How should your management team address the company’s excess

BRI-1002ABUSINESS CYCLES AND EMPLOYMENT PRACTICESIN A DOMESTIC GARMENT COMPANYPART A: MANAGEMENT’S DILEMMAYou are on the management team of a rapidly growing, privately-held apparel companythat had $80 million in sales last year and is projecting $150 million for next year. Thecompany’s operations are entirely U.S.-based, an anomaly in an industry that has moved almostall manufacturing to foreign countries in search of cheap labor. Your company has succeeded bytargeting a niche market that will pay more for fashionable styles, making the speed andflexibility of operations more important than the price. Your company is also unique in itsemployee policies. Poor working conditions are common at many apparel factories in the U.S.and abroad, and the industry is besieged by public criticism of labor practices. Yet a fundamentaltenet of your company is the belief that apparel manufacturing should be profitable withoutexploiting workers. Management has worked hard since the company’s inception to treatemployees as well as possible, and it has developed a reputation for these efforts.This summer your team found the company could not keep pace with orders. You addeda second shift and hired 1,000 new sewers to staff it, bringing the total number of sewers to3,000. During the summer months, all employees worked fulltime (eight-hour shifts, five perweek) and often overtime to meet sales needs and replenish dwindling inventories.It is now September, and it has become clear that the company’s inventory is growing toolarge. Sales across the industry are usually slow during winter months, and you know thecompany must slow its production. Each of the 3,000 sewers assembles an average of 20 dozenpieces per day. Based on projected orders and the maximum inventory you can afford to carry,production cannot exceed 4,000,000 dozen pieces between October and March. Therefore, youmust determine how to reduce your actual production over the next 20 weeks to only two-thirdsof full capacity. Wages for sewers are not based on the number of hours they work, but on thenumber of pieces they sew. The efficiency of production at your company is partly responsiblefor the high wages workers earn.This case was prepared by Research Assistant Keely Byrne and Professor Jim Detert of the Pennsylvania StateUniversity. Translation between English and Spanish for many interviews conducted for this case was provided byProfessor Tatiana Sandino of the University of Southern California. Copyright © 2005 by the Business RoundtableInstitute for Corporate Ethics ( Reproduction and use for direct educational purposespermitted. All other rights reserved.-2-BRI-1002ATypical industry practice in the U.S. and abroad is to lay off excess labor for the winterseason, with no severance pay or other assistance and no promise of rehire. Many of your sewershave lost their jobs elsewhere during the slow season for several years. However, if yourcompany made such a move it would contradict the company’s philosophy regarding thetreatment of employees as valued partners. Laying workers off seems like it would be asignificant defeat in this respect, with possible repercussions in employee motivation and publicrelations. Also, your team has invested several thousand dollars in training each employee, andyou are concerned that new sewers may not be skilled enough to meet the steep climb in ordersanticipated in the spring. If workers are laid off, there is no guarantee that you will be able torehire the same people in the spring. However, the company cannot afford to pay workers to donothing for 20 weeks, and many workers will likely return to the company if they fail to matchyour wages or working conditions elsewhere.How should your management team address the company’s excess labor problem duringthe upcoming period of slow sales? Be specific in your recommendations. For example, if yourecommend layoffs, state exactly how many workers will be affected, how you will determinewhich workers will be affected, and how this cuts production appropriately. Keep in mind, thereis no union and there are no other specific policies or agreements that mandate the basis (e.g.,seniority) for prioritizing which sewers might be affected by your decision.

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