What is open to buy (OTB)?

• ✓OTB = planned EOP stock + planned sales + planned reductions − BOP stock − on order. The first four terms are planned receipts; on order is what has already been committed against them.
• ✓Reductions — markdowns, employee and promotional discounts, and shrink — belong in the formula. Leave them out and receipts are under-planned by the full reduction budget.
• ✓At cost, convert with the markup the open purchases will carry: OTB at retail × (1 − planned IMU). A plan held at cost uses cost of goods sold instead of sales and has no markdown line.
• ✓A negative OTB is an over-bought period. It does not disappear: goods that land anyway become next month’s opening stock and reduce next month’s OTB by the same amount.
• ✓OTB is a budget per class and period; the buy plan spends it, the merchandise financial plan sets it, and the WSSI trades the same stock identity week by week.

What OTB means in business, and what it means in a store

In a business that buys merchandise to resell it — a retailer, a brand selling through its own stores and site, a wholesaler, a distributor — OTB stands for open to buy, and it means the part of the inventory budget that has not yet been spent. The merchandise plan sets how much stock the business intends to receive in each period; every purchase order written against that period uses some of it; whatever is left is open. When a merchandising director asks whether a department has open to buy for spring, the question is how much of the spring receipt budget is still uncommitted, and in which months.

The same three letters mean something slightly different depending on which side of the order you sit. For a buyer, open to buy is their own remaining budget. For a brand or wholesaler selling to retail accounts, an account’s open to buy is the budget that account’s buyer still has for the category — which is why a wholesale sales rep asks a buyer whether they have open to buy before showing a line. The arithmetic is the buyer’s; the seller is asking to see the result. A brand that both runs its own stores and sells wholesale meets the term in both senses: its own open to buy governs what it receives for its stores and site, and its accounts’ open to buy governs how much of the wholesale line can be booked.

In a store, the term means something narrower again, and in most chains it is not a figure the store holds at all. Store teams in a centrally planned chain see allocations, deliveries and transfers; the open to buy that funds those deliveries is held centrally by class and month, and the store’s stock plan is one input to it. In an independent store, the owner or a single buyer usually is the planning function, and open to buy is a monthly budget kept in a spreadsheet or a ledger: how much can still be ordered for next month without the shop ending the month over-stocked. The formula is the same in both cases. What differs is how many people the figure has to be shared between, and how far the person writing orders sits from the person who set the plan.

Outside merchandising, OTB is an abbreviation for other things, so in a cross-functional conversation it is worth spelling out once. Inside a merchandising or buying conversation it means open to buy, and it is usually said as a single word — “we have no OTB left in March” — which is a fair summary of how central the figure is to the job.

Why open to buy exists: cash, margin and freshness

A merchandise business has three reasons to cap what it receives in a period, and open to buy is the single figure that enforces all three. Without it, every buyer’s judgement about what will sell is a reason to buy more of it, and the sum of those judgements is almost always more stock than the business can afford, sell at full price, or present.

The first reason is cash. Inventory is paid for on vendor terms, usually before most of it sells, so every receipt is working capital tied up until the goods turn back into sales. A plan that lands receipts early, or lands more than the period needs, borrows against cash the business may need for payroll, rent or the next season’s deposits. Open to buy by month is what keeps the timing of commitments in step with the timing of the sales that will repay them. The working-capital view of the same stock is GMROI’s question — gross margin dollars over average inventory at cost — covered in how to calculate GMROI.

The second reason is margin. Stock beyond what demand will absorb at full price is eventually sold below it. Every unit bought past the plan is a unit that either sells at a markdown, sits as aged stock, or is cleared through an outlet or off-price channel, and the margin given up is lost on goods the business chose to buy. Open to buy does not make the sales forecast right, but it does stop the business committing beyond the forecast it has, which is where a large share of avoidable markdowns start.

The third reason is freshness. A floor or a site that is full of stock bought early has no room for what arrives later — the second delivery of a season, a chase on a style that sold, a new range a competitor has not yet shown. Open to buy held back for later months, and a reserve held back for chase, are what keep space and budget available for newness. A business that spends its entire budget pre-season has decided, before a unit sold, that nothing it learns in the season will change what it stocks.

The three reasons pull in the same direction, but not always by the same amount. A business short of cash will run a tighter open to buy than its margin alone would justify; a business whose customers expect constant newness will hold more back for later deliveries than a replenishment-led one. The formula does not change. The planned closing stock in it does, because that is where each business writes down how much inventory it is willing to carry.

Open to buy is not a forecast, and not a target to spend

Two misreadings of the figure cause most of the trouble around it. The first treats open to buy as a forecast of what the business will buy. It is not; it is a ceiling on what the business may receive without breaking its plan, and a month that ends with open to buy unspent is not a miss. If demand turned out lower than planned, unspent open to buy is exactly what the control was for.

