The big picture: Challenging market conditions and volatility are driving the need for organizations to have greater resiliency, agility and flexibility to maximize profit while reducing risk.
Between the lines: FP&A, profitability, reporting and analysis, strategic planning, enhanced data analytics and process improvement are top areas where CFOs are seeking to improve capabilities, according to Protiviti’s recent CFO survey.
What’s new: Integrated business planning (IBP), a methodology to assess challenges and risks throughout the organization with transparency, can help business leaders navigate today’s challenging environment by integrating planning and execution across sales, finance, supply chain, sourcing, procurement and operations.
___ ____ ___
Wouldn’t it have been great if, through the worst of the COVID-19 pandemic, businesses could have modeled the impacts resulting from consumers in isolation and made their decisions accordingly? Market conditions clearly have become very challenging over the past few years. Business leaders have taken note and are beginning to understand that integrated business planning (IBP) is key to navigating market volatility and creating resiliency. IBP integrates planning and execution across sales, finance, supply chain, sourcing, procurement and operations to maximize profit and cash flow while reducing risk.
IBP programs often originate with financial planning and analysis (FP&A) leaders, who are increasingly called on to inform leadership with forecasts and business insights. In Protiviti’s recent CFO survey, FP&A, profitability, reporting and analysis, strategic planning, enhanced data analytics and process improvement are top areas where CFOs are seeking to improve capabilities. All of these areas are relevant to IBP and to generating better insights, not only to define near-term tactics, but also to inform longer-term strategic planning.
The volatility we’ve come to know drives the need for greater resiliency, agility and flexibility. FP&A can’t carry the ball alone. No single function will have all the answers – nor the data or business expertise – to address complex business forecasting challenges. But organizations that embrace IBP can address them by developing cross-functional collaboration and process and systems maturity to achieve visibility and transparency throughout the enterprise.
IBP is only as good as the foundation that supports it
One of the top challenges to succeeding with IBP is harmonization of functions across the organization, particularly between finance and supply chain functions. Over time, each function may have developed its own language or have its own variation in the maturity of its data, processes and technology. For IBP to be effective, all functions must commit to ongoing collaboration, overcoming cultural differences and understanding each other’s objectives and constraints. Creating awareness and educating the various functions about key priorities of each will help overcome the typical roadblocks encountered so the groups can build the integrated business plan together and revise the plan efficiently to respond to a changing environment.
Process improvement is also essential, because it results in defined handoffs between functions and ensures that all parties are aware of their roles and responsibilities. Standardizing and rationalizing processes and instituting a governance structure over the end-to-end IBP process will also help reduce or eliminate duplication of efforts. Developing maturity across functions helps support a strong foundation that is critical to IBP success.
Automation is key to increasing organizational agility, building flexibility in reporting and enhancing planning capabilities. Automation between systems reduces manual work to improve efficiency and reduce errors. Depending on the company’s technology strategy, various solutions can offer a foundation for IBP that provides timely, agile scenario-planning capabilities that are needed as part of IBP. Additionally, supply chain platforms can provide a unified view of enterprise data gathered from a variety of point solutions and provide a solid basis for automation. However, automating flawed processes is a common misstep, so it’s critical for organizations to examine and correct any outdated or imperfect processes before automating them.
Many leaders leverage digital-process twins as a mechanism to adjust processes and then conduct simulation and scenario modeling to better understand how processes will perform under changing constraints. These simulations can help mitigate potential risks and plan responses in advance of volatility-inducing events. Data analytics and digital twins are solutions that rely on quality data to deliver those capabilities. These solutions are more accessible now than some leaders may realize, and they often include user-friendly front ends so nontechnical professionals can simulate scenarios in natural language.
Some leaders look to artificial intelligence (AI) for its promise to deliver better information faster. Practical applications in the planning realm, however, are currently limited. While AI promises much in predictive analytics, IBP leverages descriptive analytics: accurate, real-time views that improve production planning, supplier communications, and production and distribution capabilities. Those improvements can’t proceed without a solid view of what’s happening today.
Automation, data analytics, digital twins and other solutions are only as good as the data they consume. Some leaders are choosing to establish centers of excellence that provide governance over data analytics and that take charge of reporting and data rationalization enterprisewide. Some include heightened business knowledge in the center’s skill set. These data analytics centers of excellence analyze enterprise information needs and identify data sources to meet them.
Forecasting challenges unlocked by collaboration
Business leaders today face a future that will remain volatile, but IBP is a methodology to assess challenges and risks throughout the organization with transparency. The power of this approach is realized when the functions develop cohesive forecasts together, supported by mature processes and systems and integrated, quality data. IBP unlocks deep insights to deliver the resiliency and agility volatile conditions demand.
