Sales forecasts for a fall collection are up. A wholesale account has added 600 units, and two suppliers need deposits this week. The buyer still has one hard question: how much more inventory can the brand safely purchase?
Open to buy turns that question into a controlled buying budget. It connects planned sales, planned markdowns, target ending inventory, beginning inventory, and stock already on order. Used well, it protects cash while leaving room to respond to demand.
It is not a demand forecast or a purchase order. It is the financial guardrail between them.
What open to buy means for an apparel COO
Open to buy, or OTB, is the amount available for planned inventory purchases during a defined period. A positive balance means the plan has room for more receipts. A negative balance means current inventory and on-order commitments exceed the plan.
The period matters. A monthly OTB can guide replenishment for core tees. A seasonal plan can govern a spring collection with long supplier lead times. Both need the same unit of measure throughout: retail dollars, cost dollars, or units.
OTB differs from four adjacent processes:
- Demand forecasting estimates what customers may buy.
- Purchase orders commit quantities, prices, dates, and suppliers.
- Inventory allocation decides where available stock should sit or be reserved.
- Cash-flow forecasting covers the timing of all cash in and out, not only inventory receipts.
The apparel demand forecasting guide helps create a sales outlook. OTB asks whether the resulting buy fits the inventory plan.
Use an open to buy formula with one consistent valuation basis
A common periodic retail-dollar formula is:
OTB = Planned sales + Planned markdowns + Planned ending inventory – Beginning inventory – On-order inventory
Shopify publishes this same structure and notes that planned markdowns and desired end-of-month inventory belong in the calculation (Shopify). The terms mean:
- Planned sales: expected sales during the period at the chosen valuation basis.
- Planned markdowns: the retail-dollar reduction expected from planned price cuts when using retail dollars.
- Planned ending inventory: the stock value needed at period end.
- Beginning inventory: stock available at the start.
- On-order inventory: confirmed receipts due inside the period.
Do not mix retail dollars with cost dollars. If planned sales are at retail but beginning inventory is at cost, the answer has no useful meaning. A cost-based plan can work, but every input must be converted to cost.
The formula also changes with business practice. Some teams show planned reductions, cancelations, or other adjustments separately. Others use a beginning-of-period or end-of-period presentation. Document the chosen version and reconcile it to finance before buyers use it.
Worked monthly open-to-buy example for a fictional fall knitwear line
The following numbers are illustrative, not Blastramp customer data or industry benchmarks.
A brand plans September knitwear at retail dollars:
| Input | Base plan |
|---|---|
| Planned September sales | $180,000 |
| Planned markdowns | $12,000 |
| Planned ending inventory | $240,000 |
| September beginning inventory | $205,000 |
| Confirmed September on-order inventory | $145,000 |
The calculation is:
$180,000 + $12,000 + $240,000 – $205,000 – $145,000 = $82,000 OTB
The brand has $82,000 of planned retail value open for September receipts. That is not permission to issue an $82,000 supplier PO at cost. The team must convert the retail-dollar OTB through its planned markup or build the plan directly at cost.
Now add a wholesale commitment. A retailer confirms $28,000 of knitwear demand for September delivery. If those sales and the required inventory were absent from the original plan, the team updates both planned sales and the stock needed to fulfill them. It does not simply add $28,000 to OTB.
The buyer then checks the purchase-order management workflow to confirm which receipts are firm, delayed, canceled, or outside September. On-order data is only useful when dates and statuses are current.
Adjust OTB for size depth, color, commitments, and timing
An $82,000 OTB at category level can still produce the wrong buy. A fashion team must decide which style-color-size gaps deserve it.
Start with size and depth. If medium and large sell through twice as fast as extra-small, buying every size equally will protect the category total while repeating a broken size curve. Review demand and available-to-promise units at variant level.
Next, separate wholesale commitments from uncommitted demand. A confirmed 300-unit order for navy medium is different from a sales rep’s possible order. Mark the commitment state and required ship window.
Inbound purchase orders require the same discipline. Include firm receipts due in the OTB period, not every open PO. A 45-day delay can move supply across a month’s boundary and change two plans.
Returns and cancellations should enter through defined adjustments. NRF projected $849.9 billion of retail returns in 2025, or 15.8% of sales (National Retail Federation). A brand should use its own return timing and resale rate, not the national figure, to estimate what will become sellable again.
Markdown plans also belong in the formula because a $10 reduction changes retail inventory value. Finally, supplier lead time determines when an open amount can become sellable stock. An October OTB balance cannot solve a September stockout if production takes 75 days.