The second misreading treats open to buy as a budget that has to be used, the way a department might spend the last of an annual expense budget before it lapses. A buyer who fills every month to zero because the room was there has converted a ceiling into a target, and the business carries whatever stock the plan permitted rather than whatever the demand justified.

Read properly, open to buy answers one question — how much more can this class receive in this month without closing above its stock target — and leaves the question of what to buy, and whether to buy at all, to the buy plan and the evidence from the selling floor.

The open to buy formula, term by term

The formula is the inventory identity solved for receipts, with the receipts already ordered taken off. Written for one period, at retail:

• Planned receipts = planned EOP stock + planned sales + planned reductions − BOP stock
• Open to buy = planned receipts − on order
• Open to buy = planned EOP stock + planned sales + planned reductions − BOP stock − on order

The logic reads naturally from left to right. A period has to supply three things: the stock it should still hold at the end, the sales it will make, and the value it will lose to reductions. It meets them from two sources: the stock it opens with, and the orders already due to arrive. Whatever the three needs exceed the two sources by is what the period can still buy. Each term has a precise meaning, and most errors in practice are errors about what a term contains rather than errors of arithmetic.

Planned end-of-period (EOP) stock

The stock, at retail, the class should hold when the period closes. It is set from the sales ahead — usually as the next period’s planned sales times a stock-to-sales ratio, or as a number of weeks of forward cover — and it is the term that expresses how much inventory the business is willing to carry. Because each period’s closing stock is the next period’s opening stock, it also links the months of a season into one chain. In a monthly plan it is often called end-of-month (EOM) stock.

Planned sales

Net sales at retail planned for the period — the phased sales plan. It is the largest term in most months, and the one every other term is built around: the stock targets are set from it, and the open to buy moves with it. Building and phasing it is covered in how to set a sales plan, and the sales plan calculator turns last year and a growth rate into a phased target.

Planned reductions

Retail value that leaves stock without becoming a sale at the ticket: markdowns net of cancellations, employee and promotional discounts, and the shrink provision. Some plans carry only markdowns and fold the rest elsewhere; the formula works either way as long as everything that lowers the retail value of stock is counted somewhere. In the calculator this is the markdowns and reductions field.

Beginning-of-period (BOP) stock

The stock, at retail, the class opens the period with — the previous period’s closing stock. Pre-season it is a plan figure; once the previous month has closed it is an actual, and replacing the plan with the actual is the most common reason open to buy changes at the start of a month. See BOP and EOP.

On order

Merchandise committed but not yet received, valued on the same basis as the plan and placed in the period it is due to arrive. A purchase order belongs to its planned receipt month, not the month it was written, and an order that is partly received counts only for its open balance. For a retail-method plan, on-order at retail is units on order times the planned ticket.

The first four terms are a plan; only on-order is a commitment. That distinction explains how the figure behaves. Change the plan — a lower closing stock target, a reforecast of sales — and open to buy is re-solved. Write or cancel an order and open to buy moves by exactly the order’s value. Receive goods and nothing changes, because value has only moved from on-order into stock on hand. The same identity, written for the season rather than one month, is in how to plan receipt flow, which turns the period receipt budget into dated deliveries.

Open to buy at cost: two ways to get there

Buyers commit cost dollars — the purchase order is written at the vendor’s price — so even a plan held at retail has to say what the open to buy is worth at cost. There are two routes, and which one applies depends on how the business keeps its stock ledger.

Converting a retail plan

In a business that runs the retail inventory method, every term in the formula is already at retail, so the answer is converted at the end:

• OTB at cost = OTB at retail × (1 − planned initial markup on the open purchases)

The markup to use is the one the new buys will carry, not the one on stock already owned. The factor (1 − IMU) is the cost complement of the purchases still to be written; at a planned 58% initial markup it is 0.42, so 150,000 of open to buy at retail is 63,000 at cost. If the class is planned to buy richer or thinner than its opening stock — a new own-brand range at a higher markup, a branded range bought at a lower one — the conversion has to use the planned markup on the open purchases, or the cost figure is wrong by the difference. The markup itself, and the markup the open purchases must carry once part of the buy is committed, are worked through in how to calculate initial markup.

