A Brief History of IBP

Posted on January 7, 2026 by Mike Doherty

“Andre Martin, in my opinion, should be recognized as a true management scientist.”

                    - Oliver Wight

In 1988 the renowned British theoretical physicist, Stephen Hawking, published a great book entitled “A Brief History of Time”. It gave ordinary people a layman’s glimpse into the potential origins and the phenomena of the universe.

If a book were to be written about the History of IBP – Integrated Business Planning – then the best person to write this book would be my long-time colleague and Flowcasting co-author, Andre Martin. He’s the pioneer behind many of the most widely adopted concepts and ideas in integrated planning and integrated business planning.

Here then, is “A Brief History of IBP”…

It’s May 1975 and Andre Martin, then Director of Manufacturing & Distribution at Abbott Labs Canada, attends a 5-day Material Requirements Planning (MRP) class in Boston delivered by Oliver Wight and Walter Goddard. After taking the class, Andre asks Ollie if he will become a consultant for Abbott Labs.

In June 1975 Oliver Wight agreed to work with Abbott Labs in Canada and guide them in their implementation of what they would refer to as a “Closed Loop MRP system”, focused on manufacturing and production planning. Early on in their work together, Andre would inform Ollie that something had been bugging him for quite some time.

According to Andre, the planning was too focused on the factories and not on their customers – their internal distribution centers (DC’s) – since they were the ones that needed the product. There was a never-ending battle between production and distribution, and he needed to do something to resolve it. Ollie asked Andre, “what do you want to do?”.

Andre responded, “I think we should take the concept of requirements and resource planning to the DC’s and integrate it into one system with MRP. Andre explained to Ollie that instead of a classic bill of material (used to break down the materials needed to make the products) it was like an upside-down bill of material – essentially a bill of distribution. The needs of the distribution centers would drive the production requirements.

They both realized that no system existed to enable this. They would need to build and implement it. Ollie recommended a young technical wizard, Darryl Landvater, whom he was sure could help. And, low and behold, together they would build and implement the world’s first Distribution Resource Planning (DRP) solution, integrated with MRP – thereby taking the concepts of MRP to distribution.

In the summer of 1977, during a project review meeting, Ollie was stressing the point to Andre about the need for and importance of the management team at Abbott to have monthly production plan review meetings. Andre, being a professional accountant, told Ollie he was having difficulties convincing the CEO, Jim Andress, and his management team to sit down monthly and review the production plans.

Jim Andress was a West Point graduate and Lieutenant Colonel who had fought in the Vietnam war. He was the ultimate team player and extremely practical and resourceful. In Nam, he once traded a helicopter to get back his captured men. At Abbott, the management team was connected at the hip.

Andre shared an idea with Ollie, where he believed he could get management’s attention if he took the production plan, convert it to dollars then tied it into the income statement down to the gross margin level. Ollie was floored and asked him what he had in mind. Andre proceeded to explain that he had been thinking for some time about integrating Abbott’s financial system with his new operating system (the integrated DRP/MRP system).

And they did it. Oliver Wight, in the spring of 1978, declared that, based on the work done at Abbott Canada, Manufacturing Resource Planning (MRPII) was born.

To be crystal clear, the Abbott MRPII system was developed to be one unique system driving all key operations within the company (i.e., sales, distribution, manufacturing, purchasing, quality assurance & finance, etc.) To this day Andre is not sure this was ever replicated anywhere. Today many companies have implemented ERP systems, and these systems/databases remain essentially systems of record. By expanding the planning horizon to two years and adding AI assisted, collaborative workflows that sit around the core, many companies could (and probably have) replicate what was done at Abbott Labs in Canada.

At the time, they called the concept “Company Game Planning”. Others had given it the name we know today – Sales & Operations Planning. The CEO, Jim Andress, called it Executive Sales & Operations Planning. According to the President of the division, it enabled people to “view the business through my glasses”. Seeing “the other person’s side of the story” and working together to solve problems builds teamwork, and this occurs at all levels of the organization.

At Abbott, after the financial integration of their closed loop DRP/MRPII system Andre had convinced the CEO, Jim Andress, that his management team had a wonderful and unique opportunity to use their integrated operating/financial system for developing their annual budget. The integrated system contained information that represented their business model going forward for two years and, as such, they had a true model of their business within the system.

