About Open To Buy

The Open to Buy module (Jump 241) is used to create and maintain buying or purchasing plans. Open To Buy plans consist of an original plan that cannot be changed once it is posted and as many revised plans as you need. The plans display the projected or budgeted amounts you enter on the Budget line and the actual amounts filled in by PrismCore in the Actual line for each month of the plan.

Open

While you may have previously created such budgets outside of PrismCore, the advantage to creating Open To Buy (OTB) plans in your system is that once you have created a plan, real-time information flows into the plan from other parts of the system (e.g., sales & purchase amounts, ending inventory amounts), allowing you to easily see whether you are meeting your plan's objectives, or whether you might need to revise the plan. In addition, setting up OTB plans allows PrismCore to display warnings that buyers will see when purchase orders they create contain items that would exceed the open to buy amount on an original or revised OTB plan. Finally, all versions of these purchase plans are printable, so you can keep hard copies for historical purposes.
Open to buy plans can aid you in:

• Budgeting / Planning

• Achieving a better product mix

• Better use of funds

• Better analysis of sales

• Lower inventory levels

Being able to plan or budget for future sales seasons can eliminate a lot of unwanted surprises. By being able to create a comprehensive purchase plan for the future you can get the best product mix into your store to ensure maximum profitability.
In addition, the turns calculations that show on the OTB plan can help you to make the best use of limited capital resources. The sales component requires you to look at past sales history in order to build future OTB plans. Finally, through the use of warnings to buyers when they create POs, you are able to maintain a smaller inventory in your store or reduce the total inventory of a certain type of merchandise.

Open To Buy Overview and Workflow

Creating a new Open To Buy plan is very similar to creating a budget for an upcoming sales period. There a several major components you will need to know before you can start to add a new OTB plan.

The OTB plans conform to your current DCC structure and can be setup for an entire department, a specified class of items, and/or can be built to go all the way down to the category level. They can be set up to collect and display information at either cost or retail. They are created for a specific time period. Usually an OTB plan covers a fiscal year but
PrismCore will allow you to create an OTB plan for any number of periods or sales months.
All OTB plans must have a starting point. This is the beginning inventory for the first period in the OTB plan.
In the header of the OTB plan you can enter your desired inventory turns and margin on sales. As data flows into the plan, the actual turns and margins fields display the actual inventory turns and the margin on sales that have been posted in the plan period.
The OTB screen works off underlying formulas that it uses to fill in the fields as you are creating an OTB plan. For each period within an OTB plan the ending inventory is calculated by PrismCore, which takes the beginning inventory and subtracts the sales you enter for the period. Then it adds in your planned purchases for the period and adds or subtracts any other adjustments. The ending inventory is then rolled over to be the beginning inventory for the next period. This process is completed until each period within the plan has been filled in.
Once the Original plan is complete it must be posted. Posting an OTB plan from the hammer option locks in your original numbers. Once posted, the Original plan cannot be edited.
Multiple revisions can be entered into the plan as real-life events may cause you to rethink your OTB plan. All revisions are saved as separate tabs on the bottom of the OTB screen and can be viewed at any time.
There is a Budget line and an Actual line for each month in the plan. The Budget line is where you enter your projected sales, purchases and adjustments. The Actual line is updated each night of the current sales month by the Stock Ledger Daily Update program, and the final actual amounts are locked in when the sales month is closed. Therefore all of the numbers for Sales, Purchases, and Adjustments can be researched and proved via the Stock Ledger Reports and the Spreadsheet Report.

OTB Terminology

Open to Buy (OTB) Plan
An OTB plan is a comprehensive sales and purchase plan that monitors your purchases by DCC to allow you to meet sales and inventory turns goals while maintaining an acceptable level of inventory.
Plan Types
An Open to Buy plan can be made up of one or more separate plans.

• Original: After entering in all information for all periods in the plan you will be prompted to save the plan. Once a plan is saved as the original plan it cannot be edited.

• Revised: Any changes made to the original plan or any other revisions are saved as revised plans.

