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IBP Lessons from Retail, Medical and Scientific Organisations

IBP Lessons from Retail, Medical and Scientific Organisations





By Stuart Harman & Rod Hozack, Partners, Oliver Wight Asia Pacific


Integrated Business Planning (IBP) has proved popular with discrete manufacturing organisations globally. Increasingly it is being adopted by organisations in process manufacturing, retail, and service. These non-manufacturing organisations are able to learn from the experiences of the manufacturing sector, and avoid the pitfalls many have encountered in implementing their IBP process.

In turn, manufacturing companies can look to the implementations in non-manufacturing industries for lessons in taking the IBP process to the next step, and sustaining improvement to business processes.

Non-manufacturing deployments are not shackled with the paradigms of traditional manufacturing environments. They are looking at the process in a very different way, i.e. as a company framework to surface and solve problems and continually re-optimise plans as circumstances change.

Here are three case studies of IBP implementations in non-manufacturing environments, and the lessons that can be gleaned:

Retail Model

Retail is perhaps the closest to a manufacturing style environment, because it is still managing physical goods. Issues that Retail companies are trying to resolve are:

• Rapid and unpredictable changes in consumer preferences

• Online trading and replenishment

• Huge volumes merchandise to manage

• Global and local competition

• Maintaining the experience of both physical and online shopping environments

In its simplest form, the Retail IBP process is trying to manage uncertainty caused by the complexity of having a broad range of items and retail outlets. The IBP process was designed to simplify complex environments to facilitate good decision making; it is all about having people who know how to apply the right techniques.

While the names might have changed, the process is ostensibly the same. The Merchandising Director/VP heads up Product Management Review, managing the greatest areas of uncertainty, but also the greatest area of potential reward through the rejuvenation of brands, categories, products, and merchandise.

The Demand Review, which manages the ongoing product ranges and shopping experiences, is still evolving in Retail. It may be headed up by the Replenishment Director, but also Stores Operations or Merchandising Directors, as the key demand-generation functions. They would also be responsible for the point-of-sales forecasting and demand assumption management.

The process then reverts to a more traditional approach, with the Supply Chain Director taking the lead role in Supply Review, with the key output being able to cost-effectively deliver the demand and new product/range plans; the CFO, or IBP Process Leader, leads the Reconciliation Review, and hence profit projections coming out of the preceding steps; and the CEO heads up the Management Business Review, where it all comes together and decisions are made.

Medical Services Model

Medical services are centred on people, which introduces challenges that can be difficult to understand and manage. In the medical services model, the issues that need to be addressed are:

• The recruitment and retention of doctors

• A complex multi-tiered pricing and payment structure

• Generating demand

• Unique equipment lists, treatment and surgical approaches per doctor

• Out-of-hours care and staffing

The process starts early in the month with the Clinician Review, and this is where the most uncertainty lies, but also where the most reward comes from, with the acquisition of new clinicians. While the focus is on attracting new doctors, an important question is also asked every month: “What are the contingencies if the doctor leaves?” In many ways it is akin to a portfolio review.

The Demand Review is about maintaining the clinician base and re-optimising activity plans. The outputs are a revised activity plan to ensure continued patient acquisition, as well as generating forecasts by doctor, site and type of procedure, for the next 24 months.

The traditional Supply Review is replaced with Resource Reviews – in this case, Nursing, Administration, Scientific, and Clinical – all based on the updated demand plan, with the focus on making sure the right staff profile is available at the right time, and in the right place both in the medium and long term.

Heads of Department meet in the Management Business Review which is predominantly a revenue and cost Review, after which the financial projections are rolled up in preparation for the Board Meeting.

Scientific Research Model

Probably the most unusual of environments to implement an IBP process in recent years is a scientific research model. Some of the different scenarios that this model has to deal with are:

• Balancing research capabilities to the strategic goals of the organisation

• Securing funding through grants and partnerships

• Purchasing and maintaining scientific equipment and infrastructure

• Identifying individuals with the qualifications and experience to conduct the research

• Ensuring that quality and quantity of research outcomes enhance the reputation of the organisation and its employees

• Increasing the collaboration between the core research platforms to most effectively utilise the scientific assets of the organisation

However, the steps taken are actually not too far removed from a traditional model; they have a strategy, they develop new things, in this case new research areas and platforms (Portfolio Review), they need to generate and manage demand (Marketing and Funding Review), and they need to cost-effectively supply people and equipment to meet that need (Supply and Resourcing Review).

What are the common themes?

Even in industries that, on the surface, seem dissimilar to a traditional manufacturing environment, there are common elements. The common themes in these examples are aligned with what we would expect to see in a more “traditional” IBP environment:

• Strategy remains at the heart

• There is an acute awareness of where uncertainty and complexity lie

• Perhaps most importantly, demand is defined as what is important to each individual organisation, and supply is defined as what is needed to meet that demand cost effectively

The benefits of benchmarking your progress against organisations in your own industry are well documented, but, by examining IBP implementations outside the immediate environment, it is clear that different industries can offer insights into what appears to be universal business success criteria.