Building Supply Chain Capabilities for Integrated Business Planning (IBP)
Whilst Integrated Business Planning (IBP) is a cross-functional, enterprise-wide process the supply chain team is a critical contributor. The supply chain provides the foundation for executive decision-making across commercial, financial and supply chain issues. The capabilities by the supply chain required to deliver this key role are therefore a key success factor for IBP deployment.
However, most IBP deployments focus on the technical capabilities required to drive IBP (eg demand forecasting or supply planning methods) which only represent a small part of the overall requirement. My experience in leading and advising on IBP deployments suggested that 3 perspectives on supply chain capabilities should be considered in addition to the detailed technical competences required for execution of IBP;
· Mindsets & behaviours
IBP is a highly cross-functional process with many inter-dependencies. Supply chain practitioners need specific skills to connect and influence effectively in this environment. These skills include;
· Communication – building the ability to position supply chain issues in the context of broader enterprise challenges is a key skill. Whilst significant technical expertise and understanding may be necessary to build scenarios and robust supply plans, the supply chain team will typically be working with cross-functional partners with only a very basic understanding of supply chain operations. This means that communications to cross-functional stakeholders in IBP must be clearly linked and aligned with commercial and financial outcomes in order to build the engagement and understanding that supports decision-making. A key foundation for this is knowledge of the broader organisational context (see below).
· Cross-functional leadership – organisations tend to be structured on functional lines and leadership experience is typically gained within functions. However, IBP demands that key contributors to the process can work in partnership with colleagues across functions. In IBP, supply chain leaders need to build trusting and open working relationships with these colleagues and this can be particularly challenging in businesses where the supply chain team have traditionally been perceived as back-office providers. Building capabilities to form cross-functional workgroups, agree roles and ways of working and create coherent and aligned outputs for the IBP process is therefore an important development area.
· Stakeholder management & negotiation – a key benefit of the IBP process is that it creates transparency and enables rational decision-making. However, judgement and negotiation remains a key element of the process and often supply chain contributors to IBP will provide inputs for executive decision making. These inputs can sometimes be challenging (for example, where a demand trend is clearly behind a sales forecast) and it is important that these individuals are able to manage the engagement and influencing of senior stakeholders to ensure that they can bring the necessary challenge to enterprise decision-making.
As outlined above, a key requirement for supply chain leaders in IBP is to be able to position their insights and challenges in the context of the broader business. Whilst this demands specific skills in communication and stakeholder management, it also requires a sound knowledge and understanding of the wider business context.
My recommendation is that this knowledge should focus on 2 areas;
· Commercial context – Understanding the commercial challenges, priorities and strategies of the business is a critical foundation. This knowledge enables the supply chain team to translate and communicate their supply chain insights into potential commercial consequences and therefore engage and support their cross-functional colleagues through IBP. This knowledge also equips the team to proactively explore supply chain solutions and scenarios which drive commercial priorities. Demonstrating a clear understanding and alignment with business outcomes is a key success factor in the initial deployment of IBP as it quickly highlights the potential for joined-up analysis, planning and execution across the business.
· Financial metrics and goals – Enterprise decision-making is routinely measured against key financial measures (eg revenue, margin, working capital, return on capital etc). These measures represent the currency of decision-making and it is therefore essential that supply chain contributors to IBP understand the fundamentals of these measures and how they are potentially affected by supply chain proposals. Of course, IBP is also supported by the Finance team who will typically provide the financial analyses and evaluations of any proposals but it remains a crucial capability for supply chain practitioners to have a practical grasp of the measures used to support and evaluate business decision-making.
To leverage the skills and knowledge outlined above also requires the foundation of specific mindsets. One of the most common challenges for supply chain practitioners when executing IBP is that the supply chain is not traditionally seen as a strategic partner for the commercial business but as an arms-length, back-office provider.
In this context, it is very challenging for the supply chain team to adopt a leadership role in IBP workgroups, to communicate confidently or to manage stakeholders assertively. It is therefore important to note that, beyond skills and knowledge, supply chain teams often need support to build a mindset in which they are equal partners with their cross-functional colleagues. It is critical to shape this culture in which engaging with these colleagues assertively and decisively, is not just acceptable but is critical in order for IBP to operate effectively as a joined-up, well-informed process that supports rational decision-making.
A further related mindset consideration is that of empowerment. IBP is built on a principle of decisions being taken at the lowest possible level. In IBP deployments, there is often a tendency for many decisions to be escalated through the IBP hierarchy to senior executives. This overloads the executive meetings in the process cycle and also slows down decision-making at operational level (sometimes to the point that the IBP process is then rejected as it is seen to paralyse decision-making). For this reason, building an expectation of localised decision-making supported by clear decision rights and accountabilities is a fundamental foundation of IBP.
IBP is a proven approach for driving optimised enterprise planning and one which undoubtedly requires strong specialist technical capabilities in supply chain practitioners. However, deployment experiences show that a wider range of capabilities is required in order to build effective and sustainable IBP. Taking a proactive approach to addressing this range of skills, knowledge and mindsets in the supply chain team is crucial in leveraging their specialist contribution to support effective organisation-wide planning and execution.