Once a year, at budget time, the information contained in the DRP/MRPII system was replicated on a separate hard disk. This enabled the Abbott management team to save enormous amounts of time each year developing their annual financial budget.

Once the budget was completed and approved, the hard disk was kept separate from the ongoing DRP/MRPII operating system for future reference. The data on the hard disk was used monthly as a reference for what Andre called “Operations Gap Planning”. This was a monthly exercise, comparing the projections in the ongoing DRP/MRPII system with the budget numbers contained on the saved hard disk. Monthly gaps were identified, and action was taken to reconcile and close any gaps.

In the fall of 1979, Andre left Abbott labs to join Oliver Wight and Walt Goddard. One month later, Oliver Wight Education Associates were born and seven other consultants joined.

Not long after, in January 1980 Andre developed and started to teach two classes: DRP and Financial Management. Looking back, the financial management class should have been called “Company Game Planning” because that is what he had called it at Abbott. In any event, in the class he explained, in excruciating detail, how a company CEO could use his DRP/MRPII system as the enabler to have the entire management team march to the same drumbeat.

Andre ran this class for 11 years and during that time George Palmatier and Tom Wallace were two Oliver Wight consultants who attended his financial management class. Tom Wallace also visited Andre at Abbott in Montreal in the late 1970´s to see for himself Abbott’s “Company Game Planning” approach.

George, however, took a different approach. He had Andre visit his company Bentley Nevada in Lake Tahoe in the summer of 1980 to give his financial management class to 25 of his people. In the class there was the CEO and the entire management team.

George joined Oliver Wight Education Associates in 1986. Having a background in marketing, George packaged his learnings from the financial management class and his own experience at Bentley Nevada and came up with the term Integrated Business Planning (IBP) to help educate and explain the concept to others.

Currently, the Oliver Wight organization is perpetuating George’s work in IBP.

Andre left the Oliver Wight organization in 1990 to pursue his dream of a totally integrated retail supply chain from the factory to the consumer, a concept he called Flowcasting – that is, casting or calculating the flows of inventory across the entire retail supply chain. In 2006 Andre would co-author the book “Flowcasting the Retail Supply Chain” to help outline the concept and how retailers could run their businesses using the principles and concepts he had proven in distribution and manufacturing.

Andre formally retired in 2016, though he still does contribute his ideas and thinking to those who are still pursuing the vision (including yours truly).

It should be noted that IBP is internally focused – with the goal to get everyone in synch within an organization with respect to sales, inventory and production planning. Today, in retail, we’re working to take the IBP concept cross-company to something people have called Joint Business Planning (JBP) – that is, working closely between retailers and their strategic suppliers to develop joint plans to grow each other’s collective business.

Working closely with key suppliers is a concept that was initially started by Andre’s colleague, the late Robert Bruce, former Vice President, Supply Chain Strategies, Wal-Mart Stores. He was the early proponent of what became known as CPFR – Collaborative Planning, Forecasting & Replenishment. When Robert initially conceived the idea, he envisioned it as CFAR, Collaborative Forecasting & Replenishment.

Over time, early adopters of the thinking added the planning component. While the idea of collaboration between retailer and manufacturer made sense and endures, CPFR had one major design flaw – each organization was collaborating on the retailer’s order forecast, with each company developing their forecasts independently.

Of course, the concept of Flowcasting solves this design flaw and takes CPFR to the next level, enabling Joint Business Planning. In a Flowcasting/JBP process there is only one forecast for the retailer/supplier to inform and plan to: sales to the end consumer. All other demand and supply projections can be calculated from this.

What makes JBP such a powerful and value added concept is the shift in thinking it enables in the retail/CPG supply chain…retailers and their supply partners can collaborate on the inputs that drive sales and the joint plans, not the outputs…the outputs are the resulting projections, converted to various languages of the business that teams use.

To highlight the significance of Joint Business Planning between retailers and their key trading partners, consider Kraft Foods. Kraft would only need to work together with eight (8) retail customers to cover 83% of their annual volume. Together they could plan activities and strategies to increase end-consumer sales, and all other resource projections would be calculated and shared to provide complete supply chain visibility. Together they could develop joint plans and determine situations where they could take advantage of potential opportunities and/or avoid potential issues before they happen.

