Bottom Up Forecasting - Definition
Written by Jason Gordon
Updated at December 17th, 2020
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What is Bottom-up Forecasting?
Bottom-up forecasting is a method of estimating future sales revenue. The process begins with estimating sales revenue of each product or product line. The number of potential sales per product is multiplied by the average sale value to get the potential revenue for a product line. These individual projections are combined to estimate the entire revenue of the firm.
Besides the specific product or components, other factors such as sales channel, geographic region, customer types are also taken into consideration. This micro approach is used to develop a macro view of the firms sales.
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Academic Research on Bottoms-Up Forecast
- Revisiting top-down versus bottom-up forecasting, Kahn, K. B. (1998). The Journal of Business Forecasting, 17(2), 14.
- Top-down versus bottom-up forecasting strategies, Schwarzkopf, A. B., Tersine, R. J., & Morris, J. S. (1988). The International Journal Of Production Research, 26(11), 1833-1843. Top-down & bottom-up forecasting in S&OP, Lapide, L. (2006). The journal of business, 1.
- Top-down or bottom-up: Aggregate versus disaggregate extrapolations, Dangerfield, B. J., & Morris, J. S. (1992). International Journal of Forecasting, 8(2), 233-241.
- Forecasting item-level demands: an analytical evaluation of topdown versus bottom up forecasting in a production-planning framework, Widiarta, H., Viswanathan, S., & Piplani, R. (2008). IMA Journal of Management Mathematics, 19(2), 207-218.
- A positive model of earnings forecasts: Top down versus bottom up, Darrough, M. N., & Russell, T. (2002). The Journal of Business, 75(1), 127-152.
- Forecasting aggregate time series with intermittent subaggregate components: top-down versus bottom-up forecasting, Viswanathan, S., Widiarta, H., & Piplani, R. (2008). IMA Journal of Management Mathematics, 19(3), 275-287.
- TopDown Versus BottomUp Demand Forecasts: The Value of Shared Point of Sale Data in the Retail Supply Chain, Williams, B. D., & Waller, M. A. (2011).Journal of Business Logistics, 32(1), 17-26.
- Forecasting inflation through a bottom-up approach: How bottom is bottom?, Duarte, C., & Rua, A. (2007). Economic Modelling, 24(6), 941-953.
- Top-down or bottom-up: Which is the best approach to forecasting?, Gordon, T. P., Morris, J. S., & Dangerfield, B. J. (1997). The Journal of Business Forecasting, 16(3), 13.