What are five planning approaches for information technology

â € œAdvanced Planningâ €: Status quo and possibilities for advanced planning approaches

A modern planning concept for better controlling?


The constant improvement of the planning processes in companies is an important, never-ending and constantly recurring challenge. Planning is the basis of all control and monitoring activities in companies. Above all, it should meet the criteria of profitability and result orientation.

Experience has shown that the importance - i.e. the type and scope - of planning activities is very different in the respective companies. Many companies are struggling with massive use of Excel and are planning inefficiently, both in terms of procedure and duration, as the BARC Research Study (from June 2015) clearly showed, which is still informative two years after its creation .



1. How do German-speaking companies plan? Which methods and procedures are used?

Planning processes are problematic in many companies today and offer great potential for increasing efficiency. So much for a general answer to the question “How do companies plan today?” From the BARC study. A detailed answer can be presented in three categories.



a) Integrated business planning

The classic Annual planning or budgeting is a firmly anchored component in every corporate planning. The companies are well aware of the associated annual update of the plan data determined annually (forecasting). On the other hand, it plays less - but still present in two thirds of the companies Medium-term planning with a typical planning horizon of one to five years.

Fig. 1: What kind of planning do you do in your company? (n = 254)


Thinking in terms of annual disks or annual budgets is typical. Although the majority of the companies surveyed are well aware of the important connection between medium-term planning and budgeting, a quarter still do not derive their annual planning from medium-term or strategic planning. Thinking too short in the long term - thinking too long in the short term, on the other hand, when finalizing annual planning. That is why it is common additionally Either monthly or quarterly update of the plan data is required (Forecasting). The forecasting is just as detailed as the annual planning and is often created manually. Plan data is replaced by actual data at a specific rhythm (e.g. monthly or quarterly) and the remaining plan data for a financial year is adjusted according to the change.


Definition of terms: forecasting

Forecasting is the term used to describe the interim forecast of the economic development of a company taking into account the internal and external environment (e.g. product developments, market changes).

First of all, the current situation (e.g. sudden payment difficulties of a major customer) and expected changes in the economic environment (e.g. increase in raw material prices) are included and updated. The forecast is therefore a Situation or environment forecast and does not include the actions one wants to take in the future.

Action plans should then be drawn up on the basis of the prognosis or concrete decisions (e.g. delivery release only when the goods are paid for, procurement of cheaper replacement materials). It is important to separate the two from one another:

  • Forecasts (“What is likely to come?”) And
  • Plans ("What do we want to do and achieve?").


This also avoids the mixing up of forecasts with goals and wishes. First of all, a look at what is likely to come should be as uninfluenced as possible. Only then do thoughts about goals, actions and decisions begin (Rieg, BC 2008, 165 f., Issue 7).



b) Planning process

Planning in companies is becoming more common Bottom up carried out (from bottom to top), i.e. the entire process starts at the lowest company level. Plan data is developed by individual departments (e.g. department, cost center) and from there merged at the next higher level (e.g. company division, management). In contrast to this, the Top downProcedure (from top to bottom), strategic guidelines of the company management specified (e.g. profit / sales targets, desired market position). These binding targets are specified more and more precisely as you “walk through” the hierarchy in partial plans.

In the Corporate practice a combined approach is usually used Countercurrent process, in which the plan data is compiled bottom-up with top-down specifications. Finally, a comparison and possible adjustments are required.


Practical note:

Before the individual departments start their detailed bottom-up planning, together with the management for the respective overhead areas (management levels) Rough goals set and these are communicated to the planners. This will prevent the bottom-up desires from deviating too much from the costs that the company as a whole can bear.

Only if the specifications for the sales, production and cost center managers challenging the necessary efforts are made towards economic behavior. However, these must also reachable because unrealistic goals are not taken seriously and only create frustrations for those involved (Ederer, BC 2015, 351, issue 8).


