🛒 Procurement & Supply Chain
Professional procurement
Procurement tools applied to negotiation: Kraljic matrix (HBR, 1983), total cost of ownership, target costing, auctions, SRM; work by P. Kraljic, A. van Weele, R. Monczka.
Full detail in the “Origin & history” section below.
Author of the library
Negotiation lecturer at KEDGE Business School
A rare threefold background serving negotiation: teaching, commercial justice and audit, backed by experience as a company director in Bordeaux.
Open-book buying (open-book accounting) is a procurement negotiation practice in which the supplier opens up its cost structure to the buyer: materials, labour, overheads and margin become visible and open to discussion. Rather than haggling over an opaque price, both parties work together on the real costs in order to reduce them and share the gain. It is a central tool of inter-organisational cost management, shifting the negotiation from a power struggle over price towards a data-driven co-optimisation. Powerful for creating value, the technique demands a high level of trust and carefully managed reciprocity if it is not to degenerate into margin squeezing.
At a glance
Vigilance: low (3.0/10) · Preparation required: 9/10
Indicative profile: it situates the “Procurement & supply chain” family as the Procurement & Supply Chain school practises it, not this technique taken in isolation. Techniques from the same family and school therefore share the same profile. NEGOCOACH editorial rating out of 10, non-experimental · the higher the “relational risk” value, the more costly the technique is to the relationship.
NEGOCOACH assessment
Tactical potential 5.7/10 (effectiveness, impact, discretion) and vigilance low (relational and ethical risk): two distinct readings, deliberately never merged into a single score that would reward risk. NEGOCOACH editorial rating calibrated from the “Procurement & supply chain” family and the “Procurement & Supply Chain” school. Each criterion is rated out of 10; click to understand what it measures.
How far the technique can carry the negotiation in the intended direction when it is well executed.
Strength of the effect produced on the counterpart's perceptions, emotions and decisions.
How hard it is for the other party to notice the technique is being used. A high value = very discreet.
The information, analysis and rehearsal required upfront to use it effectively.
Potential cost to the relationship and to trust if the technique is spotted, refused or fails. A high value = riskier.
Moral acceptability: fairness, transparency and respect for the counterpart's autonomy. A high value = more defensible.
Documented school
The school this technique stems from is documented by recognised work and established practice, without experimental consensus. This indicator qualifies the school, not this technique taken in isolation.
Indicative NEGOCOACH editorial rating, for teaching purposes. For “Relational risk”, a high value signals a cost to the relationship, not a quality.
Open-book accounting has its roots in Japanese inter-company cost management practices (target costing and keiretsu, notably the Toyota model of the 1980s) and then in the management accounting academic literature of the 1990s and 2000s. The seminal work of Peter Kajüter and Harri Kulmala, in particular « Open-book accounting in networks: Potential achievements and reasons for failures » (Management Accounting Research, 2005), formalised the tool, its conditions for success and its causes of failure within supplier networks. Its spread in procurement was driven by cost breakdown analysis and should-cost approaches, popularised in the automotive and aerospace sectors, as well as by procurement consultancies and supply chain management frameworks from the 2000s onwards.
Open-book buying is a contractual and relational arrangement whereby the supplier discloses to the buyer the detail of its cost structure (cost breakdown): the cost of materials and components, labour times and hourly rates, machine and logistics costs, overheads, and the margin applied. The buyer analyses this breakdown, compares it with market references or a « should-cost » model, then negotiates not an overall price but each individual cost item. The operating principle rests on three mechanisms: transparency (the price is broken down and justified), co-optimisation (buyer and supplier jointly seek savings, for instance on design, volumes or processes) and gain sharing (the savings achieved are split according to an agreed rule). It is the opposite of closed-book, where only the final price is visible.
Application by context
An industrial supplier itself proposes an open-book arrangement to its key account in order to justify a price increase: by showing the genuine surge in the materials item and its stable overhead, it obtains the rise without appearing opportunistic and locks in the contract renewal.
An automotive buyer requires its component supplier to provide a line-by-line cost breakdown of a plastic part, compares it with its internal should-cost model, and negotiates a reduction in the machining hourly rate and the consolidation of part numbers, obtaining an 8% saving without touching the supplier's stated margin.
During annual pay talks, a management team opens its analytical accounts (payroll, margin, investments) to employee representatives in order to make objective what is available for distribution, turning a tug-of-war over a single figure into a shared discussion on the allocation of real value.
