70 thoughts on “A new definition for Integrated Business Planning”

1. Neils, Jon Kirkegaard here keep up the great work ! You hit on why OW and others jump on term IBP as it lets them broaden scope and provide shallow depth on their offering (generally a software product, cloud service or generic consulting process).

   In our experience at DCRA with helping clients drive significant change S&OP is a real asset to lever as it is difficult to “fake”. It is very focused and the introduction of time phased MPS /DPS material planning into a manufacturing or virtual manufacturing really creates a value add future projecting financial system grounded in the concept of inventory. We often describe it as a process of “Selling what you make and making what you sell”… in essence asking these questions continually to achieve the risk reward balance desired.

   Real S&OP is almost impossible to manipulate by operators or financial engineers and becomes an organizational truth all roles and begin to trust and thus build trust and collaboration through numbers !

   The real issue is S&OP is difficult to SELL. We generally do not introduce S&OP initially with clients we sell a process we call Total Order Fulfillment and use a variety of tools to achieve. Most often we introduce S&OP after initial wins of value creation as THE long term organizational philosophy and process that will help the client KEEP gains already achieved !

2. Fantastic points here. Being a SaaS company in this industry is quite a challenge, and one of the biggest reasons is because of the loose use of IBP to define tools, services, etc. One company claims they do “IBP” when, in fact, their service is completely different from another company’s service. How can we expect companies to adopt IBP if we don’t even have a clear idea of what it is? (Furthermore, if those software vendors offering “IBP” are so extremely different!)Your statement here is spot-on: “Anything can be called IBP. Any software vendor can call their solution IBP.” It’s refreshing to hear people speak to this issue.

   Not sure how I’ve missed your blog previously, but I’m excited to explore more of your existing work and to see what you have to say in the future! Would love your feedback on what we do / offer, should you find a free few minutes (Company: River Logic).

   Again, many thanks for sharing your thoughts on this topic!

3. Thanks for your kind comment Jon.

   I agree with you sometimes we don’t need to talk about S&OP or IBP yet. One of my clients is a successful and very profitable business. However, they are very immature in their planning capability. We agreed not to use any acronyms like S&OP or IBP, but first build some basic underlying planning capability and knowledge.

   cheers,
   Niels

4. Thanks Shannon,
   you nailed it with ‘How can we expect companies to adopt IBP if we don’t even have a clear idea of what it is?’
   Crazy stuff, but as long as there is no governing body, it will stay like that. The IBP Wild West!

   Although I don’t know your product, I think there is a big future for things like prescriptive analysis. It can provide the future bandwidth of our plans. Within this bandwidth we than can decide how much risks we want to take to move the business forward. Once we agree what we talk about (validity), big data, smart analytics and even artificial intelligence will provide the reliability of our forward projections.

   We than only need AI to make the decisions and the executives can go home 🙂

   cheers,
   Niels

5. Hi Niels,
   I like your work on building a solid an widely agreed on foundation on S&OP and/or IBP.

   I think your latest definition is a good start. What I don’t like about it is that with this definition it’s a purely informative process. In my opinion IBP should be a decision-making process.

   It’s about: align where we can and address where we can’t, meaning that the final decision is being made by the GM/CEO based on reliable and valid information.

   Regards,
   Rik

6. Thanks for your feedback Rik.

   I agree with you that IBP is about making decisions and I considered to include it in my definition
   My logic not to was the following:

   We can provide good decision making information to executives every IBP cycle.Regardless of what information we provide decisions or no decisions will be made by the senior team. I facilitated over a 100 IBP meeting where I’m sure sometimes the information was there, but decisions weren’t made.

   Is that still the accountability of IBP? I first thought it wasn’t. But it is when you include good decision making and follow through as part of the BP system thinking and the behavioural or cultural IBP capabilities needs that come with that. You can also assume that an IBP manager needs to have the capability to influence the senior team to make a decision.

   So yes I agree with you!!!!! How about this definition??

   IBP: A holistic business planning philosophy that provides executives periodically with valid, reliable and aligned information to decide how to steer their enterprise to meet budget, strategic intent and the envisioned future.

   In my point of view the decision is preferably a team decision, not just the GM/CEO. Although the GM/CEO will be held to account for any decision being made. That comes with the job.

   Thanks again

   cheers,
   Niels

7. Thanks for sharing this with the group Niels!!! I fully agree with your views within it and like the holistic planning philosophy part. A possible improvement on it may be to add additional clarity on the collaborative execution from the different functional areas of the business to achieve the plan being some individuals may say IBP needs to more than just a philosophy to advance the company forward. There also could be a sentence on how it’s continuously monitored and adjusted through each planning cycle as more information is gathered. The difficulty in writing this definition is trying to cover the major elements of IBP in a short paragraph when entire books are written on it struggling to capture them all.

8. Hi Niels,
   Thanks for you reply. I totally agree with you, and the definition looks better now.
   Rik

9. Hi Niels,

   Another great article! The working definition is a great way to open dialogue.

   With regard to the “business” part, to me that alludes / restricts to a “for profit” organisations, where as many NGO’s or even government organisations would benefit from applying IBP, hence “organisation” would be more inclusive.
   The other great benefit of the holistic nature of IBP is that is links Strategy to Execution, as opposed to being merely a feed into the executive team. The definition would be benefit from capturing the fact that the outcomes / decisions made by the IBP process, create a way (set of plans) for the entire organisation to meet the budget and strategy.

   Furthermore, I think the “valid and reliable information” part is a great element, given they are a function of the people, processes and systems that have gone toward providing it. It talks to the maturity of the IBP process.

   With regard to the question whether there is a need for a governing body for IBP, I’m not so sure. I’m convinced that a challenging force to the current establishments, i.e. Oliver Wight, Gartner, APICS, etc. would create a following. But do we really need another organisation that stands up to say they hold the IBP / S&OP truth, so they can market it? Perhaps the nature of IBP, which as you pointed out is more of a philosophy, if more suited to be “open source”.

10. Hi Steve, thanks for your input

    Getting ‘different functional areas’ or ‘cross functional’ in there is a good idea.
    Continuous monitoring comes partly back in ‘periodically’, but maybe words like calibrate, adjust, re-focus can improve the definition

    Collaboration is an overused word I believe. If functions communicate or cooperate well it already does miracles. Collaboration for me means there is a common goal, you are prepared to share resources and most importantly there is an INTENT to make the other function better. To grow the other function. I will use the word ‘participate’ for now.

    Here is the updated definition:
    Integrated Business Planning (IBP): A holistic planning philosophy, where all business functions participate in providing executives periodically with valid, reliable and aligned information, in order to decide how to re-focus the enterprise to achieve budget, strategic intent and the envisioned future.

    Maybe ‘align’ is better than ‘re-focus’ and we get rid of the ‘aligned’ before information.

    bye the way, I keep track of the definition history, so we can always go back to where we started

    cheers,
    Niels

11. Hi Freek,
    thanks for your nice comment. I was thinking about governing like SCOR is governed for supply chain process. But maybe the IBP definition should be open source as it will evolve. Well…the open source definition is starting right here!

    Agree, the definition should be valid for any industry and type of company. Especially companies that never heard of a ‘supply chain’. There is way to much bias in current IBP talk.

    You are exactly right. Validity & reliability talks about maturity (reliability more so). Understanding the risks in end to end supply chain, plan scenario’s around that and understand the impact on the P&L is not a must to start IBP. However, it will improve the reliability of the projected P&L.

    Getting the word ‘execution’ in there is a good idea. In the end IBP needs to lead to the execution of the plans proposed to deliver budget and strategy.

    Here is the updated definition:
    Integrated Business Planning (IBP): A holistic planning philosophy, where all organizational functions participate in providing executives periodically with valid, reliable and aligned information, in order to decide how to re-focus the enterprise around executing the plans to achieve budget, strategic intent and the envisioned future.

    A mouth full, but not bad may I say! I’ll update this in the blog

    cheers,
    Niels

12. Hi Niels,

    Interesting article. At Oliver Wight we developed the term Integrated Business Planning to describe a process with the following characteristics

    • A process, led by senior management that, on a monthly basis, evaluates and revises, time-phased projections for demand, supply, product management, strategic projects and the resulting financial plans
    • Typically a rolling 24 month horizon
    • A decision-making process that realigns the tactical & operational plans for all functions within an accountable organisation entity, in support of the organisation’s goals and targets
    • Drives consensus on a single operating plan, to which executives hold themselves accountable
    • Allocates the critical resources – people, equipment, inventory, materials, time and money – to most effectively satisfy customers in a profitable way

    This is the definition that we use in our Oliver Wight education materials and presentations.

    Whilst a great many advocates and practioners of S&OP and IBP sit in the Supply Chain space the process outlined above is a “whole of business” process not a supply chain one.

    Your call for a standard definition is an interesting one. At Oliver Wight, as you know from your time leading the IBP implementation at a client organisation, we have developed a maturity model for IBP and defined in detail the required process characteristics and behaviours required for excellence in IBP in The Oliver Wight Class A Checklist for Business Excellence (Sixth Edition). So, in our view, a definition exists. Whether everyone agrees with that definition is another matter.

