Digital transformation for supply chains is generating large volumes of data. Enterprises need a strategy to align the use of this data with their critical goals, while driving data simplification. This demands sophisticated supply chain planning processes that contextualize data, helping organizations optimally respond to changing market dynamics.
Integrated Business Planning (IBP), which involves the synchronization of commercial, financial, and supply chain plans into one holistic management process, is critical to supporting the evolving requirements of modern supply chains. An advanced form of Sales and Operations Planning (S&OP), IBP is seeing increasing adoption across the manufacturing, distribution, and service sectors. Enterprises that strategically deploy IBP programs consistently outperform companies that approach S&OP in a more tactical and less integrated manner, by an average of 20% in gross margin.
Integrated Business Planning (IBP) helps optimally manage opportunities as well as risks
Digital supply chain transformation is typically built around the following elements, regardless of the type of organization:
- Sophisticated supply chain planning processes
- A cloud-based supply chain platform
- Internet of Things or industrial internet
- Supplier and customer networks
- Big Data and analytics
Leveraging these digital forces to create real time business operations requires enterprises to connect devices, business processes, and enterprise data structures. With visibility across processes driven by predictive analytics using social media data or assembly line data from IoT different functions within a company can identify opportunities to maximize profits or mitigate risks to minimize losses. But investments in Big Data, predictive analytics and IoT will provide results only if an organization has a strong IBP foundation. With IBP, unstructured data from sources such as social media and structured data from connected devices, flow seamlessly across functions and help executives derive actionable insights to optimize decision making.
Figure 1: IBP delivers contextual information for real time digital supply chain operations
Consider an example of deriving insights into consumer demand based on social media data driven by Big Data and predictive analytics. Lets say a critical mass of prospective buyers on social media like a particular variant of a car or a certain color. If the manufacturer is able to predict that sales of that particular variant or color of cars is going to increase in the coming months, it can align sales and marketing strategies with the forecast. But, if operations is not aligned with this strategy, the supply chain will not be able to respond in time to the new sales strategy.
Similarly, consider the case of information from assembly line operations flowing through IoT devices. If there is a breakdown in a particular line that produces a certain variant of a car, the supply chain will not able to fulfill demand for that variant. If the supply chain information is not available to sales and marketing, they will not be able to take remedial measures to meet sales targets. IBP solves these problems by bringing supply chain operations also into the planning matrix.
Given the abundance of contextual information available today on weather, traffic, social media trends and demand signals, operations managers can leverage machine learning to instantly anticipate new opportunities and challenges, predict trends and optimize operations. This capability leads to real time business operations, resulting in fully transparent value chains.
Make planning a strategic differentiator with Integrated Business Planning
Digitally transforming supply chains is a journey, and not a one-time initiative. Initially organizations can start with incremental improvements. Artificial Intelligence, advanced optimization, and predictive analytics support robust and implementable planning, eventually helping organizations transition to IBP. When implemented correctly, IBP can help businesses reduce costs, enhance working capital and support growth, enabling competitive differentiation.