Assignment 3 Open Book Costing Essay Example | Topics and Well Written Essays - 3500 words

Assignment 3 Open Book Costing - Essay Example Where as the relationship has to be regarded as long term and should be built on mutual trust. The system of open book costing is simple that is suppliers work in partnership with retailers so that costs can be condensed to benefit both parties. Open Book Costing (OBC) can be viewed as the authentic test of a tactical relationship. Open Book Costing is defined, in a partnering arrangement, as â€Å"openness, effective communication, close collaboration and cooperation, trust, honesty, transparency, sharing and mutual benefit† (The Chartered Institute of Purchasing & Supply, CIPS). CIPS thinks that the Open Book Costing is a useful tool to arrive at a greatest advantage from a partnering relationship of both buyer and seller. The purpose of this idea is to bring mutual benefit for both retailer and supplier. Supply and purchasing management use several approaches in dealing with suppliers for the supply of goods and services. One of these is the partnering system which is otherwise known as collaboration, which uses the open book costing. There are several structures of partnering agreement that could work well in buyer-supplier relations. The concept of OBC is effortlessly said but in real practice, discussions around it can harshly challenge a relationship. For instance disagreement with regard to important efficient parameters like output rate and labour requirements may prevail and the relationship is in danger of being tarnished. The parametric quantity may be comprehended as too cautious by the buyer or too motivated by the seller. The buyer is most likely to use this favoured information to attempt to force down the seller’s profit margin or to allege him of all the gains of a cost reduction scheme to himself. Open Book Costing emphasises the faith and dedication already present in the relationship. It elucidates the cost, and therefore the cost and impact of