Integrated Business Planning

by Adarsh Raj Bhatt in

Photo credit: Pexels

Key Takeaways

  • Integrated business planning (IBP) ensures that a startup’s investment expenditures meet its business goals. What sets IBP apart from conventional corporate planning is that it considers financial planning. IBP integrates planning, execution, and finance with the startup’s goals.
  • Investment-related expenditures include supply chain, finance, product development, marketing, and other operational functions. Integrated business planning can lead a startup towards sustainable development goals by analyzing supply and demand and considering risks to minimize them.
  • A working example of IBP in progress is Coca-Cola European Partners. Their focus in this area has served them well in terms of accelerating efficiency and transparency across a fast-moving supply chain, right from production through to delivery. 
  • IBP meetings are attended by a cross-functional team that reviews product management, financial planning, demand planning, supply chain planning, integrated reconciliation, founders, and HR.
  • When using IBP, founders should have good time management skills, a willingness to use cloud-based technology, an openness to embrace cross-functional collaboration, the relative decentralization of authority, and a break from traditional approaches to the management process.

What is Integrated Business Planning? 

Oliver Wight coined the term “Integrated Business Planning” (IBP) to describe the next iteration of sales and operations planning (S & OP) in the early 1980s as a methodology for a client who wanted to balance supply and demand volume. S & OP was renamed Integrated Business Planning in the 1990s to “consolidate” different parts of a business into a “unified plan.” IBP ensures that a startup’s investment expenditures meet its business goals. What sets IBP apart from conventional corporate planning is that it considers financial planning. IBP integrates planning, execution, and finance with the business goals. Investment-related expenditure includes supply chain, finance, product development, marketing, and other operational functions. IBP has the capacity for leading a startup towards sustainable development goals by analyzing supply and demand and considering risks to minimize them.

Integrated business planning, as the name suggests, involves the entire startup by looking at it as an integrated whole comprising different parts. These parts are aligned by integrated business planning to maximize output by evaluating operational functions and ensuring profitable prospects at “minimum risk.” A working example of IBP in progress Coca-Cola European Partners. Their focus in this area has served them well in terms of accelerating efficiency and transparency across a fast-moving supply chain, right from production through to delivery. 

Elements of IBP include (but are not limited to) the following: 

The main objective of integrated business planning is to achieve the best overall result(s) after optimizing these parts of the startup or the corporation.

Benefits of Integrated Business Planning

Increased revenue, forecast accuracy, real-time insights (that prove valuable in the long run for unforeseen circumstances) are some of the many benefits of IBP. 

Here are some more:

  • When executed correctly, IBP does away with all possibility of disjointedness and the lack of efficiency in an organization by ensuring greater coordination. In cases when it doesn’t “do away” with all options of these problems, it - at the very least - does a great job of mitigating their occurrence.
  • Since IBP enables more significant and more visible coordination, it provides a clearer picture of the dynamics between resources, abilities, and goals. For example, it better visualizes the distance between projected and actual performance. The ability to plan better so that decisions are based primarily on fact, not conjecture, comes in with implementing IBP. Furthermore, IBP enables the startup to assess better the effect of any change in marketing campaigns, production quantity, and sales on financial and other operational output. As a result, future risk-taking will be backed up by concrete planning decisions.
  • IBP is a collective, consolidated resource for your startup since every team/department contributes. It can be considered a healthy, fruitful, and dynamic negotiation between different departments. Therefore, it allows for early identification of loopholes in the business such that there is sufficient time to resolve the loopholes. 
  • Divisiveness is something that can snowball into incoherence and dissipate the cadence in the rank and file of your business. Naturally, this could lead to More and more severe loopholes. IBP significantly alleviates this divisiveness as each department considers itself a part of one unified whole and works towards achieving collaborative solidarity. This proves to be a valuable asset for the startup’s overall functioning and contributes to a better image of the new player in a highly competitive market. 
  • IBP is a step towards greater accountability of employees as they know their individual and collective responsibilities and understand that they will sink or swim with the startup. This awareness among the rank and file of the startup helps strengthen its foundational assets as its employees (and their day-to-day decisions) can be counted on with confidence since IBP coaxes employees to take the overall org into account. This ultimately leaves the business with more sustainable business decisions/operational factors during its existence. 
  • IBP is quite customer-focused as it allows better planning and more focused teamwide execution toward common objectives. The customer’s trust is an asset for startups and established businesses alike. Time is money, and this consolidated resource can save a lot of time for small startups and business owners. 
  • IBP is based on the core human values of trust, belief, and respecting differences: all for the best of the organization and the people who work in it. Besides, IBP directly expresses business goals and achievements in financial terms, which is extremely useful. 

Limitations of Integrated Business Planning

Having learned these benefits, we must also consider the limitations before implementing IBP since any new change to the established system will come with its own set of constraints. A startup must be careful in choosing what it invests in. 

