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Mastering Open-to-Buy Calculation in Excel // A Guide for Fashion Retailers


Open-to-Buy (OTB) is a crucial financial tool for fashion retailers, enabling them to effectively manage their inventory and make informed purchasing decisions. By leveraging the power of Excel, retailers can accurately calculate their OTB and maintain optimal inventory levels.

In this article, we will provide step-by-step guidance on how to calculate OTB using Excel, empowering fashion retailers to enhance their retail merchandise planning and achieve better financial outcomes.
Understand the Significance of Open-to-Buy (OTB)

Open-to-Buy represents the available budget for purchasing new merchandise during a specific period. It helps retailers ensure that they have the right amount of inventory on hand, avoid overstocking or understocking situations, and maximise sales potential.
Determine the OTB Components

To calculate OTB, you need to consider several key components, including planned sales, beginning inventory, markdowns, stock shortages, and desired ending inventory. These components will allow you to calculate the total merchandise available for purchase.
Create an Excel Spreadsheet

Open a new spreadsheet in Excel and set up columns to represent the OTB components. Assign appropriate headers to each column, such as Planned Sales, Beginning Inventory, Markdowns, Stock Shortages, Desired Ending Inventory, and OTB Calculation.
Input Data for OTB Components

Enter the relevant data for each OTB component in the corresponding columns. For example, input the planned sales forecast, the value of the beginning inventory, projected markdown amounts, any anticipated stock shortages, and the desired ending inventory level.
Calculate the OTB

In the OTB Calculation column, use Excel formulas to calculate the OTB amount. Subtract the sum of beginning inventory, markdowns, stock shortages, and desired ending inventory from the planned sales. The resulting value will be your OTB amount.
Monitor and Track OTB

Regularly update your OTB spreadsheet as new information becomes available, such as changes in sales forecasts or inventory levels. This will help you maintain an accurate and up-to-date view of your OTB and make necessary adjustments to your purchasing plans.
Utilise Conditional Formatting

Apply conditional formatting in Excel to highlight any deviations or discrepancies between your actual inventory levels and the desired ending inventory. This visual aid will enable you to quickly identify potential stock imbalances and take appropriate actions.
Analyse and Adjust

Regularly analyse your OTB performance and compare it to your actual sales and inventory levels. Identify any areas where there are significant deviations and evaluate the reasons behind them. Adjust your OTB calculations accordingly to optimise your inventory management and maximise profitability.

Excel serves as a powerful tool for fashion retailers to calculate and manage their Open-to-Buy (OTB) effectively.

By following the steps outlined in this guide, retailers can gain better control over their inventory levels, improve their retail merchandise planning, and make informed purchasing decisions.

Embrace the potential of Excel in OTB calculation to enhance your assortment plan, streamline your merchandise planning, and achieve financial success in the fashion retail industry.
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