1. Middle-Out Forecasting
We have talked about bottom-up and top-down forecasting. Now it is time to blend them together!
2. Review of bottom-up and top-down forecasting
Bottom-up forecasting is great if you have the time to build forecasts for every element on the bottom of the hierarchy. Top-down forecasting doesn't produce forecasts that are as accurate. What if you don't want to lose all the accuracy of top-down, but still don't have the time for a complete bottom-up forecast?
3. Middle-out Forecasting
Middle-out forecasting is the blend between both bottom-up and top-down forecasting. Typically, we pick a middle layer of the hierarchy and forecast that layer. From there we perform top-down forecasting for every layer below that and bottom-up forecasting for every layer above it.
For our grand example that we have been working through you could forecast sales at the regional level. Adding up these regional sales forecasts will give you a total state sales forecast. Reconciling down from the regional sales forecasts will provide individual product forecasts.
You have completed most of these pieces already. In the videos we have built the mountain region. In your exercises you have built the metropolitan region. There is no code help in this video! You have all the pieces you need.
4. Let's practice!
Now go work on the southeast region and complete the entire hierarchy!