One bakehouse, every loaf: Every loaf Lena's Bakery Ltd sells is baked overnight at the Mill Lane bakehouse, from 2 a.m. until the vans leave at 5.
From September the new Station Road shop will depend on it too.
One oven, one building, one flour supplier. If any of them fails at three in the morning, every shop opens with empty shelves.
In 5.7.1 you met the difference: crisis management is handling a crisis once it has happened, and contingency planning is preparing for one before it happens.
Marco decides to prepare. Before he can ask what a plan is worth, he has to build one.
How Marco builds the plan
List what could go wrong
Marco walks through a night at Mill Lane with Priti and asks, at every step, what could stop it: the oven, the power, the flour, the people, the building.
Judge how likely and how bad
An oven fault is fairly likely and would lose a whole night. A fire is very unlikely but could hurt people. Both go in the plan. A broken mixer blade, fixed in ten minutes, does not.
Decide who does what
For each event: the first three actions, who takes them, and the phone numbers they need, on one sheet on the bakehouse wall.
Train and practise
Every baker walks through the plan, and twice a year the night shift runs a drill.
Keep it up to date
Phone numbers change and bakers leave. Marco checks the plan every year, and whenever something changes, such as a new shop opening.
| What could stop a night | How likely | How bad | What the plan does |
|---|---|---|---|
| The oven breaks down | Once or twice a year | A whole night's bread lost | An engineer on call, on site within four hours |
| A power cut | A few times a year, most short | Dough over-rises; the bake is late or lost | A standby generator, delivered within an hour |
| No flour from Valley Grain | Rare | Baking stops when the week's stock (5.3.1) runs out | A second mill, already approved and tested |
| Priti off sick | Several nights a year | A slow shift with more mistakes | One baker trained to run the night |
| A fire | Very rare | People hurt; the bakehouse closed for weeks | Fire drills, extinguishers, a first-aider on every shift |
| The wrong ingredient in a batch | Rare | A customer made ill | Every tray labelled, so the shops can remove a batch within an hour |
A plan is a list of decisions made early: Every line of the plan is a decision taken on a calm afternoon instead of at three in the morning.
Whether that is worth doing comes down to four things: what the plan does to cost, to time, to risks and to safety.
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Marco prices his plan. Some of it is paid every year, whether anything goes wrong or not.
| Part of the plan | Cost a year |
|---|---|
| Oven engineer on call, with a yearly service | $1,800 |
| Standby generator on a hire contract | $1,500 |
| A second mill approved and tested | $0 until it is used; its flour costs more a sack |
| Fire and first-aid training for every night shift | $600 |
| Two night drills, the bakers paid for the time | $400 |
| Total | $4,300 |
What one lost night costs: If the oven fails and the night is lost, the shops have no bread to sell: about 1,200 loaves at $3, which is $3,600 of sales.
Working out the real loss
- Ingredients not used: the flour and other ingredients for those loaves cost about $0.90 each.
- Contribution lost (5.5.1): on every loaf the bakery loses the other $2.10, so 1,200 × $2.10 = $2,520.
- And more: that is before any customer who finds an empty shelf tries Goldcrust instead.
Setting the cost against the saving
The plan's cost
$4,300 a year, paid every year, even in a year when nothing goes wrong.
What one lost night costs
$2,520 of contribution, and some customers who may not come back.
The comparison
$4,300 ÷ $2,520 = 1.7. If the plan saves two lost nights a year, it has paid for itself.
What the figure leaves out
Lost café and hotel orders, lost regulars, and harm to the bakery's name. Each makes a lost night dearer than $2,520, so the plan pays for itself sooner.
The cost you pay even when nothing happens: In a quiet year the plan saves nothing anyone can see. The $4,300 has gone, and Lena could have put it towards the $45,000 second oven.
That is the real cost of contingency planning: money and time spent on events that may never happen, instead of on something that would earn money every day (the opportunity cost).
So the impact on cost runs both ways. The plan adds a cost every year, and it cuts the cost of any disruption that does happen. Which is larger depends on how often things go wrong, and how much each one costs when it does.
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Picture the same night twice. At 2:30 a.m. the power fails across Mill Lane. The dough for 1,200 loaves is rising, and the oven, which bakes 600 loaves an hour, needs two hours to bake it all.
Without a plan
- 2:30 Priti rings Lena, who is asleep. Lena rings Marco.
- 3:15 Nobody knows who hires out generators at night. Marco searches online.
- 4:30 A generator is found. It can arrive at 7.
- 5:00 The dough has over-risen and is thrown away. The vans leave empty.
With the plan
- 2:30 Priti takes the plan off the wall. First line: ring the generator firm.
