It isn’t difficult to understand why integrated business planning heads the Gartner-SCDigest ‘Passion Index’. After all, what’s not to like about a situation where sales, finance and supply chain departments work together to ensure alignment with strategic goals and maximize profitability?
Or so I thought till my conversation with the supply chain director of a large aluminum manufacturer.
“Look,” he said, “I’m hearing a lot about integrated business planning, but I just don’t get it. I don’t see how integrating sales, finance and the supply chain is going to make a huge difference to our bottom line. If my supply chain is sub-optimal, plugging sales and finance into supply chain planning isn’t going to make a whole lot of difference, is it?”
He looked at me expectantly.
“Well yes,” I replied, “you’re absolutely right. In those circumstances, it isn’t going to make much difference at all!”
Why real integrated business planning has three dimensions
Analysts and commentators tend to stress the importance of functional integration, while glossing over the complexities of production. But as that supply chain director pointed out, there’s more to integrated business planning than meets the eye.
Real functional integration goes beyond ensuring that sales and supply chain planning are linked to a financial dashboard. It’s also about applying various demand scenarios to a realistic model of the supply chain to gain real-time insight into the financial implications of various demand/production scenarios.
Of course functional integration is important, but it’s the vertical and horizontal dimensions that have the greatest impact on profitability. While functional integration may show you whether or not you’re making money, it’s the vertical and horizontal integration that actually create profit-boosting opportunities.
Vertical integration is about integrating scheduling, capacity planning, sales and operations planning, and strategic planning. All these planning levels should be fully integrated so that a change in any one of them ripples through to all the other levels. This kind of integration is fundamental: without it, plans quickly lose contact with reality and are neither feasible nor aligned with your business goals.
For example, a serious machine breakdown may mean having to push some production to the following week. Planners should be able to see all the consequences of the disruption immediately and be supported in mitigating its effects on KPIs. Capacity plans should be updated automatically to reflect the changes in the production schedule.
Horizontal integration involves ensuring that schedules for interdependent operations are integrated. In the case of that aluminum manufacturer, a change in the alloys available for melting would necessarily affect subsequent operations such as rolling and slitting. To reschedule and re-optimize effectively, planners need real-time visibility into the effects of any disruption throughout the supply chain – possibly all the way to key suppliers and customers. They need immediate insight into whether it will still be possible to meet customer demand, and how to minimize any shortfall.
As that supply chain director suspected, there’s more to real integrated business planning than simply linking various business functions. Real integrated business planning integrates all planning dimensions and functions to give you the visibility and business control you need to take your operations – and profitability – to a completely new level.
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