Open-to-Buy (OTB) Formula
How apparel planners calculate open-to-buy, why spreadsheet OTB drifts from plan, and the benchmark ranges that signal a healthy buy.
What Open-to-Buy measures
Open-to-buy is the inventory dollars a planner is free to commit in a given period after everything already on the books is accounted for. It is the gate between the merchandise financial plan and real purchase orders.
OTB = Planned Sales + Planned EOP + Planned Markdowns − Planned BOP − Receipts on OrderEvery input is in retail dollars at the plan's period grain — typically month × department × channel. OTB can be expressed in units too, but most apparel brands manage it in dollars because the MFP is in dollars.
Worked apparel example
A DTC women's brand is planning May for the Tops department. The plan calls for $850K in sales, $1.2M of ending inventory at retail, and $120K of planned markdowns. The month opens with $1.1M on-hand and $400K already on order from vendors.
OTB = $850K + $1.2M + $120K − $1.1M − $400K = $670K
That $670K is what the buyer can commit to new POs for May receipts. It is not a target — it is a ceiling.
You have $670,000 of open-to-buy this period. Place POs against this budget or roll it into chase/replenishment.
Benchmark ranges
OTB dollars themselves are brand-specific. What matters is whether the calculated OTB implies a stock-to-sales ratio and weeks of supply inside your channel's healthy band. See those two formulas for benchmark ranges.
Failure modes we see
OTB drift in spreadsheets. Every planner we talk to has three versions of OTB — the one in the board deck, the one in the operating file, and the one in the buy file. They diverge within two weeks of the month starting because markdowns, cancellations, and receipts flow in asymmetrically. By the time Finance reconciles them, the buy is already placed.
Specific failure patterns:
- Receipts-on-order not trued up — late POs stay on the books as "committed" even after cancellation, suppressing real OTB.
- Markdowns double-counted — marked off the inventory AND added back to OTB, inflating the buy ceiling.
- Channel mixing — DTC and wholesale OTB combined into one number, hiding channel-level over-buys.
- Monthly recalc only — planners adjust OTB monthly, not weekly, so a Week 2 sales miss doesn't surface until Week 6 buys are already placed.
How RetailNorthstar handles OTB
In a connected system, OTB is not a separate number — it is the live gap between the plan, on-hand inventory, and open POs. It recalculates every time a sale books, a PO cancels, or a markdown is taken. When OTB goes negative, the system flags it at the department level before the buyer opens the next PO.
Every other planning metric flows from OTB. A healthy OTB is not just "not over-committed" — it is aligned with the sell-through, markdown, and receipt flow assumptions in the rest of the plan. See Stock-to-Sales Ratio and Weeks of Supply for the benchmarks that validate an OTB calculation.
Related formulas
- Weeks of Supply — the inventory-efficiency lens on the same balance
- Sell-Through Rate — the sales velocity that feeds the OTB forecast
- Forward Weeks of Supply — the forward-looking balance check
- Markdown % — one of the OTB inputs; a misread here distorts the whole plan
See how RetailNorthstar runs OTB live across plan, on-hand, and open orders — with channel, department, and class-level drill-down.
Book a Demo →Frequently asked about Open-to-Buy (OTB)
What is the open-to-buy formula?
OTB = Planned Sales + Planned End-of-Period Inventory + Planned Markdowns − Planned Beginning-of-Period Inventory − Receipts on Order. The result is the inventory dollars (at retail) a buyer is free to commit to new POs for the period.
How often should OTB be recalculated?
Weekly at minimum. Most apparel brands recalculate OTB whenever a sale books, a PO cancels, a markdown is taken, or receipts shift — anything less than weekly creates drift between plan, on-hand, and open orders that compounds quickly.
Should OTB be managed at department or channel level?
Both. Total OTB is meaningless without a department breakout, and most mid-to-large brands also run OTB by channel (DTC vs wholesale vs stores) because inventory needs and sell-through curves differ by channel.
What happens if OTB goes negative?
A negative OTB means existing POs already exceed the planned receipt flow. The correct response is to cancel open orders, push back ship dates, or re-forecast markdowns — not to ignore the signal and place more buys.