Fig. 2: Use of the bottom-up and top-down method in comparison



c) Planning duration

The time required for annual planning / budgeting can be broken down into three time periods:

  • <2 months,
  • > 2 months and <3 months,
  • > 3 months.


in the average the entire planning process takes about three months (see also Fig. 3). In this context, the time distribution of the overall process over the individual planning phases is interesting (see Fig. 4). The provision of data is the most time-consuming part, lasting around a month. The other three phases only require half a month each.


Fig. 3:How much time do you need for your entire annual planning / budgeting process (in months)? (n = 237)



Fig. 4:How is this period distributed over the individual phases of the planning process (mean and median in months)? (n = 224)



2. What are the greatest challenges or problems in corporate planning?

"Planning and budgeting processes in companies are regularly too lengthy, consume too many resources, are generally too cost-intensive, and the quality often leaves something to be desired - these are the core results of the BARC Planning Survey 14 ..." The present study says: The reasons this is probably due to the lack of integration, the lack of concentration on the essentials and the use of unsuitable software. In fact, companies lack that Focus on the strategic goals. Specifically, this means: securing the company's long-term existence and increasing its value, e.g. in relation to target markets (including expansion of business areas, abandoning unprofitable areas of activity), design of the product / service offering, product / service quality). This is mainly attributed to thinking in annual cycles. Fanning out from year to year does not offer a vision that is absolutely necessary in order to be able to take a leading position. Medium-term planning, but also simply observing the strategic goals, offer a possible solution. The multi-year planning can broaden the view and at the same time enable a better understanding and integration of the corporate strategy.

As already mentioned, forecasting is usually just as detailed as the actual annual planning. The more detailed it is, the more effort it takes to generate the plan data Forecasting takes place (e.g. with regard to the differentiation of cost types and cost centers). This Detailed effort requires a correspondingly higher expenditure of time and resources. In addition, forecasts are still created manually in many places.

With the one already presented Bottom-up planning Specific problems can arise: This procedure inevitably leads to a lack of consistency (freedom from contradictions) of the partial plans with the goals of the company as a whole. Work at the bottom is carried out without the “approval” from the top. In addition, there is little commitment on the part of employees and time-consuming coordination processes with the next higher level.

It is similar with Top-down procedure. The management issues unrealistic targets, these are broken down from the following levels, which in turn leads to a lack of acceptance of the planning by the management and ultimately to demotivated employees. The mixed methodology of the two procedures (Countercurrent process) calls, however, for a high need for coordination and long voting rounds.

Planning processes are too time-consuming, outdated too quickly - especially in volatile (fluctuating) markets - and they lack a strategic basis.



3. Where do the companies see potential for improvement in planning?

In general, companies are largely satisfied with the costs incurred for their planning. The greatest opportunities for improvements or cost savings are with the Planning duration seen. Above all, the sub-phase of data provision should be shortened. This includes the specification of actual data and data entry.


Fig. 5:In which sub-process of planning do you see the greatest potential for cost savings in your company?



Fig. 6:In general, what are the biggest problems or challenges that you encounter in the planning process in your company? (n = 250)



Depending on Company size different main problems emerge:

  • Small businesses Above all, they suffer from insufficient consideration of strategic aspects and insufficiently integrated planning.
  • Medium business on the other hand, have to struggle with lengthy planning processes and inflexible, non-agile planning.
  • Large corporations complain above all about a too high level of detail and a lack of focus on the essentials.



4. What advanced planning approaches are there?

Planning processes should be constantly questioned and made more efficient. The aim is to accelerate the planning, to focus on the essentials and thus to increase the quality of the results. This can be made possible by means of "Advanced Planning", that should bring improvements with modern and advanced planning approaches. Essential aspects here are: integration, focus, forecasting, collaboration and agility.