Planning at cost from the start

A business that keeps its stock at cost — common where items are costed individually, or where the cost base moves with a commodity price — writes the identity in cost terms throughout:

• OTB at cost = planned EOP stock at cost + planned cost of goods sold + planned shrink and write-downs at cost − BOP stock at cost − on order at cost

Two terms change. Planned sales become planned cost of goods sold, the cost of the units the period will sell. And the markdown line disappears, because a markdown lowers the price of a unit, not its cost: the unit leaves stock at its cost whether it sells at the ticket or at 40% off. What remains in the reduction line is anything that takes cost out of stock without a sale — shrink, damage, and any write-down the business takes on aged stock. For a different illustrative class planned at cost:

The two routes agree when the markup on the open purchases equals the markup on everything else, and they diverge when it does not, which is the practical argument for planning in whichever basis the stock ledger is kept and converting only once. The cost view of a retail-method stock ledger — the cost complement, ending inventory at cost and cost of goods sold — is in the retail inventory method.

Open to buy in units

The same identity works in units, and many teams carry a unit open to buy beside the dollar one — especially where the buying decision is really a depth decision, as in footwear, where a class is bought in pairs across a size run. The terms translate directly, with one important change: markdowns are not a unit reduction. A pair marked down is still a pair in stock until it sells; it leaves at a lower price, but it leaves as a sale. Only shrink, damage and returns to vendor take units out without a sale. For an illustrative footwear class:

A unit open to buy and a dollar open to buy can disagree, and the disagreement is information. If the dollar figure has room but the unit figure does not, the plan is assuming a higher average ticket on the new buys than on the stock it replaces. If the unit figure has room but the dollar figure does not, the buys are planned at a lower average ticket — more entry-price product. Neither is wrong in itself, but both should be deliberate, and a plan that only reads one of the two cannot see which it is doing.

A worked example: one class, four months

Take one class read pre-season, four months ahead, at retail. The merchandise plan has set sales, reductions and closing stock for each month. Opening stock for Month 1 is the stock the class is expected to carry into the season; every later month opens with the previous month’s planned close. Purchase orders already placed — prebooks and early deliveries — sit in the months they are due to arrive.

Read Month 1 across the formula: 480,000 of closing stock + 240,000 of sales + 30,000 of reductions − 450,000 of opening stock = 300,000 of planned receipts, and 300,000 − 150,000 on order = 150,000 open to buy. Month 2 opens with Month 1’s planned close of 480,000 and needs 420,000 + 300,000 + 30,000 − 480,000 = 270,000 of receipts — but 310,000 is already on order, so it is 40,000 over-bought. Month 3 needs 240,000 and has 90,000 on order; Month 4 needs 200,000 and has nothing on order yet.

The season column is a check, not a budget. The season’s receipts are 300,000 + 270,000 + 240,000 + 200,000 = 1,010,000, and the identity holds for the season as a whole: 450,000 opening stock + 1,010,000 of receipts − 1,000,000 of sales − 160,000 of reductions = 300,000, which is Month 4’s planned close. On-order totals 550,000, so the season’s open to buy is 1,010,000 − 550,000 = 460,000 — the same as 150,000 − 40,000 + 150,000 + 200,000. A season with 460,000 of open to buy can still have a month that is over-bought, and Month 2 is the month the warehouse and the cash plan will feel.

Month 1’s 30,000 of reductions breaks down as follows. It is a fifth of the month’s open to buy, which is why a formula that leaves reductions out is not a rounding difference:

At cost, the open purchases are planned at a 58% initial markup, so each retail figure converts at 0.42. Month 1’s 150,000 is 63,000 at cost; the season’s 460,000 is 193,200:

The negative month converts too: Month 2 is 16,800 over-bought at cost. The season total at cost, 63,000 − 16,800 + 63,000 + 84,000 = 193,200, equals 460,000 × 0.42, which is the check that every month was converted at the same complement. The step-by-step version of this calculation, with a single-month apparel example, is in how to set open-to-buy, and the open-to-buy calculator will reproduce any one of these months from its five inputs.

Where the closing stock target comes from

Of the five terms, planned closing stock is the one the business chooses rather than forecasts or counts, and it moves open to buy one-for-one: every dollar added to a month’s closing stock target is a dollar more that month can receive. That makes it the term most worth understanding, and the one most often set by habit.

It is usually derived from the sales ahead, in one of two ways. A stock-to-sales ratio sets each month’s opening stock as a multiple of that month’s planned sales, so the closing stock of one month is the next month’s sales times its ratio. Forward cover sets closing stock as a number of weeks of the sales planned for the weeks that follow. Both say the same thing — hold enough stock to present and sell the months ahead, and no more — and both are only as good as the phased sales plan underneath them.

The worked example’s stock targets imply these stock-to-sales ratios, opening stock divided by the month’s planned sales: Month 1, 450,000 ÷ 240,000 = 1.88; Month 2, 480,000 ÷ 300,000 = 1.60; Month 3, 420,000 ÷ 260,000 = 1.62; Month 4, 360,000 ÷ 200,000 = 1.80. The ratio is lowest in the peak month, which is the normal shape: a peak month sells a large share of what it opens with. Reading a plan’s implied ratios is the quickest way to find a closing stock target set by habit — here, Month 4’s 1.80 on the season’s exit month is worth a question: it opens with 360,000 to sell 200,000, and its 300,000 close becomes the opening stock of the following season, and a season that exits heavy starts the next one with less open to buy.

