Forecasting is flexible. It can be produced as a tops down, bottoms up, or mix of the two.

Description

Forecasting flexibility in Corporate Performance Management (CPM) software refers to the capability of the system to allow for different approaches in generating forecasts. This includes tops-down, bottoms-up or a mixed approach, enabling organizations to choose the method most suited to their business model and strategic goals. This functionality supports efficient and effective planning processes within an organization.

Example Use Case

Scenario: A retail company operates on a mixed forecasting model. The top management provides a strategic direction (tops-down forecasting) guided by company-wide objectives, while each store manager plans inventory and sales goals based on their local market conditions (bottoms-up forecasting).

Solution: The CPM software used by the company allows for this flexible approach in creating forecasts. The system accommodates both tops-down input from the company leadership and bottoms-up input from individual stores, generating a comprehensive and well-rounded forecast that factors in both overall strategy and local considerations.

Considerations

Flexibility in the planning tools is a must, as business requirements and priorities tend to change over time. In this example we have a hybrid model. What if we wanted a scenario that was entirely top down, and another that was entirely bottom-up? Then we compare all three to determine the most accurate method. That is only possible if the system supports more than one method.

Some hybrid models start with a top-down budget that populates all the department levels proportionally, then allows the department heads to edit those numbers. Essentially, they're giving a starting point. Other types include a set of goals, which are essentially top down targets, which allows management-level contributors to work towards those goals when building the budget.

Lastly, consider that there may be new executive hires in the future. New executives almost always want to make changes - for example, the new CFO is a top-down planner only. The company has been doing bottoms-up forever. If the system does not accommodate this new strategic direction for planning, it will end up in the trash heap.

Questions to Ask a Vendor

• Forecasting Flexibility: How does your system support different forecasting methods? Can it handle a blend of tops-down and bottoms-up forecasting?
• Hybrid Model: How does the system blend a top down and bottom-up forecasting model?
• Data Integrity: Will either of these methods overwrite each other depending on the order in which they're utilized?