How does Open-To-Buy work?

It starts with planning sales at a category/classification level for each month. You must then determine how much inventory is needed to support the sales plan. You must also include mark downs that will need to be taken.

A basic OTB may look like this:



A complete plan should include the last 2 years of sales data. The plan needs to be dynamic and change on a weekly basis based on sales, mark downs, on order, and receiving.

As inventory is the largest asset every retailer has, the ability to buy the right amount of inventory can dramatically improve not only the profitability of a store but also improve customer service.

Also, set goals for improvement. Start with shooting for a 10% increase in turnover and 5% increase in gross margin even with flat sales and you will see some great changes in profitability.

Jason Knorpp

My next couple of blogs are directed to retail business owners. The subject is Open-to-Buy. Some of you may have heard about it. To some it may be new. Below is a description of what Open-to-Buy is.

“Open-to-Buy is simply the amount of money that we have to spend in a given period to bring in stock to meet our sales and inventory plan. Open-to-Buy is calculated through the use of a six-month merchandise plan that is prepared at the classification/category level of detail, most commonly in an Excel spreadsheet. The merchandise plan has a number of components, a sales forecast, an inventory requirement to meet the sales forecast, mark downs that will be required and an estimate of the buying margin to calculate gross profit dollars. Properly executed, an Open-to-Buy plan can significantly increase turnover, reduce markdowns and increase gross margin return on inventory investment (GMROII). The process requires retailers to actually plan (forecast) each of these components on a six-month basis and update that plan each month.”

“In addition to the requirement of planning by month, the concept of planning at the category or classification level is also key for success in Open-to-Buy. Technically, a classification or category1 is a grouping or assortment of merchandise that the customer finds interchangeable. The two key words are customer and interchangeable. In defining classifications/categories it is critical that they are understood from the point of view of the customer and the way that they shop our stores. The interchangeability simply means that the customer finds similarities in the product groupings. For example, in a clothing store a classification might be dresses. It is unlikely that a customer who is shopping for a dress will substitute a pair of walking shorts if they cannot find a dress! So, dresses are a classification. We can have what are called “sub-classifications” to the main classification. So, I can have a main classification of dresses with sub-classifications of evening dresses, casual dresses, prom dresses, etc. Planning takes place at the classification level and from there we often will split our Open-to-Buy amongst the sub-classifications.”

“The main reason that we plan at the classification/category level is to ensure that if we are “over bought” or have too much in one classification it does not affect another classification. For example, if we have too many dresses that should not mean that we stop buying shorts or blouses. When we have a problem in a classification/category, we need to address that problem and not penalize another classification/category because of it.”

“Not only do we plan at the classification/category level, we also do most of our daily/weekly analysis of the business at this level, too. The Open-to-Buy plan is a dynamic process that is often updated weekly as we get information about sales, markdowns and receiving.”
“Beyond POS – Two Technologies That Can Significantly Increase Sales and Profits” Dionco Inc.

Next we will discuss how it works.

Jason Knorpp

Every restaurant that uses hand written kitchen tickets has problems with orders being prepared incorrectly. These problems can be created by:

- Not being able to read the handwriting
- Abbreviations being used differently from one server to the next
- Incomplete information to prepare the order correctly
- No ticket at all and the order is called in
- Bad communication of order changes
- And the list can go on

The bottom line is that this causes a large problem for the restaurant.

It can cause backups in the kitchen because orders are being prepared twice. It causes customer satisfaction problems and we all know how expensive that can be. It also creates an immediate food cost expense. I was in a restaurant last week that comped 3 of the 4 meals on my ticket because of preparation problems. That is expensive.

How many meals in a week is your restaurant comping due to this type of problem? An average restaurant will comp the food equivalent of 6 entrees in a week’s time due to preparation problems. If you have an entree price of $12 dollars you will give away $3,888.00 this year. If you could reduce that by half with a POS system you just paid for $1,944.00 of the system in the 1st year by fixing one thing. Not to mention the happier customers which we could probably all agree has a higher price then the food costs.

Look for features like kitchen printing, forced modifiers, conversational ordering (Quick Service Environment), easy change to modifiers, and custom modifiers as you evaluate POS systems. Micros for instance, can walk you through ordering an entrée by asking the server to input all required information like meat temperature, sides, salad dressing, etc. These can then be changed easily if needed.

Remember, POS systems if used to their full potential pay for themselves and generate additional profits for the restaurant owner.

Jason Knorpp

What is a POS system going to do for me?

This is the question each business owner must ask themselves. For each owner the answers may vary.

Some of the common reasons are:
- Tracking inventory
- Deterring theft
- Speed up service
- Improve customer service
- Increasing profits
- Better management
- Customer tracking
- Purchase order tracking
- Employee tracking
- Reduce employee error
- Reporting
- Etc., to name a few

In this blog we will explore these subjects and more. We will discuss how you can use a POS system to improve these areas of your business. We will also discuss the profits that can be increased by improving these areas.

Jason Knorpp

It is with great pleasure we announce the merger of RVP Business Systems and Ada Cash Register.!!!

Effective May 1, 2007 all Ada Cash Register business will move to 6001 Overland Rd. Our newly merged staff will continue to provide the same quality sales and service previously provided by both companies.

Welcome to our blog. My name is Billy Knorpp and I am the owner of Teknor, Inc. dba RVP Business Systems.

RVP Business Systems, established in 1973, came under new local ownership and management in 2001 as a division of Teknor Inc. In 2004, Teknor established an additional division, Abacus Credit Card Solutions, to provide a one-stop-shop that would streamline and help reduce errors in merchant's credit card proceessing. Dedicated to customer satisfaction and product excellence, we provide installation, training and 24/7 support on our state-of-the-art point of sale and credit card processing hardware and software.

We understand the importance of customer satisfaction, in fact that is exactly what has allowed us to be become Idaho's #1 business equipment and systems provider. We fully understand and appreciate the daily demands of operating a successful retail business. Your customers won't tolerate slow or ineffective service from you and we believe that our customers should expect the same from us. If your equipment goes down for any reason you need to know that your service provider is there for you.

We always have technicians ready and waiting in case our customers should need us. We sell only reliable and dependable equipment to minimize your servicing needs, but when you do need us, we are there for you!

Professional salespeople who know point of sale and business operations are ready to meet with you to discuss your needs and recommend a solution.