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# Planning Horizons

Planning horizons define how far forward your organization looks when making decisions — and more importantly, how the nature of those decisions changes as you move from next week to next year and beyond. In IBP, getting the horizon right means matching the level of detail to the level of uncertainty. 📆

Planning Horizon:
The total time span covered by a planning process, typically expressed as a rolling window (e.g., 18 months) that advances with each planning cycle rather than anchoring to a fixed calendar endpoint.

# How Far Should IBP Look?

Most mature IBP processes operate on an 18 to 36 month rolling horizon, refreshed monthly:

  • 18 months — Short product lifecycles, flexible supply chains (e.g., FMCG).
  • 24 months — The most common default. Covers two budget cycles, bridging IBP into the annual planning process.
  • 36 months — Capital investments or long-lead procurement require longer visibility (e.g., industrial equipment, pharma).

The key question is not "how far can we forecast accurately?" It is "how far ahead do we need visibility to make the decisions that matter?"

# Rolling Plans vs. Annual Budgets

Annual Budget Rolling IBP Plan
Refresh frequency Once per year Monthly
Horizon Fixed calendar year (shrinks to zero by December) Constant 18–36 months
Response to change Variance explanations; reforecasts are "unofficial" Plan absorbs new information every cycle
Behavioral incentive Hit the number that was set months ago Continuously improve the plan to reflect reality

The most powerful thing a rolling IBP plan does is eliminate the December problem: the point in the year where the organization has zero forward visibility because the budget horizon has expired and next year's plan is still being negotiated.

Organizations that have fully matured their IBP process often use the rolling plan as the primary financial projection, reducing or eliminating the traditional annual budgeting exercise entirely.

# Time Fences

Time fences divide the horizon into zones with different rules for making changes. The further out you go, the more flexibility you have; the closer in, the more discipline is required.

Execution territory. The production schedule is locked, materials committed, capacity allocated. Changes trigger expediting, overtime, scrap, and schedule instability.

  • Changes require senior operations approval (plant manager or VP level)
  • Only emergency adjustments: critical customer escalations, quality holds, safety issues
  • Without a frozen zone, the shop floor is constantly replanning, destroying efficiency

The trade-off zone. Changes are possible but require evaluation — every proposed change must be assessed for impact on supply, inventory, cost, and service.

  • Cross-functional review required (demand and supply planning leads)
  • Trade-off analysis must accompany the request: what do we gain, what do we give up?
  • This is where most IBP decisions are actually made — close enough for real consequences, far enough for alternatives

Full planning flexibility. This is where IBP focuses most of its energy — shaping demand, optimizing supply, and evaluating scenarios.

  • Changes are encouraged — proactive planning happens here
  • Scenario analysis, new product launches, and capacity investments are planned in this zone
  • Organizations spending all their energy in the frozen and slushy zones are firefighting, not planning

# How Time Fences Affect Functions

Function Frozen Zone Slushy Zone Free Zone
Demand No changes accepted Changes evaluated for feasibility Full flexibility to shape demand
Supply Schedule locked; execution focus Capacity and material trade-offs assessed Production strategy and investments planned
Finance Actuals vs. plan reporting Re-projection of financial impact Rolling plan updated with latest assumptions
Commercial Order promising from available-to-promise Promotional timing adjustments negotiated Launches, campaigns, pricing strategies planned

# The IBP Planning Calendar

The IBP process runs on a monthly cadence, with each week dedicated to a specific planning activity.

  • Prior month actuals finalized and loaded; statistical forecast models refreshed
  • Variances from prior plan calculated and root-caused
  • Market intelligence and sales pipeline updates gathered
  • Statistical baseline presented alongside judgmental adjustments from sales and marketing
  • A consensus demand plan is agreed — one number the organization will execute against
  • Demand risks and opportunities documented for escalation
  • Supply team assesses feasibility given capacity, materials, and lead times
  • Finance translates volume plan into revenue, cost, and margin projections
  • Trade-off scenarios prepared for executive review

The Management Business Review (MBR) — the executive decision meeting.

  • Senior leadership reviews the integrated plan; open trade-offs are decided
  • Gap closure actions assigned; rolling financial projection compared to strategic targets

# Aligning IBP with Other Planning Processes

IBP sits between strategic planning above and operational execution below, and it must connect cleanly to both.

Planning Process Horizon Refresh Frequency Granularity Primary Owner
Strategic planning 3–5 years Annual or semi-annual Business unit, market Executive team
IBP / S&OP 18–36 months rolling Monthly Product family, month Cross-functional IBP team
Annual operating plan 12 months fixed Annual (quarterly reforecasts) Cost center, line item Finance
Operational execution 0–12 weeks Weekly or daily SKU-location, daily Operations

Strategic planning sets direction — which markets, what capabilities, where to invest. IBP translates that direction into executable plans. The annual operating plan traditionally bridges strategy and execution, but in mature IBP organizations the rolling plan increasingly replaces it. Operational execution lives inside the frozen fence — IBP ensures it has a stable, feasible plan to work from.

# Further Reading