The Power of Scenario Planning in IBP
A Real Life Business Example
By Ryan Rickard, Director SCMO2
Scenario planning in IBP allows users to conduct what-if planning, analyze results, share planning activities with others and make business decisions, in real time, without impacting the live data set.
Let’s consider this common business situation. A salesperson receives a call from a customer who wants to purchase 20,000 extra units of a popular product. The customer would also like a price reduction because of the incremental and rather large additional order. The salesperson assures the customer that the company will gladly support the business and begins internal collaboration. The salesperson calls the demand planner to inquire if there is ample stock availability to support the request, and to enter the opportunity into the forecast. They also contact the sales manager and marketing department to discuss the price incentive. The supply chain organization needs to understand the end-to-end impact of this large immediate request to see if or when it can be supported. The business also needs to understand the financial impact of the demand at a reduced selling price.
In IBP, scenarios such as this can be used to simulate how users change data and analyze the affects of those changes on other parts of the end-to-end and overall plan. Users can create new scenarios to manage each of these what-if simulations and even share them with other planning colleagues or management.
Myriad Uses for Scenarios
Referring back to the business example above, our demand planner would be able to use IBP to create a new scenario and test this business opportunity. After building the scenario, the planner would enter the promotional opportunity into the forecast and share it with the supply planner to run MRP and understand the supply and inventory implications.
The forecasting team can also simulate the price change and its impact on profitability by changing the selling price in the scenario itself. Leadership can then view the scenario to determine if incremental volume and profitability results make sense for the business. Once reviewed, the business can determine if they want to save the results as part of the operational plan, or delete it and advise the salesperson and customer of the outcome.
Any IBP planner with authorization can create and share a scenario with others. Those with whom the scenario is shared can work with that data and run planning activities inside the scenario. Any administrator (or the original author) can reset or delete the scenario.
Versions or Scenarios?
Versions are similar to scenarios in IBP with one major difference—versions require a separate set of data. The master data and transactional data are copied to a separate version. You can then work and make planning changes in the different version and once satisfied, copy the new version back to the baseline operational version. Basically, versions function as a fully offline sandbox of sorts. The key differences between scenarios and versions are the ease with which scenarios can be shared and the change pointers that scenarios use to manage the data. Versions require that data be copied to a entirely different dataset and then copied back once accepted.
Utilizing scenarios in IBP can allow planners to quickly simulate real-time business and planning opportunities. Within a matter of minutes a planning team can test changes and understand the operational and financial impacts, allowing key decision-makers to make smarter and more profitable decisions.