The ratio, its relationship to weeks of supply and forward cover, and how it is set across a season are covered in the stock-to-sales ratio entry and the stock-to-sales ratio calculator; the cover measures are in the weeks of supply calculator and the forward cover entry.

How open to buy moves inside an open month

Once a month is trading, the useful form of the formula is the receipt budget less everything that has used it: open to buy = planned receipts − received to date − still on order for the month. Written that way, it shows exactly which events move the figure and which do not.

By mid-month, 100,000 of the 150,000 on order has arrived, so 50,000 is still due, and the buyer has written a new 40,000 order for the month. Open to buy is 300,000 − 100,000 − (50,000 + 40,000) = 110,000. Receipts landing did not change it; the new order did, by exactly its value. That is the property that makes open to buy usable as a control at the point of purchase: a buyer can read it, write an order, and know what is left without re-running the plan.

What does change the figure, and is often missed, is a sales miss. Open to buy is solved from planned opening stock, and a month that sells less than planned closes with more stock than planned. Suppose Month 1 sells 216,000 instead of 240,000, with reductions and receipts as planned. It closes at 450,000 + 300,000 − 216,000 − 30,000 = 504,000 instead of 480,000, and Month 2 opens 24,000 heavier:

Month 2 now needs 420,000 + 300,000 + 30,000 − 504,000 = 246,000 of receipts against 310,000 on order: 64,000 over-bought instead of 40,000. The miss did not disappear; it rolled forward into the next month’s opening stock and came out of the next month’s open to buy, dollar for dollar. That assumes Month 2’s sales plan is held. If the miss is evidence that the class is trading below plan, the sales plan for the months ahead is reforecast too, and the closing stock targets come down with it — which is the work described in how to reforecast in-season. Either way, an open to buy that is not re-solved after a sales miss shows room the class no longer has.

What negative open to buy means, and what you do about it

A negative open to buy means the period is over-bought: the stock it opens with plus the orders due to arrive already exceed what the plan needs. In the worked example, Month 2 needs 270,000 of receipts and has 310,000 coming, so if nothing changes it will close 40,000 above its stock target. It is not an error message. It is the plan reporting that commitments have run ahead of it, and it is worth knowing which of four causes produced it, because each points at a different fix.

• Orders grew. On-order rose past the plan — more units on an order, an extra delivery, a re-order written without checking the figure.
• The plan shrank. Sales were reforecast down or the closing stock target was cut after the orders were written, so commitments that fitted the old plan no longer fit the new one.
• Stock carried in. A sales miss in an earlier month left the period opening heavier than planned, as the Month 1 sales-miss example shows.
• Timing moved. A delivery due later arrived early, or was dated to the wrong month on the order file, pulling receipts into a period that had no room for them.

The levers work in roughly the order they expire — checking costs nothing, moving a date costs little, a cancellation costs a vendor conversation, and accepting the goods costs margin later — so they are worth working in that order:

What does not work is treating the negative figure as somebody else’s problem — writing more orders in the over-bought month because a style is selling, on the reasoning that a winning style always earns its place. It may; but the stock it displaces is still there, and the month closes heavier by the full value of the new order. A winning style is a reason to find the room — by pushing or cancelling something weaker — not a reason to go further over. The shorter treatment of the same question is in the open-to-buy calculator’s note on negative OTB.

Why a deeper markdown plan raises open to buy

Planned reductions sit on the same side of the formula as planned sales, so raising the markdown plan raises open to buy. That surprises people the first time they see it, because markdowns are a cost, and it seems wrong that spending more margin should create more room to buy.

The arithmetic is right, and the reason is that markdowns take retail value out of stock. A month that plans 24,000 of markdowns ends with 24,000 less retail value on hand than a month that plans none, all else equal, so it needs 24,000 more receipts to reach the same closing stock target. In the worked example, Month 4 plans 60,000 of reductions because it is the exit month; if the clearance plan were cut to 30,000, Month 4’s planned receipts would fall from 200,000 to 170,000, and its open to buy with it.

The link runs one way only: a markdown plan creates room only if the markdowns are actually taken. A plan that books a generous markdown budget, spends the open to buy it creates, and then holds prices to protect margin ends the month with the goods it planned to clear still on hand and the new receipts on top of them — over-bought by the markdowns it did not take. That is why the markdown plan belongs inside the sales plan, phased and owned, rather than as a reserve of open to buy; how to build it that way is in how to build a markdown plan.

