An Open to Buy (OTB) is the difference between planned purchases and merchandise that has been ordered from suppliers but not yet received. It functions like a merchant's checkbook, with planned purchases as the starting balance and purchase orders deducted as they are placed. Maintaining an appropriate OTB is important for ensuring sufficient inventory is available to meet planned sales goals. The document then defines related terms like planned purchases, on order, net sales, markdowns, markups, and others.

1. Open to Buy Glossary
J O A N B R A A T Z
V P M E R C H A N D I S I N G

2. What is an Open
to Buy (OTB)?
An Open to Buy(OTB) is often referred to as a
"Merchant's Checkbook".
Plan Purchases are similar to a beginning
checkbook balance. Placing a purchase order
is like writing a check. The balance decreases
as orders are written. And as one would in
personal finance, it is critical to evaluate the
quality and productivity of each purchase
made.

3. Open to Buy Glossary
Open to Buy (OTB):
The difference between planned purchases and
merchandise on-order.

4. Open to Buy Glossary
Planned Purchases:
The amount of goods needed to ensure that inventory
levels are appropriate to produce planned net sales.

5. Open to Buy Glossary
On Order:
The summary of purchase orders of product placed
with suppliers that have not yet shipped or been
received in warehouse.

6. Open to Buy Glossary
Net Sales:
The difference of gross total sales minus customer
returns and allowance deductions.

7. Open to Buy Glossary
Markdown:
The discount or promotional discount of selling price.
This can be temporary or permanent decrease.

8. Open to Buy Glossary
Mark-up:
The amount added to wholesale cost to establish retail
price. Measurements in mark-up can be initial,
maintained, and cumulative.

9. Open to Buy Glossary
Gross Profit:
The remainder after subtracting total cost of goods
sold from net sales.

10. Open to Buy Glossary
Cost of Goods Sold (COGS):
Includes invoice payment to suppliers for merchandise
purchased, workroom & shipping costs, less discounts
and returns to vendors.

11. Open to Buy Glossary
Turnover:
The number of times an average inventory is sold
withing a time period (generally Half or Year).

12. Open to Buy Glossary
BOM/EOM Inventory:
The Inventory on hand at the beginning of a month
(BOM). BOM Inventory in April is the same as March
EOM Inventory.

13. Open to Buy Glossary
Financial Plan:
The budget scheduling the planned month by month
net sales, inventory and reductions (markdowns +
shortages).

14. Thank You
Reach Me
Joan Braatz
Vice President Merchandising
Retail | B2C | B2B
braatzjoan@gmail.com
214-733-9677
https://www.linkedin.com/in/joanbraatz/
https://joanbraatz.com/