Can Use of AI for Open Costing Finally Balance the Scales?

CEO, Co-Founder @ MannyAI I AI for Agile Fashion Supply Chains

Open costing often amplifies the power imbalance between buyers and suppliers. According to the BGMEA, 60% of Bangladesh’s exports over the last decade were priced through open costing, mostly large orders above 100,000 units. The effective profit on these orders is typically just 1–4%, leaving little room to absorb shocks or invest in better wages.

Open costing should go hand-in-hand with accurate forecasts and help strengthen long-term partnerships by building shared knowledge of supplier context. Instead, three flaws keep it from delivering fairness:

1. One-Size-Fits-All Models

• Product mismatch – A basic T-shirt cost standard can be applied to complex garments like jackets, ignoring higher SMVs, trims, and QA complexity.

• Overestimated efficiency – Buyer assumptions about productivity rarely reflect actual line performance.

• Outdated local data – Internal factory realities like menstruation leave, attendance allowances, production bonuses, and regional wage differences are often missing. Wage and benefit figures are frequently years out of date.

2. No Live ‘What-If’ Costing 

Static Excel costing blocks real-time “what-if” discussions on design or material changes to hit target prices.

3. Blind Spots for Volatility

Models rarely account for real-world disruptions such as political unrest, currency shifts, tariffs/duties, or spikes in logistics, energy, and labor costs.

Where AI Changes the Equation

An AI-powered open costing system like Seamstream:

• Localizes to reality – Uses a factory’s digital twin to dynamically adjust for actual line efficiency.

• Links costing to design changes – Gives buyers and suppliers a shared, accurate cost picture tied directly to design adjustments, encouraging collaborative problem-solving instead of purely price-driven talks.

• Tracks volatility in real time – Instantly factors in changes to logistics, inflation, wages, and tariffs, so pricing models stay relevant and accurate.

• Enables fair comparisons – Benchmarks only against similar suppliers (same size, product type, geography) to avoid distorted negotiations.

Bottom line: With AI, open costing can shift from a blunt instrument to a precise, transparent, and fair tool, one that sustains both profitability and long-term supplier relationships.