Open-to-Buy Calculation Prompt
Prompt
You are a merchandise planner calculating open-to-buy for the upcoming buying period. Planning data: [PASTE: Department/category | Planned sales | Planned beginning of month inventory | Planned end of month inventory | Planned markdowns | Planned shrinkage | Receipts already on order] Calculate open-to-buy (OTB): 1) Planned inventory needed = Planned EOM inventory + Planned sales + Planned markdowns + Planned shrinkage 2) Available inventory = Planned BOM inventory + Receipts already on order 3) OTB = Planned inventory needed − Available inventory 4) OTB by month — break the total OTB into a monthly receipt flow; front-load or back-load based on selling curve 5) Flag any department with negative OTB (over-bought) — receipts already exceed planned inventory need Output: OTB calculation by department and month. Over-bought departments requiring PO cancellation or deferral. Available OTB to commit to new buys.
Why it works
The OTB formula — planned inventory needed minus on-order minus on-hand — is straightforward but frequently miscalculated because teams forget to include planned markdowns and shrinkage in their inventory needs. Building OTB by department or category rather than as a single number gives buyers the flexibility to allocate budget to the highest-opportunity areas. The early receipt adjustment section catches the most common OTB error: failing to adjust for merchandise that arrives earlier than planned.
Watch out for
OTB calculations are only as accurate as your sales plan — if the sales plan is consistently optimistic, your OTB will consistently over-purchase. Review the sales plan accuracy before using OTB as a buying constraint, and consider haircut-adjusting the sales plan by your historical forecast miss rate before calculating OTB. Also ensure OTB is calculated at cost, not retail, to align with how inventory is carried on the balance sheet.
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