Integrated Business Planning is poised to become the next big thing beyond S&OP. One of the key themes for IBP is linking Operational Plans to Financial Plans. This linkage enables companies to understand how financial budgets and assumptions can impact operational plans and execution and visa versa. One of the fundamental requirements for linking financial and operational plans is the ability to translate between units and revenues/margins. This is certainly easier said than done. As companies are faced with variable customer-specific pricing structures, rapidly changing prices, cost and promotional activities, simply using a static average selling price and COGS does not provide the level of accuracy needed to understand the true relationship between units and revenue.
One of the key differentiators in the Steelwedge solution is the ability to translate plans between units and renveues. Steelwedge provides the ability to manage pricing information at various levels in a product hierarchy required to capture the true relationship between operational plans and revenue projections. In addition, Steelwedge provides the ability to model pricing and cost information in a time-phased manner. Once the operational plans are translated into revenue and margin projections, finance, operations and sales can begin to compare and reconcile plans on a periodic and exception basis.
To achieve the vision of IBP, companies must have the approporiate enabling technology to perform the basic building blocks for planning. Accurate unit to revenue conversions is one of many building block that must be done well to realize the vision of IBP.