CEOs and their executive suites are continually focused on two critical areas of the business—growth and risk. Growth and profitability are functions of the right side of the brain which deals with creativity and innovation. Risk avoidance is a function of the left side of the brain which deals with organization and control. The latest research by SCM World on behalf of JDA Software found that integrated business planning (IBP) unites and supports both of these strategic objectives through more advanced and automated business processes.
The road to effective IBP hasn’t been easy, however. It began with companies trying to bridge the gaps between the demand side of the business (sales and marketing) and the production side of the business. The two sides often worked in silos, with separate forecasts and plans that seldom aligned with each other or with the overall objectives of the company. To bridge this gap and give executives the information they need to make more effective decisions, the sales and operations planning (S&OP) discipline was created.
These original attempts at S&OP had their own set of problems, however, namely: they required a great deal of time and effort to gather all of the needed data and collate it up the chain of command; and as the speed of business continues to accelerate, this slow, burdensome process does not provide the timely information executives need to agilely respond to today’s rapid market changes. As the research report, Authority at the C-Suite: Flipping the IBP Cascade to Drive Business Value, shows, properly automating the S&OP process and integrating additional executive insights on risk and growth creates an IBP process that can solve these problems to agilely support both the creative and control sides of executive decision making.
The research found that 58 percent of the over 1,000 professionals surveyed say their IBP process is effective and impactful, while an additional 31 percent say it is a necessary evil. When you examine the data by levels within the organization, however, you find these responses vary significantly. Of those in the C-suite, 63 percent say IBP is effective and impactful while only 18 percent call it a necessary evil. In contrast, at the manager level where most of the work of gathering and preparing the data for executive review is done, more than twice as many describe IBP as a necessary evil. This strongly suggests that driving value from the IBP process depends on automation.
IBP and Risk
As world markets and commodity prices grow more volatile at a time when consumers are getting ever more demanding, the C-suite is faced with much higher levels of risk than ever before. The JDA/SCM World research shows a definite correlation between those companies with effective and impactful IBP programs and their ability to perceive and deal with risk. Specifically, these companies are:
- Over three times more likely to have real-time alerts across their supply networks
- Over twice as likely to have risk monitoring and control towers in place
- Over two and one-half times more likely to have dedicated risk management teams
By combining automated IBP programs with more advanced and automated risk management processes, companies can more readily balance growth and profit plans with the associated risks.
IBP and Growth
One of the main objectives of IBP is to support profitable growth. An important capability for understanding customers in order to drive profitable growth is segmentation and cost-to-serve analysis. Segmentation enables companies to understand unique customer and consumer attributes and tailor products and services more effectively to drive top line sales. Cost-to-serve analysis coupled with segmentation enables companies to group customers by their service requirements, profitability and strategic importance. Together, cost-to-serve analysis and customer segmentation enable the C-suite to make informed decisions that improve profitability while also aligning supply chain practices to customer expectations. In the research, in fact, cost-to-serve analysis and customer segmentation were two of the top three areas where executives said supply chain management can bring the most value to the business.
In today’s volatile marketplace, analysis of costs and decisions on segmentation cannot be static. The analysis must be done on a regular basis and decisions must be made rapidly. These decisions also must be closely aligned with corporate business planning. This can realistically only be done if the processes are automated. Not surprisingly, the research found that those companies with effective and impactful IBP technology were five times as likely to also have fully automated cost-to-serve analysis and were seven times as likely to have fully automated supply chain segmentation capabilities.
Flipping the Cascade
What automating IBP and related processes does for the business is to allow people to focus on the right things. Instead of spending countless hours on the drudgery and necessary evil of gathering and collating data to pass up the line for executive decisions, IBP process orchestration allows people to spend their time enacting the growth and risk management decisions made in the IBP executive meetings. Carrying out informed right- and left-brained executive decisions will drive a lot more value to the business than crunching numbers ever will.
To read the full report, access: Authority at the C-Suite: Flipping the IBP Cascade to Drive Business Value
For a deeper analysis of the research findings and to explore how they can be applied to your business, join the JDA/SCM World webinar on March 8th at 11:00am ET.
You can also access the press release here.