Fig. 7:Advanced planning



a) Fully integrated planning models

Fully integrated planning models initially describe the combination of individual partial plans to form a uniform plan. In addition, a central point is the systematic connection and coordination of various management processes, such as planning, reporting, analysis and financial consolidation, which in turn enables partial results to be displayed and evaluated. The decisive factor for this is Connection of planning and reporting / analysis or the connection between profit and loss account, balance sheet and cash flow account as well as a common database. This is intended to remedy the lack of links between strategic and operational plans, which often still exist.

In plain language this means: one Quality improvement the planning results as well as a meaningful results planning For companies. This is confirmed by almost 90% of those surveyed in the study who already use fully integrated planning models and who see both as greatly to very much improved. However, this approach is currently the least widespread.


Fig. 8:How did the following aspects of your planning develop through the use of a fully integrated planning model? (n = 36)



b) Driver-based planning

The driver-based planning aims to reduce the large amount of time required and the level of detail that is too high, which often leads to pseudo inaccuracies. The focus of this method of planning is on the so-called. Drivers (central influencing factors such as capacity utilization or personnel costs) of your own business. You limit yourself to the essential drivers and then automatically derive the consequences from them. A systematization of cause-effect relationships, whereby

  • Relationships = linear-mathematical connections,
  • Cause = driver or influencing factor and
  • Effect = result size,


can be referred to as a (value) driver tree.

This approach is based on the integrated corporate planning, which ensures the connection of individual sub-plans with each other and in the result planning.

Although this approach some Improvements brings how

  • Reduction of the complexity of the planning or the level of detail,
  • Improvement of the quality of results,
  • increased transparency and better traceability and
  • often shortening the planning processes or reducing effort,


Driver-based planning models are rarely used in companies, least of all in small companies.


Practical advice:

To reduce the time required and the level of detail in planning, the following are also recommended concrete actions:

  • Combination of individual products into product groups. The following rule of thumb applies: Standard products with constant profit margins have to be planned less precisely than new products or products that are in strong competition with offers from competitors.
  • Reduction of the planned number of cost types: Often, selected types of costs can be planned automatically on the basis of empirical values ​​(e.g. travel costs, insurance, fees).



c) Simulations

A fully integrated planning model also forms the essential basis for the simulation and analysis of scenarios. In particular, driver-based planning models are also suitable for parameter simulations and scenario considerations. The aim and purpose of the simulation methods, which are used, for example, to determine the overall scope of risk (risk aggregation), in rating forecasts for early crisis detection or to determine risk-based cost of capital rates, is Future scenarios to model, Impact on results to simulate, analyze them and make possible forecasts. What speaks in favor of this procedure is:

  • a risk reduction (prevention of wrong decisions),
  • the cost factor; no direct investment,
  • Transparency of the consequences → plausible and comprehensible illustrations of scenarios,
  • Juxtaposition and comparison of various possible future scenarios in a model environment (e.g. best case / worst case),
  • Discover possible hidden interactions,
  • Simulation of measures and effects as well as opportunities and risks,
  • increased quality of results and planning efficiency.


However, these methods are not yet being used across the board; in medium-sized companies, almost half use simulations for business planning. Overall, the expected benefit is estimated to be very high at over 50%.


How simulations can be created on the basis of current data and which measures can be implemented to limit possible negative effects for companies shows Erichsen in BC 2015, 363 ff., issue 8.



d) Specification of planning premises

Why go through complex and lengthy planning processes based on the bottom-up principle, which lead to inadequate results, when it is easier with the help of the specification of planning premises and target values? This specification is already made as part of the top-down planning process and is therefore the most widespread advanced planning approach for 70% of the companies surveyed. Since neither top-down nor bottom-up processes produce satisfactory results planning, this led to the development of new approaches such as the "Management planning", which builds on the top-down approach. To this end, essential drivers or targets for planning are first derived, so-called "guard rails" (e.g. monetary drivers such as return on sales) and non-monetary drivers such as lead time of a production order). On the basis of these specifications, the company's management defines reliable, realistic goals through assessments.

