Operations Management 11th Edition by Jay Heizer – Test Bank

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INSTANT DOWNLOAD COMPLETE TEST BANK WITH ANSWERS

 

Operations Management 11th Edition by Jay Heizer – Test Bank

 

Sample  Questions

 

Operations Management, 11e (Heizer/Render)

Chapter 6  Managing Quality

 

True/False

 

1) Managers at Arnold Palmer Hospital take quality so seriously that the hospital typically is a national leader in several quality areas–so that continuous improvement is no longer necessary.

Answer:  FALSE

Diff: 2

Topic:  Global company profile

Objective:  LO6-1

 

2) An improvement in quality must necessarily increase costs.

Answer:  FALSE

Diff: 1

Topic:  Quality and strategy

Objective:  LO6-1

 

3) Security is the determinant of service quality that means freedom from danger, risk, or doubt.

Answer:  TRUE

Diff: 2

Topic:  TQM in services

Objective:  no LO

 

4) The definition of quality adopted by The American Society for Quality is a customer-oriented definition.

Answer:  TRUE

Diff: 1

Topic:  Defining quality

Objective:  LO6-1

 

5) Conforming to standards is the focus of the product-based definition of quality.

Answer:  FALSE

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

6) Internal failure costs are associated with scrap, rework, and downtime.

Answer:  TRUE

Diff: 1

Topic:  Defining quality

Objective:  LO6-1

 

7) Philip Crosby is credited with both of these quality catch-phrases: “quality is free” and “zero defects.”

Answer:  TRUE

Diff: 1

Topic:  Defining quality

Objective:  LO6-1

8) Deming’s writings on quality tend to focus on the customer and on fitness for use, unlike Juran’s work that is oriented toward meeting specifications.

Answer:  FALSE

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

9) Improved quality can increase profitability via flexible pricing.

Answer:  TRUE

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

10) ISO 9000 has evolved from a set of quality assurance standards toward a quality management system.

Answer:  TRUE

Diff: 2

Topic:  International quality standards

Objective:  LO6-2

 

11) Quality is mostly the business of the quality control staff, not ordinary employees.

Answer:  FALSE

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

12) TQM is important because quality influences all of the ten decisions made by operations managers.

Answer:  TRUE

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

13) The phrase Six Sigma has two meanings. One is statistical, referring to an extremely high process capability; the other is a comprehensive system for achieving and sustaining business success.

Answer:  TRUE

Diff: 2

Topic:  Total quality management

Objective:  LO6-3

14) Continuous improvement is based on the philosophy that every aspect of an operation can be improved.

Answer:  TRUE

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

15) Kaizen is similar to TQM in that both are focused on continuous improvement.

Answer:  TRUE

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

16) The Japanese use the term “poka-yoke” to refer to continuous improvement.

Answer:  FALSE

Diff: 2

Topic:  Total quality management

AACSB:  Multicultural and Diversity

Objective:  LO6-1

 

17) Quality circles empower employees to improve productivity by finding solutions to work-related problems in their work area.

Answer:  TRUE

Diff: 2

Topic:  Total quality management

AACSB:  Communication

Objective:  LO6-1

 

18) Benchmarking requires the comparison of your firm to other organizations; it is not appropriate to benchmark by comparing one of your divisions to another of your divisions.

Answer:  FALSE

Diff: 2

Topic:  Total quality management

Objective:  LO6-4

 

19) Line employees need the knowledge of TQM tools.

Answer:  TRUE

Diff: 1

Topic:  Total quality management

Objective:  LO6-1

 

20) One of the ways that Just-In-Time (or JIT) influences quality is that by reducing inventory, bad quality is exposed.

Answer:  TRUE

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

21) The quality loss function indicates that costs related to poor quality are low as long as the product is within acceptable specification limits.

Answer:  FALSE

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

22) Pareto charts are a graphical way of identifying the few critical items from the many less important ones.

Answer:  TRUE

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

23) A cause-and-effect diagram helps identify the source of a problem.

Answer:  TRUE

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

24) Source inspection is inferior to inspection before costly operations.

Answer:  FALSE

Diff: 2

Topic:  The role of inspection

Objective:  LO6-5

 

25) Of the several determinants of service quality, access is the one that relates to keeping customers informed in language they can understand.

Answer:  FALSE

Diff: 2

Topic:  TQM in services

Objective:  LO6-5

 

26) High-quality products and services are the most profitable.

Answer:  TRUE

Diff: 1

Topic:  Defining quality

Objective:  LO6-1

 

Multiple Choice

 

1) Which of the following statements regarding Arnold Palmer Hospital is false?

  1. A) The hospital uses a wide range of quality management techniques.
  2. B) The culture of quality at the hospital includes employees at all levels.
  3. C) The hospital scores very highly in national studies of patient satisfaction.
  4. D) The hospital’s high quality is measured by low readmission rates, not patient satisfaction.
  5. E) The design of patient rooms, even wall colors, reflects the hospital’s culture of quality.

Answer:  D

Diff: 2

Topic:  Global company profile

Objective:  no LO

 

2) Arnold Palmer Hospital uses which of the following quality management techniques?

  1. A) Pareto charts
  2. B) flowcharts
  3. C) benchmarking
  4. D) Just-in-Time
  5. E) The hospital uses all of the above techniques.

Answer:  E

Diff: 1

Topic:  Global company profile

Objective:  no LO

3) Companies with the highest levels of quality are almost how many times more productive than their competitors with the lowest quality levels?

  1. A) 2
  2. B) 3
  3. C) 4
  4. D) 5
  5. E) None of the above, quality has no impact on productivity (units/labor hr.).

Answer:  D

Diff: 2

Topic:  Quality and strategy

Objective:  LO6-1

 

4) A successful quality strategy features which of the following steps?

  1. A) organization environment that fosters quality
  2. B) understanding the principles of quality
  3. C) engaging employees in the necessary activities for quality implementation
  4. D) A and C
  5. E) A, B, and C

Answer:  E

Diff: 2

Topic:  Quality and strategy

Objective:  LO6-1

 

5) Which of the following statements best describes the relationship between quality management and product strategy?

  1. A) Product strategy is set by top management; quality management is an independent activity.
  2. B) Quality management is important to the low-cost product strategy, but not to the response or differentiation strategies.
  3. C) High quality is important to all three strategies, but it is not a critical success factor.
  4. D) Managing quality helps build successful product strategies.
  5. E) Companies with the highest measures of quality are no more productive than other firms.

Answer:  D

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

6) Quality “lies in the eyes of the beholder” is

  1. A) an unrealistic definition of quality
  2. B) a user-based definition of quality
  3. C) a manufacturing-based definition of quality
  4. D) a product-based definition of quality
  5. E) the definition proposed by the American Society for Quality

Answer:  B

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

7) “Making it right the first time” is

  1. A) an unrealistic definition of quality
  2. B) a user-based definition of quality
  3. C) a manufacturing-based definition of quality
  4. D) a product-based definition of quality
  5. E) the definition proposed by the American Society for Quality

Answer:  C

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

8) Three broad categories of definitions of quality are

  1. A) product quality, service quality, and organizational quality
  2. B) user-based, manufacturing-based, and product-based
  3. C) internal, external, and prevention
  4. D) low-cost, response, and differentiation
  5. E) Pareto, Shewhart, and Deming

Answer:  B

Diff: 1

Topic:  Defining quality

Objective:  LO6-1

 

9) According to the manufacturing-based definition of quality,

  1. A) quality is the degree of excellence at an acceptable price and the control of variability at an acceptable cost
  2. B) quality depends on how well the product fits patterns of consumer preferences
  3. C) even though quality cannot be defined, you know what it is
  4. D) quality is the degree to which a specific product conforms to standards
  5. E) quality lies in the eyes of the beholder

Answer:  D

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

10) The role of quality in limiting a firm’s product liability is illustrated by

  1. A) ensuring that contaminated products such as impure foods do not reach customers
  2. B) ensuring that products meet standards such as those of the Consumer Product Safety Act
  3. C) designing safe products to limit possible harm to consumers
  4. D) using processes that make products as safe or as durable as their design specifications call for
  5. E) All of the above are valid.

Answer:  E

Diff: 1

Topic:  Defining quality

AACSB:  Ethical Reasoning

Objective:  LO6-1

11) Which of the following is not one of the major categories of costs associated with quality?

  1. A) prevention costs
  2. B) appraisal costs
  3. C) internal failures
  4. D) external failures
  5. E) None of the above; they are all major categories of costs associated with quality.

