Running the OTB Calculations will get your OPEN TO BUY Plan underway, and then run them again each month as close to the beginning of the month as possible. With your Projected Sales for each month and your Turn Rates, you have computed your Ideal Beginning Inventory in each Department. Along with your Current Inventory (all in RETAIL DOLLARS), you can now compute your buying plan.
This is a several step process if done properly. You begin with your Current Physical Inventory and SUBTRACT your Projected Sales for the first month. The difference is the Inventory Balance. Then you skip ahead to Month 2 where you have calculated your Ideal Beginning Inventory from your Projected Sales for Month 2 times the Inventory Factor (the Annual Turn Rate divided into 12). You will set up these figures for each of the next 12 months leaving room for the OTB Amount which is the difference between the Inventory Balance of Month 1 and the Ideal Beginning Inventory of Month 2.
Go through this process for each of the next 10 month and you will have an OTB Amount for each of the next 12 months. One thing to notice is that in several months you will have a NEGATIVE OTB Amount which is a problem. It’s OK to have NO OTB, but you cannot have a negative OTB. When this occurs, you will need to subtract the negative OTB from any positive OTB that precedes it.
So now you have the second benefit of your OTB plan, your buying amounts in each Department for each month for the next 12 months.
The information in this and the following blog posts will help you on your way to an OTB plan and we are always available to answer your questions. The truth is that it is dramatically more cost and time efficient to subscribe to myotbplan.com. But whatever gets you using open to buy, we want to help.
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