The subsequent planning (detailed planning) takes place in two steps:

  1. Step: The management adopts plan values ​​based on key figures, value drivers and results calculations (see examples below).
  2. Step: The budget is planned out by the business areas on the selected level of detail.


Examples of measurable targets:

  • Reduce current assets - Measured variable: total replacement time for inventories (in days)
  • Increase global market share - measured variable: market share (in%)
  • Accelerate the offer process - measured variable: Exceeding the lead time from the customer (receipt of offer) to the customer (submission of offer) (in days)
  • Expand global cooperation - Measured variable: Proportion of employees with at least two years of professional experience abroad (in%).


The focus here is on control-relevant content, with the main starting point being the drivers of the business. Simulation methods and scenario analyzes (see above) are used to arrive at reliable target values. A high level of detail in the planning is dispensed with; instead becomes a Target corridor for key earnings figures and selected plan key figures are determined. This not only increases the efficiency of planning, but also improves the quality of results, as the companies surveyed report. Overall, the benefit of this approach is rated as high. Because the following applies: If you plan too detailed, you have to invest all the more work and time. Detailed planning does not necessarily lead to a higher or "more precise" result quality.



e) Forecasts and developments

Forecasts, often created manually without mathematical-statistical methods (see examples below), are very time-consuming and resource-consuming. Here, too, the following applies: the higher the level of detail, the greater the effort required to generate the plan data. This should be remedied by statistical forecasts of future developments. Such forecasts are based on developments in the past mathematical-statistical methods and should automatically forecast plan values ​​such as trend updates, linear regression, advanced data mining algorithms. In order to do justice to the growing amount of data, statistical methods can help to determine relationships between influencing factors and target values ​​(cause-effect). advantages here are:

  • a better understanding of essential drivers and key variables for planning,
  • the partial automation of the otherwise manually recorded forecasts,
  • a better quality of results,
  • a shortening of the planning process (mainly by eliminating manual effort) and
  • thus an overall increase in the efficiency of planning.


Despite the many advantages, only around 40% of the companies surveyed use statistical methods to forecast developments. The reasons for this are the lack of specialist knowledge and the lack of or limited availability of employees with in-depth statistical knowledge.



f) Cloud BI - a trend with a future?

Cloud BI (internet-based procurement and provision model for business intelligence services) is one of the most modern trends in corporate planning. In practice, however, this trend has hardly been used so far. Nevertheless, 40% of the companies surveyed can imagine Planning solutions via the cloud to acquire. Some providers offer their solutions there. One promises a needs-based and flexible use as well as lower costs; it is an interesting option for companies with limited IT resources of their own. It is used in a wide variety of areas, including data management and budget planning.



5. Which software tools are used?


Fig. 9:Which systems are used for planning and budgeting in your company? (n = 251)



The most frequently used planning tool among the surveyed companies with a share of 90% is Microsoft Excel. In almost all companies this spreadsheet program is used in some form for planning purposes. However, there are a few things that speak against the use of Excel:

  • sometimes countless Excel files (with a missing consistent database),
  • high susceptibility to errors,
  • Risk of inconsistencies (contradictions, inconsistencies) due to numerous links (e.g. from partial planning),
  • Insufficient support for the planning process (e.g. when transferring master and transaction data from ERP systems),
  • missing supporting functions (e.g. coordination of the power network can hardly be efficiently supported),
  • Additional effort (high effort due to macro programming).


Only the ease of use and the low cost factor should speak in favor of use. In contrast, the Excel series of articles in the BC magazine, which has been running since 2011, shows the many possible uses of the Microsoft Office solution, such as simpler simulations or project planning using Gantt charts.

Advanced Planning thus combines different modern approaches in the area of ​​planning and thus provides interesting approaches to improving planning.




Lisa Bauer and Jonathan Coenen, Employee of the BC editorial team, C.H.BECK publishing house, Munich.