Answer:  E

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

12) All of the following costs are likely to decrease as a result of better quality except

  1. A) customer dissatisfaction costs
  2. B) inspection costs
  3. C) scrap costs
  4. D) warranty and service costs
  5. E) maintenance costs

Answer:  E

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

13) Quality can improve profitability by reducing costs.  Which of the following is not an aspect of reduced costs by quality improvements?

  1. A) flexible pricing
  2. B) increased productivity
  3. C) lower rework and scrap costs
  4. D) lower warranty costs
  5. E) All of the above are aspects of reduced costs by quality improvements.

Answer:  A

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

14) Which of the four major categories of quality costs is particularly hard to quantify?

  1. A) prevention costs
  2. B) appraisal costs
  3. C) internal failure costs
  4. D) external failure costs
  5. E) None is hard to quantify.

Answer:  D

Diff: 2

Topic:  Defining quality

Objective:  no LO

15) Which of the following statements is not true?

  1. A) Self-promotion is not a substitute for quality products.
  2. B) Inferior products harm a firm’s profitability and a nation’s balance of payments.
  3. C) Product liability transfers from the manufacturer to the retailer once the retailer accepts delivery of the product.
  4. D) Quality–be it good or bad–will show up in perceptions about a firm’s new products, employment practices, and supplier relations.
  5. E) Legislation such as the Consumer Product Safety Act sets and enforces product standards by banning products that do not reach those standards.

Answer:  C

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

16) “Employees cannot produce goods that on average exceed the quality of what the process is capable of producing” expresses a basic element in the writings of

  1. A) Vilfredo Pareto
  2. B) Armand Feigenbaum
  3. C) Joseph M. Juran
  4. D) W. Edwards Deming
  5. E) Philip B. Crosby

Answer:  D

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

17) “Quality Is Free,” meaning that the costs of poor quality have been understated, is the work of

  1. A) W. Edwards Deming
  2. B) Joseph M. Juran
  3. C) Philip B. Crosby
  4. D) Crosby, Stills, and Nash
  5. E) Armand Feigenbaum

Answer:  C

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

18) Subaru’s green plant is an example of the application of

  1. A) ISO 9000
  2. B) ISO 14000
  3. C) TQM
  4. D) ISO 24700
  5. E) SPC

Answer:  B

Diff: 2

Topic:  International quality standards

Objective:  LO6-2

19) The philosophy of zero defects is

  1. A) the result of Deming’s research
  2. B) unrealistic
  3. C) prohibitively costly
  4. D) an ultimate goal; in practice, 1 to 2% defects is acceptable
  5. E) consistent with the commitment to continuous improvement

Answer:  E

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

 

20) Based on his 14 Points, Deming is a strong proponent of

  1. A) inspection at the end of the production process
  2. B) an increase in numerical quotas to boost productivity
  3. C) looking for the cheapest supplier
  4. D) training and knowledge
  5. E) all of the above

Answer:  D

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

 

21) Stakeholders who are affected by the production and marketing of poor quality products include

  1. A) stockholders, employees, and customers
  2. B) suppliers and creditors, but not distributors
  3. C) only stockholders, creditors, and owners
  4. D) suppliers and distributors, but not customers
  5. E) only stockholders and organizational executives and managers

Answer:  A

Diff: 2

Topic:  Defining quality

AACSB:  Ethical Reasoning

Objective:  LO6-1

 

22) PDCA, developed by Shewhart, stands for which of the following?

  1. A) Plan-Do-Check-Act
  2. B) Plan-Develop-Check-Accept
  3. C) Problem-Develop Solution- Check- Act
  4. D) Problem-Do-Continue-Act
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

23) PDCA is most often applied in regard to which aspect of TQM?

  1. A) Six Sigma
  2. B) Employee Empowerment
  3. C) Continuous Improvement
  4. D) Benchmarking
  5. E) JIT

Answer:  C

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

 

24) A Three Sigma program has how many defects per million?

  1. A) 34
  2. B) 3
  3. C) 3 times the standard deviation
  4. D) 2700
  5. E) 1500

Answer:  D

Diff: 2

Topic:  Total quality management

AACSB:  Analytic Skills

Objective:  LO6-3

 

25) A Six Sigma program has how many defects per million?

  1. A) 3.4
  2. B) 34
  3. C) 1000
  4. D) 6 times the standard deviation
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Total quality management

AACSB:  Analytic Skills

Objective:  LO6-3

 

26) A hospital benchmarked against Ferrari Racing in an effort to

  1. A) improve patient handoff quality
  2. B) increase surgery prep time
  3. C) lengthen surgery duration
  4. D) reduce the number of doctors
  5. E) all of the above

Answer:  A

Diff: 2

Topic:  Total quality management

Objective:  LO6-4

27) One of Britain’s largest children’s hospitals working with Ferrari Racing is an example of

  1. A) internal benchmarking
  2. B) external benchmarking
  3. C) Taguchi concepts
  4. D) employee empowerment
  5. E) corporate responsibility

Answer:  B

Diff: 2

Topic:  Total quality management

Objective:  LO6-4

 

28) Regarding the quality of design, production, and distribution of products, an ethical requirement for management is to

  1. A) determine whether any of the organization’s stakeholders are violated by poor quality products
  2. B) gain ISO 14000 certification for the organization
  3. C) obtain a product safety certificate from the Consumer Product Safety Commission
  4. D) have the organization’s legal staff write disclaimers in the product instruction booklets
  5. E) compare the cost of product liability to the external failure cost

Answer:  A

Diff: 2

Topic:  Defining quality

AACSB:  Ethical Reasoning

Objective:  LO6-1

 

29) If 1 million passengers pass through the St. Louis Airport with checked baggage each month, a successful Six Sigma program for baggage handling would result in how many passengers with misplaced luggage?

  1. A) 3.4
  2. B) 6.0
  3. C) 34
  4. D) 2700
  5. E) 6 times the monthly standard deviation of passengers

Answer:  A

Diff: 2

Topic:  Total quality management

AACSB:  Analytic Skills

Objective:  LO6-3

 

30) Which of the following is true about ISO 14000 certification?

  1. A) It is not a prerequisite for ISO 9000 certification.
  2. B) It deals with environmental management.
  3. C) It offers a good systematic approach to pollution prevention.
  4. D) One of its core elements is life-cycle assessment.
  5. E) All of the above are true.

Answer:  E

Diff: 2

Topic:  International quality standards

Objective:  LO6-2

31) Suppose that a firm has historically been achieving “three-sigma” quality.  If the firm later changes its quality management practices such that it begins to achieve “six-sigma” quality, which of the following phenomena will result?

  1. A) The average number of defects will be cut in half.
  2. B) The specification limits will be moved twice as far from the mean.
  3. C) The average number of defects will be cut by 99.9997%.
  4. D) The average number of defects will be cut by 99.87%.
  5. E) The average number of defects will be cut by 99.73%.

Answer:  D

Diff: 3

Topic:  Total quality management

AACSB:  Analytic Skills

Objective:  LO6-3

 

32) To become ISO 9000 certified, organizations must

  1. A) document quality procedures
  2. B) have an onsite assessment
  3. C) have an ongoing series of audits of their products or service
  4. D) all of the above
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  International quality standards

Objective:  LO6-2

 

33) Total quality management emphasizes

  1. A) the responsibility of the quality control staff to identify and solve all quality-related problems
  2. B) a commitment to quality that goes beyond internal company issues to suppliers and customers
  3. C) a system where strong managers are the only decision makers
  4. D) a process where mostly statisticians get involved
  5. E) ISO 14000 certification

Answer:  B

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

34) A successful TQM program incorporates all of the following except

  1. A) continuous improvement
  2. B) employee involvement
  3. C) benchmarking
  4. D) centralized decision-making authority
  5. E) None of the above; a successful TQM program incorporates all of the above.

Answer:  D

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

35) “Kaizen” is a Japanese term meaning

  1. A) a foolproof mechanism
  2. B) just-in-time (JIT)
  3. C) a fishbone diagram
  4. D) setting standards
  5. E) continuous improvement

Answer:  E

Diff: 1

Topic:  Total quality management

AACSB:  Multicultural and Diversity

Objective:  LO6-1

 

36) Which of the following statements regarding “Six Sigma” is true?

  1. A) The term has two distinct meanings–one is statistical; the other is a comprehensive quality system.
  2. B) Six Sigma means that about 94 percent of a firm’s output is free of defects.
  3. C) The Six Sigma program was developed by Toyota in the 1970’s.
  4. D) The Six Sigma program is for manufacturing firms, and is not applicable to services.
  5. E) Six Sigma certification is granted by the International Standards Organization (ISO).

