In some cases discussions will not bring forth an agreement. In these cases, a third party will be needed. A common approach is mediation. The mediator's objective is to help the parties participate in the process of creating their own solutions by clearly defining the issues, suggesting various approaches, and encouraging the parties to use a constructive approach as opposed to dwelling on personal issues, strict legal rights, or bargaining positions. The mediation process is informal and results in an agreed-upon resolution instead of a binding settlement.
Arbitration is another mechanism for dispute resolution.
Like mediation, a neutral third party is involved. However, with this alternative the parties to the dispute agree to abide by the decision of the arbitrator. Because arbitration results in a binding decision, it tends to be handled more formally than the mediation process. Supply chain contracts often contain an arbitration clause that specifies the types of disputes for which arbitration is to be used, how an arbitrator is chosen, where the arbitration hearings will be held, and the time frame allowed. Unfortunately, sometimes legal action through court proceedings may be necessary.