The same logic applies to shrink. A higher shrink provision raises planned receipts, because stock is expected to disappear, and a physical count that finds less shrink than the provision leaves the class holding more stock than the plan thought — which comes out of the next period’s open to buy. Testing the provision against the count is covered in the retail inventory method.

Holding back a reserve for chase

A reserve is the part of open to buy deliberately left uncommitted pre-season, so that the business can respond to what the first weeks of selling show: re-order the styles that sell, add depth to a colour that is running out, or fund a late range. It is not a separate budget. It is open to buy that has not been spent yet, and it is held back on purpose.

Continuing the worked example, the buyer first resolves Month 2 by pushing 40,000 of its on-order into Month 3, which takes Month 2 to zero and Month 3 to 110,000. Then a reserve of 20% of each month’s remaining open to buy is held back — a share chosen to show the arithmetic, not a recommendation:

The reserve totals 30,000 + 22,000 + 40,000 = 92,000 at retail, and the open to commit now is 120,000 + 88,000 + 160,000 = 368,000; together they are the season’s 460,000, which is unchanged by the push because nothing was cancelled. At cost, 38,640 is held back and 154,560 is open to commit, together 193,200.

A reserve is only real if it can be spent inside the season. That puts three conditions on it. It has to sit in months far enough out that a re-order placed when the read comes in can still land — so its useful life is set by lead time, and a reserve in a month closer than lead time can only be spent with vendors who hold stock or make quickly. It has to be matched to vendors and fabrics that can actually deliver a chase, which in apparel often means greige goods or fabric already held, and in other categories means at-once inventory at the vendor. And it needs a release date: a point at which unspent reserve is either committed to the best-selling lines or given up, because a reserve held past the last date it could land is budget the season never uses.

How large to make it is a judgement, not a ratio to copy. A range with a lot of newness, a short history and a fast-reacting supply base justifies more; a replenishment-led range with stable demand justifies less, because its replenishment is effectively a reserve already. A useful test is to ask which styles the reserve would be spent on if they sold ahead of plan, and whether those styles could be delivered in time: if the answer is none, the reserve is too large or held in the wrong months.

Releasing it is where the discipline shows. The rule worth agreeing before the season is what evidence releases reserve and to whom: a style’s sell-through running ahead of plan for a set number of weeks, a size running out at a set cover, a category trading ahead at the class level. Reading the early weeks well is covered in how to calculate sell-through rate, and sizing a reserve that lead time can actually deliver is worked through in how to plan receipt flow and how to plan a peak-concentrated season.

Open to buy vs a buy plan vs a merchandise financial plan vs a WSSI

Four documents carry overlapping numbers, and teams new to the vocabulary often use the names interchangeably. They are four views of one plan, each answering a different question at a different grain, and open to buy is the one that connects the plan to the act of buying.

The relationships are direct. The merchandise financial plan sets planned sales, reductions and stock by period, and so sets planned receipts; open to buy is planned receipts less what is already on order; the buy plan is the list of orders that spends it, line by line; and the WSSI runs the same stock identity — closing stock = opening stock + intake − sales — at weekly grain, so that in-season trading can see where the plan is drifting before the month closes. The merchandise plan is defined in the merchandise plan glossary entry, the buy plan is built in how to build a buy plan, and the WSSI is explained in what is a WSSI.

The comparison most people search for — open to buy against the WSSI, the budget against the weekly trading view, and why most apparel teams end up running both — has its own page: OTB vs WSSI. The short version is that they are two readings of the same stock flow at two speeds, and that they only stay useful while they agree.

Who uses open to buy, and at what grain

Open to buy is held at several levels at once, and each level answers a different person’s question. The figures nest: classes add to departments, departments to divisions, divisions to the company. What changes going down the levels is not the formula but who acts on the result.

The working level is class by month. A class is the smallest grouping whose sales are stable enough to plan in dollars and whose stock is managed by one buyer, and a month is the period at which most businesses close their stock ledger and reforecast. Finer than that, the figure starts to describe individual purchase orders rather than a budget — which is the buy plan’s job — and the noise in sales at style level makes a style-level open to buy swing with every week of trade. Coarser than that, a department total can hide a class that is badly over-bought behind one that is under-bought.

Some businesses add a channel or location split — a separate open to buy for stores and for the site, or for regions — where the receipts are genuinely separate decisions. That is worthwhile when stock cannot move freely between them; where one warehouse serves every channel, a single class figure with an allocation step after it is usually cleaner. The question of how a committed buy is then split across doors and sites is covered in how to allocate merchandise.

