Committing new stock against open-to-buy without overbuying

This page explains why every cost of a commitment, not only the goods value, must fit inside open-to-buy

This page is for an agent or buyer who commits new stock to a factory through an agent and has to check the whole cost of that commitment against open-to-buy, not only the price of the goods themselves. At work, a buyer who checks only the goods value against open-to-buy can approve a commitment that looks affordable, then discover the agent's own commission pushes the true cost beyond what remains. This lesson mainly teaches the money flow: it shows how an agent's commission is added to a commitment's own goods value before that commitment is checked against open-to-buy.

Fairway Stores has USD 20,000 of open-to-buy remaining for its T-shirt category. Northline Apparel, which sells through a hybrid model of wholesale to retailers such as Fairway Stores and its own direct shops, proposes committing 2,500 pieces of Order A at USD 8.00 per piece through Meridian Sourcing, an agent that charges a 5% commission on the order value. Without this skill, a buyer might check only the USD 20,000 goods value against the USD 20,000 open-to-buy, miss the commission entirely, and commit to spend the retailer does not actually have room for.

What you need, and what this lesson does not cover

You need: lesson T20-C02-L01, which shows how open-to-buy is calculated as a season budget minus committed spend.

By the end of this lesson you can:

• calculate an agent's own commission on a proposed commitment;
• add commission to a commitment's own goods value before checking it against open-to-buy;
• reduce a commitment's own quantity so its total cost fits inside remaining open-to-buy;
• explain why overbuying against open-to-buy can happen even when the goods value alone looks affordable;
• state what a hybrid selling model changes about how a commitment reaches the factory.

Not covered here: assembling open-to-buy and the WSSI into one complete worksheet (lesson T20-C02-L05).

Words you will meet in this lesson

A commitment's own true cost against open-to-buy includes every fee attached to it, not only the goods value

A retailer checks a new commitment against its remaining open-to-buy using the commitment's own total cost, not only the price of the goods themselves. When an agent arranges the order, that agent's own commission is a real cost of committing the stock, and it has to be added to the goods value before the check is made. A commitment that looks exactly affordable on goods value alone can still overbuy against open-to-buy once its own attached commission is properly counted in full.

The full cost of a commitment changes depending on who arranges it and how the brand sells

A buyer meets several shapes of commitment cost across a normal working year, and checking the full cost correctly in each one stops an agent's own fee, or another attached cost, from being missed against open-to-buy.

Fairway Stores checks whether a 2,500-piece Order A commitment, plus Meridian Sourcing's own commission, fits its remaining open-to-buy

Fairway Stores has USD 20,000 of open-to-buy remaining. Northline Apparel proposes committing 2,500 pieces of Order A at USD 8.00 per piece through Meridian Sourcing, worth USD 20,000 in goods value alone. Meridian Sourcing charges a 5% commission on the order value, an extra cost that has to be added before the commitment is checked against Fairway Stores' own remaining open-to-buy.

Reducing the commitment's own quantity brings the total cost, including commission, back inside open-to-buy

To fit the total cost, including commission, inside the USD 20,000 open-to-buy, Fairway Stores can reduce the commitment to about 2,380 pieces (USD 20,000 divided by USD 8.00, divided again by 1.05 to leave room for the commission), rather than the original 2,500 pieces.

Four steps a buyer or agent follows before committing new stock against open-to-buy

1. State the commitment's own goods value at the agreed wholesale price per piece.
2. Add any agent's own commission, or any other attached fee, to that goods value to find the true total cost owed.
3. Compare the total cost against the open-to-buy that remains, not the goods value alone.
4. Reduce the commitment's own quantity, or seek a budget increase, if the total cost overbuys against what remains.

A common mistake is checking only a commitment's own goods value against open-to-buy and missing the agent's commission entirely

A common mistake is a buyer checking a proposed commitment's own goods value against open-to-buy, seeing the two figures match exactly, and confirming the order without adding the agent's own commission on top. Once Meridian Sourcing has arranged the order with Delta Garments, the commission is owed regardless of whether the buyer accounted for it in advance. What this costs a retailer that gets it wrong is real: a commitment confirmed at exactly the open-to-buy figure, with the commission added afterward, overbuys the season budget by the full commission amount, USD 1,000 in this case, discovered only once the agent's own invoice arrives. This mistake is easy to repeat without noticing, because each single commitment can look correctly sized on its own, right up until Meridian Sourcing's own invoice lands weeks later; by then Delta Garments has already cut fabric against the full quantity, and reducing it after the fact carries its own separate cost on top of the commission that was missed in the first place. A buyer who builds the commission into the check from the start never reaches that point, because the true total cost is known before Northline Apparel or Delta Garments hears anything about the order at all.

• A commitment's own total cost against open-to-buy includes any agent's commission, not only the goods value.
• An agent's commission is normally a percentage of the order value, owed once the order is arranged.
• A commitment that matches open-to-buy on goods value alone can still overbuy once commission is added.
• A hybrid selling model checks each route to market's own commitment against that route's own open-to-buy.
• Reducing a commitment's own quantity is one way to bring its total cost back inside open-to-buy.
• A domestic commitment with no agent is usually simpler to check, since goods value alone is normally its full cost.

Meridian Sourcing must confirm with Delta Garments whether the full 2,500-piece commitment can proceed

Fairway Stores has USD 20,000 of open-to-buy remaining. Northline Apparel has asked Meridian Sourcing to arrange a 2,500-piece commitment of Order A with Delta Garments at USD 8.00 per piece, and Meridian Sourcing must confirm the order this week, including its own 5% commission.

Here is the note Meridian Sourcing actually prepared before replying to Northline Apparel:

Can Meridian Sourcing confirm the full 2,500-piece commitment this week? Decide before opening the answer.

Open-to-buy and WSSI worksheet: check a commitment's own goods value plus any agent's commission against open-to-buy

Open the course workbook's "Open-to-buy" sheet. Enter a proposed commitment's own goods value and any agent's commission rate; the sheet adds the two together automatically and checks the true total against the open-to-buy that remains, before Meridian Sourcing is asked to confirm anything with Delta Garments.

[Download the Open-to-buy and WSSI worksheet](../../templates/T20-C02-open-to-buy-and-wssi-worksheet.xlsx)

Download the Open-to-buy and WSSI worksheet (Excel)

Lesson 2.5: Building a complete open-to-buy and WSSI worksheet

You now know to count every cost, including an agent's own commission, against open-to-buy before committing new stock. The next lesson assembles open-to-buy and the WSSI into one complete worksheet. Back to the course map