The document presents a six-month merchandise budget plan for men's casual slacks. It includes projected monthly sales, reductions, beginning-of-month inventory, end-of-month inventory, and additions to stock. It also outlines the process for calculating key metrics like the beginning-of-month stock-to-sales ratio using sales projections, gross margin, and desired inventory turnover. The plan provides a framework for budgeting inventory levels and purchases on a monthly basis over a six-month period.

1. ‫روشا‬ ‫استور‬ ‫دپارتمان‬ 1
OTB
Presentation

2. ‫روشا‬ ‫استور‬ ‫دپارتمان‬ 2
OTB definition
• Open-To-Buy (OTB) is merchandise budgeted
for purchase by a retail store during a certain
time period that has not yet been ordered. In
other words, how much inventory can I buy
without getting myself in trouble. It is also the
process of planning merchandise sales and
purchases. (www.thebalance.com)
• the portion of a budget allotment remaining
available for additional purchases at any given
moment of a budgetary period (www.merriam-
webster.com)

3. The OTB system is used after the merchandise is
purchased
Monitors Merchandise Flow
Determines How Much Was Spent and How Much is Left
to Spend
Open-to-buy is like the
buyer’s checkbook. It keeps
track of how much money
has been spent and how
much money is left to spend
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 3

4. Case study
Merchandise Budget Report and Open-to-
Buy System for a Fashion
Merchandise Category
Based on :
Michael Levy, Barton Weitz-Retailing
Management, 8th Edition -McGraw-
Hill_Irwin (2011)
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 4

5. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 5
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

6. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 6
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

7. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 7
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

8. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 8
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

9. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 9
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

10. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 10
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

11. BOM (Beginning-of-Month)
Stock-to-Sales Ratio
• a stock-to-sales ratio of 2 means that the
retailer plans to have twice as much
inventory on hand at the beginning of the
month as there are forecasted sales for the
month.
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 11

12. Step 1: Calculate Sales-to-Stock
Ratio
• The GMROI is equal to the gross margin percentage
times the sales-to-stock ratio. The sales-to-stock ratio is
conceptually similar to inventory turnover except the
denominator in the stock-to-sales ratio is expressed in
retail sales dollars, whereas the denominator in
inventory turnover is the cost of goods sold (sales at
cost).
• GMROI = Gross margin percent * Sales-to-stock ratio
• Sales-to-stock ratio = GMROI / Gross margin percent
• Because this illustration of a merchandise budget plan is
for a six-month period rather than a year, the sales-to-
stock ratio is based on six months rather than annual
sales.
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 12

13. Step 2: Convert the Sales-to-Stock
Ratio to Inventory Turnover
• Inventory turnover = Sales-to-stock ratio * (1.00 -
Gross margin %/100)
• This adjustment is necessary because the sales-to-
stock ratio defines sales at retail and inventory at
cost, whereas inventory turnover defines both
sales and inventory at cost. Like the sales-to-stock
ratio, this inventory turnover is based on a six-
month period.
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 13

14. Step 3: Calculate Average Stock-
to-Sales Ratio
Average stock-to-sales ratio = 6 months/Inventory
turnover
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 14

15. Step 4: Calculate Monthly Stock-
to-Sales Ratios
• The monthly stock-to-sales ratios must
average the stock-to-sales ratio calculated
previously to achieve the planned inventory
turnover. Generally, monthly stock-to-sales
ratios vary in the opposite direction of
sales. That is, in months when sales are
larger, stock-to-sales ratios are smaller, and
vice versa.
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 15

16. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 16
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

17. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 17
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

18. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 18
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

19. Six-Month Merchandise Budget
Plan for Men’s Casual Slacks
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 19
Spring April May June July August September
Sales% distribution to season 100% 21% 12% 12% 19% 21% 15%
Monthly sales $130,000.00 $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
Reduc% distribution to
season
100% 40% 14% 16% 12% 10% 8%
Monthly reduction $16,500.00 $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
BOM stock to sales ratio 4.00 3.60 4.40 4.40 4.00 3.60 4.00
BOM inventory $98,280.00 $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
EOM inventory $65,600.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
Monthly addition to stock $113,820.00 $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00

20. OPEN-TO-BUY SYSTEM
• The open-to-buy system keeps track of
merchandise flows while they are
occurring. It keeps a record of how much is
actually spent purchasing merchandise
each month and how much is left to spend.
• The open-to-buy is the difference between
the planned EOM inventory and the
projected EOM.
• Open-to-buy = Planned EOM inventory -
Projected EOM inventory
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 20

21. Calculating Open-to-Buy for
the Current Period
• If open-to-buy is positive, then the buyer still has
money in the budget to purchase merchandise for
that month.
• If the open-to-buy is negative, then the buyer has
overbought, meaning he or she has spent more
than was in the budget
• Projected EOM inventory =
Actual BOM inventory
+ Monthly additions actual (received new
merchandise)
+ On order (merchandise to be delivered)
- Sales plan (merchandise sold)
- Monthly reductions plan
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 21

22. Six-Month Open-to-Buy System
Report
Spring april may june july august september
EOM stock plan $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
EOM actuals $69,950.00
BOM stock plan $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
BOM stock actuals $95,000.00 $59,500.00
monthly addition plan $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00
monthly addition actuals $3,500.00 $7,000.00
on order $45,000.00 $18,000.00 $48,400.00
sales plan $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
sales actuals $26,900.00
monthly reduction plan $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
monthly reduction actuals $1,650.00
projected EOM stock plan $68,640.00 $66,590.00
projected BOM stock plan $24,570.00 $68,640.00 $66,590.00 $- $- $-
OTB $- $2,050.00
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 22

23. Six-Month Open-to-Buy System
Report
Spring april may june july august september
EOM stock plan $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00 $65,600.00
EOM actuals $69,950.00
BOM stock plan $98,280.00 $68,640.00 $68,640.00 $98,800.00 $98,280.00 $78,000.00
BOM stock actuals $95,000.00 $59,500.00
monthly addition plan $4,260.00 $17,910.00 $48,400.00 $26,160.00 $8,670.00 $8,420.00
monthly addition actuals $3,500.00 $7,000.00
on order $45,000.00 $18,000.00 $48,400.00
sales plan $27,300.00 $15,600.00 $15,600.00 $24,700.00 $27,300.00 $19,500.00
sales actuals $26,900.00
monthly reduction plan $6,600.00 $2,310.00 $2,640.00 $1,980.00 $1,650.00 $1,320.00
monthly reduction actuals $1,650.00
projected EOM stock plan $68,640.00 $66,590.00
projected BOM stock plan $24,570.00 $68,640.00 $66,590.00 $- $- $-
OTB $- $2,050.00
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 23

24. Microsoft NAV OTB
NAME NAV phrasal
EOM planned Closing Stock Value (Planned)
EOM Actual Closing Stock Value
Monthly Sales Plan Sales Budget Amount (Cost)
Sales Budget Amount
Sales Actual Sales Amount
Sales Amount (Cost)
BOM plan Opening Stock Value (Planned)
Monthly Addition Actual Purchases
Open To Buy
Monthly Addition Plan Purchases (Planned)
BOM actual Opening Stock Value
Monthly Addition Actual Purchases (Committed)
Monthly Reduction actual Discounts
Monthly Reduction Plan Discounts (Planned)
Monthly Reduction Negative Adjustments
Monthly Reduction Plan Negative Adjustment (Planned)
‫روشا‬ ‫استور‬ ‫دپارتمان‬ 24