The senior management team at Aztec Component Supplies knew that they were facing a decision crucial to the future of the company. A plastic injection mouldings manufacturer, they had for the last twenty years specialised in providing industrial mouldings for domestic appliance manufacturers. They were especially adept at moulding relatively large components, such as the outer casing for carpet cleaners.
Large components were difficult to make to the high levels of tolerance and finish which customers demanded. Because of this ability they had increasingly focused on the few large customers who were willing to pay their prices. Five years ago, twelve customers accounted for around 80 per cent of Aztec’s
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Applications Service Provider (ASP)’. (Applications service providers hold computer applications such as
ERP systems, together with dedicated data bases on their own servers which their clients access using internet-type technologies).
Alice Chang, the Purchasing VP of Desron, was particularly keen that ‘single source’ suppliers, such as Aztec might be, outsourced their planning and control effort using ASPs.
‘Getting our suppliers to use ASPs is particularly important for us. It encapsulates what we are trying to do with sole suppliers. First, we want them to use compatible systems to ensure seamless coordination of material flows between their plants and ours. Second, we don’t want to get into negotiations every time we update our systems. We can do a deal with the ASPs for suppliers to update their own systems at relatively low cost at the same time as we update. Third, there needs to be far more transparency around planning decisions with our suppliers. We don’t want to get into plastic injection moulding ourselves, that isn’t our business, but we want to ensure as smooth a supply of parts as if their operation was an integral part of our plants.
It is difficult to understand why they are hesitating in accepting this deal. We both agree that, providing they can keep reducing costs, they will be overall more profitable and get better return on assets under the new deal. Also they will have a