
• Keep documentation lean and timely
• Manage the expectations of the stakeholder at all levels throughout the project
• Always aim for honesty and transparency in all communication

DSDM emphasises the value of human interaction through Stand-ups (see Chapter 13 - Timeboxing), Workshops, clearly defined roles and active business involvement.

Modelling and Prototyping make early instances of the solution available for scrutiny. These practices are far more effective than the use of large textual documents, which are sometimes written for reasons other than achieving the business objectives of the project.

4.9 Principle 8 - Demonstrate Control

It is essential to be in control of a project at all times and to be able to demonstrate that this is the case. This can only be achieved by reference to a plan for the work being done, which is clearly aligned with agreed business objectives.

It is also vital to ensure transparency of all work being performed by the team.

In order to fulfil this principle, DSDM teams, especially the Project Manager and Team Leader, need to:

• Make plans and progress visible to all
• Measure progress through focus on delivery of products rather than completed activities
• Manage proactively
• Evaluate continuing project viability based on the business objectives
• Use an appropriate level of formality for tracking and reporting

The use of well-defined Timeboxes, with constant review points, and the preparation of the Management Foundations and Timebox Plans, are designed to assist the Project Manager and the rest of the project team to follow this principle.

4.10 Summary

The eight principles help direct and shape the attitude and mindset of a DSDM team. Compromising any of the principles undermines DSDM’s philosophy, as together they deliver a collective value that outweighs their individual benefits.

Next chapter: 5 Preparing for Success

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Agile Project Management For Dummies Cheat Sheet

Agile project management for dummies.

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Agile product development focuses on continuous improvement, scope flexibility, team input, and delivering essential valuable outcomes. Agile development approaches include scrum as a framework for exposing progress, extreme programming (XP) for building in quality upfront, and lean thinking to eliminate waste. These and many other tools and techniques help organizations, teams, and individuals adhere to the Agile Manifesto and the 12 Agile Principles, which focus on small, long-lived, self-organizing teams, effective communications, continuously releasable product, and flexibility.

Manifesto for Agile Software Development

The Manifesto for Agile Software Development, commonly known as the Agile Manifesto, is an intentionally streamlined expression of the core values of agile project management and product development. Use this manifesto as a guide to implement agile practices into your products.

“We are uncovering better ways of developing software by doing it and helping others do it. Through this work, we have come to value:

• Individuals and interactions over processes and tools
• Working software over comprehensive documentation
• Customer collaboration over contract negotiation
• Responding to change over following a plan

That is, while there is value in the items on the right, we value the items on the left more.”

©Agile Manifesto Copyright 2001: Kent Beck, Mike Beedle, Arie van Bennekum, Alistair Cockburn, Ward Cunningham, Martin Fowler, James Grenning, Jim Highsmith, Andrew Hunt, Ron Jeffries, Jon Kern, Brian Marick, Robert C. Martin, Steve Mellor, Ken Schwaber, Jeff Sutherland, Dave Thomas.

This declaration may be freely copied in any form, but only in its entirety through this notice.

12 Agile Principles

The principles behind the Agile Manifesto, commonly referred to as the 12 Agile Principles, are a set of guiding concepts that support product teams in implementing agile product development and project management techniques. Use these principles as a litmus test to determine whether or not you’re being agile in your product work and thinking:

• Our highest priority is to satisfy the customer through early and continuous delivery of valuable software.
• Welcome changing requirements, even late in development. Agile processes harness change for the customer’s competitive advantage.
• Deliver working software frequently, from a couple of weeks to a couple of months, with a preference to the shorter timescale.
• Business people and developers must work together daily throughout the project.
• Build projects around motivated individuals. Give them the environment and support they need, and trust them to get the job done.
• The most efficient and effective method of conveying information to and within a development team is face-to-face conversation.
• Working software is the primary measure of progress.
• Agile processes promote sustainable development. The sponsors, developers, and users should be able to maintain a constant pace indefinitely.
• Continuous attention to technical excellence and good design enhances agility.
• Simplicity — the art of maximizing the amount of work not done — is essential.
• The best architectures, requirements, and designs emerge from self-organizing teams.
• At regular intervals, the team reflects on how to become more effective, then tunes and adjusts its behavior accordingly.

