A SmartBuyer logistics specialist worked alongside the organisation’s Supply Chain and Procurement teams to restructure its third-party logistics onto an open-book contract, producing monthly accounts and a working continuous improvement mechanism.
full cost transparency
CLIENT
Large
enterprise
CATEGORY
Third-party
logistics (3PL)
SPECIALIST
Logistics
contracting
OUTCOME
Open-book
3PL contract
A 3PL on a single rate hides its economics behind one price. The rate is set against assumed volumes, labour and transport costs, and when any of them move, the difference lands on one side or the other, with the buyer unable to see which. Cost to serve gets argued from the invoice, and savings the provider finds have no reason to be shared.
Open book looks like a simple request for transparency, but done badly it becomes cost-plus with no incentive to save. The contract must define which costs are allowable, how the fee is set, how audit rights work and how savings are shared. Providers rarely volunteer these terms, so the buyer has to define them before the books are opened.
A large enterprise distributing through a third-party logistics provider on a contract whose structure limited visibility of cost and left little room for either side to improve it.
Client identity not disclosed.
With Supply Chain and Procurement, the specialist rebuilt the contract’s commercial mechanics, defining what the provider would disclose, how often, and how any saving would be used.
RESTRUCTURE
Move onto open book
Replaced the single rate with open book, agreeing the management fee the provider would earn and the audit rights behind it, so actual cost and margin were visible and could not be buried in an allowance.
REPORT
Stand up monthly accounts
Set the format and timing of monthly open-book accounts with Supply Chain and Finance, so cost to serve could be read each month against the same definitions and checked against the provider’s invoices.
IMPROVE
Build in continuous improvement
Wrote a continuous improvement mechanism into the contract, setting how opportunities are raised, agreed and shared, so the provider has a reason to cut cost and does not simply pass transparent cost through.
Open book
The provider’s actual costs and margin are now visible, so the organisation reviews the contract against the real cost to serve and not a single rate.
Supply Chain and Finance now see cost to serve each month against agreed definitions, so a rise can be explained in the month it appears.
The contract gives the provider a reason to find savings, so cost to serve can come down during the term and not only when the contract is renegotiated.
Defining what counts as cost
Open book is only as good as its definitions, because a cost the contract does not name cannot be checked. The specialist fixed which cost lines the provider could pass through and what evidence each needed, so transparency was enforceable and not a courtesy. Loose definitions let overheads migrate into the contract, while tight ones leave the fee as the only margin to negotiate.
Turning visibility into action
Monthly accounts show where cost sits, but only a shared improvement mechanism changes it. With both sides reading the same numbers, a saving found in one month could be agreed and acted on in the next. Transparency without an incentive to act only documents the cost, so Procurement should write the mechanism in at signing.
Complete
Complete
Complete
Specialist support without a permanent hire
SmartBuyer matches organisations with experienced specialists across 250+ categories, giving budget owners access to focused logistics and contracting expertise exactly when the work demands it.
500+
specialists
Experienced category specialists who have restructured third-party logistics and other complex contracts inside large organisations.
250+
categories
Focused coverage across logistics, distribution and the wider operational spend base, matched to the contract in hand.
Flexible
engagement
Specialist cover for a single contract or a wider category, scoped and costed before any work begins, with no permanent hire.