Integrated tactical planning: Putting the pieces together in IBP
4 min. read

Integrated tactical planning: Putting the pieces together in IBP

The consumer decision-making process has underwent a significant change. Here’s how IBP can help make better assumptions for optimal demand capture, enabling better decisions in the enterprise.

While COVID-19 disrupted day to day lives worldwide, certain industries also benefitted from the change in lifestyle imposed by the disruption. Packaged Food and Beverages industry in particular and CPG in general, witnessed a surge in demand. This was primarily driven by increased in-home consumption and a greater focus on hygiene. While the retail $ sales growth in CPG ranged from 1.5%-3% between 2012 and 2019, 2020 saw the same industry growing >10%.

What this also meant was that the CPGs had to face a hitherto unknown challenge. The pre-pandemic strategy usually revolved around minimizing cost and increasing efficiencies. Post-March 2020, however, the focus immediately shifted to increasing production through all means and capturing increased demand – sometimes to the order of 150% of pre-pandemic levels.

The sudden shift in demand and consumer preferences meant that the decision-making process in CPGs needed to be revamped while the crisis was still unfolding:

  • Decision-makers needed more relevant insights and forecasts
  • Their decision journeys needed to be crisp for more agility

Below we illustrate how our IBP methods can be used to respond to such dynamic requirements at scale.

Using Integrated Business Planning to manage demand

Integrated Business Planning is one of the central pillars on which most of Enterprises today plan and allocate resources. We have helped our clients evolve their planning processes into a fully integrated cross cross-functional management and strategic execution process.

Building these processes and intelligent tools was also the cornerstone of how we enabled our clients to manage this unprecedented demand surge. Going into the 2020 holiday season with COVID in the background was a shaky platform for businesses. One of the major challenges that we helped our CPG clients resolve was making better assumptions of future demand and then optimizing their shipment across customers for Case Fill Rate (CFR) maximization.

Integrated tactical planning: Putting the pieces together in IBP

Figure 1: Integrated business planning (IBP)

Demand-Supply reconciliation for optimal demand capture and shipment allocation

Pre-COVID, the demand calls and supply allocations across customers were a monthly decision. Most large CPGs had a consistent sales trend and predictability in demand, and any variances would usually be driven by sales and marketing execution. Decisions would be locked at the beginning of the cycle, with no significant re-adjustments required during that cycle.

However, in the COVID world, this process started leading to big misses in order fulfilment. Better order fulfilment required a closer watch on-demand across customers, supply capacities and resource allocation at a much faster pace.

What was required was an intermediate process that would run through an IBP cycle weekly, utilize major assumptions on forecasted consumption, and then tactically monitor capacities and allocate resources daily to meet the targets.

Integrated tactical planning: Putting the pieces together in IBP

Figure 2: Interplay between IBP and ITP

We started by establishing an optimal decision journey and the various stakeholders involved in each stage. In general, this journey looks something like the below:

Integrated tactical planning: Putting the pieces together in IBP

Figure 3: Illustrative decision journey

The next step was to identify how data and analytics can drive each of these decisions for seamless execution.

# Information/Decision Enabler
1 Visibility to past performance Automated data pipelines connecting multiple sources to layout market performance, fill rates, inventory positions vs benchmark through a visualization application
2 Forecast future demand Predicting SKU level demand for next 3-6 months based on historical trends, promotion and advertisement plan, external factors like COVID cases, government-mandated lockdowns, retail and workforce mobility etc. Business gets an ability to decide how these drivers may pan out and build demand scenarios based on such assumptions.
3 Forecast future supply This is essential to capture what percentage of demand can be captured at an overall level. This looks at various constraints across the supply chain to deliver forecasted aggregate shipments for the demand duration under consideration.
4 Allocate demand based on supply 2-pronged approach:

  • Auto allocates supply across customers through optimization models after considering multiple parameters like contractual obligations, customer priority, internal and retail inventory positions, product shelf life etc.
  • Allows the business to simulate scenarios on top of auto-allocation to ensure the incorporation of qualitative judgements.

Fractal Impact

This example illustrates how a well oiled IBP process can be used to drive execution excellence daily using the insights generated through smart algorithms and optimized decision-making process.

We have enabled organizations to increase their CFRs by 2-5% through this allocation approach, thus providing a direct and immediate topline impact. In addition to managing the immediate COVID related challenges, this approach has also enabled a foundational data-driven approach to manage shipment allocations and set up processes that can deliver value in a post COVID world as well.

Synchronize your business with speed and scale by enabling IBP, read here