The Platinum Edge Roadmap to Value

The Roadmap to Value, shown in the following figure, is a high-level view of an agile product development cycle.

Following is a description of the stages of the Roadmap to Value:

• In stage 1, the product owner identifies the product vision. The product vision is your product’s destination or end goal. The product vision includes the outer boundary of what your product will be, how the product is different than the competition, how the product will support your company or organization’s strategy, who will use the product, and why people will use the product. On longer development efforts, revisit the product vision at least once a year.
• In stage 2, the product owner creates a product roadmap. The product roadmap is a high-level view of the product requirements, with a general time frame for when you will develop those requirements. It also gives context to the vision by showing the tangible features that will be produced during development. Identifying product requirements and then prioritizing and roughly estimating the effort for those requirements allow you to establish requirement themes and identify requirement gaps. The product owner, with support from the development team and stakeholders, should revise the product roadmap at least semiannually.
• In stage 3, the product owner creates a release plan. The release plan identifies a high-level timetable for the release of working functionality to the customer. The release serves as a mid-term boundary against which the scrum team can mobilize. A product developed using agile techniques will have many releases, with the highest-priority features appearing first. You create a release plan at the beginning of each release, which are usually at least quarterly. Releases can also happen more frequently. Some organizations release multiple times every day.
• In stage 4, the product owner, the development team, and the scrum master will plan iterations, also called sprints, and start creating the product functionality in those sprints. Sprint planning sessions take place at the start of each sprint. During sprint planning, the scrum team determines a sprint goal, which establishes the immediate boundary of work that the team forecasts to accomplish during the sprint, with requirements that support the goal and can be completed in the sprint. The scrum team also outlines how to complete those requirements.
• In stage 5, the development team has daily scrum meetings during each sprint to coordinate the day’s priorities. In the daily scrum meeting, you discuss what you completed yesterday that will impact the work to be done today, what you will work on today, and any roadblocks you have, so that you can address issues immediately.
• In stage 6, the scrum team holds a sprint review at the end of every sprint. In the sprint review, you demonstrate the working functionality to the product stakeholders.
• In stage 7, the scrum team holds a sprint retrospective. The sprint retrospective is a meeting where the scrum team discusses the completed sprint with regard to their processes and environment, and makes plans for process improvements in the next sprint. Like the sprint review for inspecting and adapting the product, a sprint retrospective is held at the end of every sprint to inspect and adapt the team’s processes and environment.

Agile Product Development Roles

It takes a cooperative and collaborative team of people to successfully develop a product. Agile product teams are made up of many people and include the following five roles:

• Product owner: The person responsible for bridging the gap between the customer, business stakeholders, and the development team, facilitating collaboration between all three roles. The product owner is an expert on the product and the customer’s needs and priorities. The product owner works with the development team daily to help clarify requirements and shields them from business prioritization noise. The product owner, above all, should be empowered to be decisive, making tough business decisions every day.
• Development team members: The people who create the product. Developers, programmers, analysts, testers, designers, writers, engineers, editors, and anyone else with a hands-on role in creating the product are development team members. Development team members are cross-functional and have multiple skills they contribute to the product development work. Most importantly, development team members are versatile, able to contribute in multiple ways to the product’s goals.
• Scrum master: The person responsible for supporting the development team, clearing organizational roadblocks, and helping the team and the organization embrace and enable agile values and principles in their practices and processes. Scrum masters are servant leaders, and are most effective when they have organizational clout, which is the ability to influence change in the organization without formal authority.
• Stakeholders: Anyone with an interest in the product. Stakeholders are not ultimately responsible for the product, but they provide input and are affected by the product’s outcome. The group of stakeholders is diverse and can include people from different departments, or even different companies. For product development efforts to succeed, stakeholders must be involved, providing regular feedback and support to the development team and product owner. This role is outside the scrum team, but we explicitly acknowledge the role’s involvement to improve scrum team success.
• Agile mentor or coach: Someone who has experience implementing agile product development techniques and can share that experience with an organization. The agile mentor can provide valuable feedback and advice to new teams and to teams that want to perform at a higher level. Although agile mentors are not responsible for executing product development, they should be experienced in applying agile principles in reality and be knowledgeable about many agile approaches and techniques. This role is outside the scrum team, but we explicitly acknowledge the role’s involvement to help improve team success.