Cost vs. Retail:
When creating an OTB plan you have the choice of using cost or retail as the basis for the plan.

Inventory Turnover Ratio (Turns)
The inventory turnover ratio (turns) of an item or DCC is a measure of how often you are turning over or selling your stock. It is expressed as a ratio, and the formula is: Cost of Goods Sold / Average Inventory
For more detailed information on turns calculations, see the 'Major Components of an Open to Buy Plan' section, below. Sales Plan
An OTB sales plan is a projection of expected sales levels for all future periods covered by the plan. A sales plan should take into account the current inflation rate plus any planned growth or reduction in sales.
Planned Purchases
Planned purchases are the amount of money that you will spend in the upcoming periods to generate the desired sales and to maintain an acceptable level of ending inventory. As you create new purchase orders you will enter in an Estimated Time of Arrival date (ETA) for the goods. The total dollar amount of the actual upcoming purchases is subtracted from the original planned purchases amount to calculate the remaining Open to Buy amount or the money you have left to spend for this plan for this period.
Adjustment to Inventory
Adjustment to inventory is all non-sales and non-purchase/returns activity that affects the inventory value. Adjustments include things like stock adjustments both from posting physical inventory and other periodic stock adjustments. Adjustments also include entries for Store Use, Theft, Donations, Merchandise Transfers, Freight (if treated as part of Inventory), and Inventory Variance.
Ending Inventory
Ending Inventory is calculated by PrismCore. If cost is used as the basis for the plan, it is the Beginning Inventory minus Sales at cost plus Net Purchase/Returns, plus or minus any Adjustments that were entered. If retail is used as the basis for the plan, the Ending Inventory is the Beginning Inventory minus Sales minus Markdowns plus Net Purchase/Returns plus or minus any Adjustments.
Actual Sales
Actual Sales are made up of total posted Sales minus Sales Discounts (which come from sales events, discounts, and price overrides done at the cash register) minus Refunds plus or minus Exchanges. This includes all activity from your POS system plus any mail order sales, if you are updating stock on hand from ICS. Actual Purchases
Actual Purchases are made up of Purchases, Purchase Accruals, Purchase Discounts, Returns, Return Accruals, Return Accruals Gain/Loss, Returns Gain/Loss, and the Freight and Postage accounts if treated as part of inventory.

Major Components of an Open to Buy Plan

• Beginning Inventory

• Projected or Budgeted Sales

• Desired Turn Ratios

• Projected Ending Inventory

Creating an OTB plan in PrismCore is a simple process, but before you can start to build a plan for an upcoming sales period (e.g., next year) there are a few things you need to determine:

1. An estimate of what your beginning inventory will be at the beginning of the OTB period.

2. What you predict or project for sales amounts at cost and retail in the coming year. To know this you will need to know what your sales have been for the current year.

3. How many times you want to "turn" your inventory in the OTB period.

4. What you want your Ending Inventory to be for the OTB period. Your ending inventory has a huge impact on your Inventory Turnover ratio and on meeting your goals of controlling the amount of stock you carry in the DCCs included in the plan.

The historical information you need to create the plan comes from PrismCore. Here is where it can be found:
Beginning Inventory
Your current inventory value can be found on the Stock Ledger Spreadsheet report. Depending on how far away you are from the first period in your plan you may have to predict or project out what the beginning inventory will be on the first day of the plan period. All of the updated information in the Actual lines of the OTB plan comes directly from the Stock Ledger.
You can find the beginning inventory value for a given current or past sales month in the Stock Ledger Reports module by previewing or printing a Stock Ledger Spreadsheet report and looking at the beginning value for the month at cost or retail in the Beginning Balance line. You can pull the information as of today or go back in time and get a snapshot of what it was at the close of each sales month. You can also extract numbers that summarize activity for the entire store, one department, one class, one category, or a range of departments, classes, and categories to cover whatever group of items you are including in the open to buy plan. You can use the historical beginning balance information from this report to project what the beginning balance will be when your plan starts.
Projected Sales
The next thing you need to determine are your projected sales for the upcoming months covered by the OTB plan. To do this you will want to know what sales were for the last 12 months. The Sales History information can be found in the Sales History – by DCC report. To run this report, go to the Manual Sales module, then from the Reports menu, select Sales History – by DCC. Select the appropriate store location and DCC or DCCs, then print or preview the report. It shows sales totals at cost and retail for each of the last 12 sales months (including the current month). An example is shown below.

