Many years ago, we would see companies using Enterprise Resource Planning (ERP) software for their business needs, accepting known functionality gaps and ‘bolting’ on additional software to bridge those gaps instead of finding another solution. This approach caused inefficiencies and disjointed planning for those companies, making it more difficult to manage payroll, inventory, supply and demand, and production. The request from large global companies – ones with manufacturing sites across multiple continents and warehouses across the world – was to find a way to have insight into their financial, operational, and sales plans in one single platform. Additionally, many small to mid-sized companies were also asking for a similar requirement: a single-integrated technology solution to be used instead of adding more headcount to manage an already streamlined process. This is where SAP Integrated Business Planning (IBP) can assist.
Benefits of SAP Integrated Business Planning (IBP)
SAP Integrated Business Planning (IBP) allows the coordination of business planning needs into one solution. IBP allows, within a single tool, to balance multiple business objectives, such as inventory optimization, supply and demand, supply chain management, operations planning, financial operations, cash flow, cost, revenue, and business strategy, in a single platform. It further allows the simulation of various actions across these areas to identify the impacts of changes as compared to the desired results. IBP also uses advanced analytics to identify suggestions a business can take in order to meet its objectives. By examining the business in its entirety, IBP allows for a more holistic approach to making decisions.
SAP Integrated Business Planning (IBP) leverages the vast amount of information available from each department and evaluates its impact on the bottom line. A simple example of the power of IBP is illustrated in the following scenario:
Company A currently has three manufacturing plants across the world. Each plant was set up to support their geographical region and for risk mitigation purposes. Region 1 has seen an increase in demand, which is expected to further increase., and its manufacturing site has been unable to meet the demand due to labor shortages. Additionally, local raw material costs have continued to increase. Region 1’s leadership team wants to relocate the manufacturing site to a location within the region where they can improve labor and material costs. Executive leadership must determine if they are willing to invest capital into upfitting Region 1 with automation to reduce dependence on labor or approve relocating the manufacturing site. The Executive team is further evaluating Region 2’s manufacturing site for closure due to a significant decline in demand within this region.
Without SAP Integrated Business Planning (IBP), conducting this type of analysis is often left to the finance department to create various cost models based on basic scenarios. However, using actual data from each of the sites in an ERP software with IBP capabilities, we could run various “what-if” scenarios based on more accurate real-time data. This would allow us to increase the agility of supply chains, understand cost tradeoffs, identify how to best respond to ever-changing supply needs, and improve how on-site or contract manufacturers operate.
SAP Integrated Business Planning (IBP) also assists in identifying business objectives and measuring performance against them in real-time. It further improves the traditional Sales and Operations Planning (S&OP) by bringing visualization of how the company is performing against financial targets and what levers the supply chain planning team could take to increase profitability and produce optimized supply plans.
Going Forward with SAP Integrated Business Planning (IBP)
SAP IBP’s ability to provide end-to-end visibility and integrate with the ERP software (including SAP’s Supply Chain Control Tower) – in addition to its predictive modeling, demand sensing, advanced analytics, and machine learning algorithms – makes it a vital option for companies considering a toolset to assist them improve their business plans and strategies.
With all this power in a single platform, isn’t it time to step away from using spreadsheets to manage your business strategies and supply chain decisions?