SAP IBP causal forecast chart isolating event-driven demand spikes versus a flat exponential smoothing baseline

IBP vs S&OP: Why They Are Not Two Different Processes

There is a number of visuals and infomercials making the rounds in LinkedIn praising the glories of IBP – the Integrated Business Planning process and why this is distinctly superior to the S&OP Process. When the S&OP process attains maturity to serve all business functions to seamlessly make decisions, then you have already absorbed the elements of IBP and embraced it.

Preaching IBP as a distinct process is great for software and consulting sales. Most organizations, when faced with a non-working S&OP process, they leave it alone and start a separate IBP workstream with a different supply chain guru. Nothing more chaotic than this.

IBP and S&OP are not two different processes…

IBP is an evolution and expansion over S&OP. Whatever you want to call it, if you have an Excom focus and discuss financial and strategic plans along with scenarios, then you have added the IBP element into your S&OP.

  • Distinguishing the two as separate and distinct processes will lead many new practitioners to think that these can co-exist in the same company. This is absolutely a faulty result.
  • When properly designed, the IBP may be the last meeting in the monthly sequence. Called the Executive S&OP or the IBP meeting, this will feed the C-Suite with insights gathered up from the trenches through diligent bottom-up planning.
  • Starting a distinct IBP process will result in the Supply Chain function running an S&OP process with mostly themselves with minimal representation from Sales or Marketing.
  • The new IBP process with Marketing and Finance with senior executives may disconnect from operational planning. Most numbers may be top-down financial guesses. Finance will feed a revenue forecast created at the brand level based on run-rate that has no content. This was the reality before the best practice of S&OP came into being.
  • C level folks running their own ExComm meetings making high level decisions based on topline numbers produced by the IBP process. Disconnects galore.

It seems fashionable to use some nice sounding words – “strategic”, “top-down” etc. but this will serve no purpose if the facts used are just top-down guesses instead of a bottom-up plan that is generated from the trenches on an on-going basis with a rolling horizon for the plan.

Just watch out for the alphabet soup from folks with a sales agenda – IBP, IBM, S&OE.

Struggling to tell whether your S&OP process has matured into true IBP, or if you’re running two disconnected workstreams? Check out SAP IBP Usability and S&OP Consulting.

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