How integrated business planning improves operational efficiency metrics
With the COVID-19 pandemic inducing large scale supply chain disruptions globally, the manufacturing industry is now focusing heavily on sales and operations planning (S&OP) and integrated business planning (IBP). However, S&OP initiatives are often hampered by large gaps between planned and budgeted sales numbers and actual sales figures. Additionally, incorrect forecasting methods and unexpected supply issues cause last-minute changes in production numbers. Traditionally, forecasting accuracy metrics such as mean absolute percentage error (MAPE) are used to measure the effectiveness of forecasting algorithms; in the process, failing to measure the effectiveness of the production scheduling or internal logistics factors. Ensuring sustainable manufacturing in the new reality requires manufacturers to adopt a demand driven material requirements planning (DDMRP) approach by decoding the correlations between MAPE and inventory turnover to improve operational efficiency.