Chapter 2 – Page 9 – The OM Blog by Heizer, Render, & Munson

OM in the News: Walmart Promises to Buy American

“We are committed to American renewal,” writes Walmart, with the announcement that it will purchase an additional $50 billion in U.S. products by 2023 . The commitment means a cumulative increase in U.S. manufactured purchases of U.S. products of $250 billion. Items that are made, sourced or grown in American already account for about 2/3 of what Walmart spends to buy products for its U.S. stores.

Walmart says that 1 million new U.S. jobs will be created through this initiative, including direct manufacturing job growth of 250,000, and indirect job growth of 750,000 in the support and service sectors. “Purchasing products closer to the point of consumption enables procurement of the best price, highest quality products and the most reliable sourcing of goods,” adds the firm. The effort allows Walmart to respond to the customer faster, respond to seasonal demands, and mitigates risks such as currency and volatility in port delays. Sourcing U.S. goods improves in-stock rates and sales.

Walmart states that Made in USA is important to its customers for 3 reasons:
– Made in USA is a strong driver of purchase decisions – 2nd only to price
– 85% of women said it is important for a retailer to sell Made in USA products
– Products are perceived to have higher quality if U.S. manufactured

Our coauthor, Prof. Chuck Munson, notes: “The most interesting aspect about this to me is that when Sam Walton was there and I lived in Bentonville back in the 1980s, Walmart had a big “Buy America” program. They were very proud about how they helped local business thrive. Then it was abandoned as they starting sourcing so much from China. Now we see them move back in the other direction. As the biggest retailer, their demand can move the bar on U.S. manufacturing jobs. And they are recognizing once again that their customers (many of whom are manufacturing workers) care about this issue.”

Classroom discussion questions:

Why is sourcing in America advantageous to Walmart?
What has Walmart’s impact been on the sustainability movement in the U.S? (see Supp. 5)

Teaching Tip: Explaining NAFTA to Your Students

Making car mats in Mexico. NAFTA put U.S. automakers in competition with Mexican workers.

Your students have undoubtedly been hearing about Donald Trump’s threat to “break” the North American Free Trade Agreement. Auto industry workers offered up some of his loudest cheers. But there are still more than 800,000 jobs in the U.S. auto sector, and The New York Times (Mar. 30, 2016) makes the case that without NAFTA (see Chapter 2), there might not be much left of Detroit at all. To be sure, the deals to reduce trade barriers threaten the livelihood of workers in the industries exposed most directly to foreign competition. NAFTA put them in direct competition with Mexican workers earning 1/5 of their compensation.

The American trade deficit in autos and parts tripled in the 2 decades after the NAFTA deal took effect in 1994, to about $130 billion in 2013. The industry lost 350,000 jobs, 1/3 of its workers, a massive shift in a flagship industry. Still, NAFTA itself had a relatively modest impact on the size of the U.S. trade deficit with Mexico. And autoworkers in Detroit were not just competing with cheap workers in Mexico. They were also competing with American workers in the union-averse South, where many car companies set up shop. They were competing with robots and more efficient Japanese and Korean automakers.

The integration of production across countries with complementary labor forces — cheaper workers in Mexico to perform many basic tasks, with more highly paid and productive engineers and workers in the U.S. — turned out to play a central role in reviving our auto industry. The Honda CR-V assembled in Mexico, for example, uses a U.S.-made motor and transmission– and 70% of its content is either American or Canadian. This regional integration gave the U.S.-based auto industry a competitive edge that was critical to its survival. There was a concern 20 years ago that an auto industry supply chain would develop across Asia, including China and Taiwan and Southeast Asia. Now, as Chinese wages rise, almost every car manufacturer is setting up shop in Mexico.

Classroom discussion questions:

Explain the purpose of NAFTA.
Why is this an OM issue?

Video Tip: Building the New Boeing 787-9 Dreamliner

The wings are being installed onto the plane with heavy machinery

To celebrate the arrival of British Airways’ first 787-9 Dreamliner, it has released a time lapse video showing the aircraft being built at the Boeing factory in Everett, Washington.The behind the scenes footage shows the massive production that is involved in constructing the Dreamliner with parts flown in from all over the world on 747 Dreamlifter cargo planes.

The four-minute video goes inside the plane showing bathrooms being installed as well as galleys, overhead cabin bins and panels being fitted onto the aircraft.The video makes a nice fit to the Global Company Profile on Boeing that opens Chapter 2, Operations Strategy in a Global Environment. We think your students will enjoy it and that it can lead to interesting classroom discussions about global sourcing, assembly lines, project management, and quality.

