Beyond the "Either-Or": Understanding the Synergy Between MRP and IBP
Contrary to popular belief, integrated business planning (IBP) versus material requirements planning (MRP) is not an “either-or” choice. It is an “and” choice. It is entirely possible even desirable for both IBP and MRP to work seamlessly together.
That may sound surprising but consider: MRP is a process (and SAP functionality) to balance demand and unconstrained supply. IBP, on the other hand, is a long-term planning process that incorporates cross functional inputs to develop a consensus forward-thinking plan. It is also an SAP advanced planning or decision support solution, modularized into activity areas. In reality, IBP and MRP are complimentary solutions that tie back to the full spectrum of planning activities.
When we think about introducing an advanced planning or decision support solution to our footprint, we need to recognize that these solutions are designed to function as an augmentation not as a substitution to our technology suite. When you utilize both, you can depend upon full support from producing a short to mid-term schedule to tactically executing the near-term plan…from issuing exception (breakdown) alerts to providing the analytical support to help drive decisions and focused improvements.
IBP: A Holistic Approach to Long-Term Planning
Why consider an IBP augmentation in the first place? The short answer is that in the modern supply chain, resiliency isn’t enough. Too much uncertainty reigns and with that uncertainty comes misalignment of efforts, questions without definitive and analysis paralysis. Disparate data sources, disconnected fragmented silos of strategic, financial and operational planning, and ad-hoc collaboration via email and Excel lead to the inability to simulate and understand the impact of decisions. And that results in analysis paralysis.
IBP offers a systematic approach planning approach that reduces the bullwhip effect the increasing ripple effect downstream that occurs with changes in demand upstream that often arises when we utilize MRP in a purely reactive fashion or plan our supply chain in spreadsheets. It is designed to empower decision-making, delivering a new paradigm of user experience, speed, visibility and efficiency.
Keep in mind that all analytical abilities live within the IBP environment. We know right away if the ball is in our court or if the baton has been passed. We become very clear about what stage we are in and what needs to be done to deliver on time and in full to meet our customer promises. If there is an issue that threatens to counteract our promises, we know which people to pull into conversation. As a result, we can collaborate, employ divergent simulation scenarios, evaluate data dashboards, and create an optimal business plan to drive revenue growth.
Asking the Right Questions: Evaluating IBP Readiness
To make an informed decision about becoming both an MRP and an IBP shop, you need to ask yourself some crucial questions. Is there an S&OP process in place at your enterprise currently and if so, are best practices understood? Are key stakeholders committed to developing or maintaining the process? Are you experiencing a strong need to work with “What if” scenarios? Is there a breakdown across functions because you are marching to the beat of different plans? Is the appetite for change and collaboration powerful? How would you rate your knowledge and use of SAP ECC orS/4HANA? There is no silver bullet for getting to a strong S&OP/IBP. It requires that you take a deep look at your candid answers and strongly believe that your enterprise is ready to champion change.
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