I work for an FMCG company with 300+ SKUs. The company wants to move towards bottom
up forecasting at regional and customer level for each SKU, using the Holt Winters method.
What is the best way to go about it and which softwares/tools can I use for this purpose which
will also be easy to learn and implement? I am new to forecasting and not aware of the best approach.
Planning Professional at a large FMCG company
It is true that most organizations use the bottom-up approach to forecasting. But the
most recent IBF survey shows that the middle-out approach (category level forecasts) yields the
least amount of error. Once you get the category level forecasts, you can dis-aggregate them
into SKU level and customer level forecasts, and combine them to get the aggregate level
I cannot tell you whether or not exponential smoothing is the best model for you. I suggest you test
this and other models by preparing ex post forecasts (preparing forecasts of those periods for
which actuals are known) and then determine which model on average yields the least
amount of error. It is difficult for me to say which software is best for you as different software
packages use slightly different models and use them a little differently.
Dr. Chaman Jain,
St. John’s University