Agile Product Development Artifacts

Product development progress needs to be transparent and measurable. Agile product development teams often use six main artifacts to enable transparency, inspection and adaptation, as listed here:

• Product vision statement: An inspirational elevator pitch, or a quick summary, to communicate what your product will be and how your product supports the company’s or organization’s strategies. The vision statement must articulate the goals for the product. This artifact is outside of scrum but improves scrum team success.
• Product roadmap: The product roadmap is a high-level initial view of the product backlog needed to achieve the product vision. It also enables a scrum team to outline a general timeframe for when you will develop and release those requirements. The product roadmap is a first cut and high-level view of the product backlog that identifies gaps and feature affinities, enabling funding committee decision-making with a reasonably complete picture. This artifact is outside of scrum but improves scrum team success.
• Product backlog: The product’s to-do list — a full list of what is in the scope for your product, ordered by priority. After you have your first requirement, you have a product backlog.
• Release plan : A high-level timetable of the next set of functionality for release to the customer. This artifact is outside of scrum but improves scrum team success.
• Sprint backlog: The goal, user stories, and tasks associated with the current sprint.
• Increment: The working product functionality, demonstrated to stakeholders at the end of the sprint, which is potentially shippable to the customer.

Agile Product Development Events

Most products navigate various levels of planning. Agile product development efforts include seven recurring events:

• Product planning: The initial planning for your product. Product planning includes creating a product vision statement and a product roadmap, and can take place in as little time as one half of a day. This event is outside of scrum but improves scrum team success.
• Release planning: Planning the next set of product functionality to release and identifying an imminent product launch date around which the scrum team can mobilize. With agile product development, you plan one release at a time. This event is outside of scrum but improves scrum team success.
• Sprint: A short cycle of development, in which the team creates potentially shippable product functionality. Sprints, the scrum term for iterations, typically last between one and four weeks. Sprints can last as little as one day, but should not be longer than four weeks. Sprints should remain the same length throughout product development, which enables teams to plan future work more accurately based on their past performance.
• Sprint planning: A meeting at the beginning of each sprint where the scrum team commits to a sprint goal. They also identify the requirements that support this goal and will be part of the sprint, and the individual tasks it will take to complete each requirement.
• Daily scrum: A 15-minute coordination and synchronization meeting held each day in a sprint, where development team members state what they completed the day before that affects the work to be done today, what they will complete on the current day, and whether they have any roadblocks.
• Sprint review: A meeting at the end of each sprint, introduced by the product owner, where the development team demonstrates the working product functionality it completed during the sprint to stakeholders, and the product owner collects feedback for updating the product backlog.
• Sprint retrospective: A meeting at the end of each sprint where the scrum team inspects and adapts their processes, tools, environment, skills, communication, and distractions; discusses what went well and what could change; and makes a plan for implementing improvements in the next sprint.

Agile Product Development Resources, Organizations, and Certifications

A big agile product development world is out there. Here are a few useful links to members of the agile practitioner community:

