opentobuy

Open-to-Buy (OTB) is a retail inventory planning concept used to control the amount of merchandise a store or department is authorized to purchase in a given period. It aligns purchasing with projected sales and target inventory levels to optimize cash flow and inventory turnover.

OTB relies on data such as current inventory on hand, on-order receipts, sales forecasts, planned markdowns, supplier lead times, and desired end-of-period inventory. The core goal is to determine how much to buy to meet forecasted demand without creating excess stock.

Calculation and process: A common approach is to compute Planned Purchases = Projected Sales for the period + Desired Ending Inventory - Beginning Inventory - On-Order. The result represents the budget available for new purchases within the period. Purchases are then scheduled and authorized accordingly.

Application and scope: While used across many retail sectors, OTB is especially common in fashion, apparel, and consumer goods where demand can be volatile and margins are sensitive. It supports seasonal buys and reduces the risk of overstock and stockouts.

Implementation and tools: OTB can be implemented via spreadsheets or integrated into retail planning software as a module within ERP or POS systems. Automated OTB tools can pull data from sales, inventory, and procurement to adjust budgets dynamically.

Limitations and considerations: The effectiveness of OTB depends on forecast accuracy, lead times, supplier reliability, and the ability to react to changing market conditions. Overly optimistic forecasts or long lead times can undermine the method.