What Is Open-to-Buy Planning? A Guide for Apparel Brands
Open-to-Buy (OTB) is the financial planning framework that determines how much an apparel brand can spend on inventory in a given period. This guide explains the OTB formula, how it connects to assortment and buy planning, and where most brands get it wrong.
What is Open-to-Buy planning?
Open-to-Buy (OTB) planning is the financial planning process by which an apparel brand determines how much inventory it can purchase during a specific period — typically a season or month — without exceeding its planned cost commitment or inventory targets.
OTB is not a budget in the conventional sense. It is a dynamic constraint that updates as sales occur, inventory is received, and markdowns are taken. A brand's OTB position at any given point in the season reflects the net difference between what was planned and what has actually happened — and translates that gap into a purchasing capacity.
Understanding OTB is foundational to every downstream merchandising decision. The assortment plan determines how OTB gets allocated. The buy plan converts the allocation into purchase orders. Allocation determines how received inventory flows to channels and locations. All of these workflows operate within the boundaries set by OTB.
The OTB formula
The standard OTB calculation at a point in time is:
OTB = Planned Receipts − On Order
But the planned receipts number is derived from a more complete formula:
Planned Receipts = Planned Sales + Planned EOM Inventory + Planned Markdowns − Planned BOM Inventory
Where:
- Planned Sales: the revenue or units expected to sell during the period
- Planned EOM Inventory: the inventory you want to have at end of period
- Planned Markdowns: inventory expected to be cleared at below full price
- Planned BOM Inventory: the inventory on hand at the start of the period
This produces the total receipts needed to meet your sales and inventory targets. Subtract what's already on order, and you have available OTB — the capacity to place new purchase orders.
In RetailNorthstar, the OTB calculation is live — it updates automatically as assortment decisions are made and sell-through data comes in. Teams see their remaining OTB at any point in the planning process without a manual reconciliation step.
Why OTB must be tracked at multiple levels
A single total-brand OTB number is not actionable. Apparel planning teams need OTB tracked at multiple levels simultaneously:
By department or category
Women's tops and women's bottoms operate on different sell-through rates, margin profiles, and seasonal structures. An OTB overage in bottoms cannot be silently absorbed by capacity in tops without a deliberate trade-off decision.
By channel
DTC and wholesale channels have different inventory economics. A wholesale commitment to a major department store account consumes OTB differently than a DTC buy — with different payment terms, floor set windows, and return exposure. Managing these against a single OTB pool obscures the trade-offs.
By seasonal delivery window
OTB at the total season level doesn't tell you whether you have room to place a February delivery or whether that capacity is already committed to March receipts. Period-level OTB tracking is necessary for managing production and vendor timelines.
Where OTB planning fails in practice
The spreadsheet disconnection problem
Most apparel brands maintain OTB in one spreadsheet and assortment decisions in another. The result: every time a style is added or removed from the assortment, someone manually carries the change over to the OTB file. This reconciliation step is always a lagging indicator — teams regularly discover they've exceeded OTB only after the buy is being locked.
When OTB and assortment planning live in different files, teams lose the ability to see the margin impact of individual assortment decisions in real time. The financial constraint becomes visible only in aggregate, not at the decision level.
Stale on-order data
OTB accuracy depends on current on-order quantities. If outstanding purchase orders aren't updated in the OTB file when delivery windows shift or quantities change, the available OTB position is wrong. Brands regularly discover they have more or less buying capacity than they thought — but only when it's too late to act.
Too high a level of aggregation
Tracking OTB only at the total season level is the equivalent of tracking a project budget without line items. The total may look fine even when individual categories are significantly over or under plan. Category-level and channel-level OTB tracking is not optional at scale.
OTB planning vs assortment planning
OTB planning and assortment planning are distinct workflows that must be connected:
| | OTB Planning | Assortment Planning | |---|---|---| | Primary question | How much can we spend? | What should we buy? | | Output | Receipt budget by period | Product selection + depth targets | | Primary user | Planning / Finance | Merchant / Buyer | | Connects to | Assortment plan (constrains it) | Buy plan (converts it) |
The OTB establishes the financial ceiling. The assortment plan allocates that ceiling across styles and categories. The buy plan converts style-level depth decisions into purchase orders. In a disconnected planning environment, these three files are reconciled manually before each buy review — often with errors.
OTB for DTC vs wholesale brands
DTC OTB
DTC brands set OTB against their direct revenue plan. Sell-through data from Shopify or their ecommerce platform informs the BOM inventory position. Remaining OTB updates in near real time as sales occur.
The DTC OTB challenge: the sell-through data is in one system (Shopify, ERP), the OTB model is in another (spreadsheet), and they're reconciled manually on some cadence — typically weekly or before buy reviews.
Wholesale OTB
Wholesale OTB must account for account-level commitments. Each wholesale account's buy commitment consumes OTB against the total wholesale pool. A brand selling to 40 wholesale accounts needs to track total commitments — not just individual account buys — to know its OTB position.
RetailNorthstar tracks OTB by channel (DTC, wholesale) with account-level commitment visibility. Total wholesale commitments reconcile against the wholesale OTB bucket automatically — no manual roll-up required.
OTB in a connected planning system
In a connected planning platform, OTB is not a static document that gets updated periodically. It is a live constraint that:
- Updates automatically as assortment depth decisions are made
- Reconciles against on-order data without manual import
- Tracks at department, channel, and period levels simultaneously
- Provides a real-time remaining OTB figure visible throughout the buy planning process
This means assortment and buy decisions are made within the financial constraint — not reviewed against it after the fact.
See how RetailNorthstar connects OTB to assortment and buy planning in a live demo.
Book a Demo →Related resources
- Open-to-Buy Glossary Term — Precise definition and formula reference
- Assortment Planning Guide — How assortment decisions operate within OTB
- OTB Planning — RetailNorthstar — How the platform handles OTB
- Replace Spreadsheet OTB Planning — Migration considerations
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