CBS and OBA: Two levers for steering procurement towards value creation

CBS and OBA originated in different contexts but pursue converging goals: improving cost control, enabling supplier comparisons, supporting collaboration, and increasing transparency in the client-supplier relationship.

CBS, a methodology that breaks down costs in a hierarchy, was developed in the early 2000s in the fields of engineering and project management. OBA, on the other hand, gained ground in the 1990s in the context of lean manufacturing; it’s built on sharing economic data between supply partners. Despite their potential, implementing these tools comes with challenges: suppliers’ reluctance to share sensitive data, operational complexity, and market volatility that hinders benchmarking.

The Procurement Lab’s research aims to explore how widely and how effectively these tools are actually used by large Italian companies, the benefits they generate, and the contexts in which they prove most effective.

The Procurement Lab’s study involved the 33 companies that participate in the Lab, an exclusive observatory of practices among Italy’s major corporations, although not representative of the industrial fabric of the nation as a whole.

CBS: A widespread but still under-strategized practice

Ninety-three percent of the companies surveyed apply the Cost Breakdown Structure, primarily to specific categories, as an operational practice developed in-house. The CBS is mainly handled by procurement teams (85%) and technical or engineering functions (70%).

In 95% of cases, CBS is regarded as a tool for cost containment, but fewer than half link it to medium- or long-term strategic goals.

CBS, then, confirms its role as a process of analysis and awareness that enables better understanding of the cost structure of an offer, supporting both negotiations and decisions such as make-or-buy.

OBA: Less widespread, but high impact in the right contexts

Open Book Accounting is less systematically applied due to the sensitivity of the data involved. Nevertheless, where implemented, it brings tangible benefits:

• 100% of users apply it to look into supplier costs and margins.
• 86% use it to analyze components of purchase prices.
• 71% to monitor currency-related variables.
• 43% to analyze labor costs.

For 43% of respondents, OBA is considered a necessary condition for supplier selection. It is adopted especially during the design and pre-production phases (up to 57%) and to support ongoing production, where transparency helps manage lead times and critical issues.

When and how to apply CBS and OBA

CBS proves especially effective when supplies are continuous and repetitive; transparency obligations are imposed by regulations or contracts; ESG compliance and cost congruity need to be demonstrated; or the buyer’s contractual position is strong.

Companies apply CBS using three main models:

• In-house development of cost models, based on technical know-how.
• Requesting CBS data from suppliers and building internal benchmarks.
• Relying on external consultants to build reference models.

OBA, by contrast, requires a high level of trust and an established relationship with the supplier. It’s particularly useful in co-design projects or when supporting transparent production in highly variable environments.

Despite the limits and barriers to adoption, CBS and OBA are complementary tools that can guide companies toward more informed, collaborative, and value-generating procurement.

CBS enables a deep understanding of costs and supports negotiations based on solid information. OBA, if adopted in the right relational contexts, it fosters trust and transparency, facilitating co-innovation and efficient supply management.

For managers and policy makers, the spread of these tools points to a cultural evolution in procurement: they no longer serve a merely operational function; they become strategic levers for navigating increasingly complex and unstable markets.