Open book practices in buyer‐supplier relationships in India

This paper seeks to explore how Indian buying firms practise an open book (OB) policy in supplier relationships in three industries, i.e. the vehicle industry, the construction industry and the information technology industry. It also aims to study determinants of open book practices.

Application of the OB policy is operationalised as the nature of open book practices, the extent and stage of data disclosed, the form of data disclosed, the direction of data disclosed, the attitude towards cost data disclosed, and the 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 organisations and several of their suppliers in order to build three case studies.

The results suggest that the OB policy is used by buyers for diverse purposes ranging from strategic to operational, for example 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.

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.

The paper highlights that an OB policy can have broader applicability than recognised 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.