Open

If you need sales amounts for months prior to 12 months ago to help you project sales for your plan, you can get the information from the appropriate months' Stock Ledger Spreadsheet report. From this historical sales information you can create a sales plan for next year. Let's look at an example where the current month is June and your new plan starts in July at the beginning of your new fiscal year. You have printed a report similar to the one above to show sales at cost and retail for July of the previous year through June of this year.
You have decided you will try to attain a growth rate of 10% each month for the upcoming fiscal year. To figure your projected retail sales for each month, multiply last year's sales at retail by 1.10. You know you carry an average margin of 50% on the items in the plan's DCCs, so you can figure your projected sales at cost by multiplying the projected sales at retail by .5.

NOTE: The amounts entered into an OTB plan are round dollar amounts that do not include cents, so use round dollars in your sales projection calculations (e.g., if the Sales History – by DCC report shows retail sales of $1,615.74, use 1,616 in your calculations).
Inventory Turns
The third component of an OTB plan is the inventory turns. Inventory Turns is a measure of how often you are turning over or selling your stock. As mentioned on the OTB Terminology page, turns are expressed as a ratio and the formula is:

• Cost of Goods Sold is the accumulated cost of all sales transactions based upon your Inventory Valuation methodology. If you are using Retail as the basis for your OTB plan then it is the accumulated Retail value of all sales transactions for the periods in the plan.
• Average Inventory is the sum of the beginning inventory balance plus the ending inventory balance for all periods in the plan divided by the total number of periods plus 1. So if your OTB plan is for a fiscal year from July thru June then the average inventory would be the beginning inventory from July 1 plus the ending inventory from each period in the plan divided by 13.
As a very basic example, if you buy $100.00 worth of merchandise at cost at the beginning of every month and sell all $100.00 at cost by the end of the month your turns would be:
$1200.00 Cost of Goods Sold / Average Inventory of $100.00 = 12 Turns per year
The turns ration is very dependent on the amount of beginning and ending inventory. The above example assumes a beginning inventory of $100.00. If the beginning inventory is $1,000.00 and you purchase and sell exactly the same amounts, your Inventory Turns Ratio will drop all the way to 1.2. The reason for this is the Average Inventory (the denominator in the formula) changes from $100.00 to $1,000.00 dollars while the Cost of Goods Sold remains the same.
Below is a more realistic plan that turns inventory 4 times per year.
4-Turn Plan

Below are examples with sales of $60,000 that show the effect of different inventory levels on the Turns Ratio: 60K in Sales with no reduction in Inventory

60K in Sales with a reduction in Ending Inventory

College Store Industry Key Statistics *for Inventory Turnover Ratios *
*Courtesy NASCORP

*Margin and Turnover rates for apparel and gifts include both insignia and non insignia.

WPAdmin Setup

Before you can use the Open To Buy feature in PrismCore, it must first be enabled in WPAdmin at Jump 108 (Inventory Control > Store Set Up > Accounting). To enable it, simply check the checkbox on the 'Use OTB Planning' line.

Buyer's Warning on Purchase Orders

After you have saved your original OTB plan, PrismCore keeps track of purchases by DCC for each month covered by the plan. It checks amounts ordered on POs against applicable OTB plans to see whether adding an item to a given PO would cause the plan's Purchases amount to be exceeded for the month that includes the ETA date on the PO. If there is more than one version of a plan (i.e., an original plan and one or more revisions), PrismCore checks against the budgeted Purchases amounts in whichever plan is set in the 'PO Check Against' field in the header of the OTB plan.

