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Old 3rd February 2005, 10:23 AM   #1
4ndr3w
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Default Open-to-Buy OTB

I'm having some difficulty wrapping my noggin around an inventory management concept called "Open to Buy". Does anyone have a pointer to an explanation of this idea in really small words?

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Old 3rd February 2005, 12:49 PM   #2
Robert
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That's a new one on me, but I found the following over at About.com: (warning, many pop-ups)

Open-to-Buy is the difference between planned purchases and stock already ordered; the dollar amount of merchandise that a buyer can order for a particular period.

So, if you've planned to purchase $1,000 worth of widgets for resale during the year, and you already have $400 worth of widgets in stock, you are open-to-buy $600 more. (sound right?)

With that number you'd have to figure out how quickly your widgets sell, how long it takes to replenish your widget stock, flucuations in widget prices, etc. so you'd know not just how much you can buy, but when you should be buying it.

(I changed the title of the thread because I think this is a cool topic and I want to grab the attention of anyone that can provide more insight. )

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