Question

Kyle and his family own a successful produce business near Whitehouse, AL, close to Hamilton. Their produce (fresh and canned vegetables, fruits, condiments, etc.) is sold under their own label,Alabama Sunshine.   Kyle raises all of the produce on the family farm and initially only sold it at his local roadside market on Hwy. 278. Kyle’s business has been successful. He has expanded his operations and now his Alabama Sunshine line of produce is in stores throughout western Alabama and parts of Mississippi. Kyle wants to regularly ship product to the larger markets of Birmingham, Mobile, and Huntsville. For these larger markets, Kyle is considering a contract with a major grocery store chain, Alabama Best Foods, Inc. (ABF). Kyle knows that the grocery store business is cut-throat with a small profit margin and he has heard that ABF is possibly up for sale to a much larger chain, United Nutrition Associates, Inc. (UNA). Kyle is also clearly aware that shipment of his Alabama Sunshine produce, like any sale of perishable goods, has certain inherent problems. Just last week, on a sale or return contract for 12 cases of Alabama Sunshine canned eggplant puree to one of ABF’s stores in Birmingham, several cans were damaged, having leaked out and onto the other cans in that case. Apparently, the cans were damaged during transit. Unfortunately, ABF‘s store manager was so upset that she sent the entire shipment back to Kyle.

This morning Kyle received a call from the ABF headquarters telling him that they wanted Alabama Sunshineproduce as a veggie variety pack in all of their Alabama stores in time for Lent. After conferring with her CFO, Candice B. Ritenoff, ABF’s CEO, Marg N. O’Hare, realizes that Kyle’s produce has developed a good following and is a money-maker for ABF, drawing customers into the stores. She immediately calls Kyle, promising to buy all of the veggie variety packs that Alabama Sunshine could produce within the next 20 days and promises to mail a deposit (down payment) of $20,000 that day to “seal the deal”.

Unfortunately, Kyle had decided to kick-back and do an extended tour of the Alabama Gulf Coast and to celebrateMardi Gras in Mobile where he was looking for new business opportunities. He did not get to talk to ABF’s CEO but did get her message off his office answer machine when he got back to Whitehouse. Kyle immediately called the plant, telling his manager, Scooter, who has just been paroled from a prison in Tennessee, to run production 24 hours a day, seven days a week, and to hire more employees to boost production. Kyle promised Scooter a “hefty bonus” ifABF’s needs were met. Kyle also negotiated a contract with UPS, anticipating a need to get the variety packs to ABFas quickly as possible.

When things were looking the brightest, disaster struck. A local crop duster, Don C. Nutton, doing some late season defoliation of a nearby cotton field, misjudged the height of the electric power transmission line supplying theAlabama Sunshine Hamilton plant, clipping the wire and shutting off all power.   In the ensuing crash, the defoliant was blown by the prevailing southwesterly wind into the plant, covering all of the production equipment and product. Restoration of electricity and de-contamination of the plant will take at least a week. Kyle is beside himself. In the meantime, ABF’s CEO calls, saying that she is just checking to ensure that the variety packs will arrive on-time at theABF warehouse in Birmingham for the Lent marketing blitz.

Kyle finished his BBA in accounting from UNA several years ago and he vaguely recalls Unit 1 from his BL 480 class, so he understands the basic issues but, as always, Kyle calls you to help him identify and resolve the issues. What advice do you have for Kyle, what are his options, and what issues must be addressed?

Answer 1

Kyle is in a typical business emergency where he is stuck with no power in his production site area and expectedly will be off for abut the next week, and he has promised a large delivery to a very good prospective third-party customer through a delivery agent. Now, Kyle has three options:

1. Kyle lies to the delivery agent that everything is on track and he will deliver the products on time and backtracks later.
2. Kyle lies to the delivery agent that everything is on track and he will deliver the products on time and manages to get some other production company produce a lower quality product and Kyle sells it off in his own name.
3. Kyle opens up about the issue at hand and explains the delivery agent about the sudden emergency he has encountered with and seeks for some more time from the prospective customer.     

The best out of these three options would be the third one. Business strategies have always revealed that the least honest a production unit or firm is, the more chance it has to suffer long term business loss and failure. If Kyle explains the issue at hand to the customer, he may encounter momentary shame , however, in the longer run , his dedication to work quality and truthfulness will work in his favor in pursuing better offers from the customer in the future.