In retail, what is an open-to-buy (OTB) plan?

An open-to-buy (OTB) plan is a financial budget that helps retailers determine how much inventory can be purchased over a specific period. This plan is crucial for managing inventory levels, ensuring that retailers have the right amount of stock on hand while avoiding overstock situations that can lead to markdowns and reduced profitability.

Having an OTB plan allows retailers to align their purchasing with expected sales and cash flow, enabling them to make informed decisions about inventory procurement. This financial tool also considers factors like current inventory levels, sales forecasts, and market trends, allowing for more accurate planning and increased efficiency in the supply chain.

In the context of retail performance, an effective OTB plan directly impacts sales and profitability, as it helps retailers avoid stockouts or excess inventory, both of which can negatively affect customer satisfaction and overall business performance.