    For those who are seeking an even tighter definition than the one that we developed I offer some words of caution. Every organisation is different. Most organisations have common issues but if we prescribe too exactly the process or system that an organisation should use to address those issues then we potentially risk the engagement with the organisation’s people in the “new way of working”. As you know, “the people stuff” makes or breaks IBP implementation or improvement.

    We are starting to see organisations outside of the traditional cohort of manufacturing such as medical, retail, scientific, service, government and military adopting the principles of IBP outlined above and making significant improvements to their results. Organisations will continue to develop new and exciting ways of doing things and together we will further evolve the IBP process definition as we have done since we pioneered S&OP in the early 1980s.

    If anyone would like further information please feel free to visit the Oliver Wight Asia Pacific website at http://www.oliverwightasiapacific.com or contact me at sharman@oliverwight-ap.com

13. Hi Niels,

    Interesting article. At Oliver Wight we developed the term Integrated Business Planning to describe a process with the following characteristics

    • A process, led by senior management that, on a monthly basis, evaluates and revises, time-phased projections for demand, supply, product management, strategic projects and the resulting financial plans
    • Typically a rolling 24 month horizon
    • A decision-making process that realigns the tactical & operational plans for all functions within an accountable organisation entity, in support of the organisation’s goals and targets
    • Drives consensus on a single operating plan, to which executives hold themselves accountable
    • Allocates the critical resources – people, equipment, inventory, materials, time and money – to most effectively satisfy customers in a profitable way

    This is the definition that we use in our Oliver Wight education materials and presentations.

    Whilst a great many advocates and practioners of S&OP and IBP sit in the Supply Chain space the process outlined above is a “whole of business” process not a supply chain one.

    Your call for a standard definition is an interesting one. At Oliver Wight, as you know from your time leading the IBP implementation at a client organisation, we have developed a maturity model for IBP and defined in detail the required process characteristics and behaviours required for excellence in IBP in The Oliver Wight Class A Checklist for Business Excellence (Sixth Edition). So, in our view, a definition exists. Whether everyone agrees with that definition is another matter but hundreds of organisations around the world have successfully used it as a reference for business transformation efforts in this area

    For those who are seeking an even tighter definition than the one that we developed I offer some words of caution. Every organisation is different. Most organisations have common issues but if we prescribe too exactly the process or system that an organisation should use to address those issues then we potentially risk the engagement with the organisation’s people in the “new way of working”. As you know, “the people stuff” makes or breaks IBP implementation or improvement.

    We have for a while now been seeing organisations outside of the traditional cohort of manufacturing such as medical, retail, scientific, service, government and military adopting the principles of IBP outlined above and making significant improvements to their results. Organisations will continue to develop new and exciting ways of doing things and together we will further evolve the IBP process definition as we have done since we pioneered S&OP in the early 1980s.

    If anyone would like further information please feel free to visit the Oliver Wight Asia Pacific website at http://www.oliverwightasiapacific.com or contact me at sharman@oliverwight-ap.com

14. Hi Stuart,
    thanks for the follow, your comment and for joining the conversation. Much appreciated.

    I understand indeed the value Oliver Wight has brought to the development of IBP. And I know you got a lot of things right. I also see a lot of opportunity for improvement in a system approach to IBP but too little open conversation about IBP innovation.

    One of my objectives in over 5 years of blogging about IBP, is to start these open conversations. My style is to operate in the area of ‘caution’ as you mention. Of the beaten track. Challenging the status quo. Not unsimilar to my IBP presentations you have seen at several conferences. It is in these areas of caution, where we might feel uncomfortable, that we scratch the surface and explore new things. This is where the exciting stuff happens and where we find opportunities and new ideas to innovate.

    My goal however, is simply to get better, know more, develop mastery and share my knowledge with anybody who has an interest and likes to listen. Reading through the results of my 2015 S&OP Pulse check, a survey I have conducted for 5 years now, I see a lot of confusion in what S&OP and IBP is. I also see a need for addressing behaviors, a thirst for more innovation and standardization.

    These are real and serious needs and concerns in a worldwide planning community, which we need to address. Not by just repeating the same stuff, but by listening to the planning community and answer with thought leadership and innovation. We all have a role to play in this. I do my little piece through my blog.

    cheers,
    Niels

15. Hi Niels,

    Thanks for again triggering a very relevant and quality discussion.

    Would like to share some words that I use in my current definitions of S&OP / IBP / E2E BP:

    1)”Tactical”: since the processes bridge strategy and execution. I find it quite common that people get muddled between these process and for me the re-focus or “course correct” is very much a tactical exercise. Neither operational (changes too small for exec too notice) or strategic (e.g. we merge our ship with a competitor), but tactical – we course correct / refocus our ship.

    2) “Continuous improvement” to me implies that there is a structural element of a mature process, next to the monthly fine-tuning. I.e. reviews of past plans v. actuals can be used to trigger various short term actions or multi-month improvement projects to structurally improve the capability of the value chain to support budget, strategy, etc. On the other hand if these is too wordy to add, it could be left to the footnotes.

    3) The big one. A sky ball way over there in left field.
    In extensive discussions with my last customer we decided the answer between S&OP v. IBP was NEITHER, and in fact it was “E2E BP” – End To End Business Planning.

    * Benefit of E2E BP: more obviously broader than supply chain than either S&OP or IBP. The advent of focus on product planning (thanks to PLM software), customer planning (thanks to Salesforce) and also supplier collaboration (SRM programs), mean a truly end to end value chain perspective is required. I don’t see mention of customer or supplier in the OW explanation of IBP above (albeit likely implied) – yet in the end both of these folk are fairly important in achieving budget and strategy.

    * Cost of S&OP: several software providers in the field (inc. big fish JDA) provide S&OP as a separate, discrete module, which is used following on from demand planning and supply planning modules. So to retrospectively label the end to end process S&OP is confusing to companies who use this software. I have also witnessed it is confusing to S&OP managers who are not sure whether they should be involved in every/some/none of the demand/supply planning meeting in the organization or just the true S&OP meetings (where the balancing, allocation, capex scenarios, etc are performed, inc. final MBR meeting).

    * Cost of IBP: still has the image of being just S&OP (and by hence, as above, supply chain) linked to strategy and finance and hence does not automatically capture the imagination or buy-in of product development or marketing executives. As the indeed regard it as S&OP on steroids, “advanced Sales & Operations planning” or worse, “advanced supply chain planning” and hence not directly relevant to them.
    The “integrated” in IBP also suffers from the most common economic application if it, in “vertical integration”, which over-emphasizes the vertical connection from strategy to budget to supply chain mental image that many have of IBP, which obscures appreciation of the even greater number of horizontal connections at play… product, supplier, customer, etc.

    Another key reason is consistency with the arguably more mature terminology used in IT. There integration testing refers to testing the data flows across two systems. And end to end testing refers to testing the data flows across all planning systems in the domain. There are even long discussions on IT forums as to how “integration” testing is a more limited subset of “end to end” testing. So I would argue our IT friends would also relate easier to E2E BP, as this process terminology coincides with their existing system terminology. And ultimately the process – whatever we call it – is surely benefited when the standard terminology of process and system are aligned!

    Also if you use E2E you could possibly drop the word “holistic” as this is now directly implied in the title and does not require this constant footnote reminder of: yes that includes you too portfolio managers, pricing managers, marketing managers, key account managers, etc. It is perhaps this lack of direct understanding of the intended holistic nature of S&OP and IBP that has provided the constant threshold block to wider acceptance of the holistic, tactical and end to end business planning processes behind it.

16. Neils:

    You are attracting a good conversation on S&OP / IBP and you are an excellent moderator of “the value proposition”. As I mentioned in my first response keep it up… turn it up ?

    What I find extremely sad – but inspiring at the same time is S&OP has the potential to really really improve peoples lives globally. For all the nonsense business concepts, motivational games, consulting, even TQM and Six Sigma they all fall really short in capturing full extended enterprise performance / measurement. So often efforts are designed to show benefits for the control area for the management sponsors but across the supply chain are just taking from one side to give to another.

    S&OP is not like that . It trully forces looking at big process not small pieces and it truly works to remove waste, improve the language of true collaboration (time phased material) and although always the same concept and algorithm can be applied as loosely or as tightly as the culture / business can support (data, decision making)

    What would be fun to explore with you – is very clear real hard hitting examples how S&OP can and does really change the world. We started a bit of this at our blog https://soptime.wordpress.com/ and sopbook.com sites but really need to bring it home to average business person as potential is enormous
    – free up capital for new jobs
    – free up capital for innovation
    – focus and pool manufacturing resources to be more production / specialized (e.g. Boeing 787 plane mfgr vs. 10 years ago… everything high tech now)
    – Improves, streamlines executive communication in average firm in marketing, sales, operations, mfgr, supply chain, CEO office
    – Great tool for rooting out fraud
    – Great tool to push back on Wall Street financial engineering mickey mouse games that do nothing but long term damage
    – Core enabler for what we at DCRA often refer to as “Assembly Coordination” to enable cost reduction and build to order change of a broad swath of the products in the market (from automobiles, Apples to X-ray machines)
    – The real GREAN energy and efficiency benefits so often touted but S&OP through elimination of cross company has potential to really be unsurpassed delivering on hype credited to a lot of nonsense and generic concepts

    So who wants to get off the “Who Moved My Cheese BS” of best practices and naming, credit for names and get on to real value creation that improves lives in all economies ? In our client experience the real hidden opportunity is how it can greatly mporve average employee / execs professional satisfaction to know they are truly pulling a synchronized oar in powering the company boat !