The people who use it follow the levels. Buyers read the class figure before writing an order and are accountable for staying inside it. Planners and merchandise finance set the plan it is solved from, re-solve it when the plan changes and report it. Buying managers and directors move budget between classes and departments when one is over and another under. Allocators rarely read open to buy directly, but the receipts it funds are what they allocate. Outside the business, wholesale sales teams and vendors read an account’s open to buy indirectly, through what the account’s buyer says they can commit.

Who sets it, who polices it, who spends it

Open to buy works as a control only when three jobs are held by people who can disagree with each other. In most merchandise organisations they are split between planning, buying and leadership, and the split is deliberate.

Planning sets the figure, because it owns the terms it is solved from: the phased sales plan, the reduction plan and the closing stock targets. The planner’s job is to make sure the figure reflects the current plan and the current order file, and to re-solve it when either changes. Buying spends it, because the buyer chooses which styles, vendors and delivery windows will use the room — and is accountable for staying inside it. Leadership moves it, because moving budget between classes or departments, or approving a month that goes over, is a decision about where the business invests in inventory, and that belongs to whoever owns the larger total.

Where one person does all three — an independent store’s owner, a small brand’s founder-buyer — the separation still matters, just in time rather than in people. The figure is set first, from the plan, before the buying appointments; the orders are written against it; and any decision to go over is made explicitly, at a set point, rather than order by order during a market week when every style looks like a reason to.

The failure the split prevents is the most common one: a buyer who also sets the closing stock target can always find room by raising it. Raising a stock target is sometimes right — a category trading well ahead, a new door to fill — but it is a change to the plan, and it should be visible as one, approved by whoever owns the total and recorded with its reason, not absorbed silently into a higher open to buy.

Retail open to buy or cost open to buy: which to plan in

The basis follows the stock ledger. A business that values inventory with the retail inventory method holds sales, reductions and stock at retail, so open to buy is naturally a retail figure, converted to cost for the orders. A business that values inventory at cost — item by item, or at weighted average cost — holds the plan at cost, and open to buy is a cost figure from the start. Either works. What does not work is a plan that mixes the two, and the mix usually enters through on-order, because the purchase-order file is kept at cost even where the plan is kept at retail.

In a retail plan, an order for 1,200 units at a $16.00 cost and a $40.00 planned ticket is 19,200 on order at cost and 48,000 at retail. Subtract the 19,200 from a retail receipt budget and the open to buy is overstated by 28,800 — the markup on the order. Across a class with dozens of open orders, that error is large enough to make an over-bought month read as having room. The fix is mechanical: value on-order at retail, units times planned ticket, wherever the plan is at retail.

Retail planning has one advantage that keeps it the default for many apparel and general-merchandise businesses: the sales plan, the markdown budget and the stock targets are all naturally expressed at the prices customers see, and the markup is visible as its own decision rather than buried in the cost line. Cost planning has the advantage where the cost base moves — commodity-linked categories, or ranges whose freight and duty change mid-season — because the figure the buyer spends is the figure the plan holds. Many teams carry both: the plan at retail, the orders at cost, and an explicit conversion at the planned markup between them.

Open to buy from the other side of the table

For a brand selling wholesale, the open to buy that matters most is often not its own but its accounts’. A retail buyer working a market week arrives with a receipt budget for the category by month, part of it already committed to other brands, and the booking a brand can take is capped by what is left. Two things follow for the brand’s own planning.

First, the timing of an account’s open to buy shapes the brand’s booking calendar. A buyer whose spring budget is largely committed by the end of the main market has little room for a line shown later, and a buyer whose budget is held back for in-season chase is a buyer who may re-order — or may not, if the reserve goes elsewhere. Booking attainment against the brand’s own wholesale plan is measured in the sell-in and bookings calculator.

Second, an account’s open to buy is the reason sell-through at the account matters to the brand. If the brand’s product sells through slowly at the account, the account’s stock stays high, its next month opens heavy, and its open to buy for the brand falls — the same roll-forward the Month 1 sales-miss example shows, seen from the vendor’s side. A brand that only reads its own shipments sees this as a cancelled re-order or a smaller next booking; a brand that reads account sell-through sees it coming.

A brand that runs its own stores and site as well as wholesale holds its own open to buy for those channels, and plans one production buy against both the booked wholesale demand and its own forecast. How the two demand signals and the shared reserve fit together is in how to plan wholesale and DTC together.

How often open to buy is recalculated

Two clocks run at once. The first is the order clock: open to buy moves every time an order is written, changed or cancelled, so the figure a buyer reads has to be current to the last order. In practice that means the order file and the open to buy are refreshed together — daily where orders are written daily, and before any buying session.