Answer:  A

Diff: 2

Topic:  Total quality management

Objective:  LO6-3

 

37) Members of quality circles are

  1. A) paid according to their contribution to quality
  2. B) external consultants designed to provide training in the use of quality tools
  3. C) always machine operators
  4. D) all trained to be facilitators
  5. E) None of the above; all of the statements are false.

Answer:  E

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

 

38) Techniques for building employee empowerment include

  1. A) building communication networks that include employees
  2. B) developing open, supportive supervisors
  3. C) moving responsibility from both managers and staff to production employees
  4. D) building high-morale organizations
  5. E) All of the above are techniques for employee empowerment.

Answer:  E

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

39) Building high-morale organizations and building communication networks that include employees are both elements of

  1. A) ISO 9000 certification
  2. B) Six Sigma certification
  3. C) employee empowerment
  4. D) Taguchi methods
  5. E) the tools of TQM

Answer:  C

Diff: 2

Topic:  Total quality management

AACSB:  Communication

Objective:  LO6-5

 

40) The process of identifying other organizations that are best at some facet of your operations and then modeling your organization after them is known as

  1. A) continuous improvement
  2. B) employee empowerment
  3. C) benchmarking
  4. D) copycatting
  5. E) patent infringement

Answer:  C

Diff: 2

Topic:  Total quality management

Objective:  LO6-4

 

41) ISO 9000 seeks standardization in terms of

  1. A) products
  2. B) production procedures
  3. C) suppliers’ specifications
  4. D) procedures to manage quality
  5. E) all of the above

Answer:  D

Diff: 2

Topic:  International quality standards

Objective:  LO6-2

 

42) Costs of dissatisfaction, repair costs, and warranty costs are elements of cost in the

  1. A) Taguchi Loss Function
  2. B) Pareto chart
  3. C) ISO 9000 Quality Cost Calculator
  4. D) process chart
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

43) A quality loss function includes all of the following costs except

  1. A) the cost of scrap and repair
  2. B) the cost of customer dissatisfaction
  3. C) inspection, warranty, and service costs
  4. D) sales costs
  5. E) costs to society

Answer:  D

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

44) Pareto charts are used to

  1. A) identify inspection points in a process
  2. B) outline production schedules
  3. C) organize errors, problems, or defects
  4. D) show material flow
  5. E) all of the above

Answer:  C

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

45) The “four Ms” of cause-and-effect diagrams are

  1. A) material, machinery/equipment, manpower, and methods
  2. B) material, methods, men, and mental attitude
  3. C) named after four quality experts
  4. D) material, management, manpower, and motivation
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

46) Among the tools of TQM, the tool ordinarily used to aid in understanding the sequence of events through which a product travels is a

  1. A) Pareto chart
  2. B) flowchart
  3. C) check sheet
  4. D) Taguchi map
  5. E) poka-yoke

Answer:  B

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

47) The process improvement technique that sorts the “vital few” from the “trivial many” is

  1. A) Taguchi analysis
  2. B) Pareto analysis
  3. C) benchmarking
  4. D) Deming analysis
  5. E) Yamaguchi analysis

Answer:  B

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

48) A production manager at a pottery factory has noticed that about 70 percent of defects result from impurities in raw materials, 15 percent result from human error, 10 percent from machine malfunctions, and 5 percent from a variety of other causes. This manager is most likely using

  1. A) a Pareto chart
  2. B) a scatter diagram
  3. C) a Taguchi loss function
  4. D) a cause-and-effect diagram
  5. E) a flowchart

Answer:  A

Diff: 1

Topic:  Tools of TQM

Objective:  LO6-6

 

49) A customer service manager at a retail clothing store has collected numerous customer complaints from the forms they fill out on merchandise returns. To analyze trends or patterns in these returns, she has organized these complaints into a small number of sources or factors. This is most closely related to the __________ tool of TQM.

  1. A) Taguchi loss function
  2. B) cause-and-effect diagram
  3. C) scatter diagram
  4. D) histogram
  5. E) process control chart

Answer:  B

Diff: 1

Topic:  Tools of TQM

Objective:  LO6-6

 

50) A manager tells her production employees, “It’s no longer good enough that your work fall anywhere within the specification limits. I need your work to be as close to the target value as possible.” Her thinking is reflective of

  1. A) internal benchmarking
  2. B) Six Sigma
  3. C) ISO 9000
  4. D) Taguchi concepts
  5. E) process control charts

Answer:  D

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

51) A fishbone diagram is also known as a

  1. A) cause-and-effect diagram
  2. B) poka-yoke diagram
  3. C) Kaizen diagram
  4. D) Kanban diagram
  5. E) Taguchi diagram

Answer:  A

Diff: 1

Topic:  Tools of TQM

Objective:  LO6-6

 

52) If a sample of parts is measured and the mean of the measurements is outside the control limits, the process is

  1. A) in control, but not capable of producing within the established control limits
  2. B) out of control and the process should be investigated for assignable variation
  3. C) within the established control limits with only natural causes of variation
  4. D) monitored closely to see if the next sample mean will also fall outside the control limits
  5. E) none of the above

Answer:  B

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

53) A quality circle holds a brainstorming session and attempts to identify the factors responsible for flaws in a product. Which tool do you suggest they use to organize their findings?

  1. A) Ishikawa diagram
  2. B) Pareto chart
  3. C) process chart
  4. D) control charts
  5. E) activity chart

Answer:  A

Diff: 2

Topic:  Tools of TQM

AACSB:  Communication

Objective:  LO6-6

 

54) When a sample measurement falls inside the control limits, it means that

  1. A) each unit manufactured is good enough to sell
  2. B) the process limits cannot be determined statistically
  3. C) the process output exceeds the requirements
  4. D) if there is no other pattern in the samples, the process is in control
  5. E) the process output does not fulfill the requirements

Answer:  D

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

55) Which of the following is false regarding control charts?

  1. A) Values above the upper control limits always imply that the product’s quality is exceeding expectations.
  2. B) Control charts are built so that new data can be quickly compared to past performance data.
  3. C) Control charts graphically present data.
  4. D) Control charts plot data over time.
  5. E) None of the above is false.

Answer:  A

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

56) The goal of inspection is to

  1. A) detect a bad process immediately
  2. B) add value to a product or service
  3. C) correct deficiencies in products
  4. D) correct system deficiencies
  5. E) all of the above

Answer:  A

Diff: 2

Topic:  The role of inspection

Objective:  LO6-5

 

57) Which of the following is not a typical inspection point?

  1. A) upon receipt of goods from your supplier
  2. B) when production or service is complete
  3. C) before the product is shipped to the customer
  4. D) at the supplier’s plant while the supplier is producing
  5. E) after a costly process

Answer:  E

Diff: 2

Topic:  The role of inspection

Objective:  LO6-5

 

58) A good description of “source inspection” is inspecting

  1. A) materials upon delivery by the supplier
  2. B) the goods at the production facility before they reach the customer
  3. C) the design specifications
  4. D) goods at the supplier’s plant
  5. E) one’s own work

Answer:  E

Diff: 2

Topic:  The role of inspection

Objective:  LO6-5

59) “Poka-yoke” is the Japanese term for

  1. A) card
  2. B) foolproof
  3. C) continuous improvement
  4. D) fishbone diagram
  5. E) just-in-time production

Answer:  B

Diff: 2

Topic:  The role of inspection

AACSB:  Multicultural and Diversity

Objective:  LO6-5

 

60) What refers to training and empowering frontline workers to solve a problem immediately?

  1. A) just-in-time
  2. B) poka-yoke
  3. C) benchmarking
  4. D) kaizen
  5. E) service recovery

Answer:  E

Diff: 1

Topic:  TQM in services

Objective:  LO6-5

 

61) A recent consumer survey conducted for a car dealership indicates that, when buying a car, customers are primarily concerned with the salesperson’s ability to explain the car’s features, the salesperson’s friendliness, and the dealer’s honesty. The dealership should be especially concerned with which determinants of service quality?

  1. A) communication, courtesy, and credibility
  2. B) competence, courtesy, and security
  3. C) competence, responsiveness, and reliability
  4. D) communication, responsiveness, and reliability
  5. E) understanding/knowing customer, responsiveness, and reliability

Answer:  A

Diff: 2

Topic:  TQM in services

AACSB:  Communication

Objective:  LO6-5

 

62) Marketing issues such as advertising, image, and promotion are important to quality because

  1. A) they define for consumers the tangible elements of a service
  2. B) the intangible attributes of a product (including any accompanying service) may not be defined by the consumer
  3. C) they educate consumers on how to use the product
  4. D) they make the product seem more valuable than it really is
  5. E) they raise expenses and therefore decrease profitability

Answer:  B

Diff: 2

Topic:  TQM in services

Objective:  LO6-5

63) Which of the determinants of service quality involves having the customer’s best interests at heart?