17. Hi Conrad,
    thanks for your contribution. Here my comments on some interesting thoughts

    E2E business planning: I really like that term. It says a lot by itself. Your explanation also makes me think that E2E value chain planning, or just value chain planning, might be a good descriptions as well. Traditional S&OP started in between the 4 walls. We’re beyond that now and have to plan across a horizontal and vertical network. Value chain planning already says that it goes beyond the enterprise. I think you’re making a good case for E2E BP and we have to keep those in mind for sure.

    Continuous improvement: for me this simply applies to almost anything. A business has to keep getting better to stay relevant, so I see it more as a footnote indeed.

    Tactical: I agree that we have to spend most of our time in the tactical horizon, so beyond the operational horizon. So IBP is mostly, not only tactical. If disaster strikes, an unforeseen competitor enters the market or a large customer walks away, we might have to change gear and operate more in the operational horizon. Furthermore calling out budget & strategy as goals to achieve already suggests we have to operate in the tactical horizon.

    The word re-focus is not the best part of the definition I think. It implies, that there was no focus in the first place. Re-align, re-direct could also be possible. My thinking is that as communication is seen as top 3 importance in strategy execution in several articles (HBR, McKinsey) the outcomes of an IBP cycle has to be used by executives to communicate how ‘the ship’ is being redirected.

    cheers,
    Niels

18. Jon,

    thanks. I’m happy to be the moderator and I think we all have to ‘turn it up’. I’m just the guy that asks silly questions and starts crazy conversations.

    You mention something I can very well relate to. I like to believe that IBP can help to improve peoples work life’s, not just improve business performance. For me the underlying purpose of IBP, is to make people understand each-other and communicate and collaborate. I even believe it can lead to higher work satisfaction.

    I wrote the purpose of IBP in a blog over 4 years ago https://supplychaintrend.com/2011/05/20/the-purpose-of-integrated-business-planning/

    In my yearly S&OP pulse checks, participants indicate that the main cultural change due to S&OP/IBP is ‘better understanding and communication between functions’. So that is what (supply chain) people believe.

    However, no CEO will invest in IBP just to improve understanding & communication. We need some hard wins to show too (most of those hard wins like reducing waste will be because of better understanding and improved communication). I think there are enough examples of hard wins around. Just maybe explained with a bit too much marketing spin around it, which undermines the message and raises doubt in the readers’ mind on how real this is.

19. Hi Niels,

    Thanks for your feedback.
    And a couple of feedbacks on your feedback:

    * Horizons to me are divided into short, medium and long term. Strategic, tactical, operational (and even executional) are attributes of “cycle” not of “horizon”, i.e. as you imply tactical decisions may impact any part of the planning horizon. The same also applies to strategic decisions. By adding the word “tactical” to the definition we would clarify the depth of analysis regularly – cyclically – intended to perform and even more importantly, intended not to perform in S&OP/IBP/E2E BP.

    I.e. we delve into issues and impacts higher than an operational nature (e.g. how to address an individual customer’s pending order for a product on short stock), but also lower than a strategic nature (e.g. M&A, redefine strategy, enter new markets, open new channels, enter new products, etc).

    A key danger of S&OP/IBP/E2E BP is when it aims to perform all levels of decision making and therefore ends up doing none of them well. This is where my clients have found that the word “tactical” provides a welcome clarity of focus, in the cyclical sense. Particularly when they are operating multiple cycles within cycles, as virtually all companies do. They need to clearly know what makes this cycle distinct from the others in their process mapping designs.

    * Agreed re-focus could be improved, as it implies no matter how many cycles and meetings we’ve had in the past, we still haven’t achieved a focus. Perhaps “decide how to re-focus” could be substituted with “continually focus”?

    In my experience running a well oiled S&OP/IBP/E2E BP, we already had focus but each month we need to ensure we maintained that focus and made effort to keep that focus in the light of changing circumstances, market dynamics, etc.
    I think if we “re-” anything, we imply a recurring type of deficiency which conflicts with and hence undermines the overall aim, and is overall too negative.

    * Good that you mentioned “value chain planning” I have liked this naming before and in fact understand Oracle already use that term. It’s another variant! On the one hand it seems more straight to the point and less nerdy (!) than either IBP or E2E BP, in implying the “why” we are planning: to add value! Rather than planning for the sake of planning by planner with nothing better to do in their lives, which both IBP or E2E BP tend to imply…

    ‘We’re planning for the sheer and simple joy that our planning can be more collaborative, consensus integrated and E2E than ever before… customer value? What’s that got to do with anything?? – we’re just planners, planning away until we reach our – well planned for – pension age… if one day our customer base evaporates and our ship sinks, at least we will have experience the not considerable satisfaction of knowing that we sunk it together, in a cross-functional, collaborative, integrated and end to end manner’.

    So you – and Oracle – may have in fact personally sold me back on VCP.

    On the other hand value chain planning quickly brings to mind mental images of value chain strategy, so the key here would to be keep that distinction very clear. In VCP we should *not* intend to review the optimal incentives per function across the mix of business strategy components (as I have published before: innovative quality, attentive service, agile delivery, or lean cost), but instead to fulfill the chosen strategy.
    At least until the next strategic cycle update.

    * The definition may require some footnotes to make it clear, standard, acceptable. #1 of those, is – what remains of S&OP? Is it rendered “obsolete and old-fashioned” or a “weak, deficient version” of IBP / E2E BP / VCP or an integral process component – and in IT terms: module – within the overall IBP/E2E BP/VCP tactical cycle?

    * For any proposal to become a standard, it requires sufficient stakeholder engagement to get it there. Aside from the loosely termed “project mgmt” community, the two key parties to me appear to be: Oliver-Wight and the key IT software providers.

    Great to see OW already commenting here… but I sense the consensus is not yet there. Even if they may not have intellectual property rights to the term IBP, I do sense they have a strong sense of ownership of it. And of course rightly so, since they originated it.

    As I mentioned before, the IT community has it’s own rather more mature, tried and tested terminology which by the highly detailed nature of the work they do is forced to be more specific than a consulting brochure. Hence I would be interested to hear an IT view of IBP as a process. Does performing integration testing and E2E testing on an integrated business planning process make sense, or confuse, or do they see the process as being an end to end business planning process? Or has the world’s 2nd largest software company (Oracle) come up with the optimal naming years ago – VCP – and patiently waited for the rest of us to finally catch up with them?

    Either way, the risk of not achieving consensus is that potential customers are bombarded with different visions from OW, IT software providers and project managers, and hence give the maturity level 4-5 vision up and settle for the safe bet of a mere ERP upgrade! I have witnessed from close hand an overwhelmed multi-billion dollar global company make such a decision. And worse still, walk away convinced that this was the best result they could have achieved.

    This is why many of us think a standard definition, shared across all key stakeholders, will benefit all stakeholders, by greatly clarifying the messaging and hence greatly enhancing the market potential of future IBP/E2E BP/VCP implementations.

    Best regards,
    Conrad

20. Thanks Conrad,
    it took the re-focus out and made it ‘align’. I then took the align away from the information.

    Integrated Business Planning (IBP): A holistic planning philosophy, where all organizational functions participate in providing executives periodically with valid, reliable information, in order to decide how to align the enterprise around executing the plans to achieve budget, strategic intent and the envisioned future.

    I just was in contact with Dean Sorensen this morning. He send me an interesting article that soon will be published in Foresight. He makes some good arguments that contribute to this conversation.

21. Niels – excellent discussion. As you know – I view IBP as marketing hype – devised to give consultancies permission to go back into the corner offices with some shiny new object. IBP is a hoax. IBP is by definition, nothing more than mature S&OP. Further, if your organization cannot understand that the expression S&OP is broader than just sales and operations – then there are a host of other issues needing to be addressed. What is REALLY needed is more depth on S&OP not some marketing redefinition. We need people to write and discuss how to make S&OP more effective, how to enable change with S&OP … how to leverage it in other industries and sectors…. as so on … Most discussions on the IBP subject … to me … are mostly mental self-pleasure.

    Marketing hypesters depend (prey?) on uneducated consumers.

    I noticed that OW weighed in … I have my old train the trainer materials from OW. One slide has “S&OP is Integrated Business Planning”. Yep … I still agree.

    So while I appreciate your attempt to put bounds around the IBP expression – to me it lacks integrity to use it … and does more damage than good.

22. Thanks Patrick,
    I know and understand your position. One of the reason I think it is better to move on from S&OP is because it is riddled with supply chain jargon and bias (so is IBP still). This it where it has its roots of course. But this is also holding back a more end to end development and I think it is a main reason for a lack of innovation.

