Reference no: EM131720927

Armando Bronaldo immigrated to the United States six years ago after working as design leader for an Italian company specializing in home sound systems. Armed with a vision and 15 years of experience, he founded his own company, Technologia, as the supplier of sound translation components including the base radiator, dome tweeter (for high frequency), composite cone (for midrange sound), the binding post (for sound translator delivery), and ohms impedance (for conducting sound through the speakers). As it builds its reputation for quality and supply chain service and delivery, Technologia relies heavily on continuing a solid relationship with AUD, a manufacturer of home sound systems, under the management of CEO Audie Richards. AUD was the company’s first contractual partner, currently accounting for 50 percent of the small supplier’s business. The initial agreement with AUD has grown and the current business relationship brings a steady stream of orders that has enabled Bronaldo, even in a tough economy, to add workers over the last three years. Bronaldo loves the reliability of selling to AUD, but he sometimes questions whether the business relationship is overbalanced in favor of the powerful manufacturer. “I think in the beginning Audie played his hand well, knowing that we were a start-up and trying to secure a solid customer base. In my eagerness to get the contract and in trying to please the head of a big company, I found myself saying ‘Yes’ and carrying out his wishes and demands,” Bronaldo admits. “Because we were a young company and because he is, by far, our biggest customer, I think he got into the habit of assuming the focus would remain on his needs and his profits throughout the business relationship. But now, with our feet under us as a company, I think it is time to look again at the relationship between the two companies.” Richards is satisfied with the present arrangement he has with Technologia and sees himself as both partner and mentor, as he recently explained to a colleague. “Bronaldo came to this country and started his company and I was willing to give him a chance, set up our logistics, and make it possible for him to grow his company. I think it’s worked out very well for AUD. And now he talks about wanting to change the way we do things. I’m suspicious about what he has in mind. But he needs us more than we need him. Look, I’ve got a good supplier; he gets lots of business from us; I see no reason to change it.” Although the relationship and dialogue at the top man- agement level is strained, mid-level managers at both com- panies do talk and are eager to explore and implement a new vendor managed inventory (VMI) system that builds a partnership of strong interdependence and equity. Instead of sending purchase orders, VMI involves sharing daily electronic information about AUD’s sales, so inventory is replaced automatically by Technologia. Mid-level managers Larry Stansell (AUD) and Victoria Santos (Technologia) reg- ularly correspond and meet to find potential areas for close cooperation, information sharing, and problem feedback. “I know that Richards is suspicious, but it really is time for these two guys to take a new look at this business relationship and how they can address issues that could be beneficial to both,” Santos says. “The playing field has changed. Technologia is stronger.” “But the relationship has not changed and I don’t think it will until Bronaldo finds a way to reduce his de- pendence on AUD. In the meantime, flexibility, information sharing, and reconsidering a range of cost-efficient options is important,” Stansell admits, “But we have to start with the discussion of whether AUD calls all the shots between our two organizations.” “Yes, and that discussion must include logistical is- sues,” Santos says. “Delivery, the disagreements about the pallets . . .” “Richards set up all of that initially—what would work best for delivery to AUD,” Santos says. “But Bronaldo insists that PM rather than AM pick-ups would be better and that a change in pallet companies, from Bradley Pack- aging to Eastmont Packaging, would cut costs per trip by reducing mileage. Plus Eastmont has a new custom-made pallet that provides greater load stabilization necessary for high-tech components. The savings for Technologia would be shared with AUD.” “But Bradley has a long-time business relationship of its own with AUD,” Stansell points out. “So, what we’re saying here is that it is not just a discus- sion about these two organizations, but a consideration of the whole supply chain. The cost of lost flexibility, the lack of shared information. It’s costing both of them. And the sudden spikes in production requests by AUD, in response to its retail customers, create unnecessary problems in pro- duction planning at Technologia and unnecessary stress for the management and workers at both companies.” “VMI could be a powerful tool that empowers and brings value to both sides,” Stansell says. “Through this sys- tem, Technologia will be able to create orders for us based on direct access to our orders and demand information— both short and long-range needs. . . .” “And then, we can work together, determining the most cost-efficient way to manage and deliver the inven- tory,” Santos continues. “We’ll look at the entire supply chain to see where changes and even minor tweaks can be made to bring down costs and make the partnership strong, but there would have to be equal give and take.” “Flexibility on both sides is necessary to make this work,” Stansell points out. “This is not a competition. No- body has to be right.” “But getting top management on board to make this work is our real challenge,” Santos says. “And we have to start looking ahead. VMI could be a stepping-stone to Jointly Managed Inventory (JMI), an even deeper collabora- tion, allowing the increased tactical planning and the real integration of Technologia and AUD’s point of sale systems. That will offer optimal cost sharing and real time sales data, allowing us to stay ahead of the curve in production plan- ning as well as logistics to meet AUD’s needs in real time.” “So, what’s our next step?” Stansell asks. “How can we make this happen?”

Briefly describe whether events in this case support or refute the resource dependence, collaborative network, population ecology, and institutional perspectives. Why or why not?