What Is Open-to-Buy (OTB)?
Open-to-buy is the budget available to purchase new inventory in a period. Learn how to calculate it and use it to manage buying discipline.
Key Takeaways
- Open-to-buy is the amount of additional inventory a retailer can purchase in a period without exceeding planned stock levels
- OTB = planned sales + planned end-of-period stock - opening stock - stock on order
- Positive OTB means you have budget to buy; negative OTB means you need to reduce future orders or increase sell-through
- OTB discipline prevents overbying — the root cause of excess inventory and margin-destroying markdowns
What open-to-buy is
Open-to-buy (OTB) is the budget available for a retail buyer to purchase additional inventory in a given period, calculated to ensure that planned stock levels at the end of the period are not exceeded. It is the mechanism that connects the financial plan (how much inventory can the business afford to hold) with the buying operation (how much can the buyer order). OTB prevents overbuying — the most common root cause of excess inventory, margin-destroying markdowns, and working capital pressure in retail.
The OTB formula
OTB = Planned Sales + Planned End-of-Period Inventory - Opening Inventory - Stock on Order. Breaking this down: planned sales tells you how much stock you need to deplete. Planned end-of-period inventory is the stock level you want to end the period with (based on the next period's sales plan). Opening inventory is what you start with. Stock on order is what has already been committed to suppliers. The result is how much more you can order while hitting your stock targets.
Positive vs negative OTB
Positive OTB means you have budget and capacity to purchase more stock — your planned sales and target end-stock require more inventory than you currently have committed. Negative OTB means you have overcommitted — you have more inventory in place or on order than your plan supports. Negative OTB is a warning signal: you need to either accelerate sell-through (more promotional activity), cancel or defer orders where possible, or revise your plan upward to absorb the excess. Ignoring negative OTB typically results in overstocked positions and markdown pressure later in the season.
OTB in practice
OTB is managed at the category or department level, typically on a monthly or weekly basis. Buyers update OTB weekly as sales data comes in (actual sales vs planned), as new stock arrives (reducing OTB), and as orders are placed (reducing OTB). The OTB position drives day-to-day buying decisions: a buyer with strong positive OTB can chase bestsellers by placing reorders, while a buyer with negative OTB needs to hold back and wait for current stock to sell through. Regular OTB reviews between buyers and merchandise planners are essential for in-season trading.
OTB and supplier management
A healthy OTB process creates better supplier relationships as well as better trading outcomes. When buyers have clear OTB visibility, they can plan orders more confidently and communicate to suppliers further in advance — reducing the need for short-lead-time orders that cost more and create supplier stress. Conversely, when negative OTB forces order cancellations, supplier relationships are damaged and future terms may be affected. The discipline of OTB management is ultimately about making commercial commitments your business can confidently stand behind.