Business concerns use different models for forecasting sales which are mainly categorized into two. The general techniques usually involve either forecasting from down to the top level or from top to bottom level for the demand. For small business organizations, the techniques being implemented depends upon the importance of value for the company.
Top Down Sales Forecasting
This method of sales forecasting predicts the demand with respect to the top level of the category of products to the individual units down. This kind of sales forefasting is like a pyramid in which the sum of each levels is equal to the number at the top level. A typical example include dividing the products into two categories intended for male and female. the next level down include further customization either depending upon color or taste. And it is also possible to have equal demand for all the products in sub categories.
Bottom Up Sales Forecasting
This method of sales forecasting is extremely opposite to the top to bottom level of sales forecasting. In this method, the sales forecast is generated at the lowest level of the pyramid. The bottom-up sales forecasting encourages the selling of individually customized products at the bottom of the pyramid to achieve overall target. Grouping of the products into further level up determines the value for that category. As the demand is analyzed from bottom to top individual products with a specific feature can be monitored separately.
Hybrid Model of Sales Forecasting
In this method of sales forecasting, both tops to bottom and bottom to the top method of sales forecasting are combinedly used. For a particular product coming under a group of family top to bottom level sales forecasting is used while for a specific classification of products the bottom to the top level method is used.