This document provides an overview of the open-to-buy and inventory control process at a wholesale company. It discusses how sales and planning build quarterly sales plans and budgets that are used to determine inventory needs. Key factors like missed sales opportunities, excess inventory, factory lead times, and strategic initiatives are considered. The open-to-buy plan is then developed using historical data and metrics like turns and weeks of supply. Inventory levels are regularly monitored and forecasts are updated weekly based on sales performance.

1. Wholesale
Open-To-Buy and Inventory Control
A WALK THROUGH

2. -Sales and Planning build a quarterly bottoms
up plan by customer and/or customer type,
incorporating metrics of units, Std. sales, OPL,
giveback for MD’s and Advertising and
Operational Credits, deriving a Net Sales Plan.
-Once the board approves the budgeted
sales plans, the OTB plan can be built. Since
this is usually at end of Q3/early Q4, the 2011
forecast is used for Q4 comparatives in the
plan. Full year projected turns are reviewed to
determine the following:
-Missed opportunities – Did the division have
enough inventory to make their plan.? Fill Rates for
QR programs are reviewed to determine “missed
sales” and EDI penetrations for the major accounts
are analyzed. Based on historical and strategic
inventory blends, the proper mix of inventory
between QR (quick response), Core (small excess
to sell on seasonal basic items), Seasonal Fashion,
and Aged Carryover is established for each
division.
-Excess Inventory – Did the division incur additional
off-price loss due to excess purchasing? This
might occur in divisions with very slow turns.
-Factory Lead Times – Did the sourcing mix change
(country/factory), leading to additional time
between FOB and ATS?. This might result in
needing more product “up front” resulting in
slower turn plans.
-Strategic Initiatives – Did the divisions customer
mix change, resulting in the need to carry
inventory for replenishment.? In order to drive
sales in Landed Branded business, additional
inventory is purchased with the sell-off planned in
advance. This would result in slower turns. Did the
division introduce new styles/new colors to the QR
program, requiring start up inventory and
potentially slower turn expectations?
Approved divisional plan
including all dilutive
metrics to bring product
from Standard to Net
sales.
When developing the OTB, we
use historical flow as well as
calendar shifts and strategic
initiatives to determine monthly
splits. Turn / Weeks of Supply
are the most significant metric
in the initial OTB process, once
sales/allowances are planned

3. The OTB
Template
This document is divided into 4 pages including:
1. Backlog Breakout Worksheet
2. Spring (Q1 & Q2)
3. Fall (Q3 & Q4)
4. Total Page (consolidation of pages 2 & 3, providing
visibility to available $’s for purchase by month, all metrics
including receipts TY vs. LY, EOM by Qtr. TY vs. LY, Gross
Sales TY vs. LY & Plan, Turn TY vs. LY vs. Plan, Avg. Stock TY
vs. LY, Weeks of Supply tracking, Actual vs. Ideal Inventory
BOM
Access to the divisional OTB’s is provided to the
Inventory Planning team, and these documents are
reviewed on a bi-weekly basis, or as needed. When
purchases exceed plan for a particular month, these
purchases are reviewed to determine if sales plan
increases can offset the additional buy, or if reductions
in future receipts still maintain divisional targeted
turnover objectives.
Key targets are April, July, October and Jan BOM, and
inventory forecasts on these dates, are compared
against LY stock and future quarter gross sales
forecasts to determine in divisions are in-line.
This is a worksheet used
when forecast submitted by
Sales/Planning, and can
help determine if sales are
trending to plan, short, or
exceeding.

4. Backlog &
Receipts
Feeder Documents
-Flash from TM1
-Finance Inventory Form
(maintained by me)
-Purchase Commitments – IT
sends daily raw data, and it is
dumped into Microsoft Access,
giving the ability to create
queries to create matrices not
available in JBA.
Originally a finance form, this file is
linked to the flash for current
inventory daily, as well as sales and
OPL. It is also linked to the OTB file,
and purchase commitment report
for future receipts. To determine
inventory received, the BOM is
reduced by the Gross Ship, then the
current Inventory is calculated and
this variance is the current receipts
Example: Bom (3079-682-
3)=2394
Current Inventory = 4464
Receipts = 4464-2394 = 2070
Sales
Backlog
Inventory

5. Calc Backlog OPL / Proj. OPL
Feeder information from:
Data Warehouse
Flash
-copied and input into excel template
with links to OTB files for current gross
shipments and OPL MTD. Backlog is
reviewed and revisions to OTB are
made based partially on the backlog,
and forecasts.
Backlog from DW -

6. Updating
Forecasts
(weekly)
-Every Monday, sales and/or planning revises
forecasts for the current and following quarter,
providing metrics of backlog, expected fall-out,
close out, new and EDI orders, and credits.
-Current net position is also reviewed on this
document, and the impact of the additional
sales at standard is shown in a reduction of the
net. In the example at right, for Q1, an
additional $800k in New/EDI will result in the
Standard sales of $941k, thus incurring an OPL of
$141k. This is then incorporated into the OTB as
a revision.
-Backlog OPL is determined by the spread (at
whsl) between the Wholesale selling price, and
what the customer is actually paying for an
item. It can be in the form of initial discounts to
drive markup for the retailer, agreed upon
upfront discounts or from closeout sales. Since
we don’t generally take an actual systemic MD
of the Whsl selling price, the OPL added back
in, brings the sales back to Standard, which is
how we determine our BOM inventory, add
factory receipts, etc.

7. Weeks of
Supply
-Every 2 weeks, President of Wholesale, Finance, Sales, Planning
and Operations conduct “Shipping” meeting, reviewing forecasts
for current and following quarters.
-One of the agenda items reviewed during this meeting, is
divisional Weeks of Supply for QR (quick response) items.
-The Inventory Planning team prepares the document (see right),
for each style on QR, reviewing current on-hand inventory units,
average sales for past 6 weeks, deriving current weeks of supply
by style.
-Performance at retail in Sell-Thru % is also analyzed to determine
if a particular style is trending to the level planned for
replenishment by that retailer. If style is below expectation, it
may be turned off, resulting is a reduction in fill ins, and additional
weeks of supply, unless some existing quantities can be
cancelled, or sold off, and factory purchases can be trimmed
back, moved to later x/f, or cancelled.
-Additional factory receipts are also considered in the calculation
of EOS weeks of supply, to allow for a forward view of the
forecasted weeks of supply.
-The complexion of the current Net Position is determined based
rolling up all styles, and determining the “buckets” they belong in.
For the example at right, aged inventory represents approx. 14%
of current Net, and QR/CORE with no current liability represents
approx. 50% of current Net.
-Each division has specific turn and weeks of supply targets, and
based on factory lead times, account requirements for fill rates,
seasonal considerations, etc. these goals are continually
monitored and fine tuned.

8. Inventory
Projection (sent
weekly to NJ Finance)
-The Inventory projection shared with the board
in tandem with the sales forecasts vs. budget is
derived from the projected ending quarterly
inventory from the OTB’s in wholesale $’s,
converted to cost using cost compliment of IMU
* % to Standard from price test, adding in
projected in-transit $’s @ first cost.
=The OTB templates are used to derive column
B (projected in-whse @ wholesale value), and
gross sales projection for the proceeding
quarter.
This blend of in-whse and MIT are compared
against LY for comparative, and against the
following quarters gross sales projection vs. LY.
This forecast is generally sent weekly or bi-
weekly depending on reporting needs and
timing in finance.