Fashion Business
Deep Dive
The OTB Calculation
OTB is calculated by taking planned purchases (based on projected sales and desired ending inventory) and subtracting inventory already on order. This rolling budget ensures retailers maintain optimal stock levels without over-investing in inventory. The formula considers planned sales, planned markdowns, planned end-of-month inventory, and beginning-of-month inventory.
Why OTB Matters in Fashion
Fashion’s seasonal nature and trend sensitivity make inventory management uniquely challenging. OTB discipline prevents two critical retail failures: stockouts that cost sales and overstock that requires margin-eroding markdowns. Effective OTB management directly impacts cash flow, profitability, and a retailer’s ability to respond to emerging trends.
Modern OTB Management
Technology has transformed OTB from a spreadsheet exercise into a dynamic, data-driven process. AI-powered demand forecasting, real-time sales data, and automated reorder systems allow fashion retailers to adjust their OTB plans continuously, responding to actual consumer behavior rather than relying solely on historical patterns.
OSF Perspective
OSF sees OTB as one of the most underrated disciplines in fashion business education. While design and marketing capture attention, the brands that endure are those with rigorous inventory planning — ensuring the right product reaches the right customer at the right time without destroying margins.
Related Terms
Assortment Planning | Inventory Turnover | Sell-Through Rate | Buying Cycle
Notable Brands
Nordstrom, H&M, Target