Life in the Fast Lane: Open-to-Buy vs. Balance-to-Buy

The traditional open-to-buy (OTB) process examines each department by projecting sales and cost of goods sold (COGS) and comparing that with on-hand inventory, resulting in an "open-to-buy" amount available for new inventory. In many cases, however, OTB is actually a negative number, as the on-hand inventory exceeds the available OTB budget. Therefore, the term "open-to-buy" is a misnomer; what we're ultimately looking for is "balance-to-buy." OTB deals with buying but not necessarily merchandising, except to report that you have too much inventory and can't buy any more. At some point, when existing inventory sells down to a certain point, buying may resume. How then, if we follow the OTB budget, do we deal with an overstocked situation? Also, how do we handle an inventory that is out of balance where our best-selling price points are concerned? Getting started. A balance-to-bu
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