  1. A) access
  2. B) courtesy
  3. C) credibility
  4. D) responsiveness
  5. E) tangibles

Answer:  C

Diff: 2

Topic:  TQM in services

Objective:  LO6-5

 

64) Which of the determinants of service quality involves performing the service right the first time?

  1. A) access
  2. B) courtesy
  3. C) credibility
  4. D) reliability
  5. E) responsiveness

Answer:  D

Diff: 2

Topic:  TQM in services

Objective:  LO6-5

 

Short Answer

 

1) Arnold Palmer Hospital uses __________ to seek new ways to reduce readmission rates.

Answer:  continuous improvement

Diff: 1

Topic:  Global company profile

Objective:  no LO

 

2) __________ costs result from production of defective parts or services before delivery to the customer.

Answer:  Internal failure

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

3) __________ is a set of environmental standards developed by the International Standards Organization.

Answer:  ISO 14000

Diff: 2

Topic:  Defining quality

AACSB:  Ethical Reasoning

Objective:  LO6-1

 

4) The work by __________ regarding how people learn from each other’s successes led to the field of cross-functional teamwork.

Answer:  Armand Feigenbaum

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

5) Not only customers, but stockholders, suppliers, and others, are among the __________ whose values must be protected in making ethical decisions concerning the quality of products.

Answer:  stakeholders

Diff: 1

Topic:  Defining quality

AACSB:  Ethical Reasoning

Objective:  LO6-1

 

6) __________ is the Japanese word for the ongoing process of incremental improvement.

Answer:  Kaizen

Diff: 2

Topic:  Total quality management

AACSB:  Multicultural and Diversity

Objective:  LO6-1

 

7) Enlarging employee jobs so that the added responsibility and authority is moved to the lowest level possible in the organization is called __________.

Answer:  employee empowerment

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

8) Respect for __________ is a cornerstone of continuous improvement.

Answer:  people

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

9) __________ selects a demonstrated standard of performance that represents the very best performance for a process or activity.

Answer:  Benchmarking

Diff: 2

Topic:  Total quality management

Objective:  LO6-4

 

10) A group of employees that meet on a regular basis with a facilitator to solve work-related problems in their work area is a(n) __________.

Answer:  quality circle

Diff: 1

Topic:  Total quality management

AACSB:  Communication

Objective:  LO6-5

 

11) __________ diagrams use a schematic technique to discover possible locations of quality problems.

Answer:  Cause-and-effect, or fishbone or Ishikawa

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

12) __________ are graphical presentations of data over time that show upper and lower control limits for processes we want to control.

Answer:  Control charts

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

13) __________ is doing the job properly with the operator ensuring that this is so.

Answer:  Source inspection

Diff: 2

Topic:  The role of inspection

Objective:  LO6-5

 

14) Identify the four costs of quality. Which one is hardest to evaluate?  Explain.

Answer:  The four costs are internal, external, prevention, and appraisal. The hardest to estimate are external costs, or costs that occur after delivery of defective part or services.  These costs are very hard to quantify.

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

15) State the American Society for Quality’s definition of quality. Of the three “flavors” or categories of quality definitions, which type is it? Explain.

Answer:  Quality is the totality of features and characteristics of a product or service that bear on its ability to satisfy stated or implied needs. This is user-based, as evidenced by the reference to needs, not to specifications or ingredients.

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

16) Quality has at least three categories of definitions; identify them. Provide a brief explanation of each.

Answer:  The three categories of quality are user-based (in the eyes of the beholder), manufacturing-based (conforming to standards), and product-based (measurable content of product).

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

17) Identify the five steps of DMAIC.

Answer:  (1) Define the project’s purpose, scope, and outputs and then identify the required process information, keeping in mind the customer’s definition of quality; (2) Measure the process and collect data; (3) Analyze the data, ensuring repeatability (the results can be duplicated), and reproducibility (others get the same result); (4) Improve, by modifying or redesigning, existing processes and procedures; and (5) Control the new process to make sure performance levels are maintained.

Diff: 3

Topic:  Total quality management

Objective:  LO6-1

18) In a sentence or two, summarize the contribution of Philip Crosby to quality management.

Answer:  In his book “Quality Is Free,” Crosby pointed out that the costs of poor quality are understated, and that understatement made it easier for firms to accept low quality results. He also promoted “zero defects” and doing the job right the first time.

Diff: 2

Topic:  Defining quality

Objective:  LO6-1

 

19) Identify the five core elements of ISO 14000.

Answer:  The five core elements of ISO 14000 are environmental management, auditing, performance evaluation, labeling, and life cycle assessment.

Diff: 2

Topic:  International quality standards

Objective:  LO6-2

 

20) Describe how ISO 9000 has evolved in the past several years.

Answer:  The standards have become more of a quality management system.  These changes came about primarily through the December 2000 revisions. They emphasize top management leadership and customer requirements and satisfaction, while documented procedures now receive less emphasis.

Diff: 2

Topic:  International quality standards

Objective:  LO6-2

 

21) What steps can be taken to develop benchmarks?

Answer:  The steps are: determine what to benchmark, form a benchmarking team, identify benchmarking partners, collect and analyze benchmarking information, and take action to match or exceed the benchmark.

Diff: 2

Topic:  Total quality management

Objective:  LO6-4

 

22) Explain how just-in-time processes relate to the quality of an organization’s outputs.

Answer:  JIT relates to quality by cutting costs of quality, by lowering waste and scrap; by improving quality by shortening the time between error detection and error correction; and better quality means less inventory and better JIT system.

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

 

23) What is the difference between conforming quality and target-oriented quality?

Answer:  With conforming quality, any unit that meets specifications is acceptable, whether it is on the edges or center of the specification range. Target-oriented quality treats output as better the closer it is to exactly what the customer wants.

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

24) Identify the major concepts of TQM.

Answer:  The major concepts of total quality management are continuous improvement, Six Sigma, employee empowerment, benchmarking, just-in-time (JIT), Taguchi concepts, and knowledge of TQM tools.

Diff: 2

Topic:  Total quality management

Objective:  LO6-1

 

25) What is the quality loss function (QLF)?

Answer:  The quality loss function identifies all costs connected with poor quality and shows how these costs increase as the product moves away from being exactly what the customer wants.

Diff: 2

Topic:  Total quality management

Objective:  LO6-5

 

26) Explain how a Pareto chart can identify the most important causes of errors in a process.

Answer:  There will generally be some causes with much higher frequencies than others. The frequency plot will clearly show which cause has the highest frequency.

Diff: 2

Topic:  Tools of TQM

Objective:  LO6-6

 

27) How is source inspection related to employee empowerment?

Answer:  Source inspection involves the operator ensuring that the job is done properly. These operators are empowered to self-check their own work. Employees that deal with a system on a daily basis have a better understanding of the system than anyone else, and can be very effective at improving the system.

Diff: 2

Topic:  The role of inspection

Objective:  LO6-5

28) What is a poka-yoke?  Give an example.

Answer:  A poka-yoke is a foolproof device or technique that ensures production of good units every time.  Examples will vary, but include McDonald’s french fry scoop and standard sized bags used to ensure the correct quantity, and prepackaged surgical coverings that contain exactly the items needed for a medical procedure.

Diff: 2

Topic:  The role of inspection

Objective:  LO6-5

 

29) Identify the ten determinants of service quality.  Describe two of them in a sentence or two each.

Answer:  The ten are reliability, responsiveness, competence, access, courtesy, communication, credibility, security, understanding, and tangibles. Descriptions are found in Table 6.5. Here are two examples: Access involves approachability and ease of contact.  Security is the freedom from danger, risk, or doubt.

Diff: 2

Topic:  TQM in services

Objective:  LO6-5

Essay

 

1) Management is concerned that workers create more product defects at the very beginning and end of a work shift than at other times of their eight hour workday. Construct a scatter diagram with the following data, collected last week. Is management justified in its belief?

 

Number of Defects
Monday Tuesday Wednesday Thursday Friday
First hour at work 12 9 6 8 7
Second hour at work 6 5 3 4 5
Third hour at work 5 2 4 3 3
Fourth hour at work 4 0 5 2 3
Fifth hour at work 1 6 2 4 5
Sixth hour at work 4 3 3 2 1
Seventh hour at work 7 4 4 6 3
Eighth hour at work 5 7 8 5 9

 

Answer:

 

 

 

There is fairly convincing evidence that there are more defects in the first and last shift hours than at other times.