Faced with a supply disruption, the client and supplier lay their costs bare in real time (freight surcharges, spot materials, overtime) in order to decide together, on transparent data, who absorbs which share of the shock and thereby avoid a cascade of failures.
In a cost-plus (cost-reimbursable) public contract, the administration imposes open-book on the contractor and audits the actual costs incurred, paying only a capped margin on justified expenditure, which limits over-billing on major programmes.
A developer contracts on an « open target cost » basis with the main contractor: subcontractors' invoices, materials costs and hours are visible, the management margin is set as a transparent percentage and site savings are shared, replacing the opaque lump sum.
A European buyer adapts open-book to an Asian supplier by starting with non-sensitive items and framing reciprocity, because cost transparency does not carry the same cultural weight of trust and may be perceived as intrusive if imposed head-on.
Two brothers jointly funding a parent's care home lay out all the real expenses (care, assistance, incidental costs) instead of arguing over a lump sum, which makes the split objective and defuses suspicions about who is paying too much.
Counter-techniques
Negotiation is also played on defence. Here is how to recognise this technique when it is used against you, and turn it around.
The signals that give it away
The counters that defuse it
Turn it into an advantage
Name the manoeuvre: said out loud, a technique loses most of its power.
Reacting emotionally instead of coming back to the facts.
Strengths: open-book turns a zero-sum game (haggling over price) into a potentially positive-sum one (shared cost reduction); it makes the negotiation objective through data and reduces the information asymmetry; it strengthens trust and the long-term relationship; it reveals savings that would otherwise be invisible (design, process, volumes); it creates a rational basis for renegotiation over time. Weaknesses: the transparency is often asymmetrical (the supplier exposes itself more than the buyer) and can be diverted into squeezing the margin; the data supplied may be manipulated or smoothed; implementation is cumbersome (audit, reliable analytical accounting) and costly; it presupposes a trust that does not always exist; it is ill-suited to one-off purchases, multiple suppliers or highly competitive markets where the market price is enough.
Best suited to strategic and lasting relationships: high-volume or high-stakes purchases, bespoke components with no market reference, co-development partnerships, single or dual sourcing, situations of mutual dependence. Relevant when the price is hard to benchmark, when structural gains are sought beyond simple haggling, when an increase must be justified, or in cost-reimbursable contracts (cost-plus, public procurement, construction). To be avoided for spot, standardised, low-stakes purchases, or with interchangeable suppliers where conventional competitive tendering is simpler and more effective.
Business · Should-cost in the automotive sector, In the automotive industry, the major manufacturers and component suppliers have long practised open-book cost analysis coupled with should-cost: the buyer asks the supplier for the detailed costs of a part (material, output rate, hourly rate, overhead, margin) and compares them with its own theoretical cost model. The management accounting literature (Kajüter and Kulmala, 2005) documents that these approaches, which grew out of the Japanese target costing movement at Toyota, make it possible to identify cost reductions jointly through redesign and standardisation, but that their success depends on mutual trust and a fair sharing of the gains, failing which suppliers withdraw from the arrangement.
Political · Cost-reimbursable public contracts, Public defence contracts and major programmes frequently use cost-plus with an open-book obligation: the contractor justifies its actual costs, audited by the administration, and receives only a capped margin. The UK National Audit Office report on open-book accounting (2015) analyses the use of this cost transparency in outsourced public contracts to control spending and combat over-billing, while stressing that the administration does not always exploit it fully for want of dedicated audit skills.
Recognising the technique: your client asks you to break down your price item by item, demands your hourly rates, your overheads and your margin, or brandishes a costed « should-cost ». Defending yourself: first, insist on reciprocity (transparency about their volumes, their commitments on duration, their own constraints) and make the disclosure conditional on an explicit sharing of the gains. Next, protect sensitive information: open up gradually, starting with non-strategic items, and refuse to hand over the know-how that gives you your competitive advantage. In your presentation, clearly distinguish cost (open to joint discussion) from margin (your remuneration, non-negotiable below a viability threshold). Document and secure your costs so that an audit confirms them. Finally, refuse unilateral open-book: if there is no consideration in return and no volume commitment, transparency is merely a lever of pressure on your margin, and a considered « no » is worth more than an eroded margin.