A warning displays if adding the selected quantity of an item to the PO would exceed the budgeted Purchases.

The warning does not stop the buyers from adding the item to the PO, but they will be aware that if they answer 'Yes', they will have overbought for the DCC for the plan month, according to the planed purchases. If the buyers answer 'No', they must lower the quantity of the item or remove it from the PO.

Searching in Open To Buy

In the Open To Buy module, you can search for an existing OTB plan by using Quick Search with any of the following methods.

Creating an Open To Buy Plan

1. Access the Open To Buy module on the Purchasing tab of the navigator.

2. Click the Insert Record button or press <F4> on the keyboard.

3. The 'Open To Buy' dialog opens.

   Fill in the following fields:

   Plan: Enter a name for your Open To Buy plan

   Start Date and End Date: Select the range of periods or sales months your plan will cover. The plan must include at least two months.

   Begin Inv: Enter what you think the beginning inventory will be for the plan’s DCC(s) at the start of the first sales month of your plan. Use round dollar amounts (i.e., 3600, not 3599.85).

   DCC: Use the ellipsis button to select the department, department/class, or department/class/category for the items in your plan. You may select multiple DCCs.

   Cost or Retail: Select whether your plan will use cost or retail values. You cannot change this parameter once the plan is created.

   Add New: The ‘Add New’ checkbox is checked by default. If you uncheck the box, you will have an opportunity to copy a plan from any existing plan.

   Copy From: This field only displays if you uncheck the ‘Add New’ checkbox. If you wish to create your new plan based on an existing plan, use the ellipsis button to select the plan you wish to copy to the new plan. Copying from a plan will copy all the details of the plan so you do not have to enter all the numbers again.

4. Click OK to save header information and exit the 'Open To Buy' dialog.

5. The new plan displays.

6. The following information is contained in the header. Enter or change information in the fields that are editable.
   Plan Name: Displays the name that was entered in the 'Open To Buy' dialog. You can change the plan name until you post the original plan.
   Start and End Dates: Displays the dates that were entered in the 'Open To Buy' dialog.
   DCC: Displays the DCC(s) that were entered in the 'Open To Buy' dialog. Please note that if there is more than one DCC selected you will see 'Multiple DCCs' in this field instead of a list of DCC codes.
   Locations: Displays the locations for which the plan will apply. You may add and remove locations using the New (Insert) button and the Delete button.
   Turns/Margins: Once the original plan has been posted and at least one revision has been created you can use the combo box to select which plan you want to use for calculating the turns and margins that display in the plan header (e.g., original plan, first revision).
   Desired Turns and Desired Margin: Enter the desired turns and margin for the plan. This field is FYI only.
   Actual Turns and Margins: These fields display the actual turns and margins that were achieved during the plan's timeframe.
   Budget Turns: As you enter values in the Budget line for each month, a budgeted inventory turnover ratio displays, based on the budget numbers you entered in the selected plan.

   1. The following information is in the detail grid. Enter appropriate values in the lines where the Type Description shows 'Budget'.

      Type Description: Shows a Budget and an Actual line. The Budget lines are where you enter values for sales, purchases, and adjustments, either in the original plan or in revisions. The Actual lines display the actual values for each month, which largely come from the stock ledger table. They begin to display once stock ledger entries begin to be made for the month and the Stock Ledger Daily Update has been run.
      NOTE: The Budget line is only editable for future months. If a plan is created that begins in the current month, the Budget line will not be editable.
      Date: Displays the month/year for the line in the grid.
      
      Begin Inv: The Budget line displays the projected beginning inventory value for the month/year. For the first month of the plan, the beginning inventory is the amount entered when the plan record was created. After the first month the beginning inventory is equal to the ending inventory for the month before. When stock ledger entries are created for the month, the Actual line displays the actual stock ledger Beginning Inventory for the month.
      
      Sales: Enter your projected sales amount for the month in the Budget line. As sales are posted for a month, the Actual line displays the actual sales figures for that month. The sales value is calculated from Sales minus Sales Returns that are stored in the stock ledger for the month.
      
