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Managing the Open-to-Buy

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The Open-to-Buy is a figure that indicates how much merchandise may be received into a department or classification in the course of a given month without exceeding the planned inventory at the end of that month.

Purpose of Open-to-Buy

The Open-to-Buy (actually it's an "Open to Receive" figure) shows the buyer how to adjust current purchasing so as to compensate for any variations from planned figures in actual sales and stocks. Stores make this calculation in dollars (at retail) for each buyer - once, or twice, or more often each month. Under normal conditions, orders may not be placed in excess of the Open-to-Buy figure.



From the store wide viewpoint, the Open-to-Buy serves as a financial control upon the buyer, so that management will not be committed to an inventory of greater than planned value.

Buyers make calculations for themselves, in units, or dollars, or both, for individual subdivisions of their departments, to help them channel funds into those classifications, or price lines, or other segments that should have them.

Without such guides, the buyer can easily overstock some classifications or price lines and find herself without adequate funds for other subdivisions of the department.

Flexibility of Open-to-Buy

The Open-to-Buy can be quite flexible in your hands. Many of the elements that go into its calculation are under your control. By the way you manage them, you can make your Open-to-Buy best fit your department's needs.

Only one element is inflexible: planned purchases. Barring management's intervention, that figure remains as planned.

You exert control, however, over the various figures that are subtracted from planned purchases in order to arrive at the Open-to-Buy:
  • actual receipts of merchandise

  • merchandise in transit

  • merchandise on order for delivery during the month

  • excess of actual inventory on hand over planned figure.
If your actual inventory is higher than plan, your Open-to-Buy is decreased; if it is lower, you have more Open-to-Buy.

Sales, markdowns, and returns to vendors decrease the value of your inventory and increase your Open-to-Buy. Merchandise receipts, customer returns, and additional mark-ons increase the value of your inventory and decrease the Open-to-Buy.

If the Open-to-Buy appears insufficient, check the points enumerated below to see what you can do on your own to improve matters.

Seeking Help

There may be circumstances under which, in spite of your best efforts, the Open-to-Buy simply will not cover all you think it should. If you are convinced that you may be missing an opportunity or are failing to serve your customers adequately, consult your merchandise manager promptly. Do this even if the lack of Open-to-Buy has been caused by what hindsight now tells you was an error of judgment on your part.

Typical situations under which to ask for help include:
  • market emergencies - the need to buy early in anticipation of possible scarcity, strikes, transportation problems, etc.

  • market opportunities - exceptional buys, new hot items, etc.

  • unexpected changes in local spending power or spending patterns

  • changes in the competitive picture - an opportunity to fill an area left open by the withdrawal or oversight of a competitor, a need to meet new competition, etc.

  • new incoming fashions or fads

  • lack of funds to reorder good styles and sell-outs

  • lack of funds to cover basics, branch needs, fast-selling classifications and price lines, or other "life-blood" segments of the department

  • lack of funds to cover planned promotions adequately.
Get the Advice You Need

To postpone calling attention to situations like those listed above is like sitting on a time bomb. If the inventory problem is beyond your know-how, or the opportunity requires action beyond your authority, ask advice early. You're entitled to it.

Your merchandise manager may suggest ways to operate more effectively within your Open-to-Buy, or he may make emergency adjustments.

Naturally, one doesn't make a habit of asking for special treatment. But there is a difference between needlessly running for help and wisely recognizing real emergencies and opportunities when they do occur. In the latter situation, even the most experienced buyers move promptly to seek assistance.

Reaping the Benefits

When you manage your Open-to-Buy well, you find yourself always with funds for purchasing new stock for your department, wherever and whenever you most need it. Your assortment will be fresher and more interesting than it could possibly be if you timed or distributed your purchases without this guide. And your operation will keep profitably within the financial limits that management has set for your department - a point in your favor when your performance as a buyer is evaluated.
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