martes, 19 de mayo de 2015

The right amount, Of the right stuff, At the right time.

1      Introduction           

Good inventory control is critical to ensuring an adequate level of stock is on hand for the amount of sales being generated. Having too much inventory (or the wrong type) during certain periods can slow your cash flow and reduce profits with too mant markdowns. On the other hand, if you under buy and miss sales opportunities then you are not making your potential profit. A retailer can be sure to stock the right amount of the right products at the right time by using an open to buy (OTB) plan.
Open-to-buy is a system of monitoring merchandise flow in order to determine how much money was spent on merchandise and how much is balanced to spend. It helps the retailer to ensure that enough budget is available to buy the merchandise as and when required.

2      OTB Concept

Open-To-Buy can be calculated in either units or dollars. OTB is essentially the difference between how much inventory is needed and how much is actually available. This includes inventory on hand, in transit and any outstanding orders.
In order to take advantage of special buys or to add new products, some of the OTB dollars should be held back. This also allows the retailer to react to fast-selling items and quickly restock shelves.
Consider maintaining an OTB plan for your business as a whole, but also plan for each category of merchandise you stock. The plan can be maintained on paper, in a spreadsheet or by purchasing one of the several retail software packages available that contain Open-To-Buy programs.

3      Planning Levels

An Open-To-Buy can be prepared at many levels.  It may be planned at the company level by a multi-store operation or at the store, department, classification or buyer level, or a combination of some of these.  However, to be most effective, a buying plan must be prepared at the classification level.

4      The Formula

Planned Sales
+ Planned Markdowns
+ Planned End of Month Inventory
- Planned Beginning of Month Inventory
= Open-To-Buy (retail)

5      The Example

For example, a retailer has an inventory level of $150,000 on July 1st and planned $152,000 End of Month inventory for July 31st.
The planned sales for the store are $48,000 with $750 in planned markdowns. Therefore, the retailer has $50,750 Open-To-Buy at retail.

6      Open to Buy – SAP® Business One Apparel & Footwear Solution

The module allows users to an easy-to setup OTB.

1. Setup (costing source, stores, etc)

2. Merchandise classification (brands, department, style groups, etc) , levels and dependecies.

     3. Wizard. The user has the option to run the wizard. Past sales history is proposed to calculate the sales planning period and inventory turnover. These information is vital to start preparing an OTB planning for the next season

Once the wizard is created the OTB starts compiling information. When the purchases and receipts are entered in SAP Business One the information gets updated in real time. Merchandisers can adjust manually as the OTB as information planned is compared with actuals transactions.  

Open to Buy answers “How much” while Merchandise planning answers “What to buy”
Visit our blog for the Merchandise planning module highlights and how integrated information helps fashion companies to run better.

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