Retail Definitions:
Open to Buy (OTB)
What exactly is open-to-buy planning?
The process by which retailers create budgets for future purchases for a specified period of time.
An inventory management system that determines the amount of inventory needed to meet customer demand while maintaining a positive cash flow.
Understanding retail inventory is the key to financial health.
An open-to-buy plan determines how much of each class of merchandise you or your buyers can purchase every month.
The main purpose of an open-to-buy plan is to make sure that you don’t have too much or too little of each class of product to accurately meet demand. But it’s not just about demand. Properly understanding your inventory is the key to overall financial health. When followed correctly, an open-to-buy plan increases your margins and profits, helps you control cash flow, and tells you how much money is available to reinvest in the growth of your business.
The basics of an open-to-buy plan are simple: You start with your planned sales for a given period of time, factor in the inventory levels you expect to have at the beginning and end of that period, and then account for markdowns. But while the formula is easy, the projections that go into that formula have to be reliable in order for it to work. That’s where the predictive analytics and expert advice provided by Management One come in. Our Retail ORBIT® technology helps you properly predict sales and inventory levels, so that your open-to-buy plan is as reliable as it can be.