    I make this argument in my article ‘the rise and fall of S&OP’. S&OP lives in a supply chain bubble, with no serious academic research and one they it will be replaced by an other end to end business management method. Most likely from a financial or strategy angle, as there is a lot more serious research and conversation happening.

    However, you’re right to say we need more depth. That’s why, besides pitting out some of these challenges, I also try and contribute with my vision on where S&OP has to go (The Rise and Fall of S&OP, 6 ultimate signs of S&OP maturity and many others)
    Cheers,
    Niels

23. IBP is …. to me … nothing more than a weasel word expression. Weasel words or expressions are so non-specific or generic as to cause confusion themselves. The supply chain jargon will always exist in IBP, or S&OM or SIOP or S&OP … or any other future variants of the name because you are looking at the long term impacts of supply and demand plans. Calling it IBP does not remove those issues. Further, if an S&OP lead cannot lead or persuade their organization around a unified process name — then they are not skilled enough of a leader to run S&OP. Let’s call it what it is … it was a marketing ploy invented by a consulting organization to sell more consulting services. Only the naïve or uninformed think otherwise.

24. Haha I like your clarity Patrick. Love it and thanks for your contribution.

    We’re not too far apart, I just still think a good definition gives us an opportunity to leave the supply chain bubble so we can more easily engage other functions like marketing, strategy, finance. All those functions we need so hard to make it work better and start innovating and planning with a vision and strategy in mind

25. Hi Niels and Patrick,

    Good to see some familiar names adding their perspective.
    And by this I also include OW whom I personally have enjoyed working with and also picked up some useful tips from. 😉

    I actually agree with both of you:
    * S&OP IS inadvertently supply chain biased due to its name (for example only implying but not stating the role of portfolio, finance, strategy) BUT
    * IBP has – perhaps unintentionally – morphed into a vague and hence elitist hype (it excludes ‘integrating’ merged companies and system ‘integrations’ yet requires both of these integrations as pre-requisites to it’s own brand of ‘integration’).

    Anyway I’ve long considered that the debate between S&OP versus IBP will NEVER be directly resolved between these two candidates. The fight has already gone beyond 15 rounds (i.e. years) and neither fighter is establishing a clear dominance nor showing signs of throwing the towel in. It’s becoming like the decades long debate of old horseman last century as to who was the greatest ever horse Man O War or Phar Lap? Until a 3rd horse named Secretariat arrived to put that issue to bed.

    Question is can we resolve this S&OP versus IBP nexus in a similar, fact (rather than emotionally) driven way? I believe we can. By examining these phrases as well as two major alternatives, through the dual lenses of English grammar and IT module naming conventions.

    The Four Candidates:
    – S&OP
    – IBP
    – E2E BP (End to End Business Planning)
    – VCP (Value Chain Planning)

    Test 1: English grammar
    Nouns: Sales & Operations, Value Chain
    Adjectives: Integrated, End to End
    –> Recommendation: let’s “plan” (verb) a clear noun likes Sales/Operations or Value Chain, not an abstract adjective like an Integration (of what?) or an End to End (from where to where?)

    Remaining candidates:
    – S&OP
    – VCP

    Test 2: IT module naming conventions
    Relevant examples of IT module names include Product Lifecycle Management, Demand Planning, Supply Planning, S&OP, etc
    –> Recommendation: S&OP is a widely accepted, clear and stand alone module offered by several IT companies to distinguish it from other stand-alone module offerings. The name S&OP absolutely deserves to live on, but as the specific module that supports those Pre-SOP/Reconciliation and S&OP/MBR type meetings that follow on from portfolio, demand planning and supply planning. However we should NOT expect IT companies to reuse the same term to signify both a single module as well as an entire suite of related modules including itself. (I should know – I already tried it on the inside of an IT vendor, prior to their global suite naming launch).

    The Winner:
    – VCP

    VCP meets the criteria of being both a clear noun and a distinct naming suitable for use by IT vendors to cover a suite of separate modules including S&OP. VCP is already used as such by the world’s 2nd largest software company Oracle (whom I incidentally until now have zero affiliation with) and who apparently sell a suite of 15 VCP applications, ONE of which is called S&OP. (As I found here: https://docs.oracle.com/cd/E26401_01/doc.122/e48791/T578797T578800.htm)

    In conclusion I would summarize:
    * S&OP is a modular process and tool that leads to integrated business planning.
    * VCP is a suite of multiple modular processes and tools – including S&OP – that leads to integrated and end to end business planning.

    >> Niels, Patrick, and others – what are your thoughts?

26. Conrad .. interesting discussion…

    If IBP made sense – it would not raise a debate. (at least with me) I would be all over it. However, when something otherwise well designed is changed … one must ask the question Why ? And … if there is no difference between S&OP and IBP … (except one is a more mature version) … again one must ask Why ? The answer is obvious – with everyone “saying” they are doing S&OP (even if unproductively) — it is impossible to get into the corner office. You need to create difference (even if there is none) to get executive mind share. IBP is different if only in name. Hence my hoax comments.

    Now … if you drew a line in the sand … and said S&OP is an aspired to level of planning maturity that is less inclusive by design … you may have an intellectual leg to stand on …

    As an example – if we all agree that S&OP is not an all in / all inclusive planning process … then IBP might have some legs … or turn the words around so that you have “achieved Integrated Business Planning” at Level X of S&OP maturity …a form of planning Nirvana …. you might convince me to use the expression…. but selling a mature S&OP process as something different is disingenuous…

    There … I have done their marketing for them … you’re welcome 😉

    Finally, as I view systems as a tool to execute planning – VCP is a stretch to me … but I understand where you are going.

    Good points Conrad – thank you!

27. Great discussion gentlemen

    @Conrad; thanks for dissection this language wise. With my grammar, I wouldn’t be able to that. I don’t think we necessarily need an IT naming convention, but it comes in handy and I actually like VCP. I still prefer to give IBP a go first though.

    @Patrick; do I read correctly that you would accept IBP under certain circumstances, ie if we all agree that IBP is a level of X S&OP maturity (The S&OP nirvana)? What changed your mind?

    Ok then. I just wrote an article about that. I hope it get published, but it might be too much out there. The approach is simple tough. The nirvana for any company is to achieve its purpose and envisioned future. Planning will have to support reaching this.

    I use a model from Collins & Porras from 1996 that describes what makes up the envisioned future of a company. I describe in the article how planning can support visibility, decision making and alignment on how to reach this envisioned future, whilst staying true to its purpose. If planning can do that, it supports the ultimate goal of a company, its nirvana or its envisioned future.

    IBP back on the table for you Patrick, if I get this article right?

28. @Patrick: indeed I think that’s were IBP got stuck in the middle, trying to cover two things at once: trying to sell itself as – in your words – as both a “mature S&OP process” as well as “all inclusive planning process” that includes S&OP as one element. As Abraham Lincoln famously said: “it was not best to swap horses when crossing streams.”

    Firstly I do not think S&OP – narrowly defined to cover one process – will be “killed off” soon by any number of consultants or practitioners. That bird has long flown. It would be akin to killing off “inventory optimization”, “order promising”, “supply planning”, “PLM” or “demand planning” which have, like “S&OP” all become accepted as industry standard process elements and system modules.

    The only question that remains in my mind is whether IBP is the most appropriate naming for the “all inclusive planning process”? This is something that I could conceive of.

    A quick look at the As-Is world reveals:
    * Oracle uses “Value Chain Planning” (https://docs.oracle.com/cd/E26401_01/doc.122/e48791/T578797T578800.htm),
    * JDA uses “Supply Chain Management” (http://www.jda.com/solutions/solutions-index/)
    * Infor have moved from “Supply Chain Planning” to “Integrated Business Planning” and now back to “Supply Chain Management” (http://www.infor.com/solutions/scm/).

    Incidentally all three vendors offer S&OP as distinct modules within their planning suites, with no sign of any IBP module in sight.

    Based on this, I would suggest our role as consultants and practitioners is to achieve consensus – from a process view – as to which umbrella term for “all inclusive planning process” – and also for business transformation programs – makes the most sense.

    >> Is it Integrated Business or Supply Chain or Value Chain… Planning, or even something else?

    @Niels, Patrick, OW, others: do you see scope for IBP to allow S&OP to “live on” as a separate process/module and instead be considered as the umbrella term for all value chain processes/modules?

    Or do either SCM or VCP fulfill this need better, by virtue of being based upon tangible, easy to visualize and understand, nouns?

    Or should we still press ahead against the odds and persuade the majority of multiple IT vendors to switch from S&OP to IBP modules and the majority of global organizations to rename their S&OP Managers as IBP Managers?

29. The proponents of IBP have not created the intellectual line in the sand…or a real point of difference…. and I am sorry but a mature S&OP process is not anything more than a mature S&OP process. I am not sure I have changed my position. However, if I were the collective marketing group for these folks I would position IBP as a Nirvana like level of planning enlightenment. Not just a highly functioning process. … Real “IBP” as it were – is a level of engagement and participation in the process that goes beyond the functionally necessary… it is a driving force in the organization …

    To me, S&OP is still the noun and IBP is the “verb”. I loved the OW Slide heading .. that was “S&OP is Integrated Business Planning”.