      Purchases: Enter your projected purchases amount for the month in the Budget line. When stock ledger entries are created for the month, the Actual line displays the actual purchases for the month. The Purchases value is calculated from the Purchases, Purchase Accruals, Returns and Return Accruals that are stored in the stock ledger for the month.
      NOTE: If the budgeted amounts for sales or purchases will be the same or very close to the same for multiple months in your plan, you can fill out the top Budget line of the group of months that should have the same amount, then right-click in that month's Sales or Purchases field and select 'Fill Remaining'. This puts the value you had entered on the Budget line where you right- clicked into the Budget lines for each month below that line. For instance, if the value you enter in the third month is the one you want copied into the remaining rows, right-click on the Sales or Purchases field on the third line, then select 'Fill Remaining'. You can then change any values that should be different from what was filled in by the system.
      
      On Order: This is a calculated field in the Actual line that displays the total value of all proposed and open POs for the DCC(s) included in the OTB plan which have not yet been received or cancelled. The field is zeroed out when the sales month has been closed. PrismCore uses the ETA (Estimated Time of Arrival) field in the PO header to determine the month in the OTB plan to which the on order quantities will be written. The ETA date defaults to one month from the PO create date, and must be changed to the correct estimated arrival date in order for the OTB plan to be accurately updated. Outstanding on order quantities from POs that do not have an ETA date (ones created prior to version 1.6.0.0 of PrismCore) display in the first month of the plan.
      NOTE: If the ETA is entered on a PO for a month on the plan that is already closed, the actual line will still be updated for that month.
      
      Received: As merchandise in the OTB plan's DCC(s) is received, its value moves from the On Order column in the month for which it was ordered to the Received column in the month in which it was received.
      
      Adjustments: Enter any projected stock adjustment amounts for the month in the Budget line. When stock ledger entries are created for the month, the Actual line displays any stock adjustment amounts that were done in the month with the following reasons: Count Adjustment, Store Use, Damaged, Donation, Other and Theft. On the stock ledger spreadsheet this would be the equivalent of Count Adjustments, Store Use and Other Adjustments.
      
      Ending Inventory: The ending inventory amount for one month carries over as the beginning inventory amount for the next budget month. In the Budget line, this field displays the amount of inventory you should have at the end of the month. In the Actual line, the true ending inventory is only calculated when the sales month is closed (although it shows values throughout the month). For both lines it is calculated as follows:

Viewing Open To Buy Detail Information

The amounts for Sales, Purchases and Adjustments that show in the Actual plan lines of an Open To Buy plan are calculated from data that comes from various fields in the stock ledger. In addition, the On Order amount is calculated from outstanding on order amounts of merchandise in the DCCs that make up the plan.

If you would like to see the details of how those values are being calculated, you can right-click the appropriate line in the detail grid and select one of the following options:

Post an Open To Buy Plan

Once you complete your original plan, it must be posted. Posting an OTB plan locks in your original plan's numbers and allows actual values to be written to it. Once posted, the original plan cannot be edited. However, you can make any number of revisions to the original plan after it is posted.

To post an OTB plan:

1. Click the Options button (hammer), then select 'Post Plan' from the menu.

2. A confirmation dialog appears. Click 'Yes' to confirm that you want to post the plan.

Edit an Open To Buy Plan

As time passes and circumstances in your store change, you may need to change your plan to more accurately reflect your goals. Once you have posted your original OTB plan, you cannot change it. However, you can create and edit one or more revisions to the original plan. You can then choose to use values from the original plan or from one of the revisions to determine how the OTB quantity is calculated in the Purchase Orders module and to calculate the turns and margins information displayed in the header of the OTB plan record.
To create a revision to an OTB plan:

1. Click the Options button (hammer), then select 'Edit Revision' from the menu.

2. In the Edit Revisions dialog that opens, click 'Add' to add a new revision. The name of the revision appears on the left as 'New Revision'.