The second is the plan clock. The terms open to buy is solved from — sales, reductions and the closing stock targets — change when the plan is reforecast, and a common working cadence is monthly, at month-end, when the previous month’s actual closing stock replaces its plan as the next month’s opening stock. A reforecast mid-month, after a run of weeks trading well above or below plan, re-solves it too. An open to buy that is current on orders but stale on plan is the most dangerous kind, because it looks precise.

The weekly view sits between the two. A WSSI projects closing stock week by week from actual sales and planned intake, and a week in which the projected close drifts away from the monthly stock target is the earliest warning that the month’s open to buy is about to change. Reading the weekly grid for those signals is covered in how to read a WSSI.

Where open to buy sits in the season calendar

Open to buy is not one figure set once; it has a life across a season, and what it is used for changes as the season approaches and passes.

Before the season, it is a budget being spent. The merchandise plan is set, the receipt budget by month falls out of it, and the buying team commits most of it as prebooks and production orders, timed to the delivery windows the range needs. Lead time decides how early: where goods take months to produce and ship, most of a season’s open to buy is committed before the previous season has finished trading. What remains uncommitted at the end of this phase is the reserve and the room in the later months.

As the season opens, it becomes a control. Actuals replace plan month by month, the first weeks of selling show which styles and categories are ahead and behind, and open to buy is re-solved from the reforecast. The figures that matter now are the over- and under-bought months: over-bought months are worked with the levers above, under-bought months release reserve or fund re-orders, and budget moves between classes where one is trading ahead of another.

Toward the exit, it becomes a constraint. The last receipts of the season land, the closing stock target for the final month is held as policy because the next season needs the space, and any open to buy left in the final months is either spent on the best-selling lines that can still land or deliberately left unspent. A season that ends with open to buy unspent and stock on target has done its job; a season that ends with open to buy spent and stock above target has carried its over-buying into the next one.

The calendar the months are drawn from matters too. On a 4-5-4 calendar, five-week months need more receipts than their four-week neighbours at the same weekly rate, and a 53-week year adds a week of sales and receipts to one month. Last year’s figures have to be restated onto this year’s weeks before the comparison means anything.

Reading an open to buy report: six questions

An open to buy report is a column of numbers that all look equally authoritative. Six questions separate the ones that can be bought against from the ones that cannot.

1. Which plan is it solved from? The pre-season plan, or the latest reforecast. A report on the pre-season plan after the season has started shows room the reforecast may already have removed.
2. Is every term on one basis? Retail or cost, throughout — and if retail, is on-order valued at retail rather than pulled from the order file at cost?
3. Are reductions in it? Markdowns, discounts and shrink. A report without them under-states receipts by the reduction plan.
4. Is on-order dated by receipt month? If every open order sits in the current month, the current month will look over-bought and later months open.
5. Is the opening stock actual or planned? For closed months it should be actual. A plan opening stock after the month has closed hides any carry-over from a sales miss.
6. How much of the figure is reserve? The open to commit now and the reserve held back for chase should be shown separately, with the reserve’s release date.

None of the six needs a model to check. Each needs the report to state its own basis, so that a reader can verify the figure instead of trusting it. A report that cannot answer them is an estimate of open to buy, and should be bought against like one.

Keeping open to buy in a spreadsheet

The formula is five terms and a subtraction, and a spreadsheet handles it well: one row per class, one column block per month, opening stock linked to the previous month’s close, and on-order summed from a tab of open purchase orders by receipt month. For a small range with one buyer, that is often all the system open to buy needs. The free open-to-buy template is a six-month worksheet built that way.

What breaks is not the arithmetic but the inputs. On-order lives in the order file, actual stock in the stock ledger, the sales plan in the planning workbook and the reforecast in a copy of it. Every one of them changes on its own schedule, and the open to buy is only as current as the last time each was copied in. The usual symptoms are an order file pasted in last week, a closing stock figure from the pre-season plan after a reforecast has cut it, and two versions of the workbook in circulation with different totals — each of which produces a figure that subtracts correctly and is wrong.

The test of whether a spreadsheet is still enough is simple: can every buyer, before writing an order, see an open to buy that includes the orders written that morning and the plan agreed at the last reforecast? While the answer is yes, the spreadsheet is doing its job. When it becomes “usually”, the figure has stopped being a control and become a report.

Nine common open to buy errors

Each of these produces a figure that subtracts correctly. None of them shows up as a spreadsheet error; each shows up weeks later as a month that closes heavier or lighter than its plan.

What changes in each vertical

The formula is identical everywhere. What changes is how far ahead the receipts are committed, what unit the buy is really made in, and what sits outside stock altogether — so an open to buy is read against its own category’s calendar. Apparel is the reference case.