    I would only enhance the wording a bit to be a touch clearer…. “A mature S&OP process will lead to integrated business planning”

    In my company we do not call the S&OP process … S&OP… we call it SEC (Sales Estimating Committee) … I am not bothered by the name IBP — I am bothered by the disingenuous portrayal of IBP as something new and fresh. It is old thinking repackaged.

30. Thanks guys, our positions are clear. 3.5 years ago I tried to describe the planning nirvana in https://supplychaintrend.com/2012/02/06/the-four-phases-of-ibp-2/
    , a blog later published in a finance – yes a finance – magazine

    I’m now finalising an article that takes my concept even further and provides a planning framework to support a company’s vision.

    My plan is to engage the strategy community with this article. Strategy is trying to solve the same problem as us with the office of Strategy Managenent (OSM), a concept proposed in 2005 by Kaplan & Norton. Those communities don’t know IBP and S&OP even less so.

    If we start talking to other communities we need to have a good definition for what we’re trying to achieve or look like fools. I can’t start talking to them about SEC, SIOP or S&OP my gut says. They will say WTF???

    My article doesn’t use IBP, it just mentiones integrated planning. I will however use the definition as it stands now, as I think it is the best definition to describe what we’re trying to achieve

    Thanks for all your input. I believe we need more of these discussions

31. You have a great blog going here Niels! The one topic I have seen touch above but not gone into too deep is if IBP replaces the S&OP process at companies in the maturity journey or is it an additional business process? I just can’t see having them both on a monthly cycle with the amount of limited resources and volume of meetings most organizations have these days. If it’s an additional process, I could not see both of them being held monthly. Would the IBP process be a quarterly one? Has anyone seen both in place at one company? I’d be interested in hearing the group’s perspective on this.

32. Thanks Steven,
    I don’t think we need different names. What we probably do need is different operational rhythms otherwise the scope becomes to big in a month. For example review your operational plan monthly, your rolling forecast to EBIT bi-monthly and your strategy quarterly. This will also be industry specific.

    The strategy guys (McKinsey, Kaplan & Norton) often suggest a quarterly rolling forecast and strategy review. In supply chain we’ve gone the other way around and I read about real-time S&OP or on demand S&OP. That’s the wrong direction for me.

    The Office of Strategy Management (OSM) as proposed by Kaplan & Norton in 2005 describes integrated planning as I see it and it comes close the definition we came up with in this blog.

    Have a look at the slideshare from this Strategy Phd. http://www.slideshare.net/ArnoudvanderMaas/building-the-strategy-management-office?qid=852655de-9125-4c7f-92d1-8aeecbc13c03&v=qf1&b=&from_search=1

    Based on OSM, he talks about the strategy management process in 5 steps. The last 3 steps are what I want to achieve from integrated planning perspective and what I described in the four phases of IBP. https://supplychaintrend.com/2012/02/06/the-four-phases-of-ibp-2/

    He also suggest 3 types of meetings; strategy review meetings, execution review meetings & operations review meetings. Again this is what I believe integrated planning is. He describes the same, just from a strategy perspective.

    No offence to the supply chain background of S&OP, but we have to get out of our same old supply chain bubble and started talking to these type of guys to get this thing further. That’s why I reached out to this person.

33. Neils

    Alot of long worded responses done with what appears to be good intentions but what is missing in all this WHAT IS PROBLEM you are attempting to solve ?

    I would state the REAL underlying problem in 90% of the clients we see at DCRA Inc. is they believe GAAP or IFRS accounting via their ERP systems are the way to manage a global manufacturing supply network – period. The know but don’t fix the fact that these ERP systems are grossly manipulated, backwards looking and do not not the ability to time phase material plans cross organizations without huge buffers of inventory and capacity.

    They also are reinforced by the training of most accountants who focus on overly precise metrics to drive controls but miss the accuracy of the whole system. My favorite is the warehouse manager so proud of how much inventory he stores, accountants proud of how he so precisely measures said inventory but the system missing that the warehouse could largely be bypassed by flow of inventory to customers. (e.g. Radio Shack vs. Amazon)

    Thus what you need is in reality an “alternative financial and operational measurement system” that will be recognized and utilized by major players in an enterprise.

    If you believe the above is the REAL problem then we can intelligently decide how best to make the introduction to invoke CHAGE ? How to engage those who think they already have it all figured out with ERP, what to call the program, the change initiative, the systems, how to measure, how to prove, how to get top down and even more important bottom up support !

    In our experience at DCRA Inc. and my experience decades prior with large strat consulting and leading supply chain technology providers this program is best defined in business terms of strategic advantage, cashflow, working capital consumption and customer service improvements ! Then slip in an elegant measurement system that is very difficult to corrupt and vary narrowly defined ( S&OP with time phased material planning) under the cover of darkness. Show some results and momentum will win the day.

    Starting with either S&OP or IBP as the initiaitve is a looser in 99% of the cases I have seen – period. And yes 99% of the so called S&OP technologies are also losers as they are big, complicated, expensive, IT investment traps as they are there only to cement in the change you make but are not slick partners in change management to redefine thinking and build support !

    See more ideas, case studies and approaches at sopbook dot com.

    The more things change the more they stay the same

    Jon

34. Hi Jon,
    You make a very good point to ask what the problem is. The problem is a simple question and the same for every company in the world. How do we fulfill our vision?

    The question I’m trying to solve here is; ‘what is the best way to continuously plan, monitor and control my strategy and budget, in order to support the achievement of a company’s vision?’

    Or maybe even shorter

    ‘how can planning support the implementation of a company’s vision?’

    This can then be followed by; How do we call this? What would be its definition? etcetc

35. Neils

    With all respect for your good intentions I would still say the whole S&OP / IBP conversation comes across to much as a solution looking for a problem to solve.

    I personally and professionally am a 100% supporter of the “magic” an S&OP culture followed by true S&OP enablers can and will accomplish. Problem is have NEVER seen a business person looking for S&OP. They are looking to specifically
    – create more profit
    – take less risk for more return
    – spread their working capital further
    – Improve customer service
    – Strategically leap around competitors
    – Create profits even in a “sign wave” style up and down market
    – expand their fulfillment and sourcing using 3rd party resources but maintain control
    – etc.

    The reality is a tightly crafted time phased enabled forward looking planning process (S&OP) can and will support if not drive much of these problems are documented and goals set in stone. But cannot be sold as S&OP but more a business improvement effort defined by the measurement of results. Not so sure about the broader, much more vaque, must more corruptible IBP definition as I think I am 100% agreement with Patrick and others that state it is a ploy to sell more confusing software and consulting ?

    So my recommendation to those who think S&OP is the anwer start the dialog with PROBLEMS and Goals to solve – put a stake in the ground or real results no platitudes like benefits of planning. Planning is a process like Order fulfillment, like financial reporting and when presented as a solution looking for a problem not anchored to real ROA, real financial and other measurements can be more a distraction then a solution.

    In my experience 90 percent plus of business decision ONLY engage when you say … (as an example) take this path and can cut out 50% of your working capital and improve customer service satisfaction from 90 to 99% and expand your product breadth to strategically out maneuver you 3 largest competitors !

36. Jon,
    we’re taking different angles here. I’m not trying to solve a problem for my or your customer. I wouldn’t dare to bore them with this conversation. I’m more taking a theoretical approach.

    IBP doesn’t have any scientific or academic leg to stand on. Somebody just came up with this terminology and now everybody is using it without understanding what it is.
    A whole world is created around it.

    I find that unbelievable and unacceptable. That’s not how we make progress in this world. IBP doesn’t exists in the academic world or any other world outside the supply chain world. And even in the supply chain world we don’t agree what it is. A bit of a joke to be honest.

    I want an unbiased, academically sound, maybe even peer proven definition for something that connects a company’s vision, strategy, budgeting and execution through planning.

    I looked for it but have not been able to find it. The aim of the blog was to have a go at that definition. Once I find it, I’ll shut up, I promise 🙂

37. Neils

    No need to apologize you are providing a solid service to the dialog !

    I think we are saying same thing as to us the huge benefit of the S&OP term is it grounds itself to a type of problem (demand and supply balancing issue) and thus is much less vulnerable to distortion. It is also the part of global manufacturing and distribution that is generally not done or not done with a scientific method. In most companies is a mess of overriding and statistically invalid guesses !

    S&OP thus is slipping in a time phased MPS / DPS with a properly designed planning bill of material into the clients CURRENT demand and supply process. Our experience this is a HUGE winner and is VERY defined and measurable ! In essence EASY once the client sees the huge whole in the center of his bridge that he needs to fix. Our approach to the technology to support this is it works with ANYTHING and does not require client to uproot his basic demand and supply process… just add science and quantitative analytics to the question and answer dialog and reduction of cycle times to ask and answer the question. Can I make what I sell and can I sell what I make ?

    IBP as a term could be “Bob” or “Sam” or EIS (Executive Information System). It is so broad and so wide it can be and is widely interpreted to mean “WIHTS” is IBP. Or Whatever I Have To Sell is Integrated Business Planning.

    So you are right defining IBP is an “academic exercise” 🙂

38. There is a brilliant point in all this …. and it is about the lack of academic standards in S&OP. The fact that there are no academic standards – allows anyone to come in and change the definition or name of S&OP. This hopefully will change.

39. Patrick

    Good point ! So lets define S&OP ! Lets define it very narrowly so it can work ? So it can be a driver for value and change ?

    You can see my narrow definition above… restated here

    “S&OP thus is slipping in a time phased MPS / DPS with a properly designed planning bill of material into the clients CURRENT demand and supply process. Our experience this is a HUGE winner and is VERY defined and measurable ! In essence EASY once the client sees the huge whole in the center of his bridge that he needs to fix.”

    Jon

40. Unfortunately Jon – this needs to be primary research done by academics, and then submitted to peer reviewed journals. I know of people that have done so in the past, without success. There are currently efforts underway (I have been asked to review some of the work) … but submission and acceptance is the process to get this the proper level of academic review.

41. Patrick:

    If defined by academics I would suggest really needs to be defined from a finance / cashflow / working capital management perspective first – and then the S&OP planning process tied back to finance and operations.

    For example to continue discussion something like the following. I will post a more detailed examples, user manuals, job guides on our blog soptime /and or sopbook.com

    So here you go a draft to chew on ! My contribution to clearing the confusion for ALL

    In the world business now operates (Flat) there are often grey boundaries between enterprises that are often described as the “extended supply chain”. In this “flat” world the ability to match resources of supply with true demand can get buffered, not counted, wasted, over ridden in many forms using traditional accounting or even specialty enterprise tools creating enormous waste, missed orders etc.

    Thus in this flat extended enterprise there is an amplified need for a current and forward horizon planning, operational, measurement system that can measure (inventory, cashflow, working capital consumption, order book etc.) not just across functional groups within AN enterprise (eg sale / manufacturing) but increasing cross enterprise / function (order fulfillment to contract manufacturer to component supplier) across financial business entities.

    We at DCRA Inc. define S&OP as this financial and operational planning and process most companies and especially cross enterprise virtual fulfillment / manufacturing operations require and unfortunately majority lack.

    We at DCRA Inc. define S&OP as that enterprise to cross enterprise process that uses a scientific based time phase lead time algorithm in their manufacturing and distribution planning which is driven by an operational planning bill of material. The planning bill of material is not the same as an engineering bill of material it is generally the components of or finished good said enterprise controls. Thus are the functional building blocks of a complete order of an item, group of items or build to order product.

    {insert simple planning bill with exploded time phased component diagram here}
    Figure 1

    The S&OP planning process can run at ANY frequency or as “real time” as the appropriate, demand, supply, inventory, lead time information can be synchronized. The more often the more strategic and lean the enterprise can run ! More profit !
    {insert Figure 2 planning frequency diagram here}
    Generally a weekly S&OP plan with updates to address major disruptions is state of the art but by no means is it optimal. S&OP REQUIRES technology enablers for this time phase planning process but is NOT and should NEVER be considered a TECHNOLOGY or software or cloud software PRODUCT. Optimally done the technology enabler should be capable of seamless linking to ANY and all existing enterprises existing order, fulfillment, manufacturing execution,accounting, order management, financial planning, transportation and other functional processes a business currently utilizes.

    This concept of the S&OP technology enabler being compatible with ANY other enterprise system is not an academic point it is critical to SUCCESS as with an extended supply chain / virtual business there is NEVER the ability for one organization to dictate ONE common SYSTEM. Additionally even if they used the same “product” the instance would be an asynchronous loosely coupled nature and thus would be impossible to reconcile disjoint plans. So this we all use the same ERP plan is a non starter and should be avoided from day 1 and specifically identified by the S&OP definition.

    So there is a START ! But is a start and a definition we developed 20 years ago, have applied very successfully to many clients, patented key parts of the enablers. Run the S&OP in all sorts of industries and at all sorts of planning cycle times. I think it is also a definition most I have met who have really deployed a real S&OP success agree with ! Those selling an OLAP product, and ERP module, a supply chain CLOUD or a general consulting solution don’t generally like as it does not let them call their product S&OP ? Most of these folks want to use S&OP as a strategic entry point to trap you into their oozing blob of function and never let go ! Be careful !

    We find it is unfortunately contrary to the economic interests of many if not MOST who want to sell you and S&OP product (software, cloud etc.). We think this is because there is not a true definition of S&OP and because it does not fit typical VC, big software, IT synchronous system models that every software company product business models and their financial backers cling to ! To be clear it is not Microsoft WORD !
    S&OP really requires a SOLUTIONS approach that defines a process, coaches the process but also introduces technology to save people time and consistently apply science to the decisions.

    We KNOW from experience leadership of an organization MUST be informed so they can properly pick the path the plan to proceed with ! You have to pick… do you want financial, operational success then you have to use a SOLUTION definition of S&OP very much like what we define here.

    or

    If you want to plug a product into a hole and declare functional success you could do whatever you want and call it whatever you want ! – but it will NOT create the value of S&OP ! It will not be S&OP and from what history has show often ends up being a huge distraction with a negative ROA and serves to confuse and divide the top down bottom up cooperation in a a business vs. unite them into a team !

42. Jon –

    All good thoughts – but I am not an academic or talking head.
    I think we need to an SCM professor somewhere and have them publish a paper on S&OP as a process (with definitions)….

43. I described the lack of academic background in my article ‘the rise and fall of S&OP’. I send it to the journal of business forecasting.

    It was their opportunity to share this lack of solid S&op foundation with the global planning community and guide a proper conversation. They found the article ‘interesting, but not renewing’. A missed opportunity.

    We have to make that noise so that an academic gets interested and steps in to this mess

44. Great to see we are all aligned on the need for clarity/renewal of core problem and solutions. I think Toyota Production System said honestly confronting a problem is the first step in solving it. That’s always my favorite moment in any group discussion.
    In my observation S&OP has traditionally been viewed a “too practical” subject by academicians, which unfortunately most of whom have also had minimal real world experience with, and hence barely any of them touch it.
    Following this thread I still don’t see any hard arguments against S&OP as a key sub-process and “VCP” (Value Chain Planning) as the umbrella process characterized by adjectives like Integrated, End to End and Collaborative.
    I also think the word “Value Chain” is a powerful noun as it immediately calls into mind the link to Porter’s value chain strategy (and more modern variants thereof such as Treacy & Wiersma and my own expansion of that), without needing to resort to long-winded footnotes to explain that, yes, of course your tactical plans are intended to support your strategic plans, as well as drive lower level detailed planning.
    I also made a rough draft for an academic paper on this similar hot topic and based on that plus these discussions would propose the following:
    GOAL: to materialize the organization’s vision.
    METHOD: by optimizing the four-tiered cycle of Value Chain Planning as follows:
    i) develop and review – strategic value chain plans
    ii) plan and monitor – tactical value chain plans (which includes S&OP as one component, alongside portfolio/customer/demand/supply, etc plans)
    iii) schedule and maintain – operational value chain plans
    iv) execute and control – real-time value chain plans

    Incidentally the four planning tiers I note here I also proposed and were accepted as the naming convention on the relevant global BI reports by the world’s #2 largest beer company some years back. That said, if anyone has logical arguments, questions, comments, etc over their use, please feel free to shoot.

45. Conrad

    You are correct in describing S&OP within a broader VCP or full Business Process Framework. We have swim lane diagrams for various industries and outsourced industry models defining these processes we use often to define context. To define ISO 9001 certifications in and around this discussion and to evaluate technologies in support of said processes.

    However, I would amplify “in my experience” of all the processes S&OP is exponentially the highest value for many reasons. So it sort of makes sense it is the harder one to make happen !

    Good thoughts, good frame work and in your approach I guess I really do not see much need for the IBP term. IBP as a term does not add to clarity and focus but rather seems to detract ? Others may and will disagree and as always the discussion Niels and all of you have participated in is excellent !

    I have some very solid relationships supply chain / MBA / Industrial Engineering faculty at various schools and maybe we can get some academic partners to participate ! I have actually worked with several of them over last 10 years to encourage them to create an entire specialty around S&OP.

    The phenomena is they see the need but contrary to what you would think they follow industry practice rather then engineer and design practice from first principles and research. Enough time has passed now and there is so much business interest in the value created by S&OP etc. timing should be good to make it happen ?

    To Patrick’s point a leadership voice of objectivity linked to value creation in and around S&OP is needed !

    Jon Kirkegaard
    President DCRA Inc.
    http://www.sopbook.com

46. Conrad,
    I like the four steps you describe. I wrote an article ‘how to plan with a company’s vision in mind’ that covers the first two and send it to the JBF. After they respond I can share it with you guys. I don’t know many academics, but will reach out to some I’m connected with. As Jon said previously, let’s keep pushing

47. Hi guys,
    I updated part of our conversation on wikipedia under ‘Criticism’. I refer to Patrick’s IBP is a hoax, Dean Sorenson answer to that, the lack of academic definition from my article on the rise and fall of S&OP and the IBP definition we came up with in this blog

48. @Niels: good job on updating wikipedia!

