Far Bank Enterprises Builds Top-Down and Bottom-Up Business Plans with Quantrix Modeler

Inventory planning is just one element of a consumer product company’s overall fiscal picture, but for Far Bank Enterprises, it also provides the foundation for business forecasting. By using Quantrix to develop a top-down/bottom-up hierarchical model, the company is building a detailed financial planning model to drive its business decisions moving forward.

Far Bank Enterprises is a manufacturer and distributor of fly-fishing products, including rods, reels, lines, leaders, tippets, and performance outdoor apparel. Its products are sold via three brands: Sage, which is known throughout the fly-fishing community for its high-end rods; Redington, which sells entry- and mid-level rods and reels along with waders and apparel; and RIO, which sells fly lines, leaders, and tippets.

Mike Locascio joined Far Bank as Director of Finance. His first efforts were to develop long-range planning, budgeting, and forecasting models, and he immediately started using Quantrix Modeler. “I was an early adopter of Quantrix in a previous finance job for a multi-channel clothing retailer, and knew that it was a great tool for inventory planning and finance,” says Locascio. “I was able to develop a detailed, accurate budget using Quantrix within 30 days of starting, and to build a sales model for our five-year plan within 25 days.” This sales model was robust enough to use in detailed inventory budgets and multiyear planning.

The company wanted a deep-dive analysis on its various lines in order to impact future directions. “We’re a wholesaler, so margin, cost, and inventory are product-driven,” says Locascio. “In order to know how to grow each of the companies profitably, I need to use historical data in a planning environment so that we can maximize unit sales volumes at the highest regional prices while determining our inventory investment.”

For retail inventory planning, the goal is to look at the performance of each item individually, as well as part of a group. For example, Redington sells hard goods and soft goods. In the soft-goods category, it sells both men’s and women’s apparel, both of which need to be viewed as a whole and as categories. Sub-categories include shirts - short- and long-sleeve, woven vs. knits, pullovers vs. button-downs, etc. And each sub-category contains numerous individual items.

Locascio uses Quantrix’ DataNav to pull in information from multiple sources, including its accounting systems as well as from SQL and Oracle databases. He uses hierarchical relationships for every product in the inventory, linking them to groups and categories. He then adds information on channel and country. “We have details on units, sales, and cost for retail and for inventory in our accounting system by item,” says Locascio. “We marry that item-level detail with item hierarchies using the item number, and join supplemental tables – we have all the necessary data to analyze performance.”

He can use Quantrix to look deeply at each financial factor such as margin dollars, margin percent, and ROI on margin, for each category, sub category, and individual item. “We use Quantrix to keep drilling down until we find the metric that can be used in planning. Areas where we can be doing better become evident and appropriate plans can be laid out,” says Locascio. 

“Quantrix is an ideal application, because we can link the most current data available, put it into a format necessary to analyze and plan, adding equations for metrics and KPI’s,” says Locascio. “We can calculate inventory turnover, gross margin, and return on investment, all off of raw data.”

Because Quantrix is structured so that users can create one formula and use it repeatedly throughout a model, Far Bank knows that it is measuring everything using a uniform standard. “We have a profitability measure that is the same for all products using one formula, not the thousands of formulas we would have in a spreadsheet,” says Locascio. “And we can slice and dice the product mix in a flexible environment.” The model is scalable, and therefore simple for Far Bank to add years.

While Quantrix Modeler is ideal for inventory planning, it also is easily adaptable for forecasting. “I use the same analytic model, throw in some assumptions, and now I have a plan,” says Locascio. “It is the basis for sales, margin, and inventory forecasting.” This sales and margin plan becomes part of Far Bank’s Profit/Loss and Balance Sheet.

It is easy to create 'what if' scenarios within Quantrix by adjusting assumptions, which enables Far Bank to do numerous checks at each stage of the planning process. “I break my assumptions down, and always check how they impact the model when I roll it back up,” says Locascio. “If the scenario isn’t consistent with the top-level goals, then I adjust the plan. At each stage, I can check that what we’re planning for the future is consistent with history and goals. The basic principle is to have it work both top-down and bottom-up within a that hierarchical structure.”

From there, he can get the detailed-level planning he needs to create item-level budgets for the company, and roll up the information to get a comprehensive forecast so that Far Bank can plan its investments to generate the maximum profitability. “It’s all about decision-making, and those are only as good as the thoroughness of plan and the level that you can break down the metrics,” says Locascio. “The devil is in the details, and that construct is Quantrix’s home turf.”