Open book costing is based on the transparent sharing of cost structure between buyer and supplier. For a Chief Procurement Officer or Managing Director, this approach goes beyond simple price negotiation: it creates the conditions for shared economic performance, a more resilient supply chain, and lasting partnerships.
Contents:
- What is open book costing? Definition and key principles
- Open book costing, traditional negotiation and should-cost: what are the differences?
- In what contexts should you deploy open book costing with your suppliers?
- How to deploy an open book costing agreement in 5 steps
- Open book costing and strategic challenges: resilience, ESG and competitiveness
- Advantages, risks and success factors of open book costing in B2B
In a B2B environment marked by raw material volatility and margin pressure, the buyer-supplier relationship is being reinvented. Open book costing is steadily establishing itself as a differentiating lever for organisations seeking to move beyond a purely tariff-driven balance of power. By making the real cost structure visible, this approach allows performance to be co-built rather than simply negotiated.
What is open book costing? Definition and key principles
Open book costing is a contractual method in which the supplier shares its entire actual cost structure with the buyer. The aim is to eliminate opacity around pricing and to base the relationship on mutual transparency. Two variants formalise this approach: open book pricing, which focuses on justifying prices, and the open book contract, which formally sets out this access to the supplier's data.
The components of a shared cost structure: Materials, labour, overheads and margin
Open book costing rests on four core components: direct costs (raw materials, labour), overheads and the supplier's profit margin. Visibility over these actual components makes it possible to identify genuine optimisation levers without squeezing the supplier's margins. Well-drafted open book contracts specify exactly which of these cost items are shared, audited and reviewed. This is precisely what Pierre-Olivier BRIAL, Managing Director of Manutan, highlights when discussing total cost:
"In the world of procurement, there's what we call the total cost. We've moved from a logic of pure price negotiation to a more holistic approach: what my supply chain cost, my acquisition cost, and so on. We began to see that some purchases made at very low prices were, in reality, costing more."
This logic of total cost and shared profit underpins open book costing, just as it underpins the hidden costs within a supplier portfolio.
Open book costing vs closed book: What is the fundamental difference?
Closed book, sometimes called cost-plus, maintains total opacity over the cost structure. Under closed book contracts, the buyer receives a fixed price with no visibility over the actual costs incurred, and has no way of verifying them precisely up front. The open book contract, by contrast, formally sets out access to the supplier's data, defines the scope of the information shared and specifies the conditions for review.
The level of transparency achieved through an open book contract becomes a reciprocal commitment, not a simple pricing concession.
Open book costing, traditional negotiation and should-cost: What are the differences?
Positioning open book costing within the Chief Procurement Officer's toolkit means distinguishing it from two common approaches: traditional negotiation and should-cost modelling.
Traditional negotiation and should-cost modelling: Limitations and complementarities with open book
Traditional negotiation generates short-term savings but weakens the supplier relationship over time. Should-cost modelling is a valuable preparation tool for the buyer, but it remains one-sided: it models a theoretical cost with no means of verification. Open book complements this approach by making it two-way and verifiable.
This is not an alternative, but a logical evolution for strategic partnerships.
Procurement negotiation best practices also apply upstream of any open book agreement.
In what contexts should you deploy open book costing with your suppliers?
Open book costing is not universal. It responds to specific conditions of volume, length of relationship and strategic interdependence between customer and supplier.
Strategic suppliers vs transactional suppliers: Who is eligible for open book?
Eligibility criteria for open book include significant annual contract value, proven supply criticality and sufficient relationship maturity. The approach is not suited to transactional purchases where volume is low and contracts are standardised.
Supplier relationship management is a prerequisite for identifying the suppliers for which this approach creates value.
B2B use cases: manufacturing industry, distribution and business services
Three sectors illustrate open book costing in practice:
- In manufacturing industry: co-optimisation of components and supplies with the supplier;
- In B2B distribution: transparency over logistics and warehousing costs where volumes are high;
- In business services: visibility over the provider's actual hourly rates and overheads.
