Despite overwhelming evidence of the hard and soft benefits of cloud-based IBP, many organisations still cling to legacy technologies and habits.
Move to Cloud-based IBP or Die with Your Spreadsheets
As management leaders, we often measure our performance according to Key Performance Indicators (KPIs). We set goals and objectives and we review our progress towards them periodically to determine how the team, group or organisation as a whole is performing.
Regardless of technology, this fundamental layer of performance management is generally the same across organisations. What is fundamentally different from one organisation to the next is the quality of outcomes. Organisations that rely on spreadsheets and manual processes to predict needs and track and manage performance pale in comparison those with an Integrated Business Planning (IBP) platform. The difference is staggering in terms of forecast accuracy, demand–supply planning, customer satisfaction, cost management, and market agility – or the speed at which we react to change.
According to AMR research, the following percentage improvements express the hard benefits of an IBP platform over the use of spreadsheets and non-forecast-enabled ERP systems:
In a nut shell, migrating to a forecast-driven IBP sets the stage to reduce inventory, shorten your cash conversion cycle, increase working capital, and generally enhances operating efficiency and productivity. These are substantial, measurable gains, and they are only just the start. It is in the soft benefits that enable these hard gains where we achieve perhaps even greater strategic improvement. These benefits include:
- Improved vertical and horizontal communication
- Optimised collaboration in a real-time, shared environment
- Increased trust across teams, budgets, plans, and assumptions
- Empowered executive decision making
What is hard to believe, for me, is that despite overwhelming evidence of the hard and soft benefits of cloud-based IBP, many organisations still cling to legacy technologies and habits.
For example, most organisations still approach planning and forecasting with either spreadsheets, a non-forecast-enabled ERP system, or some mix of both. This is both archaic and inefficient.
My reasoning? ERP systems are great for executing transactions, cutting down on desktop spreadsheet management, and consolidating and reporting financials. Some even provide excellent web-based computing environments for historical reporting. But what ERP systems are not designed to do is transform forecast accuracy, or perform comprehensive what-if analyses. These capabilities are the reason we have forecast-driven, cloud-enabled IBP platforms.
I have two points here. The first is that an IBP platform is the perfect complement to a standard ERP investment, which until now focused on execution, data management, and basic BI. For one, cloud IBP can deliver hard returns almost immediately, especially with respect to supply planning. Also, it can integrate with ERP to create value in ways that ERP alone cannot, such as determining optimal service levels, safety stock, reorder points, and order quantities.
My second point is the following: if you’re not looking to compliment an ERP investment, but rather to scrap a more antiquated system, then cloud-based IBP is the way to go. The cost of not streamlining your forecasting and planning process is simply too great.
SiriusDecisions, a sales and marketing advisory, estimates that sales reps spend an average of 2.5 hours per week on forecasting – even more at organisations with legacy processes. Yet four out of five sales organisations do not even forecast within 10% of actuals. That’s a lot of work for poor accuracy. The problem, like the solution, is a function of people, process, and technology. Process is perhaps the tallest hurdle.
Many organisations come to us with planning and forecasting processes that are labor-intensive, error prone, and rife with bad habits. Some, for example, maintain dozens to hundreds of versions of the same forecast, with only slight differences in a few variables. Others make decisions based on shadow forecasts that lurk off the radar until after a key decision has been made.
While these practices exacerbate inefficiency, distrust and cost, they don’t have to. In fact, they’re not even possible in the transparent, virtual environment of cloud IBP, where everyone is working off of ONE VERSION OF THE TRUTH.
When (not if) you’re ready to make the move, put the following lessons in action early on:
- Set clear expectations for project sponsors and stakeholders.
- Make sure you have consensus around your IBP process. Remember: people, process, technology. You need all three working in concert to yield the full range of benefits.
- Make time to review your as-is people and processes, including roles and individuals. Then begin to define the future, including how automation and optimisation will redefine certain processes.
Once the IBP process is live, your organisation should begin to notice some positive changes immediately, such as improved communication across various lines of business. This may spur defensive reactions from a few certain stakeholders (those who can no longer hide behind “their data”). But in general, this is GOOD! The best way to build trust among all parties is to remind all parties that they’re working with the same set of metrics, KPIs, and core data. This reinforcement will help individual teams evolve from power fiefdoms to cultures of collaboration. Then, and only then, can we achieve optimal performance and breakaway results.