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

2) Perform a Pareto analysis on the following information:

 

Reason for unsatisfying stay at hotel Frequency
Unfriendly staff  6
Room not clean  2
Room not ready at check-in  3
No towels at pool 33
No blanket for pull-out sofa  4
Pool water too cold  3
Breakfast of poor quality 16
Elevator too slow or not working 23
Took too long to register  7
Bill incorrect  3
Total 100

 

Answer:

 

 

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

3) Perform a Pareto analysis on the following information:

 

Reason for unsatisfying check-out at store Frequency
Unfriendly cashier 27
Incorrect change  4
Cashier too slow  9
Price check 34
Poorly bagged merchandise  2
Slow receiving check approval  3

 

Answer:

 

 

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

4) Construct a cause-and-effect diagram showing why a student might be dissatisfied with the cafeteria.

Answer:  (Note that answers may vary considerably

 

 

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

5) Pretend that you have just come from a relative’s wedding reception. It didn’t turn out as well as it should have, and the bride’s parents are pretty mad at how things turned out. Use the supplied template to construct a conventional cause-and-effect diagram. Identify twelve sources of defects for the issue “dissatisfied customer of wedding reception caterer.” (Your dozen need not be exactly three per main cause, but should be a balanced treatment.) Categorize each cause onto a main cause. Provide brief support for each of your choices.

 

 

Answer:  Individual responses may vary considerably; some of the variation in responses comes from differing views of what is the caterer’s realm of responsibility, compared to what might be assigned to a wedding planner instead. Material: not enough plates, glassware, utensils; prepared wrong dish; food was cold; ran out of food; food was “bad.” Machinery: air conditioning/heating was broken; room was dirty; room too small; furniture poorly arranged; wedding “props” ugly or shopworn. Method: not on time; overcharged; not enough workers. Manpower: wait staff not properly attired; wait staff not speedy; wait staff not courteous. Responses should comment as necessary to show why a fault lies on a certain main branch; as an example, “cold food” might be interpreted as Method, not Material.

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

 

6) A refrigeration and heating company–one that installs and repairs home central air and heating systems–has asked your advice on how to analyze their service quality. They have logged customer complaints. Here’s a recent sampling. Use the supplied template to construct a conventional cause-and-effect diagram. Place each of the complaints onto a main cause; justify your choice with a brief comment as necessary. 1. “I was overcharged–your labor rates are too high.” 2. “The repairman left trash where he was working.” 3. “You weren’t here when you said you would be. You should call when you must be late.” 4. “Your repairman smoked in my house.”5. “The part you installed is not as good as the factory original.” 6. “Your repairman was here for over two hours, but he wasn’t taking his work seriously.”7. “You didn’t tighten some of the fittings properly–the system’s leaking.” 8. “Your estimate of repair costs was WAY off.” 9. “I called you to do an annual inspection, but you’ve done more–work that I didn’t authorize.”10. “Your mechanic is just changing parts–he doesn’t have a clue what’s really wrong.” 11. “Your bill has only a total–I wanted to see detail billing.” 12. “Your testing equipment isn’t very new–are you sure you’ve diagnosed the problem?”13. “One of the workmen tracked mud into my living room.”

 

 

 

Answer:  Individual responses may vary. A typical set of responses might be Material: item 5. Method: items 1, 3, 8, 9, 11. Machinery: item 12; Manpower: items 2, 4, 6, 7, 10, 13. Items 7, 8, and 11 could be manpower or method.

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

7) Construct a cause and effect diagram for why students arrive to class late.  Include at least three reasons for each of the M’s.

 

 

Answer:  Student responses should look like the above, with the 4 M’s of Manpower, Machinery, Method, and Material listed.  Possible responses include: Manpower- not conditioned to waking up early, I can’t wake up at the same time every day, I stay up late the night before sometimes  Machinery- Car failure, Alarm clock reset from power outage, alarm clock turned off by roommate  Method- forgot to set alarm clock, incorrect alarm clock setting (AM vs PM), I could not find the classroom  Material- (these responses can be overlapped with machine answers to some degree) I wore flip flops so I could not walk fast, I could not find a sweater and did not want to go out in the cold, I lacked the proper materials for walking in the snow/ice.

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

8) A professor teaches two sections of a class, one on MWF for 50 minutes per day and another on T/TH for 75 minutes per day.  Use the following information to construct a scatter diagram with test # on the x-axis and score on the y-axis.  Should the professor argue for a change in the university’s scheduling?

 

MWF Section Test Results             Test #                  T/Th Test Results

75                                                       1                                 82

70                                                       2                                 77

65                                                       3                                 73

65                                                       4                                 70

70                                                       5                                 76

 

Answer:

 

It appears that the T/TH section consistently scores higher than the MWF section.  Perhaps the instructor should ask for MWF to be changed to MW with longer sessions, although the sample size is small.

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

9) Create a Pareto Chart for the following mistakes made in grading an exam.

 

Cause Frequency
Incorrect Sum 35
Question marked wrong was right 3
Question marked right was wrong 4
Partial Credit not consistent 58

 

Answer:

 

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

10) Construct a cause and effect chart for a missed field goal late in a football game with at least three aspects for each M.

Answer:

Responses should include the 4M’s of Manpower, Material, Machine, and Method.

Student responses should fill out a diagram similar to the following.

 

 

 

Possible responses include Manpower- Nervous mindset, Inconsistent offensive line blocking, lack of practice, Material(football)- ball was wet/slippery, ball was too worn/not worn in, ball was over/under inflated  Machine (turf and field goal uprights)- uprights were slanted, uprights were too far away from the field (not positioned correctly), turf was wet/muddy, grass type was not correct  Method- ball kicked too far to left or right, not kicked hard enough, kicker slipped on the kick, kicker did not hit the ball at the correct point, kicker aimed incorrectly.  Other responses are acceptable as long as they mesh with under their associated M.

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

11) A pizza delivery company wants to improve its response time to gain a competitive advantage.  Create a flowchart with 8 unique events from the time the customer calls in to the time the pizza is delivered.

 

 

Answer:  Student responses will vary but should follow a similar pattern.  The flowchart will likely be in a single line, however any pattern is fine so long as the boxes are sequential connected with directional arrows.

Diff: 2

Topic:  Tools of TQM

AACSB:  Analytic Skills

Objective:  LO6-6

Operations Management, 11e (Heizer/Render)

Chapter 7  Process Strategy

 

True/False

 

1) A firm’s process strategy is its approach to transforming resources into goods and services.

Answer:  TRUE

Diff: 1

Topic:  Four process strategies

Objective:  LO7-1

 

2) Intermittent processes are organized around processes.

Answer:  TRUE

Diff: 1

Topic:  Four process strategies

Objective:  LO7-1

 

3) In process-focused facilities, equipment utilization is low.

Answer:  TRUE

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

4) The typical full-service restaurant uses a product-focused process.

Answer:  FALSE

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

5) Harley-Davidson, because it has so many possible combinations of products, utilizes the process strategy of mass customization.

Answer:  FALSE

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

6) A value-stream map includes both (1) inventory quantities, and (2) symbols for customers and suppliers.

Answer:  TRUE

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

 

7) The assembly line is a classic example of a repetitive process.

Answer:  TRUE

Diff: 1

Topic:  Four process strategies

Objective:  LO7-1

8) One essential ingredient of mass customization is modular design.

Answer:  TRUE

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

9) The tool that calculates which process has the lowest cost at any specified production volume is a crossover chart.

Answer:  TRUE

Diff: 2

Topic:  Four process strategies

Objective:  LO7-2

 

10) The term focused processes refers to the quest for increased efficiency, whether in goods or services, that results from specialization.

Answer:  TRUE

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

11) Service blueprinting is a process analysis technique that focuses on the customer and the provider’s interaction with the customer.

Answer:  TRUE

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-4

 

12) Activity times should not be included in a service blueprint.

Answer:  FALSE

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-4

 

13) A process map with the addition of a time axis becomes a process chart.

Answer:  FALSE

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

 

14) Time-function mapping is a flowchart with time added to the horizontal axis.

Answer:  TRUE

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

 

15) Process maps use distance, but not time, to show the movement of material, product, or people through a process.

Answer:  FALSE

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

16) Professional services typically require low levels of labor intensity.

