Open – To – Buy

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Open – To – Buy

Inventory purchase budget based on sales plan (Target)
Usually done at the category level, if necessary, you can drill down to sub-levels even down to SKU level
 
OTB Formula:

Desired End of Month (EOM) inventory
Plus sales and markdowns
Minus Beginning of the Month (BOM) inventory and on order and receipts
Equals Open To Buy
 
Example:

 Open to Buy

The component that makes the open to buy calculations difficult is the fact that the end of month and markdown values are based on forecast. That requires complete knowledge of the customer, market, store, competition and of course the product.

Benefits of Open – To – Buy:

 Estimate in advance capital required for inventory
 Ensure right inventory levels for planned sales
 Control merchandise commitments
 Establish objectives so that actuals can be compared with
 Provide opportunity for more profit

 

 

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