    @Jon & Niels: value academic input, but note also the existence of the industry process taxonomy called APQC, from “idea to market”, “market to order” and “order to cash” business process fame. The academics may feel pressured to try and trump this long standing and widely recognized taxonomy. Last version I checked I didn’t recall S&OP (or IBP) being called out as a part of it… if that’s still the case, perhaps the case could be made to lobby for it’s inclusion?

    Also in the context of APQC, I am quite certain the use of the term S&OP to describe all tactical, collaborative, integrated planning activities including but also beyond sales and operations will not hold APQC nor academic sway. It’s like using a key component like “V12 engine” to label an entire Ferrari. It quickly leads to confusion of non-experts – and sometimes even experts!

49. Hi Niels –

    Should you add the IBP as a Hoax article reference to the Wiki … I don’t update Wiki’s … but it might add more color to the overall criticisms

50. @ Conrad, great suggestion to lobby for Integrated Planning Process to be included in APQC.

    With regard to the call for adamic input, any critical thinking on the subject would be welcome. Having said that, there is enough empirical evidence around, in my view, to confirm the need and benefits of IBP without the validation from the academic world.

    An area of research on the topic, that I see is would be beneficial, is to outline the requirements on an organisation to meet a particular level of maturity of planning. If the highest level of S&OP (IBP) is like running a Formula 1 team. That requires highly sophisticated equipment using specialised fuel, a team with a racing culture, in-depth knowledge of race tactics, equipment tuning and racing skills, that runs like clockwork. Oh and the financial means to back it up. And the lowest level of S&OP is taking the bike around the track. Each level has it lap times (the speed to review how the vision materialisation (nice one Conrad!) is tracking and what the plan is to plug the gap)
    If the requirements per level of maturity would be outlined and understood by an organisation embarking on the IBP mission, expectations would be met a lot more and I would dare say, with it comes a higher adoption rate of IBP. Which I assume is the ultimate aim for the call for academic research?

51. @ Conrad good thinking on the APQC, I don’t know that very well myself

    @patrick under criticism there first reference I make is to your article ‘IBP is a hoax’

    I never updated a Wiki in my life until yesterday

52. @Freek: a commendable idea, but since Gartner already claims to “own” the maturity levels, I think in reality academics are afraid to burn their fingers trying to compete there, or with APQC’s process definitions. For example, I’ve seen the resume of one business process professor with over 100 published articles – but not a single one of them on S&OP or IBP!

    @Jon: I agree the planning puzzle needs more analyzing. I also think the puzzle never makes complete sense until it’s dissected into the cycle I mentioned, and which incidentally supply chain “Shaman Lora” also often refers to, e.g. here: http://www.supplychainshaman.com/supply-chain-2/e2e-really/ The cycles need to be distentangled so you know what frequency and granularity with which to approach any planning issue.

    @All: in the end, the planning puzzle is quite clear in my mind at least. Each company has it’s own variations, but the main planning processes are usually more similar than different. I guess the main issue is to agree on high level naming conventions and secondly break up the micro elements into discernable, bite size pieces instead of the tendency promoted by some advisors to give every MRP run or sales order confirmation a vague blanket label like “S&OP” or “IBP”.

53. ps? Incidentally Lora applied the umbrella term “E2E planning” in her article, not S&OP or IBP…or VCP for that matter.

54. @conrad thanks for your ideas and contribution. Good stuff

    The planning puzzle is getting pretty clear in my mind too. The four steps as mentioned by you and Lora have to be part of that. They are not new, but they need to
    be incorporated in both a top down and bottom up description.

    I just wrote an article from a top down perspective which discusses a very high level framework on what it means to plan with a company’s vision in mind. I’ll hear in a week or so if JBF wants to publish it. If so, we might be able to leverage that in the conversation we’re having.

    I actually don’t think it needs a lot more analysis. I think we know 99% of the stuff. All we might need is some empirical validation, agree definitions and a framework. Preferable for me an academical push. Getting agreement is the main issue.

    We are early adapters in this conversation. Our job is to keep pushing it until it reaches critical mass, the tipping point and there is no way back and the whole planning world wants a revolution!

55. Well all fascinating dialog … seems like we all agree there is not enough clarity or attention / education to business leaders of S&OP ?

    Seems to me best way to reign in the 90% of business leaders / excecs to S&OP is to speak in their business value measurement terms !

    That is why I sort of 100% believe the real value of S&OP is an alternative financial system that is more simple, not easily financial engineered and forward projecting not historical in its design.

    I had quite the busy week but will reach out to a few university engineering / supply chain programs for interest ! What I have found in the states is the following paralax with university programs as they look to “follow the money” not do real research.

    1. Proper home for alot of this is in an Industrial Engineering program but very few think enterprise let alone extended enterprise ? Hau Lee at Stanford does a Don Ratliff used to at Georgia Tech ?

    2. MBA programs are to focused on financial engineering vs value creation. Finance junkies get it cold but want to go to leveraged finance not operations ?

    3. Supply Chain programs for most part are 90 percent focused on warehouses, and transportation sort of teaching the basic skills to work in these fields and S&OP just to “intergalactic” for them to comprehend.

    So in my experience speaking to about 20 programs about interest is you need a two part sponsor
    1. An MBA finance Wharton type focus on the need an education on how to evangelize the need… sell it to the top down owners / shareholder fiduciaries etc.
    2. A partner engineering program into algorithms with IE or manufacturing / Systems engineering to run the program… manage the tools and train the bottom up users

    S&OP is to much for most professionals to handle singularly as requires both the top down finance skills and lingo and bottom up operational clarity and integrity as well as the analytical skills as well unflappable mental toughness to persevere through the obstacles that are thrown at you.

    Probably more reason why a “clear” definition of S&OP in terms of metrics and process will help many?

    Jon Kirkegaard
    http://www.sopbook.com

56. Hi Niels, Patrick, Jon & Co.,

    Just a quick heads up to see if anyone noticed a rather interesting update to the IBP wiki page as follows “In return to this criticism, it has been pointed out that IBP is not a marketing hoax, but an important part of Enterprise Performance Management (EPM) system.”

    The comment had a footnote direct link to an article by Dean Sorensen, an IBP-er who has apparently approached IBP from the finance side rather than the operational side (in contrast to most contributors to this discussion). He interestingly sees S&OP as a key plug-in to EPM (Enterprise Performance Management) systems sold by numerous vendors. EPM in turn focuses on reporting on financial and strategic (balanced scorecard) indicators to Executive management.

    Reviewing some of Dean´s published content I uncovered four distinct capabilities which, from an S&OP viewpoint, are not covered by S&OP but are relevant for the MBR meeting (the last review meeting of “advanced” S&OP, where operations and finance and strategy meet)…
    1) Integrated variance analysis
    2) Scenario planning based on a full set of financial statements
    3) Balanced Scorecard KPIs
    4) Pro-active financial risk management, inc. foreign exchange exposures

    Based on Dean´s rather thorough analysis, as well as his highlighting of the reality that many Executives tend to first turn to EPM systems rather than S&OP systems for business guidance, he makes a stronger case that IBP equals EPM + S&OP, at least from a systems stand point. And that IBP requires both inputs to realize strategic objectives.

    In fact I would also argue that Dean presents the most compelling case I have seen to date for “IBP” (no disrespect intended to anyone). Even a hardline S&OPer like me is tempted to accept that the *paradigm shift* from S&OP to IBP may be feasible.

    I think until now this proposed *paradigm shift* has been far to vaguely specified before now, often via marketing brochures full of motherhood phrases, which has rightfully triggered the strong reactions of those not wishing to be sold snake oil. After all, best practice S&OP always has been integrated with finance and strategy to some degree, e.g. evaluating demand plans in both units and dollars.

    The question now is whether the proposed step up in the degree of integration with finance and strategy – as listed above – warrants a name change and general operational side acceptance of a *paradigm shift* in the S&OP process.

    … Any takes on this?

57. ps, here is the direct link to Dean´s article…
    http://www.industryweek.com/software-systems/integrated-business-planning-not-just-marketing-hoax

58. @ Conrad – and with respect to Dean’s comments.

    Variance analysis — everything from ppv to operational variances to profit … etc. would be handled in S&OP under the proper step or MBR or IR. Nothing new here. It simply requires in-depth knowledge of S&OP

    Risk (currency, commodity etc etc .etc) IR or proper step meeting .. reporting to executive review.

    Balanced Scorecard … really? … new to S&OP? Holy cow do people not understand the process.

    Scenario planning should always take into account financial impacts…. new to S&OP … nope.

    There is a home …. in classic definition … for most planning activities in S&OP….

    It does not matter what you call it if you don’t understand what it is …. everything mentioned is part and parcel of S&OP. Sorry for pooping on this parade…

59. Conrad,
    I wrote the whole wiki paragraph under ‘criticism’ referring Dean, Patrick, myself and this conversation.

    I’ve been in contact and have shared ideas with Dean for over 3 years. He sought my input for his ‘IBP collaborative’. I know he is releasing a news article as I had a pre-read.

