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IBP: redesign planning for a more dynamic business environment

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Technology Evaluation Centers published this report with help of Ventana Research. You’ll have to subscribe to TEC to get access to this and other white papers.

I copied part of the executive summary below:

In most companies, the projections underlying the annual financial plan are frozen in the 10th or 11th month of the current fiscal year. Meanwhile, sales, operations, manufacturing, supply chain, logistics and other departments revise their outlooks in detail, usually on a weekly or monthly basis. Thus, by the start of the new fiscal year, the financial plan and these other plans already are out of sync. And typically it grows worse: Since a large majority of companies update their financial plan quarterly, semiannually or not at all, it is out of sync with other plans throughout most of the year. The data shows that this limited integration has negative consequences in two areas: the accuracy of the plans and a company’s agility and ability to coordinate planning and action when major changes must be made to assumptions and forecasts.

There are many areas where organizations need serious improvement:

  • It’s difficult to adapt to change: Fewer than one-quarter (22%) of companies are able to do a complete revision to their annual financial plan when major changes occur. Why? It’s too hard.
  • There’s too little contingency planning: Just 13 percent of organizations say they explore a comprehensive set of business scenarios and examine in detail the implications of each for the entire company. Doing this would give executives and managers an in-depth understanding of how best to respond in each set of circumstances. Companies that do comprehensive scenario planning find it easier to respond to change than those that do not, even if a less-likely scenario occurs.
  • There’s not enough outward-looking information: Nearly two-thirds of the participants in our research said that having a better understanding of market trends would make their forecasting process more accurate.
  • Implications are unclear: Our research shows that most business managers and executives have only a general idea of how the plans and the actions of their business unit will affect others. Fewer than one in ten said they have all the information they need to be able to measure accurately the impact of trade-offs they may be considering within their part of the business.
  • Coordination is an issue: Barely more than one in ten (11%) say their plans are very well coordinated across their organization. Participants report that a lack of coordination is common; this disjointedness is a significant business issue for one-fourth of all companies.

Written by ibpnews

June 1, 2011 at 9:17 pm

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