What is Open-to-Buy Planning?

Quick Answer: Open-to-buy (OTB) is the budget available to purchase new inventory in a given period. It is calculated as planned sales plus planned ending inventory, minus beginning inventory and on-order stock. OTB planning ensures buying decisions stay within financial constraints while meeting demand.

Open-to-buy (OTB) is a financial inventory planning framework that determines how much a business can spend on new purchases during a specific period without exceeding its inventory investment targets. It bridges the gap between demand forecasting (what you expect to sell) and financial planning (what you can afford to buy).

OTB originated in retail merchandise planning and is now widely used by direct-to-consumer brands, wholesale businesses, and omnichannel retailers to keep inventory investment disciplined and aligned with cash flow.

The OTB Formula

Open-to-Buy = Planned Sales + Planned Ending Inventory − Beginning Inventory − On Order

Breaking down each component:

Planned Sales : The demand forecast for the period — how many units or how much revenue you expect to sell.

Planned Ending Inventory : The stock level you want to have at the end of the period (often expressed as weeks or months of supply).

Beginning Inventory : The inventory you already have on hand at the start of the period.

On Order : Purchase orders already placed but not yet received.

Why OTB Planning Matters

Without an OTB framework, buying decisions are often made in isolation — each product manager or buyer orders based on demand signals alone, without a view of total inventory investment or cash flow impact. The result is overbuying, cash tied up in slow-moving inventory, and reduced flexibility to respond to new opportunities.

OTB planning addresses this by:

• Setting a clear spending ceiling for each period

• Forcing prioritization when budget is constrained

• Creating a shared language between finance and operations

• Preventing inventory investment from growing faster than sales

OTB Planning in Practice

Retail / DTC

For DTC brands, OTB typically runs monthly or quarterly. The key inputs are:

• Demand forecast by product category

• Planned sell-through rate

• Target ending inventory (expressed as weeks of supply or inventory-to-sales ratio)

• Cash flow constraints from finance

Wholesale

How OTB Connects to Replenishment Planning

OTB planning sets the budget envelope. Replenishment planning determines how to allocate that budget across SKUs based on demand forecasts and stock coverage needs. The two work together:

1. Finance sets the OTB budget for the period

2. Demand planning generates SKU-level forecasts

3. Replenishment planning ranks and prioritizes orders within the OTB budget

4. Purchase orders are generated and tracked against the OTB balance

How Moselle Supports OTB Planning

Moselle generates the demand forecasts and replenishment recommendations that feed OTB decisions. When you export your forecast with financial projections, you can see the inventory investment required to meet demand — and compare it against your available OTB budget.

Import and Export ForecastGenerate Orders

Frequently Asked Questions

Is OTB planning the same as a purchasing budget?

Answer: They're related but different. A purchasing budget is a financial allocation. OTB is a calculated number that changes as sales, receipts, and on-order quantities change throughout the period. OTB is dynamic; a budget is typically fixed.

How often should I recalculate OTB?

Answer: Most brands recalculate OTB monthly, but fast-moving consumer goods businesses may do it weekly. The right cadence depends on how quickly your inventory position changes and how long your supplier lead times are.

What happens if OTB goes negative?

Answer: A negative OTB means you've already committed more inventory than your plan calls for. This signals a need to either cancel or defer open orders, accelerate sales through promotions, or revise your inventory targets.