What is Open to Buy (OTB)?

 Open to Buy (OTB) is a budgeting tool for retailers to plan how much they can spend on new stock during a specific period. It ensures the right inventory levels to meet demand without overspending or overstocking.

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OTB Formula

OTB = Planned Sales + Planned EOM Inventory - Current Inventory - On-Order Inventory

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Example in ₹

For March:

Planned Sales: ₹20,00,000

Planned EOM Inventory: ₹12,00,000

Current Inventory: ₹8,00,000

On-Order Inventory: ₹5,00,000

OTB = 20,00,000 + 12,00,000 - 8,00,000 - 5,00,000 = ₹19,00,000

The retailer can spend ₹19,00,000 on new stock.

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Why OTB is Important

Prevents overstocking or understocking.

Keeps cash flow healthy.

Maximizes profits by reducing markdowns.

OTB helps retailers balance inventory and stay profitable.