By: Greg Spira
I was recently chatting with a colleague who is working on the integration of an acquisition. He showed me a diagram of the acquired company’s monthly planning process to get my feedback. It was a little unorthodox, to put it politely. But that discussion was just one of several discussions on the topic of evaluating an IBP or S&OP process that I’ve been having lately.
At Oliver Wight, we have a very robust definition of what good looks like: we call it the Class A Standard. But it doesn’t take a full assessment against the Class A Standard to know if your process is working or not. Measuring against Class A is a great way to drive continuous improvement, but I don’t go into a full-blown assessment if a client or colleague asks me for a directional opinion.
I usually start with a very simple question: are you using your IBP or S&OP process to run the business?
It’s a simple question to ask, but not always simple to answer. Certainly, many companies put a lot of effort into their IBP process. But does putting effort into the process mean that it’s being used to run the business? Or is it just a labour-intensive, expensive management reporting process?
A more objective, yet simple measure that you can apply to your process is: how many decisions are being made? And by decisions, I don’t mean the easy stuff like approving the demand or supply plan. I mean the tough decisions. Investment decisions and trade-offs between brands, product lines, or sales channels. Decisions to launch or delay a product because of a shortage of R&D resources. Decisions to take a price increase to manage the inflationary pressure on raw material inputs. Decisions to double-down on advertising and promotion to take market share from a competitor.
If you can’t put your finger on a couple of significant decisions being made through your IBP process each month, then they’re likely being made elsewhere. And if those decisions are being made elsewhere, then your IBP process isn’t being used to run the business.
Integrated Business Planning Course