In each of these contexts, open book costing transforms the customer-supplier relationship into a lever for shared performance.
How to deploy an open book costing agreement in 5 steps
A structured rollout of open book costing follows five sequential steps:
- Select eligible suppliers according to objective criteria;
- Formalise the contractual framework through an open book contract;
- Jointly audit the supplier's actual cost structure;
- Set up joint, regular governance;
- Measure the return on investment via defined KPIs (Key Performance Indicators).
Steps 1 to 2: Selecting eligible suppliers and formalising the contractual framework
The first step relies on a selection grid combining contract value, criticality and relationship maturity. The second involves drafting a solid open book contract: confidentiality clauses, the scope of shared data, and the conditions for contract review. Alignment between legal and procurement teams is essential.
The design-to-cost approach can usefully complement this framework upstream to structure cost targets.
Steps 3 to 5: Analysing the cost structure, steering governance and measuring ROI
The joint audit of the supplier's actual cost structure makes it possible to identify shared optimisation levers without one-sided pressure. The governance committee then ensures regular contract management and monitoring of commitments. Key KPIs include the reduction of TCO (Total Cost of Ownership), changes in actual unit costs and the rate of codeveloped innovation.
Data transparency is the essential condition for a lasting relationship.
Getting Support to Structure Your Supplier Relationships
Manutan supports procurement and management teams with dedicated human expertise to structure supplier relationships, validate contractual approaches and identify optimisation levers suited to every context. This service is available in Belgium, Czech Republic, Denmark, Sweden, Finland, France, Germany, Hungary, Italy, Netherlands, Norway, Poland, Slovakia, Spain, Switzerland, United Kingdom and Portugal, at the time of publication of this content.
Open book costing and strategic challenges: Resilience, ESG and competitiveness
Beyond price optimisation, the benefits of open book costing extend to organisational resilience and wider responsibility challenges. It is on this ground that the approach takes on its full strategic dimension for senior management.
Supply chain resilience: How cost transparency reduces supplier risk
Visibility over the supplier's actual cost structure makes it possible to anticipate its financial weaknesses, raw material pressures and potential disruptions. Transparency and mutual trust encourage the early sharing of warning signs, fostering trust and collaboration between the two parties. The risk of supplier failure decreases significantly when the relationship is managed on the basis of shared data.
Open book costing becomes a tool for prevention and risk management, not just control.
Integrating ESG criteria into the shared cost structure: CSRD and Scope 3
Open book costing makes it easier to integrate ESG (Environmental, Social and Governance) requirements into the supplier relationship: access to carbon emissions data for Scope 3 calculations, and verification of the supplier's social and environmental criteria. The European CSRD (Corporate Sustainability Reporting Directive) requires large European companies to report on their value chain. Access to the supplier's actual data therefore becomes a compliance requirement, no longer just a voluntary approach.
Open book costing directly supports the organisation's ESG strategy.
Advantages, risks and success factors of open book costing in B2B
Open book costing offers measurable benefits, but also risks that need to be anticipated to sustain the relationship.
Measurable benefits: TCO reduction, shared innovation and relationship quality
Open book pricing generates tangible benefits for both buyer and supplier:
- Reduction of the TCO through the joint identification of savings opportunities;
- Improved product quality and stronger value for money through joint cost engineering;
- Faster shared innovation between supplier and buyer;
- Stronger mutual trust, healthier profit margins and improved retention of strategic partners.
These benefits fit within a wider drive to reduce indirect procurement costs, where every lever counts.
Risks to anticipate and key success factors for a lasting open book relationship
Several risks need to be anticipated when using open book pricing:
- Increased dependency on the supplier if it becomes indispensable;
- Managing the confidentiality of sensitive data shared;
- A maturity gap between the two parties, a potential source of deadlock;
- Drift in the arrangement if governance is insufficient or not properly formalised.
The three key success factors are prior relationship maturity, a solid contractual framework covering every scenario, and regular joint governance. Open book costing is not an end in itself: it is a living process that requires ongoing commitment from both parties to be sustainable.