Answer:  FALSE

Diff: 2

Topic:  Special considerations for service process design

Objective:  LO7-4

 

17) An example of the postponement strategy for improving service productivity is having the customer wait until you have sufficient time to serve the customer.

Answer:  FALSE

Diff: 2

Topic:  Special considerations for service process design

Objective:  LO7-4

 

18) Process control is the use of information technology to monitor and control a physical process.

Answer:  TRUE

Diff: 1

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

19) One use of camera-and-computer-based vision systems is to replace humans doing tedious and error-prone visual inspection activities.

Answer:  TRUE

Diff: 1

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

20) Automated storage and retrieval systems are commonly used in distribution facilities of retailers.

Answer:  TRUE

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

21) Flexible manufacturing systems, because of easily changed control programs, are able to perform such tasks as manufacturing one-of-a-kind parts economically.

Answer:  TRUE

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

22) Production technology has had a major impact on services, but as yet there has been little reduction in service labor requirements.

Answer:  FALSE

Diff: 2

Topic:  Technology in services

AACSB:  Use of IT

Objective:  LO7-5

23) Optical checkout scanners and ATMs are examples of technology’s impact on services.

Answer:  TRUE

Diff: 2

Topic:  Technology in services

AACSB:  Use of IT

Objective:  LO7-5

 

24) Successful process redesign focuses on departmental areas where small, continuous improvements can be made.

Answer:  FALSE

Diff: 2

Topic:  Process redesign

Objective:  LO7-5

 

25) Processes can be environmentally friendly and socially responsible while still contributing to profitable strategies.

Answer:  TRUE

Diff: 1

Topic:  Sustainability

AACSB:  Ethical Reasoning

Objective:  LO7-5

 

26) In selecting new equipment and technology, decision-makers look for flexibility–the ability to respond with little penalty in time, cost, or customer value.

Answer:  TRUE

Diff: 2

Topic:  Selection of equipment and technology

Objective:  LO7-5

 

Multiple Choice

 

1) An organization’s process strategy

  1. A) will have long-run impact on efficiency and flexibility of production
  2. B) is the same as its transformation strategy
  3. C) must meet various constraints, including cost
  4. D) is concerned with how resources are transformed into goods and services
  5. E) All of the above are true.

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

2) A job shop is an example of a(n)

  1. A) repetitive process
  2. B) continuous process
  3. C) line process
  4. D) intermittent process
  5. E) specialized process

Answer:  D

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

3) Three types of processes are

  1. A) goods, services, and hybrids
  2. B) manual, automated, and service
  3. C) process focus, repetitive focus, and product focus
  4. D) modular, continuous, and technological
  5. E) input, transformation, and output

Answer:  C

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

4) Which of the following industries is most likely to have low equipment utilization?

  1. A) auto manufacturing
  2. B) commercial baking
  3. C) television manufacturing
  4. D) chemical processing
  5. E) restaurants

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

5) A product-focused process is commonly used to produce

  1. A) high-volume, high-variety products
  2. B) low-volume, high-variety products
  3. C) high-volume, low-variety products
  4. D) low-variety products at either high- or low-volume
  5. E) high-volume products of either high- or low-variety

Answer:  C

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

6) Which one of the following products is most likely made in a job shop environment?

  1. A) rolls of newsprint
  2. B) paper forms
  3. C) television sets
  4. D) cigarettes
  5. E) canned vegetables

Answer:  B

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

7) Which of the following products is likely to be assembled on a repetitive process line?

  1. A) automobiles
  2. B) personal computers
  3. C) dishwashers
  4. D) television sets
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

8) An assembly line is an example of a

  1. A) product-focused process
  2. B) process-focused process
  3. C) repetitive process
  4. D) line process
  5. E) specialized process

Answer:  C

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

9) Arnold Palmer Hospital uses which focus?

  1. A) process
  2. B) repetitive
  3. C) product
  4. D) mass customization
  5. E) A and D

Answer:  A

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

10) One of the similarities between process focus and mass-customization is

  1. A) the volume of outputs
  2. B) the process layout
  3. C) the standard cost
  4. D) the variety of outputs
  5. E) All of the above are similarities

Answer:  D

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

11) Frito-Lay is to __________ focus as Harley Davidson is to __________ focus.

  1. A) pocess, repetitive
  2. B) product, repetitive
  3. C) repetitive, product
  4. D) process, product
  5. E) product, mass customization

Answer:  B

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

12) One of the similarities between repetitive focus and mass customization is

  1. A) the wide variety of outputs
  2. B) module inputs
  3. C) the process layout
  4. D) the standard cost
  5. E) the high volume of outputs

Answer:  B

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

13) Flexible equipment with rapid changeovers is most closely associated with which approach?

  1. A) product
  2. B) process
  3. C) mass customization
  4. D) repetitive
  5. E) A and C

Answer:  C

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

14) Swift movement through the facility is typical of goods in which approach?

  1. A) product
  2. B) process
  3. C) mass customization
  4. D) repetitive
  5. E) A and C

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

15) High fixed costs and low variable costs are typical of which approach?

  1. A) product
  2. B) process
  3. C) mass customization
  4. D) repetitive
  5. E) A and C

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

16) Goods made to order are typical of __________ and __________ approaches while goods made to forecast are typical of __________ and __________ approaches.

  1. A) process, mass customization; repetitive, product
  2. B) product, mass customization; repetitive, process
  3. C) product, process; repetitive, mass customization
  4. D) repetitive, product; mass customization, process
  5. E) repetitive, process; mass customization, product

Answer:  A

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

17) Smooth FM Radio uses a __________ approach when it mixes pre-recorded local segments with its national music blocks.

  1. A) mass customization
  2. B) product focus
  3. C) process focus
  4. D) repetitive focus
  5. E) both D and A

Answer:  A

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

18) Which of the following companies use a mass customization approach?

  1. A) Dell
  2. B) Align Technology
  3. C) Frito-Lay
  4. D) Arnold Palmer hospital
  5. E) A and B

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

19) Which of the following transformations generally has the highest equipment utilization?

  1. A) process-focused process
  2. B) repetitive process
  3. C) product-focused process
  4. D) specialized process
  5. E) modular process

Answer:  C

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

20) Harley Davidson

  1. A) utilizes job shops to make each of its modules
  2. B) uses product focused manufacturing
  3. C) uses a large number of modules to build a small number of different bikes
  4. D) uses work cells to feed its assembly line
  5. E) All of the above are true.

Answer:  D

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

21) Which of the following is false regarding repetitive processes?

  1. A) They use modules.
  2. B) They allow easy switching from one product to the other.
  3. C) They are the classic assembly lines.
  4. D) They have more structure and less flexibility than a job shop layout.
  5. E) They include the assembly of basically all automobiles.

Answer:  B

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

22) When done correctly, mass customization

  1. A) increases pressure on supply-chain performance
  2. B) helps eliminate the guesswork that comes with sales forecasting
  3. C) drives down inventories
  4. D) increases pressure on scheduling
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

23) Which of the following phrases best describes product focus?

  1. A) low volume, high variety
  2. B) finished goods are usually made to order
  3. C) processes are designed to perform a wide variety of activities
  4. D) high fixed costs, low variable costs
  5. E) raw material inventories are high relative to the value of the product

Answer:  D

Diff: 3

Topic:  Four process strategies

Objective:  LO7-1

 

24) Which of the following phrases best describes process focus?

  1. A) low volume, high variety
  2. B) finished goods are usually made to a forecast and stored
  3. C) operators are modestly skilled
  4. D) high fixed costs, low variable costs
  5. E) raw material inventories are low relative to the value of the product

Answer:  A

Diff: 3

Topic:  Four process strategies

Objective:  LO7-1

 

25) Which of the following characteristics best describes repetitive focus?

  1. A) It uses sophisticated scheduling to accommodate custom orders.
  2. B) Its output is a standardized product produced from modules.
  3. C) Operators are broadly skilled.
  4. D) It is widely used for the manufacture of steel.
  5. E) Its costs are often known only after a job is done.

Answer:  B

Diff: 3

Topic:  Four process strategies

Objective:  LO7-1

 

26) Utilization in process-oriented facilities is frequently low because

  1. A) the postponement strategy for improving service productivity is being used
  2. B) scheduling in process-oriented facilities is not very complex
  3. C) with high fixed costs, utilization is not very important
  4. D) excess capacity for peak demands is desirable
  5. E) low raw material inventories cause machines to be idled

Answer:  D

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

27) A quasi-custom product

  1. A) gets its apparent customization from the combinations available from a small number of modules
  2. B) is often the output of repetitive focus facilities
  3. C) is a valid description of a fast food sandwich
  4. D) is only possible when the focus strategy of service productivity improvement is in use
  5. E) All but D are true.

Answer:  E

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

28) Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $15 per unit. The crossover point between process A and process B is

  1. A) 50 units
  2. B) 200 units
  3. C) $2,500
  4. D) $5,000
  5. E) $9,500

Answer:  A

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

29) Process X has fixed costs of $10,000 and variable costs of $2.40 per unit. Process Y has fixed costs of $9,000 and variable costs of $2.25 per unit. Which of the following statements is true?

  1. A) The crossover point is approximately 6667 units.
  2. B) It is impossible for one process to have both of its costs lower than those of another process.
  3. C) Process Y is cheaper than process X at all volumes; there is no crossover point.
  4. D) Process X should be selected for very large production volumes.
  5. E) Process X is more profitable than process Y and should be selected.

Answer:  C

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

30) The crossover point is that production quantity where

  1. A) variable costs of one process equal the variable costs of another process
  2. B) fixed costs of a process are equal to its variable costs
  3. C) total costs equal total revenues for a process
  4. D) total costs for one process equal total costs for another process
  5. E) the process no longer loses money

Answer:  D

Diff: 2

Topic:  Four process strategies

Objective:  LO7-2

31) Product Focused processes

  1. A) allow more customization, but are not very efficient
  2. B) are desirable because resource needs increase slowly with the complexity of a process
  3. C) are processes that are specialized for relatively few products or customer groups
  4. D) apply only to service firms, not to manufacturers
  5. E) are profitable because customers demand flexibility, not specialization

Answer:  C

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

32) Value Stream Mapping

  1. A) is a variation on time function mapping
  2. B) examines the supply chain to determine where value is added
  3. C) extends time function mapping back to the supplier
  4. D) starts with the customer and works backwards
  5. E) All of the above are true.

Answer:  E

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

 

33) One fundamental difference between a process chart and a process map is that

  1. A) the process chart uses a time dimension, while a process map is not time-oriented
  2. B) the process chart includes the supply chain, while the process map stays within an organization
  3. C) the process chart is more like a table, while the process map is more like a schematic diagram
  4. D) the process chart focuses on the customer and on the provider’s interaction with the customer, while the process map does not deal directly with the customer
  5. E) None of these is true, because a process chart and a process map are the same thing.

Answer:  C

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

 

34) Service blueprinting

  1. A) provides the basis to negotiate prices with suppliers
  2. B) mimics the way people communicate
  3. C) determines the best time for each step in the process
  4. D) focuses on the provider’s interaction with the customer
  5. E) shows how Ishikawa techniques can be added to improve quality

Answer:  D

Diff: 2

Topic:  Service process design

AACSB:  Communication

Objective:  LO7-3

35) A drawing of the movement of material, product, or people is a

  1. A) flowchart
  2. B) process chart
  3. C) service blueprint
  4. D) process map
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

 

36) Strategies for improving productivity in services are

  1. A) separation, self-service, automation, and scheduling
  2. B) lean production, strategy-driven investments, automation, and process focus
  3. C) reduce inventory, reduce waste, reduce inspection, and reduce rework
  4. D) high interaction, mass customization, service factory, and just-in-time
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Service process design

Objective:  LO7-4

 

37) Which of the following is not a strategy for improving service productivity?

  1. A) self-service
  2. B) automation
  3. C) scheduling
  4. D) separation
  5. E) mass customization

Answer:  E

Diff: 2

Topic:  Service process design

Objective:  LO7-4

 

38) In mass service and professional service, the operations manager should focus on

  1. A) automation
  2. B) equipment maintenance
  3. C) sophisticated scheduling
  4. D) human resources
  5. E) all of the above

Answer:  D

Diff: 2

Topic:  Service process design

Objective:  LO7-4

39) In mass service and service factory quadrants of the service process matrix, the operations manager could focus on all of the following except

  1. A) automation
  2. B) standardization
  3. C) tight quality control
  4. D) removing some services
  5. E) customization

Answer:  E

Diff: 2

Topic:  Service process design

Objective:  LO7-4

 

40) Which of the following is true regarding opportunities to improve service processes?

  1. A) Automation can do little to improve service processes, because services are so personal.
  2. B) Layout is of little consequence, since services seldom use an assembly line.
  3. C) If a work force is strongly committed, it need not be cross-trained and flexible.
  4. D) All of the above are true.
  5. E) None of the above is true.

Answer:  E

Diff: 2

Topic:  Service process design

Objective:  LO7-4

 

41) Which of the following is typical of process control systems?

  1. A) The output may take numerous forms including warning lights or statistical process control charts.
  2. B) The data are analyzed by computer, which generates feedback.
  3. C) Their sensors take measurements on a periodic basis.
  4. D) The sensors’ measurements are digitized.
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

42) Which of the following is true regarding vision systems?

  1. A) They are consistently accurate.
  2. B) They are modest in cost.
  3. C) They do not become bored.
  4. D) All of the above are true.
  5. E) None of the above is true.

Answer:  D

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

43) The use of information technology to monitor and control a physical process is known as

  1. A) process control
  2. B) computer-aided design
  3. C) information numeric control
  4. D) numeric control
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

44) Which of the following technologies would enable a cashier to scan the entire contents of a shopping cart in seconds?

  1. A) ASRS
  2. B) AGV
  3. C) CAD/CAM
  4. D) RFID
  5. E) FMS

Answer:  D

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

45) “Automatic placement and withdrawal of parts and products into and from designated places in a warehouse” describes

  1. A) AGV
  2. B) CAD/CAM
  3. C) CIM
  4. D) ASRS
  5. E) FMS

Answer:  D

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

46) Computer-integrated manufacturing (CIM) includes manufacturing systems that have

  1. A) computer-aided design, a flexible manufacturing system, inventory control, warehousing and shipping integrated
  2. B) transaction processing, management information systems, and decision support systems integrated
  3. C) automated guided vehicles, robots, and process control
  4. D) robots, automated guided vehicles, and transfer equipment
  5. E) all of the above

Answer:  A

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

47) Which one of the following technologies is used only for material handling, not actual production or assembly?

  1. A) robots
  2. B) CNC
  3. C) CAD
  4. D) AGVs
  5. E) FMS

Answer:  D

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

48) A system using an automated work cell controlled by electronic signals from a common centralized computer facility is called a(n)

  1. A) adaptive control system
  2. B) robotics
  3. C) flexible manufacturing system
  4. D) automatic guided vehicle (AGV) system
  5. E) manufacturing cell

Answer:  C

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

49) “Operators simply load new programs, as necessary, to produce different products” describes

  1. A) CAD
  2. B) automated guided vehicles
  3. C) flexible manufacturing systems
  4. D) vision systems
  5. E) process control

Answer:  C

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

50) Which of the following is not one of the essential ingredients for mass customization?

  1. A) storage of the many variations of finished goods to quickly accommodate the high level of customization
  2. B) personnel and facility flexibility
  3. C) reliance on modular design
  4. D) rapid throughput
  5. E) very effective scheduling

Answer:  A

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

51) Advances in technology

  1. A) have impacted the manufacturing sector only
  2. B) have had only limited impact on services
  3. C) have failed to change the level of customer interaction with an organization
  4. D) have had dramatic impact on customer interaction with services and with products
  5. E) have dramatically changed health care, but have not changed retailing

Answer:  D

Diff: 2

Topic:  Technology in services

Objective:  LO7-5

 

52) Process redesign

  1. A) is the fundamental rethinking of business processes
  2. B) can focus on any process
  3. C) tries to bring about dramatic improvements in performance
  4. D) focuses on activities that cross functional lines
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Process redesign

Objective:  LO7-3

 

53) Ethical and environmentally friendly processes include which of the following?

  1. A) emission controls
  2. B) recycling
  3. C) efficient use of resources
  4. D) reduction of waste by-products
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Sustainability

AACSB:  Ethical Reasoning

Objective:  LO7-5

 

54) Making environmentally sound products through efficient processes

  1. A) is unprofitable, as long as recyclable materials prices are soft
  2. B) is known as lean manufacturing
  3. C) can still be profitable
  4. D) is easier for repetitive processes than for product-focused processes
  5. E) none of the above

Answer:  C

Diff: 2

Topic:  Sustainability

AACSB:  Ethical Reasoning

Objective:  LO7-5

55) Flexibility can be achieved with

  1. A) movable equipment
  2. B) inexpensive equipment
  3. C) sophisticated electronic equipment
  4. D) modular equipment
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Selection of equipment and technology

Objective:  LO7-5

 

56) Which of the following statements regarding ethical and environmentally friendly processes is true?

