How USD Professor David Pyke Is Challenging Business Norms
The global economy has been devastated by the coronavirus as millions of people have lost jobs or been furloughed. To return to some semblance of normalcy, healthcare experts have established a goal of fast, widespread testing for the presence of the virus and of antibodies. Unfortunately, many of the chemicals, materials and components required for the tests and testing equipment have experienced severe supply shortages, partly due to exploding demand, but also due to past decisions to outsource to low cost countries.
David Pyke, PhD, has crafted insights to help professionals as they navigate global sourcing decisions and other global business situations. The professor of operations management at the University of San Diego Knauss School of Business holds a deep knowledge and professional background in operations and supply chain management. He has consulted for major organizations, such as Accenture and Home Depot, and co-authored a book that has served master’s and PhD students across the globe. Pyke’s research has illuminated new viewpoints and perspectives that continue to prove valuable to professionals today.
Successful Outsourcing
Outsourcing has been a historically controversial topic in the business community. If a major firm or corporation chooses to cut costs by laying off employees and outsourcing their responsibilities to lower-wage workers in other countries, it may face blowback from the public, policymakers and current and former employees.
Some firms may anticipate and acknowledge these risks but choose to proceed with outsourcing anyway. In a report titled “Shanghai or Charlotte? The Decision to Outsource to China and Other Low Cost Countries,” Pyke notes that focusing only on cost reductions is the most common pitfall firms make when outsourcing, as it can lead to unexpected problems such as late deliveries, poor product quality and challenges associated with international negotiations. Pyke’s research shows that while outsourcing might make operations cheaper on paper, the potential issues from poor planning may outweigh the presumed cost benefits.
In response, Pyke developed a framework that can help firms effectively determine if outsourcing would be beneficial — and if so, assist them in preparing for the transition. This framework includes a corporate strategy review (does outsourcing align with the goals of the business?), operations strategy review (how will outsourcing impact quality, delivery and flexibility in addition to cost?), cost model (what are the easily quantifiable and soft/interpersonal costs?), and risk factor examination (what are the potentially unseen pitfalls associated with this decision?).
The coronavirus pandemic has brought the risk factors into sharp relief and likely will force many firms to reevaluate their future outsourcing decisions. Pyke’s research provides these firms with a structured, strategic approach so they can avoid narrow and potentially dangerous outsourcing decisions.
Aviation Industry
Airline pricing adheres to a few basic truths. Ticket prices tend to be higher on the weekends or around the holidays. Costs of seat upgrades and amenities can vary depending on the airline. Longer flights to remote destinations often make travel more expensive. Airlines’ decisions about the size of aircraft they fly, and the frequency of flights on a given route, are less well understood.
Along with co-authors Soheil Sibdari and Iman Mohammadian, Pyke conducted research and developed new insights regarding these capacity decisions, examining factors such as jet fuel cost, overall airline industry passenger demand, and the national unemployment rate. Their study confirmed our understanding that increases in jet fuel cost and unemployment generally decrease overall passenger demand. They also found that increased passenger demand is associated with smaller aircraft and more frequent flights, while higher fuel costs are associated with larger aircraft and less frequent flights.
“It is clear that fuel costs are critical to airlines because of the high percentage of operating costs they represent,” the researchers note. Pyke’s research helped show that fluctuations in fuel prices also have a significant impact on airlines’ success. Additionally, Pyke and his fellow researchers argue that airlines can become more profitable by making smarter, integrated decisions about flight frequencies, aircraft sizes and airfares. Airlines could use these insights to make strategic decisions in response to changes in variables such as jet fuel costs and passenger demand, which may help them to generate more profit and revenue.
Looking Forward in Business
Pyke’s research has delved into multiple facets of operations and supply chain management across a range of industries. If there is a prevalent common factor among his diverse body of work, though, it’s the willingness to question what may be preconceived truths or widely accepted knowledge of how firms and industries function. By revealing new insights about issues such as airline pricing and profitability, and the unanticipated consequences of outsourcing, Pyke has become a thought leader in operations management.
The University of San Diego School of Business is home to Professor David Pyke, as well as other talented and forward-thinking business professionals and academics. Pyke’s research has numerous real-world applications. Individuals and organizations, from lawmakers to major airlines, can develop strategies to improve their operations and efficiency thanks to his insights. Students who study with Pyke and other progressive educators at the University of San Diego Knauss School of Business will be prepared to challenge conventional wisdom and make more informed decisions throughout their careers.
David Pyke is a professor of operations and supply chain management at the University of San Diego's Knauss School of Business. He was dean of the School of Business from 2008 until 2015, leading the school to a significant presence in international rankings.