For calculating the Open to Buy, you first need to compile information on the following -
Planned Sales
Planned markdown (price reduction)
Actual inventory at the beginning of the month
The planned end of the month inventory
If you have the above information in place, the calculation is pretty straightforward.
Here is the basic formula to arrive at OTB :
OTB = Planned Sales + Planned Markdown + Planned end of the month inventory - Actual inventory.
For example, a retailer has a beginning inventory of $ 130,000 on 1st April and plans to have an ending inventory of $ 132,000 on 30th April. The planned sales for the month are $ 40,000 with $ 800 in planned markdown. By plugging in the values to the formula, we see that the retailer has $ 42,800 OTB in retail.
