Open-to-Buy (OTB) Planner

How the open-to-buy calculation works

Open-to-buy (OTB) is the amount you can still spend on new merchandise in a period without going over your plan. Retailers work it out at retail value and then convert it to cost. This planner uses the standard retail-method formulas, one month at a time.

One month's end-of-month stock is the next month's beginning-of-month stock. That is why the plan asks for a “month after the plan”: it sets the stock you want on hand at the end of your last month. All the markup and margin figures here are percentages of the selling price.

The four ways to plan stock

• Stock-to-sales ratio. Beginning-of-month stock = ratio × that month's net sales. A ratio of 3 means you plan to start the month with three times its sales in stock.
• Weeks of supply. Beginning-of-month stock = weeks of supply × average weekly sales, where weekly sales are the month's sales divided by 4.33 (52 ÷ 12).
• Basic stock method. Beginning-of-month stock = that month's net sales + basic stock. Basic stock = average stock − average monthly sales, and average stock = total period net sales ÷ the stock turn for the period. The stock turn cannot exceed the number of months in the plan, because the stock would then be less than one month of sales.
• Direct entry. You type in the beginning-of-month stock you want for each month and the stock you want at the end of the plan.

Worked example

A buyer plans three months with net sales of 100,000, 120,000 and 90,000, then 80,000 in the month after the plan. Markdowns are 10% of sales, shrink is 0%, and the stock-to-sales ratio is 3.0 every month. Month 1 already has 150,000 on order. Initial markup is 50%.

• Beginning stock: 300,000, 360,000 and 270,000. End-of-month stock: 360,000, 270,000 and 240,000.
• Reductions: 10,000, 12,000 and 9,000.
• Planned purchases, month 1: 100,000 + 10,000 + 360,000 − 300,000 = 170,000. Month 2: 120,000 + 12,000 + 270,000 − 360,000 = 42,000. Month 3: 90,000 + 9,000 + 240,000 − 270,000 = 69,000.
• Open-to-buy, month 1: 170,000 − 150,000 = 20,000 at retail, or 10,000 at cost.

The “Load example plan” button fills in a six-month sample so you can see the whole planner at work, and then you can replace it with your own figures.

How to use the results

• Positive OTB means you have room to buy. Spread it across vendors and categories according to your sales trends.
• Negative OTB means you are over-bought for that month. Options include delaying or cancelling deliveries, shifting receipts to a later month, or planning extra markdowns. The planner shows the amount so you can decide.
• Keep it current. Update actual sales, stock on hand and orders each month, and look at the plan again.

Glossary

Net sales

Sales after returns and customer discounts, at retail value.

Reductions

Markdowns, shrinkage (theft, damage, counting errors) and other reductions in the retail value of stock. In this tool they are a percentage of net sales.

BOM and EOM stock

Stock on hand at the beginning and at the end of a month, at retail value.

Initial markup

The markup from cost to the first retail price, as a percentage of retail.

Maintained markup

The markup you actually keep after reductions, as a percentage of net sales.

Stock turn

How many times stock sells through in a period: net sales divided by average stock.

Frequently asked questions

Why does the plan use retail value?

Sales, markdowns and stock are all tracked at selling prices in the retail method, so the stock-flow arithmetic works cleanly at retail. The planner converts the answer to cost only at the end, using your initial markup.

What counts as “on order”?

Enter the retail value of merchandise you have already committed to receive in that month, including goods in transit. If you enter the whole season's orders in the first month, the planner will show that month as over-bought.

How is stock turn calculated in the results?

Average stock is the average of the planned beginning-of-month stock for the months in your plan. Stock turn is the plan's net sales divided by that average, and the annualized figure multiplies it by 12 and divides by the number of months.

Does this plan for delivery dates within a month?

No. It works in monthly buckets. For delivery timing, use it alongside your vendors' ship dates and our Timeline Planner.

Related tools and resources

• Merchandising Metrics Calculator
• Target FOB Price Calculator
• Landed Cost Calculator
• Size Curve & Order Splitter
• Garment Cost Sheet
• Timeline Planner (T&A Calendar)
• Clothing stores
• All tools for the apparel industry

This tool is for planning and general guidance. Results are calculated from the figures you enter, and real sales, stock and costs will differ from any plan. Confirm important buying decisions with your own records and qualified professionals. See our Legal page for terms of use.