3. If you want a different name for the revision, type the new name into the field on the left. If you later decide to rename the revision, select 'Edit Revisions' and click the 'Rename' button to rename the revision. When you are ready to update the revision, click 'Close'.

4. The new revision shows at the bottom of the module as another tab. It displays the values that were entered in the original plan. You can then enter the revised values into the revision.

Revisions are not posted, so you can change your projected amounts for future sales months at any time or create further revisions to an original plan in order to preserve your first revised numbers. By default, any new revisions display the values from the original plan.
When you add a new revision, you may wish to start with the values from a previous revision instead of from the original plan. In that case, use the 'Copy From Revision' combo box in the 'Edit Revisions' dialog to select the revision whose values you wish to copy into the new revision.

Once you have posted an OTB plan, a wire frame called 'PO Check Against' appears in the plan's header. This allows you to choose whether you want to have the buyer's warning in the Purchase Orders module calculate the open to buy quantity based on the values in the original plan or based on one of the plan's revisions. To select the version of the plan to be used for this PO check, select the desired plan from the combo box in the 'PO Check Against' wire frame.

You can also choose to display turns and margins information for the original plan or for any of its revisions. To select which values display on the screen in the Open To Buy module, select the desired plan from the combo box in the Turns/Margins wire frame in the header.

Calculate Totals for an Open To Buy Plan

The values in the fields in the Actual lines of an Open To Buy plan are updated each time the Stock Ledger Daily Update program is run, which is usually part of your system's nightly scheduled tasks. Occasionally the values that appear in an OTB plan can get out of sync with the values that show in the stock ledger for the DCCs defined for the plan. For instance, this can happen if you delete POs with an ETA that falls within a month in a plan.
If the numbers look like they are incorrect after the daily update has been run in WPAdmin, you can recalculate totals for the OTB plan using the 'Calculate Totals' option under the Options hammer. To recalculate OTB plan totals:

1. Click the Options button, then select 'Calculate Totals' from the menu.

2. The calculation process runs and appropriate values are replaced in the detail grid of the plan.
   NOTE: There is no dialog or message that displays when you run this option. The values are simply recalculated.

Open To Buy Reports

The Open To Buy module has one report that allows you to print an Open To Buy plan in its entirely or to print only selected months from the plan.
Open To Buy - prints a listing of OTB information for selected months from the OTB plan or for all months. It is simply a printed version of what displays in the OTB detail grids for the selected OTB plan. It prints each version of the plan (i.e., the original plan and all revisions) on a separate page. The parameters for this report are the plan name, a 'From' date, a 'To' date, a
'Use Date' checkbox, and an 'Include List of DCCs Chosen' checkbox.
To print an Open To Buy report:

1. Access the Open To Buy module.

2. Click 'Reports' on the Menu bar.

3. Select the Open To Buy report.

4. A 'Report Parameters' dialog opens. Enter the parameters for printing the report:
   Open To Buy

   > Select the OTB plan you wish to print.
   > If you wish to print information for only some months in the plan, select a 'From' date in the first month you wish to print.
   > If you wish to print all months in the OTB plan, you do not need to select a date.If you wish to print information for only some months in the plan, select a 'To' date in the first month you wish to print.
   > If you wish to print all months in the OTB plan, you do not need to select a date.
   > If you wish to print information for only some months in the plan, check the 'Use Date' checkbox and enter appropriate 'From' and 'To' dates.
   > If you wish to print all months in the OTB plan, do not check the box.If you wish the report to show a list of the DCCs included in the plan, check the 'Include List of DCCs Chosen' checkbox.

5. Click OK to generate the report.

6. A new window opens, displaying the report on the screen. Click the Print button at the top of the window to print the report.

7. A 'Print' dialog opens. In the Print Range frame, select whether to print all pages or only selected pages (enter the selected page numbers), the number of copies, and whether to collate multiple copies. When the parameters are set correctly, click OK.

8. When the report has printed, close the report window using the Close button in the upper right corner.