What is Open-to-Buy?

The short definition

Open-to-buy is the budget remaining to commit to inventory for a defined period (a season, a month, a quarter), expressed in dollars at cost. The formula in its simplest form:

OTB = Planned Sales + Planned End-of-Period Inventory − Planned Beginning Inventory − Inventory On Order

Said differently: OTB is what you can still commit to vendors without overshooting your inventory plan.

Why OTB matters

The moment you confirm a purchase order, those dollars are committed even though the goods haven’t arrived. If you don’t track on-order against your plan, you can be deep in the red before a single box hits the dock. Over-buying shows up as dead stock, markdown pressure, cash-flow strain, and a compressed ability to chase hot sellers mid-season. Under-buying shows up as empty shelves, lost sales, and flat growth. OTB is the dial that keeps both in check.

How the math actually works

Let’s walk through a worked example for a single category and month.

• Planned sales for the month: $40,000 (at retail) or $20,000 (at cost, with a 50% IMU).
• Planned end-of-month inventory: $60,000 at retail / $30,000 at cost.
• Beginning inventory (start of month): $50,000 at retail / $25,000 at cost.
• Already on order for the month: $10,000 at cost.

OTB = $20,000 (sales at cost) + $30,000 (end inv at cost) − $25,000 (beg inv at cost) − $10,000 (on order) = $15,000 left to commit.

Everything you commit this month up to $15,000 stays inside the plan. A PO for $18,000 blows the plan by $3,000 of over-commitment; you’ll carry more inventory into next month than planned, which pushes markdowns or tightens next month’s OTB to compensate.

Running OTB across dimensions

Most buyers don’t run a single OTB. They run multiple OTB plans in parallel: by category (tops, bottoms, accessories), by vendor (to cap brand exposure), by store or location (when the mix differs), and by season. A specific PO line contributes to each OTB plan it matches.

OTB at cost vs at retail

Both conventions exist. "At cost" uses wholesale or landed dollars; "at retail" uses ticketed retail prices with an initial markup (IMU). Be consistent. Most modern systems, including Vendee Pro’s OTB module, default to cost because your POs and vendor commitments are denominated in cost.

Common mistakes

• Tracking received-only, not on-order. If you only count what’s landed, you discover you’re over-bought when the boxes show up. Always include on-order in your OTB math.
• Ignoring cancellations and returns. A cancelled line should free up OTB. A returned shipment should flow back into the plan. Manual spreadsheets miss these.
• Planning in a single bucket. Total-company OTB hides category-level overshoots. Break the plan down to the cuts where decisions are made.
• Treating OTB as static. Mid-season reallocation is normal. Add to a category that’s running hot; reduce one that under-performed. The plan is a tool, not a law.

How Vendee Pro tracks OTB

Vendee Pro computes OTB live from the same data that drives your POs. Set a budget at any combination of category, vendor, store, and season. As POs are drafted, submitted, received, cancelled, or reversed, the OTB ledger moves in step. The remaining OTB number is always current at the moment you click submit, because it reads from the same source as the PO module. Read more →