• Scrum For Dummies : In 2018, we published the second edition of Scrum For Dummies (Wiley) as a field guide not only to scrum but also to scrum in industries and business functions outside information technology (IT) and software development. Scrum can be applied in any situation where you want early empirical feedback on what you’re building or pursuing.
• Scrum Alliance : The Scrum Alliance is a nonprofit professional membership organization that promotes the understanding and usage of scrum. The alliance achieves this goal by promoting scrum training and certification classes, hosting international and regional scrum gatherings, and supporting local scrum user communities. To find a scrum user group in your area, search your location .
• Agile Alliance : The Agile Alliance is the original global agile community, with a mission to help advance the 12 Agile Principles and common agile practices, regardless of approach. The Agile Alliance site has an extensive resources section that includes articles, videos, and presentations. Find an index of independent and local agile community groups across the world .
• International Consortium for Agile (ICAgile ): ICAgile is a community-driven organization helping people become agile through education, awareness, and certification. Its learning roadmap provides career path development support in business agility, enterprise and team agile coaching, value management, delivery management, human resources, agile engineering, agile testing, and DevOps.
• Mind the Product & Product Tank : Mind the Product is the world’s largest community of people passionate about product. They also founded ProductTank meetups to bring product leaders to connect, share and learn from each other. With over 150,000 members worldwide, they offer blogs, global, regional and local events, local meetups and training from the leading product management experts from all over the world. The resources at ProductTank tend to be high quality, and the content is both unique and relevant to the issues facing agile product development teams. Find a local ProductTank meetup in your area.
• Lean Enterprise Institute : Lean Enterprise Institute publishes books, blogs, knowledge bases, news, and events for the broader community of lean thinkers and practitioners. As you pursue agile product development, remember to incorporate lean thinking in all that you do. Lean.org is a good launching pad for you to explore the lean topics relevant to your situation.
• Extreme Programming: Ron Jeffries was one of the originators of the extreme programming (XP) development approach, along with Kent Beck and Ward Cunningham. Ron provides resources and services in support of XP’s advancement on his ronjeffries.com site. The “What Is Extreme Programming?” section of the site summarizes the core concepts of XP. Other articles and extreme programming resources are also available in wiki format .
• PMI Agile Community : The Project Management Institute (PMI) is the largest nonprofit project management membership association in the world. With nearly 3 million members in most countries throughout the world. PMI supports an agile community of practice and multiple agile certifications, including the PMI Agile Certified Practitioner (PMI-ACP) and a series of Disciplined Agile (DA) certifications.
• Platinum Edge : Formed in 2001, Platinum Edge is one of the original agile transformation Their blog provides insights on practices, tools, and innovative solutions emerging from their work with clients and the broader agile community. You can also learn about the following services to help make your transition successful:
• Agile audits: An assessment of your current organizational structure and processes to create an agile implementation strategy. This assessment may include providing feedback on your current agile transition efforts to help you gauge whether the investment you’ve made is generating the expected results.
• Recruiting: Help you finding the right people to bootstrap your scrum teams, including scrum masters, product owners, developers, and agile mentors.
• Training: Public and private agile and scrum training and certification including Certified ScrumMaster (CSM), Advanced Certified ScrumMaster (A-CSM), Certified Scrum Product Owner (CSPO), Certified Scrum Developer (CSD), LeSS, Scrum@Scale, SAFe approaches to scaling, and PMI Agile Certified Practitioner (PMI-ACP) test preparation.
• Transformation: Nothing is a larger factor of future success than proper As a follow-up on agile training, professional agile mentoring and coaching are embedded in your organization to ensure that the right practices occur in the real world.

About This Article

This article is from the book:.

• Agile Project Management For Dummies ,

About the book authors:

Mark C. Layton , "Mr. Agile ® ," is an executive and BoD advisor. He is the Los Angeles chair for the Agile Leadership Network, a Certified Scrum Trainer (CST), and founder of agile transformation firm Platinum Edge. Mark is also coauthor of Agile Project Management For Dummies. David Morrow is a Certified Scrum Professional (CSP), Certified Agile Coach (ICP-ACC), and an executive agile coach.

Mark C. Layton, "Mr. Agile ® ," is an executive and BoD advisor. He is the Los Angeles chair for the Agile Leadership Network, a Certified Scrum Trainer (CST), and founder of agile transformation firm Platinum Edge. Mark is also coauthor of Agile Project Management For Dummies. David Morrow is a Certified Scrum Professional (CSP), Certified Agile Coach (ICP-ACC), and an executive agile coach.

This article can be found in the category:

• Project Management ,
• What Is Agile Project Management?
• Strategic Approaches to Implementing and Managing Change
• Steps to Successfully Become an Agile Organization
• Agile Project Management: Know Your Customers
• Agile Planning with the Roadmap to Value
• View All Articles From Category

BA Techniques

Challenge yourself by keeping up with practical business analysis techniques you can apply on the job.