The wings of the planes are lifted into place as are the engines and finally it is finished with a spray paint of the British Airways logo. British Airways has started flying the new stretched model (20 feet longer than the original 787) to Delhi. Routes to Abu Dhabi, Muscat, Kuala Lumpur and Austin will follow. The Boeing 787-9 Dreamliner seats around 250 passengers, has a flight range of 8,200 nautical miles, and uses 20% less fuel than the 747s.

OM in the News: Reshoring to the U.S. Gains Momentum

“In a sharp reversal, more large manufacturers that are planning to add production capacity for goods consumed in the U.S. say that they will add that capacity in the U.S. than in any other country,” reports the Reshoring Initiative (Feb., 2016). Thirty-one percent of respondents to The Boston Consulting Group’s annual survey of manufacturing executives said that their companies are most likely to add production capacity in the U.S. within 5 years, while 20% said they are most likely to add capacity in China. Asked the same question in 2013, 30% of respondents said that China was the mostly likely destination for new capacity, while only 26% said capacity would be added in the U.S.

Moreover, the share of executives saying that their companies are actively reshoring production increased by about 250% since 2012. This suggests that companies that were considering reshoring in previous years are now taking action. By a 2-to-1 margin, executives said they believe that reshoring will help create U.S. jobs at their companies rather than lead to a net loss of jobs. “These findings underscore how significantly U.S. attitudes toward manufacturing in America seem to have swung in just a few years,” said the BCG report. “We are seeing more evidence of an American manufacturing renaissance. There is good reason to believe that the cost-competitiveness of the U.S. compared with China and many other economies will continue to improve in the near term.”

This year’s survey also confirmed that factors such as logistics, inventory costs, ease of doing business, and the risks of operating extended supply chains are weighing heavily in executives’ decisions. (76% of respondents reported that a primary reason for reshoring production of goods sold in the U.S. was to “shorten our supply chain,” while 70% cited reduced shipping costs and 64% said “to be closer to customers.”) The decreasing costs and improved capabilities of advanced manufacturing technologies such as robotics also make manufacturing in the U.S. more attractive than in economies whose chief advantage is cheap labor.

Classroom discussion questions:

Does reshoring mean a resurgence in manufacturing jobs?
Why are more companies considering returning?

OM in the News: China’s Fading Factories

Workers walk past notices listing factory space for rent in Dongguan, a once thriving manufacturing hub.

For decades, the Dongguan region of China’s Pearl River Province drove that country’s global ascent in exports, producing furniture, garments, shoes and other goods. But the world’s workshop has been stumbling as cheaper production bases in Asia have gained ground, reports The New York Times (Jan. 20, 2016). Last year, Chinese exports fell for the first time since the recent financial crisis, a situation that is likely to be further eroded by the Trans-Pacific Partnership. The U.S.-led trade agreement deepens American ties with Asian countries like Vietnam and Malaysia, but it excludes China.

Chinese leaders have started to encourage the phasing out of low-end exports in favor of promoting the service sector and high-tech manufacturing. Some traditional manufacturers have responded to the downturn by relocating farther inland or overseas, where costs are generally lower. The shift away from low-end, labor-intensive manufacturing “is an unavoidable part of the structural change that the economy is undergoing,” says a China expert at Oxford.

At their peak, factories in Dongguen accounted for 1 in every 4 pairs of athletic shoes sold globally. Now, while costs are rising, demand from overseas customers has also been declining. So some companies are making a future bet by expanding to a less-developed province, Guizhou, where labor costs are 40% less than those in Dongguan. Other large Dongguan shoe companies have shifted production to Bangladesh.

Other sectors have similarly been struggling, including some electronics manufacturers. In October, Fu Chang Electronic Technology, a supplier to the telecommunications equipment makers Huawei and ZTE, shut its doors unexpectedly. The closing prompted a protest by thousands of workers.

Classroom discussion questions:

How is China following American manufacturing trends?
Is automation a major factor in Chinese production?

OM in the News: The Top 10 Manufacturing Countries in 2020

A new study on future global competitiveness, reported by Industry Week (Dec.9, 2015), predicts that the U.S. will dislodge China as the most competitive manufacturing nation in the world in 2020. “Manufacturing competitiveness, increasingly propelled by advanced technologies, is converging the digital and physical worlds, within and beyond the factory to both customers and suppliers, creating a highly responsive, innovative, and competitive global manufacturing landscape,” says the report. While emerging markets continue to push the leaders, the manufacturing powerhouses of the 20^th century (the U.S., Germany, and Japan), hold 3 of the top 4 positions currently and in the future. The study also suggests that Brazil and Russia seem to have lost their allure as highly competitive manufacturing locations today. Here are the rankings:

# 1 The U.S.: By 2020, the U.S will overtake China to earn the top spot for the most competitive nation in the world, due the country’s investment in research, technology, and innovation.

#2 China: Shenzen is a large manufacturing center that has sprung up quickly (see photo).

#3 Germany: Germany is pushing its leadership in industrial production research and development toward “smart production.”

#4 Japan: The manufacturing sector accounts for 19% of Japan’s GDP.

#5 India: It has a large population of engineers and factory workers, its intellectual property is widely respected, and it is easy to find English-speaking managers there.

#6 Korea: The biopharmaceutical industry is an important manufacturing sector to South Korea.

#7 Mexico: Electronics manufacturing activity in Mexico is widespread. In the last 15 years, $14 billion in investments have been made to make production stronger and more efficient.

#8 Taiwan: Five of the world’s largest producers of TFT-flat screens are Taiwan-based.

#9 Canada: Montreal’s aerospace sector is comprised of more than 210 companies which employ 43,500.

#10 Singapore: More than 30 biomedical sciences companies have established regional headquarters in the country.

Classroom discussion questions:
1. Why not Brazil and Russia?

2. What makes U.S. manufacturing more competitive than 30 years ago?

OM in the News: Levi Strauss Considers Leaving China

Thirty years ago, Levi Strauss & Co. began producing its iconic jeans in China, eager to tap a seemingly endless stream of workers willing to sew for a few dimes an hour. Now that stream is starting to dry up. “Over the coming decades, a labor shortage will force Levi and scores of other Western brands to remake their China operations or pack up and leave,” writes The Wall Street Journal (Nov.24, 2015). The changes will mark a new chapter in the history of globalization, where automation is king, nearness to market is crucial and the lives of workers and consumers around the world are once again scrambled. “Labor is getting more expensive and technology is getting cheaper,” says one of Levi’s major suppliers in China.

Fearing that it will see an exodus of manufacturers, China last year called for “an industrial robot revolution,” and the country has become the world’s largest market for automation. It is an open question whether automation can hold down costs as effectively as Chinese peasant labor did. But consumers should look forward to more choice, faster delivery and, perhaps, less harm to the environment. Some technologists even think that inventions such as 3-D printing will have a big impact by 2050. In such a world, printers could spew out clothing, food, electronics and other goods ordered online from a nearly limitless selection, with far fewer workers involved in production. The end of very cheap labor in China is giving a push to these advances in technology, which will make China less central to global manufacturing.

China’s rise to the world’s No. 2 economy relied on a huge increase in the country’s working-age population, which expanded by 380 million people between 1980 and 2015. In one of history’s greatest migrations, hundreds of millions of rural Chinese headed for cities for manufacturing jobs that were a step up from peasant labor, even though the work paid poorly by global standards.

Classroom discussion questions:

Will more and more companies be leaving China to chase cheaper labor?
Why is automation so important to China? To the U.S.?

OM in the News: Poor Countries and Manufacturing Jobs

Cows on the streets of Ahmedabad, India. India has vowed to build better roads and clear red tape to pull it into the leagues of Asia's industrial powerhouses. — Cows on the streets of Ahmedabad. India has vowed to build better roads and clear red tape to pull it into the leagues of Asia’s industrial powerhouses.

The U.S. and Europe—and East Asia more recently—first got rich because of their factories. Over time, as incomes rose and their economies became more sophisticated, they shifted into modern services like health care and finance. But today, parts of South Asia, Africa and Latin America are failing to create thriving manufacturing sectors even though their wages remain low. Manufacturing employment and output are peaking and declining at vastly lower levels of income and development than they did in the West. When manufacturing peaked as a source of jobs in the U.S. in 1953, it employed 26% of American workers, and overall per capita income was around $17,700 in today’s dollars. By 2010, manufacturing accounted for around 9% of U.S. jobs.

Factory automation and robotics are reducing the need for unskilled workers from the countryside to staff assembly lines. Industrial latecomers now have to compete against China, whose massive, integrated manufacturing machine has made it the world’s factory floor and created a huge barrier to entry. Lower trade barriers and better communication have made it easier for supply chains to be spread over farther-flung locales, bringing more countries into direct competition for factory investment. “The factory-led model of advancement—which, for more than a century, has offered the quickest route out of poverty—is simply no longer available to today’s poorest nations,” writes The Wall Street Journal (Nov. 25, 2015). India must joust more often with other cut-rate producers like Bangladesh or Vietnam for slices of the manufacturing process—a component or an assembly here, some product development there—rather than for “start-to-finish industry.”

More factories also might not translate into as many jobs, at least not for humans. Sales of industrial robots shot up by 29% last year to a record of nearly 230,000 units and are expected to keep climbing, to 400,000 units shipped by 2020, especially in Asia.

Classroom discussion questions:

U.S. ever recoup the manufacturing jobs it lost since 1950? Why?
Why is it harder for India to catch up with China?

OM in the News: Toyota’s New “Quiet” Plant in Kentucky

Last month, a switch was flipped at a sprawling auto factory in Georgetown, Ky., and with it, Toyota started building Lexus cars in the U.S. for the first time. Adding the 50,000 Lexus ES 350 models to be produced each year will transform the Kentucky plant into the largest Toyota factory in the world. That Toyota will have its largest factory in the American South is only the latest example of a building boom here by foreign automakers, writes The New York Times (Nov. 13, 2015).

Domestic automakers, by contrast, have resisted building new plants here. They have taken steps like adding shifts and hiring more workers at existing American plants, but building new ones is the purview of foreign automakers like Mercedes, Toyota, and VW, that are taking advantage of the lower shipping and trade costs, currency stability and largely nonunion work force that American factories provide.

Getting the new Lexus production line ready meant an expansion of machinery to create an almost completely separate operation from the rest of the Toyota factory. It also meant training workers in the Lexus quality control methods, which require tighter tolerances for fitting parts compared with regular Toyotas and more meticulous painting. The 750 new workers spent a total of 1.5 million hours training. Some even traveled to Japan to train with Lexus workers at plants there.

Then there is the noise at the plant — or lack of it. The quest has been to create what was unimaginable not too long ago: a largely noiseless, hushed atmosphere to house the new assembly line. “We want our team members to be able to hear a click,” says Lexus. “It is not just enough for a worker to see a potential problem; the worker should be able to hear it, too.”

Classroom discussion questions:
1. Why a quiet plant?

2. Why is Lexus manufacturing in the U.S.?

OM in the News: Amazon–From Warehouse to Retail Bookstore

Bookstore owners often think of Amazon.com as the enemy. Now it’s becoming one of them. Yesterday morning the online retail giant opened its first-ever brick-and-mortar retail store in its 20-year life, in Seattle, reports The Seattle Times (Nov. 3, 2015). The store, called Amazon Books, looks a lot like mall bookstores. Its shelves are stocked with over 5,000 titles, best-sellers as well as Amazon.com customer favorites.

There is some irony in Amazon’s opening a physical store. For years, it could undercut physical retailers on price because it didn’t have brick-and-mortar locations. But those stores offered something Amazon couldn’t: the instant gratification of owning an item the second it was purchased, as well as the personal touch of a knowledgeable sales clerk.

Amazon is betting that the troves of data it generates from shopping patterns on its website will give it advantages in its retail location that other bookstores can’t match. It will use data to pick titles that will most appeal to shoppers. And that could also solve the business problem that has long plagued other bookstores: unsold books that gather dust on shelves and get sent back to publishers. More than most book retailers, Amazon has deep insight into customer buying habits and can stock its store with titles most likely to move. It will stock best-sellers, but will also include books that get the highest ratings from its customers, including little-known titles. One other way the store, with 5,500 square feet of retail space and 2,000 square feet of storage, is distinct from traditional bookstores: Every book will face out, rather than be stacked tightly with only their spines showing. That leaves far less space for books. And while the store will showcase some of Amazon’s gadgets, such as its Kindle e-readers and Fire devices, it will be first and foremost a bookstore.

Classroom discussion questions:

What is Amazon’s strategy in opening this (and future) retail stores?
Discuss the capacity issues and compare Amazon to a large competing bookstore chain.

OM in the News: Made in Vietnam

The trans-Pacific Partnership would mostly benefit developing nations like Vietnam and Malaysia — The Trans-Pacific Partnership would mostly benefit developing nations like Vietnam

Massive factories have sprung up in Long An to make goods for Western companies such as Nike, taking advantage of Vietnam’s young workforce and wages that are roughly half those in China. This agricultural province, located near Ho Chi Minh City, now has more than a dozen industrial parks, and is playing host to an increasing amount of manufacturing.

“This growth could accelerate if the U.S. and 11 other Pacific Rim nations ratify the Trans-Pacific Partnership agreement, a landmark trade deal concluded earlier this month,” reports The Wall Street Journal (Oct. 19, 2015). The deal would eliminate certain tariffs between members, mostly benefiting developing nations whose growth depends heavily on exports. Skyrocketing wages and a growing labor shortage in China are heightening Vietnam’s appeal. If the trade deal goes through, Vietnam’s economy would be the single largest beneficiary, because it would gain much greater access to large consumer markets. Money pouring into the Southeast Asian economy could make Vietnam one of the world’s two fastest-growing large economies between now and 2050.

The trade agreement would benefit firms like Avery Dennison Corp., one of the world’s biggest makers of clothing labels and tags. The California company just opened a 300,000 square foot facility in Long An. Inside, sewing machines print tags for Japanese clothing brand Uniqlo, while workers pour red ink into giant machines that print the labels sewn into North Face outdoor-sports clothes. “The skills of Vietnamese workers are increasing exponentially every year,” says Avery Dennison’s VP, “and the country is able to accommodate ever more complex production. What took 30 years in China is taking 10 years in Vietnam to happen. That is why more and more companies are making bets on Vietnam.”

Classroom discussion questions:

Why is the trade deal useful to Vietnam? To the U.S.?
How does this impact American garment makers?

OM in the News: The Economics of L.L. Bean’s Boots

In Brunswick, L.L. Bean operates a 170,000-square-foot factory where the boot is assembled from start to finish.

For over a hundred years, the company Leon Leonwood Bean founded has been making rubber boots and outdoor clothes in Maine. “L.L. Bean’s offerings have traditionally not been synonymous with cool,” writes The Atlantic (Oct. 19, 2015). But then something happened in 2011: The outdoorsy aesthetic that L.L. Bean had been selling for 100 years became trendy. That’s when the duck-boot shortage first began, and “Bean Boot heartbreak” spread as countless consumers found that retailers didn’t have what they wanted. The answer to why the signature Bean Boot has sold out every year since 2011 lies in the decisions the company has made that are different than other American manufacturers in the past few decades.

The rubber bottom of the Bean Boot is made by a machine, but after that it’s handmade by 200 people who split their time between 3 shifts. All in all, making the boot takes about 85 minutes worth of labor. Bean describes it as “a mix of old and new technology.” While the boots aren’t made exactly as they used to be, the assembly process and sewing are all done by hand.

There are two main reasons, then, the Bean Boot can’t keep up with demand. The first is the company’s decision to keep making the boot in Maine, rather than exporting operations out to China, where the majority of shoes sold to Americans are made. Fifty years ago, 98% of shoes for Americans were made in the U.S. Now, China makes 12.5 billion pairs of shoes–about 90% of shoes made worldwide. To preserve its brand, L.L. Bean keeps operations local, which lets sourcing for leather and steel remain local. The second reason that the boot keeps selling out is that it’s not as easy to find shoe makers here as it used to be when Maine was the epicenter of the U.S. shoe industry. So scaling up has become more difficult than in the past, when L.L. Bean could simply find workers in the area.

Classroom discussion questions:

Why did L.L. Bean stay in Maine?
Describe the process of making the Bean Boot.

OM in the News: Outsourcing Accounting Jobs to India

Workers at Tata Consulting Services in India have replaced Americans

When Congress designed temporary work visa programs, the idea was to bring in foreigners with specialized, hard-to-find skills who would help American companies grow, creating jobs to expand the economy. “Now, though,” reports the New York Times (Sept. 30, 2015), “companies are bringing in workers on those visas to help move jobs out of the country”.

For four weeks this spring, a young woman from India on a temporary visa sat elbow to elbow with an American accountant at the New Jersey headquarters of Toys “R” Us. The woman, an employee of a giant Indian outsourcing company Tata, studied and recorded the accountant’s every keystroke, taking screen shots of her computer and detailed notes on how she issued payments for toys sold in the company’s megastores. “She just pulled up a chair in front of my computer,” said the accountant, 49, who had worked for the company for more than 15 years. “She shadowed me everywhere.” By June, 8 Tata workers had produced intricate manuals for the jobs of 67 people. They then returned to India to train Tata workers to take over and perform those jobs there. The Toys “R” Us employees were laid off.

Employers must sign a U.S. government declaration that the foreign workers “will not adversely affect the working conditions” of Americans or lower their wages. In recent years, however, global outsourcing firms have obtained thousands of temporary visas to bring in foreign workers who have taken over jobs that had been held by Americans. But the Toys “R” Us layoffs — and others underway now at the New York Life Insurance, Cengage Learning, and others — go further. They are examples of how global outsourcers are using temporary visas to bring in foreign workers who do not appear to have exceptional skills.

A spokeswoman for Toys “R” Us said that the staff reduction there was part of “designing a streamlined, more efficient global organization to make it fit for growth.The outsourcing resulted in significant cost savings.”

Classroom discussion questions:

Discuss the legal and moral issues here.
How is this different from outsourcing manufacturing jobs to China?

OM in the News: All Your Clothes Are Made With Exploited Labor

Yes, this is the somewhat shocking title of The Atlantic’s (June 3, 2015) article featuring Patagonia, which has become a symbol of well-heeled outdoor adventure. But the apparel and sporting company thinks of itself as more than just a retail company. Says Patagonia’s founder: “We aim to make the best product, cause no unnecessary harm, and perhaps most important, inspire solutions to the environmental crisis.” And yet, despite these aspirations, internal audits turned up multiple instances of human trafficking, forced labor, and exploitation in Patagonia’s supply chain.

The audits examined not Patagonia’s first-tier suppliers—the factories that cut, sew, and assemble Patagonia’s products—but the mills that take raw materials and produce the fabrics and other parts that later become jackets and backpacks. About 1/4 of those mills are based in Taiwan, and the majority were found to have instances of trafficking and exploitation. Those mills didn’t hire workers themselves and instead turned to so-called labor brokers. These labor brokers charged migrants exorbitant, often illegally high fees in exchange for jobs.

Though it may seem shocking that a company so publicly committed to fair labor practices could have such violations in its production chain, the news is less surprising when taking into account how the apparel industry operates: with unwieldy, complicated supply chains that reach around the globe. So the findings of Patagonia’s audits show the near impossibility of treating workers well at every step in the production process.

Labor violations are more rampant at the mills and parts manufacturers, which are often subcontracted to provide the materials for the first-tier factories. Traditional factory audits by both brands and NGOs often miss instances of trafficking deeper down the supply chain. Auditors often don’t even have the proper language skills to communicate with the multi-national population of workers that make up the workforce. To complicate the situation further, supply chains are massive and far-flung; relationships among brands, factories, and employees are often informal; and corporate social-responsibility programs tend to be relatively unestablished and toothless.

Classroom discussion questions:

1. What is the solution?

2. If Patagonia is a global leader in ethical manufacturing, what is the status of the rest of the apparel industry?

OM in the News: Disney Outsources IT to India — and Workers Cry Foul

The Team Disney building in Orlando which houses most of the company's IT operations — The Team Disney building in Orlando which houses most of the company’s IT operations

The employees who kept the data systems humming in the vast Disney fief here in Orlando did not suspect trouble when they were suddenly summoned to meetings with their boss. While families rode the theme park rides, these workers monitored computers, making sure millions of Disney ticket sales, store purchases and hotel reservations went through without a hitch. Some were performing so well that they thought they had been called in for bonuses. Instead, about 250 were laid off. “Many of their jobs,” writes The New York Times (June 4, 2015), “were transferred to immigrants on temporary H-1B visas for highly skilled technical workers, who were brought in by an outsourcing firm based in India.”

Disney “made the difficult decision to eliminate certain positions, including yours,” as a result of “the transition of your work to a managed service provider,” said a contract presented to employees on the day the layoffs were announced. It offered a “stay bonus” of 10% of severance pay if they remained for 90 days. But the bonus was contingent on “the continued satisfactory performance of your job duties.” For many, that involved training a replacement, and the new workers took the seats at their computer stations.

Former employees said many immigrants who arrived were younger technicians with limited data skills who did not speak English fluently and had to be instructed in the basics of the work. HCL America, a branch of a global company based in Noida, India, won a contract with Disney. But the layoffs at Disney are raising new questions about how businesses and outsourcing companies are using the temporary visas to place immigrants in technology jobs in the U.S. These visas are at the center of a fierce debate in Congress over whether they complement American workers or displace them. According to federal guidelines, the visas are intended for foreigners with advanced science or computer skills to fill discrete positions when American workers with those skills cannot be found.

Classroom discussion questions:

1. Why did Disney make this change? Is it a common strategy?

2. Discuss the merits and problems with the H-1B program.