The value of orders already placed but not yet received. Example Calculation
If a boutique clothing store is planning for October with these projections: $20,000 Planned End-of-Month Inventory: $15,000 Planned Markdowns: $1,000 Beginning Inventory: $18,000 On-Order Inventory: $4,000 The calculation would be: OTB . Key Implementation Details Open to Buy (OTB) Guide - Retail Dogma open to buy formula
OTB=(PlannedSales+PlannedMarkdowns+PlannedEnd−of−PeriodInventory)−BeginningInventory−On−OrderInventorycap O cap T cap B equals open paren 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 P e r i o d cap I n v e n t o r y close paren minus cap B e g i n n i n g cap I n v e n t o r y minus cap O n minus cap O r d e r cap I n v e n t o r y The value of orders already placed but not yet received
The desired stock level you want to have at the end of the month or season. The revenue you expect to generate during the period
The revenue you expect to generate during the period.
The value of the stock you have on hand at the start of the period.
The formula is a retail inventory management tool used to determine the remaining budget available for purchasing new merchandise while maintaining ideal stock levels. Core Formula The standard way to calculate OTB is as follows: