Open to buy (OTB) and the OTB Controller agent

What open to buy means

Open to buy (OTB, also written open-to-buy) is the amount of merchandise a retailer can still buy for a period without going over its inventory plan. It is usually stated in money, at retail or at cost, and sometimes in units, for a department, class or channel and for each month or week. When OTB is positive, the buyer has budget left. When it is negative, the business is overbought for that period: more is coming than the plan can absorb.

OTB comes from the merchandise financial plan. The plan sets the sales, markdowns and inventory the business intends to have. OTB turns those targets into a purchasing limit and subtracts the commitments already made. It is the control that keeps a buying team ordering against this season’s plan rather than last season’s enthusiasm.

Getting OTB right matters for three reasons:

• Cash: inventory ties up working capital, so buying past the plan strains it.
• Margin: excess stock usually leaves through markdowns.
• Availability: buying too little leaves stores short of what customers want, and those sales do not come back.

A well-run OTB keeps some budget open in season, so buyers can chase what sells instead of being fully committed months before customers have voted.

The open to buy formula

The standard retail formula, for one period at retail value:

OTB = planned EOP inventory + planned sales + planned markdowns − BOP inventory − on order

The first four terms give the planned purchases, or receipts, for the period: the stock you want to end with, plus everything that will leave through sales and markdowns, minus what you hold at the start. Subtracting on order, the merchandise already committed to arrive in the period, leaves what is still open.

Planned purchases = planned EOP inventory + planned sales + planned markdowns − BOP inventoryOTB = planned purchases − on order

Some teams count all reductions, not only markdowns: markdowns plus employee discounts plus shrink. Others plan at cost. The structure is the same either way. What matters is that every term uses the same basis (all at retail or all at cost) and the same period, and that on order is counted by the month the goods arrive, not the month the order was placed. The retail planning glossary defines each term.

For a future month, BOP inventory is the planned figure. Once the month has started, teams use actual stock on hand and the re-forecast sales, which is why OTB for the current and next periods changes every week.

A worked open to buy example

Planned purchases are $520,000 + $180,000 + $20,000 − $480,000 = $240,000. Subtract the $150,000 already on order and OTB is $90,000 at retail.

Buyers commit purchase orders at cost, so the retail figure is converted with the cost complement. If the department buys at an initial markup of 55% of retail, each retail dollar costs 45 cents, and OTB at cost is $90,000 × 0.45 = $40,500. That is what the buyer can still commit for the month.

Now suppose a slow start brings the month’s sales re-forecast down to $150,000. With the same ending inventory target, planned purchases fall to $520,000 + $150,000 + $20,000 − $480,000 = $210,000, and OTB falls to $60,000. A $30,000 drop in sales takes $30,000 out of the budget. If the buyer has already spent the original $90,000, the department is $30,000 overbought, and the choices are to cancel or delay orders, accept a higher ending stock, or plan deeper markdowns to clear it.

The example shows why OTB has to move with the sales re-forecast. A budget calculated at the start of the month and left alone would have let the buyer spend money the plan no longer supports.

How buying teams manage OTB today

OTB planning is usually owned by merchandise planning or merchandise finance and used by buyers. Each week the planner loads actual sales and stock, rolls the re-forecast forward and reissues OTB by department and month. Buyers check it before raising purchase orders, and the weekly business review covers where the business is overbought and where there is room to chase.

Most of this runs in spreadsheets fed by exports from the merchandising system or ERP. The workbook holds the plan, the actuals and the on-order file, and its formulas produce OTB. It works until something moves fast. A cost change, a supplier delay or a sales spike means rebuilding the numbers by hand, and in the meantime buyers commit receipts against last week’s numbers.

Practices that keep OTB useful:

• Hold part of the season’s budget back when buying pre-season, so there is money to chase in-season winners.
• Track OTB by the month goods arrive, since that is when they count against the inventory plan.
• Keep OTB at cost as well as at retail when margins differ a lot between vendors or categories.
• Move budget between departments and channels when demand shifts, rather than letting one area sit overbought while another runs short.
• Recalculate whenever a large order, a cost change or a new re-forecast lands, not only at month-end.

Where OTB sits in the planning cycle

OTB is the link between the financial plan and the product decisions. The merchandise financial plan sets the money. OTB says how much of it is still uncommitted for each month. The assortment plan decides which styles that money buys, and purchase orders commit it. When the plan changes, OTB is the first number that tells buyers what the change means for them.

Because of that position, OTB is only as good as the plan beneath it. A plan that is re-forecast weekly gives buyers a budget that reflects the current trade. A plan that closes at month-end gives them a budget that is weeks old.

How the OODARIS OTB Controller agent runs it

In OODARIS, open-to-buy is part of MFP & OTB, one of the ten capabilities the Agentic OS covers, built from the plan of record that merchandise financial planning produces. It is part of how OODARIS applies agentic AI to retail planning. The OTB Controller is the specialist agent for it.

It rolls the open-to-buy forecast forward from the latest demand, checks cash, capital and margin limits before proposing a move, and drafts the open-to-buy notes for the weekly business review. It works with finance planning systems, assortment plans, and the ERP ledger and inventory valuation.

With OODARIS, a cost change, such as a new tariff on the autumn buy, rebuilds OTB and the margin impact by department before the next purchase order goes out. In the illustrative product view on the Plan page, the steps are: the new tariff is applied to autumn receipts, OTB is re-projected by department and channel, the margin impact is restated against the plan, and open purchase orders are held for approval. What is written back is OTB by department and channel, the budget buyers commit against.

The Procurement Navigator works in the same crew. It watches supplier lead times, fill rates, costs and risk signals, and proposes order splits, alternate suppliers or new terms when a supplier slips. Buying and sourcing approve its changes, which are written to your ERP as purchase-order changes.

By default, the person who owns the decision approves each change before anything is written back. Teams can also keep OODARIS read-only, or let it act on its own inside limits the decision’s owner sets; how it works describes the four levels.

Merchandise financial planning and open-to-buy run in production at ALDO Group. Open-to-buy runs in OODARIS, built from the plan of record, and its output feeds ALDO Group’s own reports and dashboards, as well as OODARIS. ALDO Group’s story has the detail.

Frequently asked questions

What is the open to buy formula?

OTB = planned EOP inventory + planned sales + planned markdowns − BOP inventory − on order. The first four terms give planned purchases for the period; subtracting what is already on order leaves what can still be bought.

How do you calculate open to buy at cost?

Either calculate OTB at retail and multiply it by the cost complement (1 minus the markup as a share of retail), or plan every term at cost from the start. With a 55% markup, $90,000 of OTB at retail is $40,500 at cost.

What does negative open to buy mean?

The business is overbought for that period: the goods already on order exceed the purchases the plan supports. The usual responses are to cancel or delay orders, move budget from another department, accept a higher ending stock, or plan markdowns to clear the excess.

What is OTB planning?

OTB planning is the process of setting and maintaining open-to-buy budgets: deriving them from the merchandise financial plan, splitting them by department, channel and month, updating them as sales and orders change, and deciding where to move budget when demand shifts.

What is the difference between OTB and MFP?

The merchandise financial plan sets targets for sales, margin and inventory. OTB is the budget for buying that falls out of that plan once existing orders are subtracted.

Does the OTB Controller move budget on its own?

Not by default. It proposes budget moves between departments and channels, after checking cash, capital and margin limits, and merchandise finance approves with the buying lead before the approved budgets are written back to your planning or ERP system.