    I always thought Dean’s strength is his financial angle as the IBP conversation is too supply chain biased. So I see him as a real ‘asset’ to take the IBP conversation to the finance community. Less for the strategy community. I think thats again a different angle then what I’ve seen from Dean

60. @ anonymous
    First of all I would appreciate if you sign with your name. A decent thing to do in a conversation like this.

    I agree with you that all the things you mention are not new to S&OP. Although a strategic BBS as defined by Kaplan & Norton is not really part of classic S&OP and not a lot is written about it. Properly integrating that can be a good start to align, measure and Control strategy progress.
    Dean’s perspective to bring IBP under the umbrella of EPM is new as far as I know and although maybe too financially focused it is an angle I like. If we add to that angle of ‘the office of strategy management’ as proposed by Kaplan & Norton, we include strategy execution better.

    And that’s exactly my argument. We need to start having conversations with the finance and strategy community to take IBP further. Or, as I dramatically mention in ‘the rise and fall of S&OP’, it will loose relevance and die!

61. Hi Niels and anonymous,

    When I (and I think Dean) refer to Integrated variance analysis, I also mean for “non-operational” cost centres such as facilities (rent, utilities, security, cleaning, etc), business travel, lease cars, as these were all aspects that occupied management concerns during my time in Finance.

    As for treasury management issues (perhaps a clearer umbrella term for managing forex, commodity price risk, liquidity, funding, etc), this is a probably even more core concern of management yet really doesn´t touch stripped down S&OP at all as again it´s largely non-operational.

    Both of the above are why I think we need to be clearer and more unanimous that the last meeting review in S&OP be merged with “MBR” and not merely Executive S&OP or Global S&OP as the apparent majority use now. Because otherwise management still needs a separate MBR to address the above issues and you have parallel processes, splintering and ineffiency. So in that sense perhaps Dean is correct in suggesting S&OP feeds into EPM – at least at the MBR stage.

    As for Office of Strategy Management, I´ll have to re-read that, but wonder if it´s widely applied yet and/or whether it has – or requires – software tool support?

    One common strategic theme that I have noticed missing in many large companies – invariably to their bottom line detriment – is lack of clarity on strategic KPIs versus the competitive capabilities priority of quality (Q), cost (C), delivery (D) and service (S). E.g. for one company I worked for I translated the apparent business strategy into Q > S > D > C for my staff, so they very clearly knew how to make “trade-off decisions” in their day to day work. Funnily enough, once they knew what the goal-posts where, my team then proceeded to break every supply chain KPI record in corporate history and maintain that for years. Even with only Gartner maturity level 2 systems support.

    I further note QCDS thinking is heavily emphasized in procurement certificates (e.g. CPM), but I see precious little of it elsewhere, not even in boardrooms. And then I see one quality oriented company flounder due to chronic quality issues being subjugated a lesser role behind endless marketing campaigns, another quality oriented company flounder due to not upgrading a critical component until products started exploding – first in reality and then in the media – directly causing the loss of market leadership – and a delivery oriented provider flounder due to staff incentives which place fee per hour revenue (directly incentivizing slowness) above the agile delivery required to generate references and new customers, subsequently losing major market share, etc. And then I scratch my head.

    Anyway I will have to check whether QCDS thinking is part of the Office of Strategy Management. Because I do not know of a more direct way to translate strategy into execution than this.

62. Apparently I did something that made me anonymous.

    @ Conrad – you wrote a lot from strategy to non-operational costs to treasury functions, to procurement and total quality. So … I agree…. and again … it can all fall under S&OP. That does not make IBP a worthy moniker. What happens in the Executive Review is pretty much at the discretion of the leadership team – and I have witnessed countless morphs of the agenda …

    In fact, many of the serious implementers or practitioners in S&OP will suggest that you find a monthly “business review” meeting, and begin to convert that meeting into an S&OP Executive review.

    Of interest to maybe only me … is the “right sizing” of the S&OP process. Too many companies try to do a full sprint when they lack personnel, systems or process maturity or size. I am not a believer that every company benefits from an overwrought and over thought S&OP process. Sometimes a mid maturity process is the right goal given the supply demand and financial characterics of the company. … it makes all of this super high maturity process description everyone is describing accessible only to a few hundred large multi-nationals.

63. @ Conrad. I’m a big fan of being approximately right rather than being precisely wrong. In the longer term horizon we don’t need to calculate all those variances in detail. The finance function loves that and give them the opportunity to support that with a system and they will get lost in all their ppv’s and real time reporting. Rather have a good conversation on the top 3 risks and opps in the business.
    The office of strategy management is a paper written in 2005 by kaplan & norton and available on-line. It is not the final answer to properly include strategy in a periodic management review, but it has overlap with IBP and therefore a great conversation starter with the strategy community

64. @Patrick and @Niels, thanks for these great answers! And… do I even detect a convergence here between the concepts of “right sizing” and “roughly right”?
    Anyway, sometimes by taking an argument to an extreme, e.g. considering when and where to analyse facilities/travel cost variances and treasury exposures, new truths can be revealed.
    My 2015 takeaway is this: each organization can choose whether to “loosely couple” or “tightly integrate” their S&OP with its Strategic S&OP Review, a.k.a Deming’s ‘Plan’ and EPM processes (inc. BS review) with its Mgmt Business Review, a.k.a Deming’s ‘Check’.
    If loosely coupled the processes retain their separate names, if tightly integrated – and that especially means systems – then IBP is the accepted naming. So the theory is clear enough.
    However, back here on planet Earth I note Patrick says only the largest of companies could aim for such a full integration, a.k.a. high maturity. Now with my experiences of three Global 500 companies, not one of them aimed for an IBP as per the definition above. Even though two of them literally millions on their business transformation programs, with armies of ARIS modelers, S&OP/IBP consultants, IT implementers, ERP specialists, BI gurus, Cloud/System Integrators, etc. I additionally worked with a fairly ambitious IT company which, when nudged by a noted S&OP/IBP consulting group, fainted at the thought of creating this IBP platform as a pre-defined feature.
    So, I would even question whether any company has yet achieved Maturity Level 5 of S&OP/IBP (as defined above)… and if so, were the incremental benefits versus Maturity level 4, actually worth the cost in time and effort?
    So… perhaps in the future, if and when the system integration is pre-built into available softwares to support all of this, then true level 5 IBP maturity will be a reality and the however small or large incremental benefits will be realized.
    But until such times, the vast majority of companies – even the Global 500 – are likely best served by a well designed & implemented S&OP process, a well designed & implemented and with well designed & implemented “core” process/system touch points between them, i.e. “loosely coupled”. I.e. importing Budget targets from EPM into S&OP, monetizing demand plans in S&OP and exporting them to EPM and inviting Finance staff to assess S&OP capex scenarios against projected KPI suites. That’s it. For me at least.

65. Happy new year guys and thanks for all your contributions. It’s very useful for me and I also really enjoy these thoughts and little debates, so thanks again

    My motivation is and always has been to understand things better and make things better. I like to write and share thoughts. If that contributes together with your comments a tiny bit to help somebody, that’s great and all I wish for

    My blog views doubled in 2015. Let’s keep doing that for a couple more years and we might make an impact 🙂

    Thanks again
    Cheers,
    Niels

66. Dear Neils,

    Thanks a lot for sharing this valuable information.

    We have been implementing S&OP for years. While, to further improve the company’s performance, we have evolved S&OP to SIOP with more focus on inventory optimization.
    Now, we are considering to make a proposal to the top management to evolve the SIOP to IBP, like others companies.

    However, the existing difficulty is, we could not explain the difference between S&OP and IBP to Top management well. We could not provide expected merits by evolving S&OP to IBP.
    With this headache, we would ask for your great support. That is, could you please explain more or provide some cases, survey result to show the difference between S&OP and IBP?

    As you mentioned, 47% replied there is difference in your survey. What is the evidence for their conclusion? Could you please show such information？

    Regards and thanks,
    Hui Wang

67. Thanks for your comment Hui. Whatever abbreviation your company uses to describe integrated planning, I wrote a blog describing 6 elements of highly mature integrated planning.

    https://supplychaintrend.com/2015/10/13/the-6-ultimate-signs-of-sop-maturity/

    Once you master these elements your business has a periodic check on the budget, strategy, resource allocation, business risks and use effective behaviours.

    These elements must entice your senior leaders. If you need further help, don’t hesitate to contact me at niels@truebridges.com

    Me and my business partners can help you establish these advanced S&OP elements anywhere around the globe.

    Cheers,
    Niels

68. Pretty good article!

    I work for an organization that has the S&OP implemented, and we have some particular points on the execution and planning processes that fits better the current company’s business approach. I could say it is an IBP, once we have most of the elements highlighted in this article.
    I think one problem on discribe the differences between S&Op and IBP is that organizations sometimes started executing the first, take this one (S&OP) to the next level, but they are not able to realize it.

69. Thanks Wilson Junior,

    I just had a conversation with a multi billion dollar in industry. To them, I described IBP as:

    “An integrated governing model that continuously aligns, plans and measures your company strategy, with the aim to improve execution, company performance and employee engagement.”

    As long as the aspiration of a business is to continuously plan, execute and measure their strategy, they are trying to get to IBP

70. Pingback: The Components of Integrated Business Planning | Fwdtimes