MoSCoW : Requirements Prioritization Technique

MOSCOW TECHNIQUE - Includes Free Template

Requirements need to be prioritized because stakeholders can’t always have everything they want, or should I say, because we can’t always give them everything they want. This is not because we don’t like their faces but because most projects are faced with a limited budget and time frame. As a BA, how do you ensure you focus on the most important requirements?

The MoSCoW technique is used by analysts and stakeholders for prioritizing requirements in a collaborative fashion.

Using a Human Resources System as an example, here’s an explanation of the MoSCoW Technique:

Defines a requirement that has to be satisfied for the final solution to be acceptable e.g. The HR system “must” store employee leave history.

This is a high-priority requirement that should be included if possible, within the delivery time frame. Workarounds may be available for such requirements and they are not usually considered as time-critical or must-haves. e.g. The HR system “should” allow printing of leave letters.

This is a desirable or nice-to-have requirement (time and resources permitting) but the solution will still be accepted if the functionality is not included e.g. The HR system “could” send out notifications on pending leave dates.

WON’T or WOULD (W)

This represents a requirement that stakeholders want to have, but have agreed will not be implemented in the current version of the system. That is, they have decided it will be postponed till the next round of developments e.g. The HR system “won’t” support remote access but may do so in the next release. 

You'll notice that the HR system features have been discussed in a decreasing order of priority - from what we must have, to what we should have, could have and won't have in that order.

Practical Application

This technique is best used when the BA has gathered all existing solution requirements.

• Assemble all stakeholders – Each stakeholder, with help from the BA, is responsible for assigning priorities to the requirements that fall under their purview
• All Requirements may be listed on a flip chart and prioritised by assigning categories to each (M, S, C or W).
• If there are multiple stakeholders with different opinions on what category to assign to a requirement, voting can be used to reach consensus.
• Present categorized requirements in a readable format - See template here
• The requirements should be reviewed throughout the project as stakeholder needs may evolve with time.

The BABOK Guide provides 8 criteria to be used for assigning priorities to requirements. They are:

• Business Value: Which requirement provides the most business value? The more business value a requirement will deliver, the greater the priority stakeholders may choose to assign to it.
• Business or Technical Risk: Some requirements pose a significant risk of project failure if not implemented successfully. The analyst may assign a high priority to this category of requirements so that if the project does fail, the least amount of effort would have been spent. 
• Implementation Difficulty: Which requirements are the easiest to implement? Straightforward requirements may lead to quick-wins and provide an opportunity for the project team to familiarize themselves with other elements of the project before taking on more complex requirements for implementation. 
• Likelihood of Success: Which requirements can provide quick-wins and increase the probability of project acceptance? If the objective of the project is to demonstrate value as quickly as possible and quell negative chatter, requirements that have a higher probability of success would be given high priority.
• Regulatory Compliance: Which requirements are necessary for policy and regulation adherence? These requirements are non-negotiable and usually have to be implemented within a set period of time, causing them to take precedence over stakeholder requirements in some cases.
• Relationship to other requirements: Which requirements support other high-value business requirements? Such requirements may be assigned a high priority because of their link to important requirements.
• Urgency: Which requirements have a high degree of urgency? Most stakeholders tend to place a high priority on requirements needed like yesterday
• Stakeholder Agreement: Requirements on which stakeholders disagree should be postponed or assigned a low priority until consensus can be reached on their usefulness.

The above criteria can be used for prioritizing requirements by assigning weights to each requirement using a decision table. Requirements with the highest scores receive greater priority than those with lower scores. Other useful techniques for requirements prioritization are  time-boxing  and  voting.

MoSCoW technique was introduced by Dai Clegg of Oracle UK in 1994.

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• Requirements Elicitation
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• Critical Thinking in Business Analysis
• Missing requirements
• Soft Systems Methodology
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• Requirements Elicitation Technique
• Use Case Diagram
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• How to design questionnaires
• Role and Permissions Matrix
• State transition diagram
• Pareto analysis and decision-making
• Problem tracking technique
• Document Analysis

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