Top-down forecasting uses sales projections for categories and narrows them down to products based on the product contribution into the category.
For example, if a variant contributes 2% to the total revenue for a category, the the forecast will continue to show the variant contributing 2% to the category revenue. This will follow fluctuations in the category performance (for example for seasonal products).
When should you use top-down forecasting?
- When you have enough sales data in categories (more than 12 months), the top-down forecasting can automatically account for spikes in sales.
- It also works for products without long sales history. Top-down forecasting uses the product category pattern to help predict future sales.
Account-wide top-down forecasting
To enable top-down forecasting, go to Account > Settings
> Forecasting and enable Use top-down forecasting setting.
Top-down by category, vendor or total
To override the bottom-up forecast (forecasting for each SKU, then summing those forecasts to the product, category, vendor or total), go to Edit Forecast.
Then select Top-Down by Product, Vendor, Category, or Total.
If you will have higher demand (for example due to promotions or new sales efforts such as trade shows), enter an override in number of units as seen here for May 2019.
Then Save Changes to implement this override.
The increase (or decrease) indicated in the override will scale proportionally to all associated variants. For example, if the original forecast is 500 units, then the override is 750 units, all associated, replenishable variants will see a 150% increase to the forecasted demand for that month.