Open-to-buy budgets define the dollars that buyers have available to purchase products in order to meet customer demand while staying within the overall financial plan. The open-to-buy budget is set during the merchandise financial planning process and then updated monthly based on current inventory position which includes inventory on hand, in transit and any outstanding orders. Open-to-buy is essentially the difference between how much inventory is needed and how much is actually available. It can be set for the business as a whole and/or at the category level.
By tracking the current purchasing spend to budget, open-to-buy planning helps buyers to make intelligent and informed purchasing decisions that mitigate risk. No business should operate without monitoring its inventory spend within the overall financial plan. Having visibility into the allocated budget allows buyers to track the amount available to invest in further inventory. In order to take advantage of special buys or to add new products, some of the open-to-buy dollars should be held back. This also allows the retailer to react to fast-selling items and quickly restock shelves.