Limits: open-book presupposes reliable analytical accounting and an audit capability that are rarely both present; it works poorly outside a lasting, balanced relationship; the transparency is almost always asymmetrical, exposing the supplier more. Ethics: the line is thin between co-optimisation and abuse of a dominant position. Using cost disclosure to squeeze the margin of a dependent supplier systematically is opportunism and can weaken the entire supply chain, and may even fall foul of the law on unfair commercial practices or abuse of economic dependence. Fair conduct presupposes reciprocity, genuine gain sharing and respect for the partner's survival margin. The confidentiality of the data supplied and respect for trade secrets must be set out contractually.
Variants and related techniques: should-cost / cost modelling (reconstructing the theoretical cost yourself in order to benchmark); target costing (a target cost set from the market price and then broken down); cost breakdown analysis (line-by-line decomposition); inter-organisational cost management and total cost of ownership; cost-plus / cost-reimbursable contracts; gain-sharing clauses and open-book savings-sharing arrangements; linkage bargaining and integrative negotiation (creating value before sharing it) in the sense of Fisher and Ury.
Quick exercise
Answer in your head, then reveal the solution. Memory is built through active recall.
Frequently asked questions
Open-book buying (open-book accounting) is a procurement negotiation practice in which the supplier opens up its cost structure to the buyer: materials, labour, overheads and margin become visible and open to discussion. Rather than haggling over an opaque price, both parties work together on the real costs in order to reduce them and share the gain. It is a central tool of inter-organisational cost management, shifting the negotiation from a power struggle over price towards a data-driven co-optimisation. Powerful for creating value, the technique demands a high level of trust and carefully managed reciprocity if it is not to degenerate into margin squeezing.
Yes. Used in good faith it stays within a fair negotiation: it structures the exchange without deceiving the other party. Being transparent about your intentions strengthens the long-term relationship.
Reacting emotionally instead of coming back to the facts. The right reflex: slow down and reformulate.
NEGOCOACH does not assess the experimental validation of this technique in isolation. What we document is the grounding of its source school (Procurement & Supply Chain): documented school. Full detail is in the "At a glance" section of this page.
Practise with AI
Copy, paste into your assistant, replace the [brackets]. Works with ChatGPT, Claude, Gemini, Mistral, Perplexity.
Build your plan before the meeting
You are an expert negotiation coach. Help me prepare to use the "Open-Book Purchasing" technique in the following situation: [describe your situation]. Give me: the conditions for success, a 3-step script, my counterpart's likely objections and how to answer them.
Rehearse against an AI counterpart
Play the role of my counterpart in a negotiation. I am going to test the "Open-Book Purchasing" technique. React realistically and with resistance, do not give in too quickly, then at the end analyse my performance and suggest 3 concrete improvements.
Analyse a past negotiation
Here is how my negotiation went: [paste the exchanges]. Analyse whether the "Open-Book Purchasing" technique was used well, what worked, the mistakes made, and spell out precisely what I could have done better.
References
Founding works of the 🛒 Procurement & Supply Chain school this technique belongs to.
Purchasing Must Become Supply Management (Harvard Business Review)
ArticleP. Kraljic · 1983
Purchasing and Supply Chain Management
BookA. J. van Weele · 2018
Purchasing and Supply Chain Management
BookR. M. Monczka et al. · 2015
Category Management in Purchasing
BookJ. O'Brien · 2019
Procurement tools applied to negotiation: Kraljic matrix (HBR, 1983), total cost of ownership, target costing, auctions, SRM; work by P. Kraljic, A. van Weele, R. Monczka.
On video
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Technique map
Every technique sits within a network: what it draws on, what it combines with, where it applies, and how to defend against it.
Spot its signals, neutralise it and turn it around with the defensive playbook on this page.
See the counter-techniquesOpen-book buying (open-book accounting) is a procurement negotiation practice in which the supplier opens up its cost structure to the buyer: materials, labour, overheads and margin become visible and open to discussion. Rather than haggling over an opaque price, both parties work together on the real costs in order to reduce them and share the gain. It is a central tool of inter-organisational cost management, shifting the negotiation from a power struggle over price towards a data-driven co-optimisation. Powerful for creating value, the technique demands a high level of trust and carefully managed reciprocity if it is not to degenerate into margin squeezing.
Name the manoeuvre: said out loud, a technique loses most of its power.
Reacting emotionally instead of coming back to the facts.
Our programmes turn theory into a concrete advantage.