• Open-to-buy calculator — the figure for one period from five inputs →
• How to set open-to-buy — the step-by-step →
• OTB vs WSSI — the budget against the weekly trading view →
• Sales plan calculator — the phased sales line OTB is solved from →
• How to set a sales plan →
• How to plan receipt flow — from a receipt budget to dated deliveries →
• How to build a buy plan — the lines that spend the budget →
• How to reforecast in-season — re-solving OTB from actuals →
• Open-to-buy template — a six-month worksheet →
• Stock-to-sales ratio calculator — setting the closing stock targets →
• Open-to-buy — glossary definition →
• Merchandise plan — glossary definition →
• BOP and EOP — glossary definition →
• The open-to-buy formula on RetailNorthstar →
• What is open-to-buy planning? on RetailNorthstar →

Frequently asked questions

What is open to buy (OTB)?

Open to buy (OTB) is the receipt budget still available for a period: planned end-of-period inventory + planned sales + planned reductions − beginning-of-period inventory − merchandise already on order. It is measured at retail or at cost, usually for a class or department and a month. A positive figure is room left to buy; a negative figure means the period is over-bought.

What does OTB mean in business?

In retail, wholesale and brand businesses, OTB stands for open to buy — the amount of inventory a buyer can still commit to receive in a period without going over the merchandise plan. When a wholesale sales rep asks an account whether it has open to buy, the question is whether that buyer still has budget left for the season, and in which months.

What is the open to buy formula?

At retail: OTB = planned end-of-period stock + planned sales + planned reductions − beginning-of-period stock − on order, where reductions are markdowns, employee and promotional discounts and shrink. In this guide’s worked example, Month 1 is 480,000 + 240,000 + 30,000 − 450,000 − 150,000 = 150,000. At cost, multiply by the cost complement of the open purchases, one minus their planned initial markup: 150,000 × 0.42 = 63,000.

How do you calculate open to buy at cost?

Two ways, depending on how the plan is held. A plan held at retail converts the answer: OTB at cost = OTB at retail × (1 − planned initial markup on the open purchases). A plan held at cost uses cost terms throughout: OTB at cost = planned end-of-period stock at cost + planned cost of goods sold + planned shrink and write-downs at cost − beginning-of-period stock at cost − on order at cost. Markdowns do not appear in the cost version, because they lower the price of the goods, not their cost.

What does negative open to buy mean?

It means the period is over-bought: stock on hand plus orders due to arrive already exceed what the plan needs. In this guide’s worked example, Month 2 needs 270,000 of receipts and has 310,000 on order, so its open to buy is −40,000. The levers are to check the inputs, push deliveries later, cancel unshipped lines (by agreement with the vendor, or as of right once a line misses its cancel date), move budget between classes, change the sales or reductions plan with evidence, or accept the goods and take the amount out of later months.

What is the difference between open to buy and a buy plan?

Open to buy is the budget — a dollar or unit figure per class and period. The buy plan is how it is spent: the styles, colors, quantities, vendors, costs and delivery windows that the orders will carry. A buy plan is checked against open to buy every time an order is written, and the open to buy falls by the value of every order placed.

Is open to buy the same as a merchandise financial plan?

No. The merchandise financial plan sets planned sales, reductions, stock and receipts for every period and category; open to buy is derived from it as the planned receipts not yet covered by orders. Change the merchandise financial plan and open to buy moves with it. The step from one to the other is the formula: planned receipts − on order.

How much open to buy should be held back for chase?

There is no standard share, and this guide offers none. The worked example holds back 20% of each month’s open to buy purely to show the arithmetic: 92,000 of the season’s 460,000. The right reserve depends on how uncertain the range is, how much of it can be re-ordered inside the season, and whether vendors with short enough lead times exist. A reserve that cannot be spent within lead time is not a reserve.

Why does a bigger markdown plan increase open to buy?

Because planned reductions sit beside planned sales in the formula: markdowns take retail value out of stock, so a month that plans more of them needs more receipts to reach the same closing stock. In this guide’s worked example, cutting Month 4’s reductions from 60,000 to 30,000 would cut its planned receipts from 200,000 to 170,000. The room is only real if the markdowns are actually taken; a plan that books them and then holds prices ends the month over-bought.

Can open to buy be planned in units instead of dollars?

Yes, and many teams carry both. The identity is the same in units, except that markdowns are not a unit reduction — a marked-down unit is still in stock until it sells — so only shrink, damage and returns to vendor sit in the reduction line. In this guide’s footwear example, 4,800 + 2,600 + 100 − 4,200 − 1,900 = 1,400 pairs of open to buy.

How often is open to buy recalculated?

The figure moves every time an order is placed, changed or cancelled, so buyers read it before writing each order. The plan behind it — sales, reductions and stock targets — is commonly re-solved on a monthly cadence and whenever a reforecast changes the sales view. Receipts arriving do not change open to buy; they move value from on-order into stock on hand.