Inventory finance
Open-to-Buy (OTB)
By the Supply Chain Manager team · Updated October 16, 2026
Open-to-buy (OTB) is the budget left for new purchases in a period after planned sales, planned closing stock and orders already placed are accounted for.
It comes from retail merchandise planning, but the idea suits any distributor managing a stock budget: you can only buy what the plan says you will sell, plus any planned change in stock, minus what is already on order.
In distribution, open-to-buy is often set at category or supplier level each month. Within that budget, SKU-level reorder rules decide what to buy. If the budget is exhausted, the plan should be revisited rather than skipping reorders of fast movers, which would cause stockouts on the items that generate the most cash.
How to calculate open-to-buy
Open-to-Buy = Planned sales + Planned closing inventory − Opening inventory − Stock already on order (all at cost)
Open-to-buy example
Illustrative numbers: for next month, planned sales are $200,000 at cost, planned closing stock is $500,000, opening stock is $520,000 and $120,000 is already on order. OTB = 200,000 + 500,000 − 520,000 − 120,000 = $60,000 left to commit.
Why open-to-buy matters for distributors
OTB stops purchasing from running ahead of the plan, especially across many buyers or product categories. It is a guardrail, not a substitute for SKU-level reorder decisions.
Common open-to-buy mistakes
- Forgetting orders already placed, so the budget is spent twice.
- Letting OTB block reorders of fast movers while slow lines use the budget.
Examples on this page use made-up round numbers to show the calculation. They are not benchmarks or results from real businesses.