- 2:35 The bakers move the dough into the cold room to slow its rise, as the plan says.
- 3:45 The generator is running and the oven is back on.
- 5:45 The last tray is out. The vans leave at 6, an hour late, and full.
Time spent early, time saved later: Without the plan, the night went on finding out: who to call, what to do, who decides. With it, those answers were already on the wall.
Contingency planning moves time from the crisis to the calm before it. The response starts in minutes, not hours, and the decisions were made by people who had time to think.
Writing it
- 40 hours of Marco's time to walk through the night with Priti and write the plan
- Hours spent on events that may never happen
Keeping it ready
- Two night drills a year, when the bakers practise instead of baking
- One baker trained to run the shift: six nights working beside Priti
- About 10 hours a year to check the names and numbers
When it is needed
- The first actions start in minutes
- Nobody waits for an owner to wake up
- The bread is late, not lost
The time cost is real for a small business. Marco's 40 hours come just as the Station Road shop is being fitted out. In a small firm the person who writes the plan is also doing everything else, so the plan waits behind every urgent job. That is one reason many small businesses never write one.
What a plan does to risk: A plan does not stop the power failing. Mostly, contingency planning cuts the damage an event does, not the chance of it.
Cuts the damage (most of the plan)
- It changes what happens next: the night is late instead of lost.
Cuts the chance as well (a few parts)
- The engineer's yearly service finds worn oven parts before they fail.
- A second mill already approved means a problem at Valley Grain need never reach the bakehouse.
Where a plan falls short
The event nobody listed
A flooded road could close the route to the shops. Marco's plan covers the oven, the power, the flour, the people, fire and ingredients, and says nothing about the vans. No plan lists everything.
Plans go out of date
In 2.1.6, three of the six night bakers left Mill Lane in one year. A plan that names the baker trained to run the shift is wrong the day that baker leaves.
False confidence
A plan in a drawer that nobody has practised can be worse than none. Managers relax because it exists, then find at 3 a.m. that the generator firm's number has changed.
Too long to use
A plan that tries to cover fifty events runs to thirty pages, and nobody reads thirty pages with the lights out. Marco keeps each event to one sheet.
Safety is different: For cost and time, Lena can set the plan against what it saves. For safety, she cannot in the same way, because the harm is to people.
Why safety cannot wait
- A baker burned at 3 a.m. needs first aid in the next minute, not after someone has been woken.
- A loaf with the wrong ingredient could make a customer with an allergy seriously ill.
- Fire drills and first aid at work are often required by law as well, so this part of the plan is not a choice.
| Who is kept safe | The risk | What the plan does |
|---|---|---|
| The bakers | Burns, cuts and fire around hot ovens at night, with no director on site | A first-aider on every shift, fire drills, exits kept clear |
| Customers | A loaf containing an ingredient it should not | A batch label on every tray, so the shops remove that batch within an hour |
| Neighbours on Mill Lane | A fire spreading from the bakehouse | Extinguishers checked, and the fire service's way in kept clear |
Worth it
- When one event could stop the whole business, as one bakehouse can
- When people could be hurt
- When the business can spare the time and money to keep the plan up to date
Less worth it
- When events are rare
- When events are cheap to put right afterwards
- When things change so fast that the plan is out of date before it is used
When is a plan worth it?: The plan should fit the size of the risk.
Know your predicted grade
Take timed mock exams and get detailed feedback on every answer. See exactly where you're losing marks.
How this comes up: The long question asks you to recommend whether a business should engage in contingency planning, for ten marks.
Where it turns up
- The long question: a case where managers deal with problems as they arise, some data, and a proposal to plan ahead.
- A wider plan: contingency planning can be one part of a plan of action for a business facing several threats.
- Shorter questions: on its benefits or drawbacks.
The ten-mark pattern
- Say what contingency planning is, in one line. Preparing, before anything goes wrong, for the events that could.
- Argue for it from the case. Which events the case shows, what one of them would cost, how a plan cuts the time to respond, who it keeps safe.
- Argue against it from the case. Its yearly cost, the time it takes to write and keep up to date, the events it cannot foresee, what else the money could buy.
- Use the figures. Set the plan's cost against what one disruption costs.
- Decide, and say what it depends on. Yes or no, the condition that would change your mind, and what the case does not tell you.
Trap one: a list that fits any business: 'It saves time, reduces risk and improves safety' could be about anyone. Show each point with a figure or a name from the case.
Trap two: leaving out the data: The case gives figures for a reason. An answer that never sets the plan's cost against what a disruption costs cannot show whether the plan is worth it.
Recommend whether Lena's Bakery Ltd should adopt Marco's contingency plan for the Mill Lane bakehouse.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.