We’re obviously not there yet, but that is the vision.

And, like most vision’s, it starts with pioneers – folks who, like Oliver Wight himself once said “move the ball down the field”.

Integrated Business Planning moved the ball down the field, thanks largely to the pioneering work of Andre Martin.

Now you know its history.

A Rather Unassuming Approach

Posted on October 2, 2024 by Jeff Harrop

When we make assumptions, we contribute to the complexity rather than the simplicity of a problem, making it more difficult to solve. – Julie A., M.A. Ross and Judy Corcoran

Planning the retail supply chain not only requires, but is entirely predicated upon making assumptions about the future.

Why?

Because when a customer walks into a store, they already expect the products they want to be on the shelf in sufficient quantity to satisfy their demand – and they give no advance notice of their planned visit. So depending on the cumulative lead times from the ultimate source of supply to the store shelves, the decisions you make regarding product movements today must be made based on what you anticipate (i.e. assume) customers will want – how much, where and when – days, weeks or even months into the future.

So for retailers of any size, that could add up to millions of assumptions that need to be made each day just for the expected consumer demand element alone. And each assumption you make is a risk – if an assumption doesn’t hold, then the decisions you made based on that assumption will cost you in some way.

If the supply chain is disconnected, there are more assumptions to be made. So there are greater risks and higher costs in the form of customer service failures and/or inefficient use of labour and capital.

As an example, it’s not uncommon for a retailer to have different planning and replenishment systems for stores and distribution centres. And those systems usually have a “what do I need to request today?” focus – think min/max or reorder point.

The store replenishment problem is relatively straightforward:

What is the current on hand in the store minus the display minimum (or “cycle stock” for want of a better term)?
What do you anticipate (assume) you will sell between now and the next scheduled delivery day?
If what you expect to sell exceeds the cycle stock, request the difference, rounded to the nearest ship pack

In this case, the only assumption you’re making is the expected sales, with a few “sub-assumptions” with regard to trend, seasonality, promotional activity, etc. going into that.

(NOTE: You are also assuming that your store on hand balance is accurate, which is a whole other lengthy discussion in and of itself.)

Okay, so far so good. Now we need to make sure that there will be sufficient stock in the distribution centre to satisfy the store requests. Because the supply chain is disconnected, the requests that the stores drop onto the DC today need to be picked within a day or two, so that means that the DC must anticipate (assume) what the stores will request in advance.

A common way to do this is to use historical store requests to forecast future DC withdrawals. In this case, you are making a number of additional assumptions:

That store inventories are largely balanced across all stores served by the DC and have been so historically
That any growth/decline in consumer sales will be accurately reflected in the DC withdrawals with a consistent lag
That there are no expected changes in store merchandising requirements that will increase or decrease their need for stock irrespective of sales

Going further back to the supplier, they have their own internal planning processes whereby they are trying to guess what each of their retailer customers are going to want from them in order to plan their inventories of finished goods. They are now several steps removed from the ultimate consumer of their products and have to apply their own additional set of assumptions.

It’s like a game of telephone where each successive person in the queue passes what they think they heard on to the next.

And if something doesn’t go according to plan, a whole bunch of people need to revisit their assumptions to figure out where the breakdown happened. At least they should, but that rarely happens. Everyone is too busy dealing with the fallout in “crisis mode” to actually figure out what went wrong.

The result?

In stock rates to the consumer in the 92-93% range
Excessive amounts of “buffer stock” to try to cover for all of the self-inflicted uncertainty (assumptions) in the process
Margin loss from taking markdowns on excess stock that’s in the wrong place at the wrong time

So how does an approach like Flowcasting – a fully integrated end-to-end planning process – sustain in-stocks in the high 90s while simultaneously (and significantly) reducing stock levels throughout the supply chain?

It’s not magic. By connecting the supply chain with long term supply projections and keeping those projections up to date, the number of assumptions you need to make are drastically reduced:

You already know the inventory for every item at every location, so you can model the long term need for each individually and roll them up rather than assuming averages.
The planning approach automatically models the impact of any changes in consumer demand by netting against available stock in store and applying the necessary constraints and rounding rules using simple calculations – there’s no need to guess how a changing demand picture will affect upstream supply.
Inventory level decisions (e.g. changes to display quantities and off locations) can be discretely modeled separately from demand and incorporated directly into the store projections in a time-phased manner. You don’t need to make a “same as last year” assumption if you already know that won’t be the case.

