Why do think Brassimo and Right have different perspectives on the need for a change in the relationship between their businesses?

Technomagia and AUD Vito Brassimo 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, Technomagia, 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, Technomagia relies heavily on continuing a solid relationship with AUD, a manufacturer home sound systems, under the management of CEO Martin Right. 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 steady stream of orders that has enabled Brassimo, even in a tough economy, to add workers over the last three years. Brassimo 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 Right played his hand well, knowing that we were a startup 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," Brassimo 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." Right is satisfied with the present arrangement he has with Technomagia and sees himself as both partner and mentor, as he recently explained to a colleague. "Brassimo 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 management level is strained, mid-level managers at both companies 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 sending purchase orders, VMI involves sharing daily electronic information about AUD's sales, so inventory is replaced automatically by Technomagia. Mid-level managers Gary Handell (AUD) and Victoria Santos (Technomagia) regularly correspond and meet to find potential areas for close cooperation, information sharing, and problem feedback. "I know that Right 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. Technomagia is stronger." "But the relationship has not changed and I don't think it will until Brassimo finds a way to reduce his dependence on AUD. In the meantime, flexibility, information sharing, and reconsidering a range of cost-efficient options is important," Handell admits, "But we have to start with the discussion whether AUD calls all the shots between our two organizations." "Yes, and that discussion must include logistical issues," Santos says. "Delivery, the disagreements about the pallets ." "Right set up all of that initially-what would work best for delivery to AUD," Santos says. "But Brassimo insists that PM rather than AM pick-ups would be better and that a change in pallet companies, from Bradley Packaging 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 Technomagia would be shared with AUD." "But Bradley has a long-time business relationship of its own with AUD," Handell points out. "So, what we're saying here is that it is not just a discussion 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 its retail customers, create unnecessary problems in production planning Technomagia 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," Handell says. "Through this system, Technomagia 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 inventory," 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 necessary to make this work," Handell points out. "This is not a competition. Nobody 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 collaboration, allowing the increased tactical planning and the real integration of Technomagia 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 planning as well as logistics to meet AUD's needs in real time." "So, what's our next step?" Handell asks. "How can we make this happen?"