  • The IT industry is still in a period of growth. To ensure that the move towards IBP is smooth, one has to consider that IBP itself is a radical change and that its functioning involves new ideas. For many traditionally operating startup founders, being open to collaborative planning is a novel idea and a departure from what they are used to. Besides, if S&OP (Sales & Operations Planning) is not stable, IBP might be a significant leap for any startup. 
  • Even if the S&OP (Sales & Operations Planning) process exists, IBP can come as an exercise characterized by complex adaptation. This can be due to the difference in terminology used by the two of the most influential teams in the company. The physical supply chain team talks a lot in terms of amounts (e.g., units, products, quantity, and so on), all of which are to be converted to money, while members of the financial planning team talk directly in terms of currency values, profit, loss, costs, revenue, and other money-centered concepts and terminology.
  • IBP naturally requires a more significant contribution from employees (and, sometimes, requires more employees overall) than the S&OP process. This means an increase in costs for the startup. 
  • IBP isn’t for startups that are opposed to delegating decision-making to the lower hierarchy levels. It also furthers the risk of inconsistency in terms of commitment from several departments. 
  • IBP is available only on the cloud, and to implement IBP, the startup has to be open to using cloud-based technology and the associated risks.
  • It is essential to consider that when dealing with cloud applications, there can be internal challenges within the startup: these might include data privacy concerns, geodata location mix, a potential loss of service, and concern over whether it can be managed better with custom applications. The subsequent loss of software and services becomes more complex in a hybrid environment where lines of responsibility can become blurred. 
  • Security is a primary concern in using a cloud application. Authentication and verification of users are required by SAP Cloud Identity or an on-premise identity provider. Excel sheets containing business planning and personal data must be secured as they are prone to viruses. For launching software updates on SAP IBP, two cloud products have to be involved with on-premise agents (HCP IS and SDI). Several components of the software are involved in the SAP IBP landscape. SAP IBP needs quarterly update frequency, which causes frequent impacts on the landscape. There is some control over the time of updates for the customer. Still, practical experience testifies that a regression test is required to check that all parts of the application are still functioning after each update. For this, test scripts and (ideally) automated testing tools are needed to ensure the resolution of issues as soon as they’re identified. This, apart from being time-consuming and expensive, is devoid of the human element. Budgeting can become a significant concern for any business that dips its toes in this technology. 
  • Even if the absence of an optimal format is overcome by S&OP and IBP software packages, a more significant drawback seems to be that these packages are generalized or biased towards providing reasonable solutions without even determining the lowest cost.  

Who comes to Integrated Business Planning meetings? 

Integrated business planning requires a closely-knit team to ensure effective collaboration of all departments and to present the results of this collaboration. The following are some of the things that happen at most IBP meetings:

  • A cross-functional team reviews product management; it is their job to check the status of all product-related projects. This includes details such as the availability of raw materials and manufacturing capacity. It’s also their job to prepare a plan to deal with changes as they occur. 
  • A financial planning team addresses the startup’s monetary policy. 
  • The demand planning team brings together finance, sales, and marketing members to check that the right markets are being targeted.
  • The supply chain planning team includes experts who help meet projected demand in a cost-friendly way. The formal supply chain visibility project works on inventory shortfalls before they become major concerns. A lower cost of goods sold is their guiding factor. 
  • The integrated reconciliation team brings the holistic business plan (the core of IBP) into existence by integrating techniques from other departments such as product, supply, and demand.
  • The executive team resolves differences and presents the updated plan to the entire company.
  • An HR professional identifies certain traits in applicants to ensure that they’re good at teamwork as IBP requires transparency and open give-and-take between all departments. If someone does not seem like they’ll be good at and available to teamwork in such a collaborative arrangement, then a startup using IBP might not be the best place for them. 

What to expect when using Integrated Business Planning? 

There are some things that one should expect when using integrated business planning:

  • IBP demands robust time management because it is a collaborative effort depending on contribution from all departments, where each employee understands their department’s role in the startup’s overall plan.
  • Willingness to use cloud-based technology can be more beneficial in the long run. It also must be used efficiently for the proper execution of IBP.  
  • Openness to embracing cross-functional collaboration is based on trust and works towards diversity in ideas. Ideally, awareness and the educational program work well for employees, mainly using traditional work environments. 
  • Decentralization of authority automatically comes with the implementation of IBP. In this scenario, individual responsibility is as important as a collective responsibility, and decision-making is shared power. The Japanese word “Kaizen” (which essentially means “continuous change for the better”) can be applied here.
  • IBP is a step towards the future as more and more startups engage in it. Founders with a traditional approach will be at a disadvantage. Having said so, it is essential to consider the time spent in successfully adapting to this new process.

Integrated business planning template

This resource offers various IBP templates that might be of use to you.

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