Creating a healthy balance between supply and demand isn't as easy as it sounds, especially when offshore supplier relationships and a complex distribution chain are added to the mix. The more dispersed business processes become, the more difficult it is for an organization to align its operational goals.
For example, suppose an automotive manufacturing expert runs a spend analysis of how many tires the company will need to procure in Q2 2015. Because he or she did not coordinate with the enterprise's sales director, the assumption is made that factories will require 800,000 sets of tires. However, because the sales director expects demand to decrease in the second quarter of next year, the purchasing officer will unwittingly order a surplus of tires.
A symbiotic environment
Resolving the aforementioned issue requires a platform capable of combining and supporting a combination of multiple applications. According to IndustryWeek contributor Dean Sorensen, this involves merging sales and operations planning and enterprise performance management to create a single solution. IBP enables enterprises to conduct the following tasks:
- Initiate and manage relationships with suppliers
- Conduct demand forecasting based on real-time sales data
- Orchestrate materials handling endeavors, whether these include acquisition or logistics
- Develop holistic goals and assign teams to initiate those projects
- Organize finances and accounts
An intelligent system
Supporting these capabilities requires an intelligent foundation capable of recognizing discrepancies and making smart decisions. Sorensen noted many manufacturers believe they already use IBP implementations. However, there are some who translate the word "integrated" a bit too liberally, believing that throwing a simple set of S&OP and and EPM tools into the same infrastructure creates an IBP deployment. In actuality, this is hardly the case.
Analytics and machine learning are essential to make IBP environments work the way manufacturers, health care providers and other professionals require them to. Sorensen used the term "embedded logic" to describe IBP's operational functions, which can perform these seemingly banal, but essential responsibilities:
- Identify time-sensitive data and factor it into how it changes demand forecasts, benchmarking conclusions, etc.
- Track industry fluctuations that affect predefined approaches to the market
The smarter the system, the more succinctly strategies will be developed.
Why the cloud is necessary
For developmental reasons, creating, deploying and supporting an IBP solution in a cloud environment is the optimal choice. Sure, cloud computing has been surrounded with a lot of hype over the past year or so, but there wouldn't be so many discussions regarding the technology if people didn't think it was useful.
To obtain a better understanding as to why the cloud (specifically, Platform-as-a-Service) and IBP go hand-in-hand, it's important to observe the kind of data and applications IBP solutions handle:
- Web-based: Whether from Google News or social media, the Internet can provide a lot of insight into how specific industries are changing on a weekly, or even daily, basis. This consists of unstructured and semi-structured information, which can only be stored in expansive, flexible infrastructures.
- Collaborative: Whether email or project-based, logging communications takes up a considerable amount of capacity, as well as network bandwidth.
- Analytics: As IBPs are smart systems, they require an enormous amount of processing power to perform at an optimal level.
These sources are only three out of dozens of actions that produce more data and require a fair amount of computing power. Add this element with a company's need to customize its IBP solution, and PaaS appears to be the best option. According to WhaTech, such environments allow administrators to define security protocols, set up databases, develop software and manage networks.
Of course, IBP users don't have to contract a cloud provider to receive the operational benefits. Pre-existing data centers can be modified into cloud infrastructures, delivering the same benefits as companies that offer the technology as a service.