However, it’s not perfect and things can still go wrong. You still need to have long term forecasts about consumer demand, which means assumptions still need to be made. But when bad things happen, the information travels quickly and transparently up and down the supply chain assumption-free after that. Everyone knows exactly how they are affected by any botched assumptions about consumer demand in near real time and can start course correcting much sooner. “Bad news early is better than bad news late.”

It’s like playing telephone, except that the first player doesn’t whisper to the next – he uses a megaphone to ensure that everyone hears the same phrase at the same time.

Rising Tides

Posted on October 4, 2023 by Jeff Harrop

It is better to aim high and miss than to aim low and hit. – Les Brown

Why is the shelf empty?

I could go on and on about the myriad factors that could be at play, but it really boils down to one of two things:

Failure to anticipate (or quickly react to) demand or;
Not enough available supply, even if demand is properly planned

The first one is pretty obvious. No how matter how much effort you put into forecasting, sometimes shit just happens. The season breaks way earlier than expected. A mundane product that’s been selling steadily for years “goes viral” because of a TikTok trend. Or a customer just comes in and wipes you out unexpectedly for no discernible reason.

The second one is also obvious – at least on the surface. Clogged ports, pandemics and strikes immediately come to mind. But what often doesn’t come to mind is store inventory accuracy. Of all of the millions of item/locations in retail stores with a computerized on hand balance, how many times does the replenishment system think there’s stock available to sell when there is actually none? And how often does this condition go undetected until the store manager starts seeing shelf gaps? With store inventory accuracy hovering in the 50-60% range, I’m going to say “probably a lot”.

I would argue that it’s probably the single biggest “supply issue” in retail, but the subject is so universally ignored and not measured that there’s no way of actually proving me right or wrong on that. But it sure feels like I may be right.

Regardless, lack of incontrovertible evidence aside, an informal quorum of people seem to agree with me anyhow, even if they may not know it.

Why do I say that?

Whenever we talk to retailers about fully integrated planning from supplier to shelf and explain the process in detail, someone inevitably connects these dots:

Store on hands are a critical input to the planning process – TRUE!
Store on hands aren’t particularly accurate – TRUE!
Therefore, you can’t properly plan anything until inventory accuracy is under control – hmmm, well…

Here’s the thing about that last point: Inaccurate inventory has been a problem in retail for time immemorial. Computer assisted ordering, stock checking for customers, online order pickup in store – these are all common practices in retail today and have delivered significant benefits in terms of growth, efficiency and customer service. The most critical input for all of these processes is store inventory balances, which everybody knows are not accurate. Yet I haven’t seen any retailers shutting down automated ordering or buy online/pick up in store programs until their store inventory accuracy is up to snuff.

Could greater benefits be achieved if store inventory records were more accurate? Duh! But that doesn’t change the fact that significant benefits can be (and have been) achieved in spite of inaccurate inventories. Implementing an end-to-end planning approach that relies on store inventory balances is no different in that regard. There is no hard dependency on some arbitrary level of inventory accuracy to start building or improving upon planning capabilities.

Transforming a retailer from a reactionary firefighter to an integrated planning organization takes hard work and discipline and delivers enoromous benefit.

Sustainably improving inventory accuracy in stores also takes hard work and discipline and also delivers enormous benefit.

Either of these initiatives can appear daunting individually, so – except for the most courageous among us – creating a false dependency (i.e. “we can’t plan without accurate inventory”) is a surefire way to ensure that nothing gets done about either of them.

As John F. Kennedy famously popularized: “The rising tide lifts all the boats.”

A retailer with so-so inventory accuracy will be made better with improved planning capabilities. A retailer with poor (or virtually nonexistent) planning capabilities will be made better with improved inventory accuracy.

So work on planning and shelve inventory accuracy for awhile.
Or work on inventory accuracy and shelve planning for awhile. Or be extra brave and work on both at the same time.

But work on something.

Remember Warren Buffet’s addendum: “A rising tide may lift all boats, but only when the tide goes out do you realize who’s been swimming naked.”