Open-to-Buy or OTB is an inventory planning strategy that helps retailers accurately work out how much inventory to buy.
An OTB plan can start with your revenue goal for the coming months and then factor in current and incoming ordered stock to ensure that you have enough inventory on hand to meet your revenue goals.
It factors in how many of a particular product (or your complete range) you have in stock and how much you expect to sell.
With OTB planning, buying budgets for future items can be based on historical data of how well products in similar categories have sold. This allows accurate predictions to be made for new categories, so merchants can make informed buying decisions.
Advantages of open to buy planning
1. Better cash flow
Right now, cash flow is the biggest issue facing most merchants. By knowing the difference between how much inventory is needed and how much is available, you can streamline your inventory and ensure you always have the right products available in the right quantities, at the right time.
2. Buy with confidence
Open-to-Buy planning gives you an objective way to approach your merchandising so you can buy with confidence. By planning inventory from a financial perspective, business owners can make data-driven decisions, rather than just relying on a ‘gut feeling’ or spreadsheet-based guesstimates.
3. Avoid overstock and stockouts
Running out of stock is a surefire way to miss out on revenue and annoy customers that you’ve worked hard to win. Excess stock ties up your cash in goods you can’t shift. OTB helps you control your inventory so you avoid both these situations.