This depth of understanding (and the partnership formed from regular collaboration) is critical to support effective and timely influencing across the business and is simply not attainable from the traditional annual planning set-piece, IBP also provides the Finance team with an ongoing mechanism to gain insight on both current performance and foresight on the medium-term outlook of the business. The combination of these features mean that as financial plans are reviewed at progressively higher levels in the business, it is very time-consuming for the finance function to develop a joined-up and comprehensive understanding of the financial plans being presented by local commercial and supply chain teams and also to ensure that there is good alignment from local through to global level, especially in the context of a time-pressured annual planning cycle. Josh Peacher is a manager at The Hackett Group. The sales and marketing team will have created a first draft of what is called an unconstrained consensus demand plan. For example, a commercial decision to shift promotion from one brand to another may have positive benefits on revenue and margin but may create negative consequences for inventory or operating expense. Instead, the goal of this meeting should be to create an aligned set of numbers that are close. This demands that finance teams develop a detailed understanding of business performance and combine this with good insight on upcoming risks and opportunities in order to provide sound guidance and challenge to business leaders in addition to their more traditional regulatory/reporting responsibilities. A recent study at The Hackett Group found that 90 percent of organisations reported that they have some form of IBP present today. This meeting incorporates the supply planning team and is utilised in order to provide a rigorous process for understanding capacity, raw materials needs, and how to optimally utilise resources and assets given the agreed upon consensus unconstrained demand plan. In our experience, one question continuously surfaces as a pain point: what is the role of the finance organisation in the IBP process? Josh Peacher is a manager at The Hackett Group. This meeting, the executive IBP meeting, is a forum to present the aligned forecasts to the organisational leadership team, receive recommended top down adjustments, and provides an opportunity to resolve any high level gaps that could not be resolved in the pre-IBP meeting. If IBP is on your organisation’s 2015 initiative list, start by taking a long, hard look at how the finance organisation is integrated and whether they are owning the correct elements of the process. Firstly, an effective IBP process can drive substantial financial benefits for an organisation, including increased revenue, reduced COGS, and lower overall inventory levels. Sales & Operations Planning (S&OP) and Integrated Business Planning (IBP) are often seen as fundamentally supply-chain centred processes which offer somewhat limited direct benefit to other functions, especially Commercial and Finance. Prior to meeting with the demand planning group each month, the finance organisation is responsible for the creation of a first cut gross and net revenue plan looking out around 18 to 24 months. You may hear a lot about a ‘one number organisational forecast’; however, getting everyone to agree to a single number is often more trouble than it is worth. This means that where there is any misalignment between the commercial plan and the required capacity, working capital and expense levels in the supply chain this quickly becomes visible. Corporate financial planning processes typically share common templates, milestones, high-level assumptions and top-down targets. This means that in addition to developing and updating an integrated cross-functional plan, IBP also provides the discipline to reconcile the evolving plan back to corporate goals and any deviation from the existing plan is clearly highlighted and discussed as part of the process.

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