The revenue you expect to generate during the period. Planned Markdowns: Anticipated discounts or promotions.
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is a critical financial control and budgeting process used in retail to manage inventory investments. Essentially, it acts as a roadmap for retailers, determining how much inventory they can afford to purchase during a specific period—typically a month or a season—to meet sales goals without overstocking. The Core Mechanics of Open-to-Buy open to buy
OTB (retail) = (100k + 10k + 150k) – (120k + 30k) = 260k – 150k = $110k retail
cap O cap T cap B equals cap P l a n n e d cap S a l e s plus cap P l a n n e d cap M a r k d o w n s plus cap P l a n n e d cap E n d minus o f minus cap M o n t h of open paren cap E cap O cap M close paren cap I n v e n t o r y minus cap B e g i n n i n g minus o f minus cap M o n t h of open paren cap B cap O cap M close paren cap I n v e n t o r y The revenue you expect to generate during the period
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The Stock-to-Sales Ratio represents the relationship between the inventory on hand and the sales generated. It tells you how many months' worth of inventory you need to support one month of sales. Essentially, it acts as a roadmap for retailers,
But OTB is more than just a number; it is a strategic philosophy. When executed correctly, an OTB plan ensures you have the right product, at the right place, at the right time, while maximizing your ROI.
OTB=(Planned Sales+Planned Markdowns+Planned End-of-Month Stock)−Beginning-of-Month Stock−On-Order Commitmentscap O cap T cap B equals open paren Planned Sales plus Planned Markdowns plus Planned End-of-Month Stock close paren minus Beginning-of-Month Stock minus On-Order Commitments