Open To Buy (OTB) planning is important to consider when building your merchandise plan. OTB allows retailers to evaluate inventory levels relative to forecasts and customer demand. In its simplest form, OTB can be calculated with the following formula:
Open To Buy = Receipts Plan - On Order Actuals.
In Toolio, you are able to view OTB values for AUC, AUR, Margin, Cost, Retail, Ticket & Units. You will find Open To Buy metrics on both Toolio Pre-Season and Toolio In-Season Planning views already configured - you can always add additional metrics and variants as you see fit via the View menu.
You want to know how much additional inventory you need to order to meet the forecasted Sales and Inventory values in your Merchandise Plan for this month. By looking at the Open To Buy metrics on Toolio, you can quickly understand exactly how much additional inventory you need to order.
See below for a calculation and conceptual walkthrough:
In this example, we will be looking at Open To Buy in the scope of Costs. Please note that the same approach can be applied to Unit, Retail, Ticket, or even Margin planning.
We see that the Plan value for Gross Sales Cost in March is forecasted at $500K, while the BOP Cost is $900K, EOP Cost is $1.0M, and Returns Cost is $50K.
Please recall that Open To Buy = Receipts Plan - On Order Actuals.
Since Receipts Plan Cost = EOP Cost + (Gross Sales Cost - Returns Cost) - BOP Cost, the Receipts Plan Cost for March will be $1.0M + $450K - $900K, or $550K.
By subtracting the On Order Actuals Cost of $439.9K (based on existing PO's) from the Receipts Plan Cost of $550K, we arrive at the Open To Buy Cost of $110.1K. This tells us that in order to meet our Plan metrics for Gross Sales Cost and EOP Cost, we will need to place PO's to be received in March of $110.1K in inventory costs.
As demonstrated above, Open To Buy values can be affected by many other metrics. Please refer to the Metric Glossary for an overview of all Toolio metrics.