TOCICO

Retail chains have long struggled with keeping within budget in purchasing of product categories. A widespread solution that has taken roots is called “Open to Buy” (OTB), in this each product manager / purchaser is given a budget and they must respect this limit in the purchasing of the respective category. OTB generates major negatives. First: being a budget makes the purchaser assume the “use or loose” mentality and buy even when they have no demand justifying the purchase. Second: the uniform treatment of new SKUs, lower performing SKUs and high performing SKUs makes it very hard to align the mix to the real demand in the chain. In clients Neogrid has come across the use of OTB and when the company implements the TOC Distribution solution the OTB generates the above negative effects and in effect prevents the significant improvement of inventory turns and invites behaviors not in line with the demand distorting and sometimes derailing the solution. There are positive aspects of OTB, namely control and a mechanism to refresh the mix with new products (NPI). In this presentation, we outline a new algorithm that replaces traditional OTB with a new version fully compatible with the TOC Solution and at the same time preserving the positive effects of traditional OTB. The result is a comprehensive and effective system to manage categories, introduce new products and align the retail (and its chain) with demand. Video length: . PDF: slides.