I have seen many companies, or better said organizational systems where the planning process is so much chaotic that nobody can implement something as is planned. Why? Because they don’t use some integrated business planning solution.
Sometimes growing the business from entrepreneurial eyes can be seen as a nightmare. Growing the business means more employees, more departments, more decision makers, more innovation in the process that must have control, and so on. With more people and departments, a planning process is more difficult than previous with the entrepreneur and couple of employees. One man, one plan. More departments, more different plans and in some cases chaotic plans.
The Root Problem
Furthermore, it is known that in the planning process, there is a big gap between different departments that have their own viewpoint of important planning details. Look at the following different goals of three important departments in a production company.
As you can see, while marketing will require a high level of inventories to ensure excellent customer support, the finance will want to reduce the storages and low inventory levels. On the other side, the production will want a high level of inventory related to raw materials to ensure uninterrupted production flow. This is totally conflicting goals from three different departments.
The Cons of Chaotic Business Planning Process
The planning process in such companies is something like this:
- All departments make their own plans.
- After that, individual plans are sent to the higher management level to join all plans received from departments into one plan. (I have experience where this task was accomplished on an operational level without strategic viewpoint. In these situations, plans were only as a paper that never becomes a true or reality.)
With such a process, you will cope with real problems.
Manufacturing, Finance, Marketing, Sales and Supply department all have different objectives and different views about their needs. Something that for Finance Department is viewed as a cost, engineers from Manufacturing Department view as a development and improvement of the business or production processes.
The sales will always have problems with a late delivery from Manufacturing Department. On the other side the Manufacturing Department will have problems with the Supply department for late delivery of raw materials.
It is normal that different departments and different subsystems in one company to have a different view of the things around them. But, because of that there exists a management that will need to coordinate those activities and that will look more strategically into the things around all departments.
Integrated Business Planning as a Solution to This Problem
The solution for better planning that will close that gap between departments (operation side of the business) and higher level managers (strategic side of the business) is integrated business planning.
The best way is when manufacturing has information about the market needs for the next year. In such a way that information can be incorporated into their operational plans. The marketing department will know what is the budget for advertising and can incorporate that limits into their plans. All of this will be possible with integrated business planning as a part of the business intelligence process in a company.
Planning is something that is based on the historical data and the predictions. In most of the cases, the history data come from previous data from selling, market share, costs… The prediction is something that can become real in the future. A combination of good historical data and good prediction about the future will give you the best plan for your whole business.