Case Study - Local Bakery Seeking Ingredients

Case Study - Local Bakery Seeking Ingredients

Case Study - Local Bakery Seeking Ingredients

Mediation is a great tool for dealing with crises that could otherwise wind up in court and ultimately with broken business relationships and all sides worse off.  But how exactly does that work? This is a case study in mediation - built off of real-life situations. It describes a dispute faced by a local business and how meditation led to a better outcome.

By Ehsan Ali and Alnoor Maherali

We often say that mediation can help generate better options for businesses struggling within their contractual relationships. But this can be hard to imagine in the abstract.  The following is a case study of just how mediation can work in reality – built off of real-life scenarios without disclosing any confidential information. 

Sam runs Hypothetical Bakery, a local hotspot in her neighborhood. People from throughout the community flock to her bakery each day to purchase hearty breads and delectable treats. Back in May, Sam had the foresight to partner with a local farm to supply all the wheat, eggs and milk. Her customers were overjoyed that they could track where the ingredients came from and know that they were supporting the local economy by buying from Sam. And she was happy to have a reliable source of high-quality ingredients. 

But something happened in early November that shook Sam up. On that first Sunday of November, when she expected to receive her biweekly shipment from the farm, she was alarmed to receive only half of what she expected. The bakery found itself with a shortage of supplies – meaning that Sam couldn’t bake enough goods and had to turn loyal customers away.  Some customers complained, and that was tough – but Sam expected that to happen.  Normal supply has since resumed and some free samples have those customers smiling again. But Sam noticed that business has been down relative to where it otherwise should be – and she thinks those are customers that went elsewhere during the shortage. 

Sam’s busiest season is approaching, and she’s now facing a choice.  The contract specifies that Sam will buy 80% of ingredients from this farm. Moreover – her customers have commented that they appreciate knowing where the bakery’s supplies come from.  But Sam has a business to run, and another short-supply could damage her business again at a time when the bakery makes a significant portion of its annual profits.  The alternative is establishing a contract with Globo-Farm, a large agricultural conglomerate that requires at least 60% of Sam’s business to open a contract with her but can guarantee her ingredients will arrive as ordered. Sam’s lawyer has said that her contract leaves her open to a lawsuit if she switches to Globo-Farm, but that she might also have a claim for breach of contract for the short-supply in November.  What should Sam do?

While it might seem like Sam has to choose between ending up in court to break her contract or doing nothing and hoping another short-supply doesn’t happen, she actually has other options.  This is the kind of situation mediators regularly help with and can work wonders in.  Sam takes pride in her business and wants to provide reliable service to her customers. And she may feel like she is stuck between a rock and a hard place in balancing the needs of the business. But good outcomes can be found through mediation with the local farm.  And this is how it could unfold.

Because of the confidentiality and neutrality of the mediation process, both Sam and the local farm can feel safe in sharing information with the mediator(s) – and ultimately, perhaps, with each other. This could change each of their perspectives on the situation.  They could then begin to generate quality options that effectively address each of their needs and can even strengthen the relationship. The mediator(s) could then help them work through their options and help them craft proposals that satisfy both their interests.  And because each person has control of the solutions when working with facilitative mediators – like Venn Mediation – any resolution they walk away with is one they actively want.  

Sam might be wondering what information she could learn in mediation that would change her view of the situation or open up more options for how she can respond.  After all, Sam knows everything about her side of the situation. For this scenario, let’s consider the farm’s point of view.  

This local farm contracts with four to five local independent bakeries and they’re proud to serve those communities and to know their customers.  Most of their contracts are for 30 - 50% of the bakeries’ requirements.  Sam’s was actually the first bakery for whom they agreed to handle 80% of the ingredient requirements.  They were and still are very excited about that, and they have pictures of Sam’s happy customers displayed proudly on their wall.  It has been hard to meet Sam’s requirements each week, but they’ve gotten it done.  However, the harvest wasn’t as good this year as they expected and they had to find ways to keep all of their customers satisfied. 

One way they have approached this shortfall has been scaling back the percentage of the other bakeries’ orders, down to providing 20-30% of their requirements.  They did it because Sam is their best customer and they knew she was relying on them. But this has left two of the other bakeries disgruntled. In that first week of November, those two underserved bakeries threatened to cancel their contracts unless the farm provided their full requirements.  It was short notice, and a new manager was handling the packing of the orders.  In their panic, they took from Sam’s order to provide to those complaining bakeries.  The new manager was disciplined for that but not fired.  And the farm’s counsel has advised them not to admit what happened as it could be an admission of liability and leave them open to a lawsuit from Sam.  They value having Sam’s business and they are committed to keeping all of their customers as satisfied as possible.  But with the smaller harvest they can’t meet their orders and are afraid of permanently losing their bakery-partners if they ever admit to the difficulties. 

They are not aware how much the short-supply damaged Sam’s business and that Sam remains concerned about her orders with them. That’s because, since the reduced shipment arrived, communications between Sam and farm have been strained.  And they didn’t tell Sam about their supply situation because they didn’t want to lose her business.  In fact, each side has withheld some pieces of information because they were concerned about liability or losing the business relationship.  And as such each has an incomplete picture of a difficult situation.  

Let’s return to Sam. Being thoughtful and well advised of her options, she reached out to a mediator rather than going directly to court. And during the course of the mediation Sam shared her perspective and learned more about the farm’s situation.  

With this new information, Sam now sees more possibilities on how to work through the problem.  Perhaps she can renegotiate the agreement to be for 50% of the bakery’s requirements rather than 80%, and plan to renegotiate based on next year’s harvest.  The farm might be able to point to another small farm that could supply the rest of Sam’s requirements in the interim, so her clients can still have the feeling that they know precisely where her ingredients come from.  Or perhaps once the farm hears about the harm to Sam’s business, they could choose to end one of the other contracts and opt to keep the entirety of Sam’s business – with a greater understanding that Sam can never have another short supply again.  Sam and the manager could even exchange cell phone numbers to discuss emergency circumstances and avoid this kind of problem in the future. 

Sam and the farm renegotiate their agreement while avoiding a costly legal battle.  Sam’s customers are happy and she has an even stronger partnership with her supplier(s).  And all because she was wise enough to enlist the help of a mediator to help navigate her way through this conflict instead of avoiding it or taking a more aggressive approach. 

If you or someone you know is stuck in conflict, consider reaching out to Venn Mediation. From situations that are in their initial stages to those already in the legal process, Venn assists our clients to find settlement terms and deals that work for them. We are based in New York but are experienced in online mediation and can work with people anywhere. Disputes can be difficult, but dispute resolution doesn’t have to be. We would love to help.

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