Reconciled merchandise planning: the complete guide
The complete guide to reconciling a bottom-up demand forecast with a top-down merchandise financial plan, so your buy starts from real demand.
Most brands run two plans that never quite meet. Finance sets a top-down target for sales, margin and inventory. Planning builds a bottom-up forecast by style, size and channel. The two are built in different tools, on different assumptions, and they disagree. The buy gets committed before anyone reconciles them, and the gap shows up later as markdowns or empty shelves.
The two numbers that never meet
The top-down plan is a budget. It answers what the business needs to hit. The bottom-up forecast is a prediction. It answers what customers are likely to buy. Both are right in their own terms and wrong at the point where you place the order, because the order has to satisfy both and usually satisfies neither.
What each side misses
Top-down planning is fast and financially coherent, but it spreads a number across categories that behave nothing alike. Bottom-up forecasting respects how products actually sell, but left alone it drifts away from the margin and cash the business can carry. Reconciliation is the step that makes one number both buyable and affordable.
How reconciliation works
Start from a demand forecast at the level you buy: style or SKU, by channel, by week. Roll it up against the financial plan. Where they disagree, you can see exactly which categories are over or under the target and by how much. You adjust once, at the level that matters, and the change carries through to open-to-buy, assortment and receipts.
The point is not to force the forecast to match the budget. It is to make the trade-offs visible before the buy is locked, so the decision is a choice and not an accident.
What changes when they agree
The buy lands closer to real demand, so more sells at full price and less cash sits in stock that will not move. Open-to-buy becomes a live number the whole team plans from, not a spreadsheet that is stale by Monday. And when sell-through comes in, you re-forecast and reconcile again, in season, instead of waiting for the post-mortem.
This guide walks through the method step by step, with the top-down and bottom-up templates you can use to see the gap in your own numbers.