Integrated corporate planning

Table of contents

What is corporate planning and what challenges does it pose for companies?

The concept of planning can be described as the mental anticipation of future actions that refer to specific planning horizons. (7)

In addition to being an essential part of the management process, corporate planning is also a significant management tool. (15) It pursues the goal of contributing to the sustainable existence of the company and providing orientation for decisions. It serves these goals by reducing the risk of wrong decisions and thus achieving a higher degree of goal attainment with greater probability. In this context, corporate planning can also be seen as a method for analysing problems and potential alternative solutions in order to create room for manoeuvre at an early stage. (15)

In practice, this function faces many challenges; often caused by a lack of uniformity in the systems for planning within companies as well as by frequent departmental data silos that prevent coordination between functional areas. These structures often result in inconsistencies in planning data, which complicates corporate planning and can reduce its effectiveness.

How can integrated planning help here?

Integration of planning addresses these weaknesses and, in contrast to classical planning, focuses on linking all operational sub-plans, taking into account their interdependencies - also between different planning levels. In contrast to classical corporate planning, strategic planning is not simply broken down into operational plans without additional coordination of the sub-plans. (9) In this context, integrated corporate planning encompasses the factual and temporal reconciliation of both quantity and monetary plans such as the income statement, balance sheet and cash flow statement and cannot be regarded as the mere linking of these three plans at the financial level. (11)

This approach is becoming more and more important, especially due to the increasing speed of market changes, and makes a long-term change in corporate planning imperative.

Where are there dependencies in corporate planning?

Overall, corporate planning forms a network of different, mutually interdependent plans. These mutual dependencies, i.e. interdependencies, are optimally fully recorded and taken into account in order to ensure a goal-oriented determination of alternative courses of action as part of corporate planning. They exist both within the individual planning areas - e.g. in production planning between its production programme and production execution planning - and between the different areas - e.g. between production and sales planning.

In the case of interdependencies between planning areas, a distinction can be made between two forms: interdependencies dependent on cross-sectoral goals and independent interdependencies. The latter represent factual interdependencies whose emergence results from the existence of a restriction that applies to several areas in common. Success interdependencies, on the other hand, count as dependent interdependencies and are present when the level of one variable is mutually dependent on that of another variable. (13) A distinction must also be made as to whether the interdependencies of the business planning areas relate to a single period or to several. (13)

What are the advantages of integrated corporate planning?

A closed planning system ensures the consistency of planning data and the reliability of planning. In addition, integrated planning makes the otherwise enormous coordination effort between individual planning levels obsolete and long-term corporate goals and operational planning can be consistently reconciled. (4) Finally, the implementation of fully integrated planning also reduces the duration of the entire corporate planning process and results in an increased quality of this, which brings cost savings, increased planning reliability and increased flexibility. (6)

What are the components of (integrated) corporate planning?

Plan profit and loss account

The budgeted income statement forms a period statement and is used to obtain an impression of the expected success of the planning period on the basis of the planning of expenses and income. (14) The aggregation of operating sub-plans, such as in particular sales, production, investment and financing plans, makes it possible to plan the profit or loss for the period. (2)

Planned balance sheet

In contrast to the profit and loss account, the budgeted balance sheet with its presentation of the planned asset and financial situation of an enterprise forms a point in time calculation. It can be derived from various sub-plans and can therefore be seen as a compilation of interdependent results of operational sub-plans. (11)

Plan cash flow statement

The focus of the budgeted cash flow statement is the forecast of future cash inflows and outflows. (3) It provides information on the origin and use of liquid funds and is an important instrument for securing liquidity in the company (3), which can be derived from the budgeted balance sheet and budgeted income statement.

Sales planning

Sales planning focuses on the determination of the products to be sold according to type, quantity and time period. The decision for suitable sales policy instruments is a support for achieving the sales targets. (11)

Production planning

Production planning is directly linked to the planned quantities in sales planning. It is used to plan a production program based on the interaction of fixed production orders, existing production resources and the defined production requirements. (9) The sub-areas of production program planning, production execution planning and material requirements planning fall under this planning component. (1)

Procurement planning

The task of procurement planning is to plan the procurement of the net demand for consumption factors, such as raw materials and supplies. (13) Also important for procurement planning is the determination of optimal order quantities and times in order to take into account the economic efficiency of the procurement process.

Personnel planning

The objective of personnel planning is to determine the personnel requirements necessary for the fulfilment of operational tasks, differentiated according to quantitative, qualitative, temporal and local aspects. (10) Personnel planning shall be carried out in the form of sub-planning, which can be divided into the sub-areas of personnel requirement planning, personnel procurement planning, personnel reduction planning, personnel deployment planning and personnel development planning.

Investment planning

The function of investment planning lies in the consideration and operationalisation of those investment needs to be realised in the planning period. (7) It can be subdivided into the phases of investment stimulation, which serves to identify and stimulate the necessary investments, and investment investigation, which is responsible for the selection and evaluation of alternative investment opportunities.

How does integrated planning work in the SAC?

The planning component of SAP Analytics Cloud (SAC) offers users an option for building an integrated planning solution. It enables complete planning processes to be mapped and enriched with integrated forecasts and analyses. It offers numerous interfaces to other IT systems and thus enables automated data provision for planning to a large extent. (8)

The different sub-plans of the corporate planning can be represented as independent plans in the SAC and then merged into a common plan in order to implement the integration of these. Various functions of the SAP Analytics Cloud can be used for this, such as so-called data actions, which implement the transfer of transaction data between models, or the creation of public dimensions. (8) With the help of public dimensions, the same master data can be used by different models so that changes to the dimension of one model are also visible in the same dimension of another model. Especially for dimensions that are used cross-functionally, such as a cost centre dimension, this function is very beneficial to ensure the consistency of master data. Data actions, on the other hand, can be used to handle transaction data in the SAP Analytics Cloud. (8)

In this context, planning is integrated centrally by linking the individual data models and combining their contents in a common data model. The planning of the individual components or functional areas of corporate planning can be carried out in separate models. Data actions are then used to integrate all sub-planning into a common model, for example the model for the profit and loss statement. Such mergers between different models can be carried out in the SAP Analytics Cloud using so-called cross-model copy steps as part of a data action. When a cross-model copy step is executed, the transaction data is obtained from a "source model" and transferred to a "target model". (8) From the target model, the merged transaction data can be consumed in SAC stories across different hierarchy levels and used for the subsequent steps of integrated business planning.