Compare base, upside, and downside OTB scenarios
A single plan creates false confidence. Use three cases with the same definitions.
| Input | Downside | Base | Upside |
|---|---|---|---|
| Planned sales | $150,000 | $180,000 | $220,000 |
| Planned markdowns | $20,000 | $12,000 | $8,000 |
| Planned ending inventory | $215,000 | $240,000 | $260,000 |
| Beginning inventory | $205,000 | $205,000 | $205,000 |
| On order | $145,000 | $145,000 | $145,000 |
| Calculated OTB | $35,000 | $82,000 | $138,000 |
The downside case does not automatically tell the buyer to purchase $35,000. It shows the room under that demand and markdown assumption. The COO can decide how much flexibility to preserve until two weeks of actual September sales arrive.
Track leading indicators for the scenario switch: full-price sell-through by style, wholesale confirmation rate, supplier delays, return-to-stock time, and markdown performance. The multichannel sales-data guide explains why DTC and wholesale results need a shared view.
Move beyond a spreadsheet without claiming a native OTB module
A spreadsheet can run the formula. It works when one owner controls a small assortment, updates on-order dates, and reconciles inventory before each review.
It breaks when DTC sales, wholesale commitments, returns, and POs live in separate systems. One buyer exports Monday inventory, finance changes a PO Tuesday, and sales accepts a wholesale order Wednesday. By Friday, the open amount is based on three different versions of the business.
Connected inventory, order, sales, and PO data can make the inputs easier to maintain. Blastramp HQ manages multichannel inventory and orders for fashion brands, but this article does not claim a native open-to-buy module. The team still needs an agreed formula, owners, assumptions, and decision cadence.
Avoid six open-to-buy planning mistakes
Do not mix cost and retail values. Do not omit confirmed on-order inventory. Do not count a supplier order in the wrong month. Do not treat an OTB balance as available cash. Do not leave wholesale commitments outside the plan. Do not let a category total hide missing core sizes.
One more mistake deserves attention: changing the formula silently. If finance removes markdowns while buying still includes them, two correct spreadsheets can disagree. Put the formula and valuation basis at the top of every review.
An apparel team should also reconcile plans against actual results before rolling the next month. Compare planned sales with actual sales, planned receipts with received inventory, and planned markdowns with price changes taken. A $20,000 supplier delay can make September OTB look open even though the October plan now carries the receipt. Move the commitment; do not erase it.
Keep a short decision log beside the plan. Record the date, scenario used, approved amount, category, owner, and affected purchase orders. When a buyer asks why the team reduced outerwear but added knitwear, the answer should be visible without reconstructing an email thread.
Monthly OTB review checklist for apparel teams
- Lock the period and valuation basis.
- Reconcile beginning inventory to the inventory system.
- Refresh planned sales with DTC and wholesale inputs.
- Confirm markdown dates and retail-dollar effects.
- Review every on-order line due in the period.
- Separate firm wholesale commitments from opportunities.
- Check returns expected to re-enter sellable stock.
- Compare base, upside, and downside cases.
- Allocate the approved open amount by style, color, and size.
- Record decisions and update affected purchase orders.
The checklist should end with a variance review. Imagine the team approved $82,000 in retail-value OTB for September but placed receipts representing $96,000. The $14,000 difference may be justified by a confirmed wholesale order, a supplier minimum, or a deliberate pull-forward from October. It still needs an owner and an offset elsewhere in the plan.
Track three versions rather than overwriting the original: approved plan, current forecast, and actual result. This makes it possible to see whether a missed target came from demand, receipts, markdowns, or an unrecorded decision. It also gives the next buying meeting evidence for changing the size and color mix.
For brands operating in US and Canadian dollars, choose a documented exchange-rate convention. A Canadian supplier PO converted at one rate while the OTB plan uses another can create a false variance. Finance should set the rate and timing used for the plan.
Open-to-buy FAQ for apparel brands
Is open to buy the same as cash available?
No. OTB is an inventory-planning amount. Cash availability also depends on payment terms, deposits, payroll, freight, taxes, and other obligations.
Should apparel brands calculate OTB at cost or retail?
Either can work if all inputs use the same basis. Retail OTB is common in merchandising; cost OTB may align more directly with purchasing cash. Finance and buying should agree on one version.
How often should an OTB plan be updated?
Monthly is a common operating cadence, with weekly exception updates during launches or volatile periods. Supplier delays and major wholesale orders should trigger an update.
Does Blastramp have open-to-buy software?
This guide makes no native OTB-module claim. Blastramp can centralize relevant inventory and order information; Sales can confirm how your stack and data would support your chosen workflow.
Make the buying budget traceable
Open to buy works when every input can be traced to a current inventory, sales, markdown, or purchase-order record. The formula is simple. Keeping the business facts aligned is the real operating work.
Review Blastramp pricing to compare connected inventory and order management with the cost of spreadsheet handoffs. To check whether your current data can support a cleaner OTB workflow, request a demo.
