The desired stock level you want to have at the end of the month or season.
The value of orders already placed but not yet received. Example Calculation open to buy formula
The value of projected discounts or price reductions. The desired stock level you want to have
The revenue you expect to generate during the period. The revenue you expect to generate during the period
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
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
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: