Operations management: concepts, principles, and applications

Business Management -- Operations

Why are core competencies so important in service industries?

The profit margin for many service industries can be razor thin. In many cases, the difference between running a profitable service enterprise and one that does not turn a profit boils down to specific decisions about products and presentation issues made by upper management. Core competencies are essential for the efficient implementation of management decisions at the operational level. They provide both teachable methods and measurable performance parameters for the manifestation of management directives about issues that cannot be left to chance or to independent decisions of first-line management or employees.

Core competencies can also relate directly to some of the elements of service industry entities' core values and the public identity that the organization hopes to establish, cultivate, and maintain in their public perception. In many cases, core competencies within service industry organizations are defined by the corporate image upon which organizational success depends.

2) Why do small upstarts sometimes have a technological advantage over some of the enormous multinational organizations with equally gigantic budgets?

By the time changes in technology develop, large organizations may have already spent enormous sums of money and other valuable resources on technological infrastructure that cannot easily be dismantled or adapted to newer technologies. Typically, the newest technologies offer significant advantages over slightly older technology but even those advantages are insufficient to justify the expenses required to make the transition necessary to exploit any of those advantages.

As a practical matter, organizations cannot simply abandon all of their existing technological systems every time new technologies become available. Every such change entails capital investment, training and retraining personnel, and (often) hiring new personnel to implement the transition or provide the necessary training for its implementation to be successful. By contrast, smaller upstart companies often have the luxury of implementing the latest technologies available at the time of their inception precisely because they are starting from scratch and do not have to consider their previous expenses on and commitment to older technologies.

3) How is technology in operations affecting competition at the worldwide level?

Technological innovations have been tremendously important to global competition. Real-time RFID-based information and tracking systems in particular have allowed companies to streamline their operations and expenses by tailoring supply and even production to consumer demand. Furthermore, as operations (in general) become more and more capable of being fulfilled mechanically, that allows reductions in personnel previously required to accomplish tasks now performed mechanically and automatically.

4) What are pros and cons associated with outsourcing a number of supply chain activities?

The most obvious benefit of outsourcing supply chain activities would be the reduced costs associated with using overseas labor for tasks ordinarily performed by much higher paid domestic employees. One potential negative associated with outsourcing would be less direct control and oversight over operations. Another potential negative would be the bad publicity resulting from any ethical violations overseas or from the use of foreign workers whose conditions of employment in their home countries falls very short of those required by law domestically.