Open book practices in buyer-supplier relationships in India

This is the latest version of this item.

Official URL: http://dx.doi.org/10.1108/08858621211207225

Purpose - The study explores how Indian buying firms practice an open book (OB) policy in supplier relationships in three industries, including the Vehicle Industry, Construction industry and Information Technology industry. It also studies determinants of open book practices. Design/methodology/approach - Application of the OB policy is operationalized as nature of open book practices, extent and stage of data disclosed, form of data disclosed, direction of data disclosed, attitude towards cost data disclosed, and purpose and conditions of data disclosed. Determinants of the open book policy comprise characteristics of the exchange, the product, the buyer, the supplier and the supply market. Qualitative data were collected in the form of 22 interviews with representatives of three buying organizations and several of their suppliers in order to build three case studies. Findings - The results suggest that the OB policy is used by buyers for diverse purposes ranging from strategic to operational, e.g., value engineering at the product development stage, to ensure supplier margins, for self improvements and cost reductions, and country entry decisions. Similarly, the data shared ranged from narrow to wide in scope and scale. Suppliers’ attitudes ranged from fairly neutral to very negative towards open books. Power asymmetries, the number of alternative suppliers, product performance characteristics and value, incentives offered, and buyer efforts were found to influence OB practices. Research limitations/implications - Indian companies utilize an OB policy to support price negotiations. Nevertheless, experiences gained through the OB policy employed by the industrial manufacturing firm leads to specific suggestions on how Indian companies can leverage the open book policy potential for joint problem solving, equitable profit sharing and supplier selection issues. Practical implications - Experiences gained from employing an OB policy in vehicle manufacturing suggests that firms in other industries can better leverage the use of open books for joint problem solving, equitable profit sharing and supplier selection. Originality/value - This paper highlights that an OB policy can have broader applicability than recognized by many past studies and indicates that it can serve purposes of strategic decision-making. It can also be an integrated part of a buyer’s risk reduction strategy. Further, the study provides specific recommendations for Indian companies with regard to the application of an open book policy.