  1. A) Operations managers can be environmentally sensitive, but they must avoid following a low cost strategy.
  2. B) Processes can be environmentally friendly or socially responsible, but not both.
  3. C) Operations managers can be environmentally sensitive and still follow a low cost strategy.
  4. D) Using energy-efficient lighting saves so little that it should not be labeled environmentally friendly.
  5. E) The only business strategy consistent with ethical and environmentally sensitive management is the differentiation strategy.

Answer:  C

Diff: 2

Topic:  Sustainability

AACSB:  Ethical Reasoning

Objective:  LO7-5

 

57) The four R’s of sustainability do not include

  1. A) recycling
  2. B) resources
  3. C) regulations
  4. D) reputation
  5. E) responsibility

Answer:  E

Diff: 2

Topic:  Sustainability

Objective:  LO7-5

 

58) Which of the following is true regarding the concept of flexibility?

  1. A) It is the ability to change production rates with little penalty in time, cost, or customer value.
  2. B) It can be accomplished with sophisticated electronic equipment.
  3. C) It may involve modular, movable, even cheap equipment.
  4. D) All of the above are true.
  5. E) None of the above is true.

Answer:  D

Diff: 2

Topic:  Selection of equipment and technology

Objective:  LO7-5

Short Answer

 

1) An organization’s approach to transforming resources into goods and services is called its __________.

Answer:  process strategy

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

2) The process strategy that is organized around processes to facilitate low-volume, high-variety processes is called a(n) __________.

Answer:  process focus

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

3) __________ is a process strategy that uses a product-oriented production process that uses modules.

Answer:  Repetitive focus

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

4) __________ is a rapid, low-cost production process that caters to constantly changing unique customer desires.

Answer:  Mass customization

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

5) __________ represent an organization’s attempt to gain increased efficiency through specialization, which can include, for example, concentrating on certain classes of customers.

Answer:  Focused processes

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

6) A(n) __________ uses symbols to analyze the movement of people or material.

Answer:  process chart

Diff: 1

Topic:  Process analysis and design

Objective:  LO7-3

 

7) A special form of time-function mapping, which goes beyond the organization into its supply chain, is __________.

Answer:  value-stream mapping

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

8) __________ is a process analysis technique that focuses on the customer and the producer’s interaction with the customer.

Answer:  Service blueprinting

Diff: 1

Topic:  Process analysis and design

Objective:  LO7-4

 

9) The strategy for improving service productivity that customizes at delivery, rather than at production, is __________.

Answer:  postponement

Diff: 2

Topic:  Service process design

Objective:  LO7-4

 

10) __________ involves the ability to respond with little penalty in time, cost, or customer value.

Answer:  Flexibility

Diff: 2

Topic:  Selection of equipment and technology

Objective:  LO7-5

 

11) __________ is the use of information technology to control a physical process.

Answer:  Process control

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

12) __________ is a computer-controlled warehouse that provides for the automatic placement of parts into and from designated places within the warehouse.

Answer:  Automated storage and retrieval system or ASRS

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

13) A(n) __________ uses an automated work cell controlled by electronic signals from a common centralized computer facility.

Answer:  flexible manufacturing system or FMS

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

14) __________ is the fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance.

Answer:  Process reengineering

Diff: 2

Topic:  Process redesign

Objective:  LO7-5

15) Why is Harley-Davidson identified as a repetitive manufacturer, not a mass customizer?

Answer:  Harley-Davidson manufactures a variety of motorcycles on an assembly line. They are not a product-focused process. While Harley-Davidson’s motorcycles display lots of variety, they are not as individualized as Dell’s personal computers. The variety comes from choices in predefined modules, and there is apparently no place for a customer to get customization that would go beyond what is available in these modules.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

16) What is the link between focused processes and specialization? What kinds of focus are possible?

Answer:  Focused processes are a means of obtaining increased productivity through forms of specialization. Focus can take several forms, including concentrating on specific classes of customers, working only with products in selected product families, specializing in a specific service, or working with a narrow range of technology.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

17) Describe Value-Stream Mapping. Explain how it is different from process mapping.

Answer:  Value-Stream Mapping is a variation on time-function mapping or process mapping. The most fundamental difference between them is that Value-Stream Mapping is not confined to the organization itself. In particular, in its analysis of where value is added, it extends the analysis to the organization’s supply chain.

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-3

 

18) How are modules useful in manufacturing processes?

Answer:  Modules are parts or components of a product previously prepared.  By using modules, the final  product can be quickly assembled.  Using a different combination of modules allows for quasi-customization.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

19) What is mass customization?

Answer:  Mass customization is rapid, low-cost production of goods and services that fulfill increasingly unique customer desires.  It brings us the variety of products traditionally provided by the process focus, with low costs associated with standardized high volume production (the product focus).

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

20) Name the four basic process strategies; describe them in a complete sentence or two each.

Answer:  The four process strategies are process focus, product focus, repetitive focus, and mass customization. Process is a job shop–high variety and low volume; repetitive is an assembly line–relatively standardized products with options from modules; product is for high volume, low-variety, such as oil refining, flour milling; mass customization is for high volume, high variety.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

21) Why is equipment utilization in process-focused service industries often low?

Answer:  Equipment utilization is low because excess capacity to meet peak demand loads is often desirable, and scheduling is typically difficult.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

22) Compare an intermittent process to a continuous process on the basis of variety, volume, equipment utilization, and inventory.

Answer:  Intermittent has high variety, low volume, low utilization, general purpose equipment. Since most output is made to order, there is little inventory of raw materials or finished goods. Continuous has low variety, high volume, high utilization, and specialized equipment. Just-in-time practices keep inventory very low.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

 

23) The textbook described four basic process models, and hinted that there are others. Construct an example of a hybrid process. Can this process be applied in any well-known organization? How common do you think hybrid processes are?

Answer:  Most students will graft elements of process onto elements of product or repetitive. Examples may include food service, where “process” may typify most operations, but salad bars add an element of “repetitive.” In health care, hybrids of process and repetitive can readily be found. .TOPIC

Four process strategies

Diff: 2

Topic:  Four process strategies

AACSB:  Reflective Thinking

Objective:  LO7-1

 

24) In an affluent society, how do we produce a wide number of options for products at low cost?

Answer:  In an affluent society we produce a wide variety of options for products at low cost, primarily by use of modular components assembled in repetitive facilities, but automation is allowing more overlap of different types of production processes.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

25) Name the tools of process analysis and design. Describe them in a sentence or two each.

Answer:  Five tools of process analysis and design include flowcharts, time-function mapping, value-stream mapping, process charts, and service blueprinting.  Flowcharts are a schematic or drawing of the movement of material, product, or people.  Time-function mapping is a flow chart, with the addition of time on the horizontal axis.  Value-stream mapping shows how to add value in the flow of materials and information in the entire production process.  Process charts use symbols, time, and distance to provide an objective and structured way to analyze and record the activities that make up a process.  Service blueprinting focuses on the customer and the provider’s interaction with the customer.

Diff: 2

Topic:  Process analysis and design

Objective:  LO7-1

 

26) Provide an example of the focus strategy for improving service productivity.

Answer:  The focus strategy refers to restricting the offerings.  Examples will vary, but a restaurant with a limited menu would be one example.

Diff: 2

Topic:  Service process design

Objective:  LO7-4

 

27) Provide an example of the postponement strategy for improving service productivity.

Answer:  The postponement strategy refers to customizing the product at delivery, not at production.  Examples will vary, but a home builder might leave some tasks unfinished until the house is sold, so that the buyer can make those final decisions. Carpeting, paint colors, cabinet doors, and some appliance choices might be good examples.

Diff: 2

Topic:  Service process design

Objective:  LO7-4

 

28) Identify the typical elements in a process control system.

Answer:  Sensors collect data; analog devices read data on a periodic basis; measurements are digitized and transmitted to a computer; data are analyzed; and output occurs in the form of signals, diagrams, charts, messages, etc.

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

29) Identify the advances being made in technology to enhance production.

Technology used to enhance production include numerical control, process control, vision systems, robots, automated storage and retrieval systems, automated guided vehicles, flexible manufacturing systems, and computer integrated manufacturing.

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

30) Identify the techniques for improving service productivity. For any two techniques, describe in a short paragraph, and include an example.

Answer:  The seven techniques are separation, self-service, postponement, focus, modules, automation, scheduling, and training.

  • Separation: structuring the service such that the customer must go where the service is offered (a medical facility)
  • Self-service: let customers perform their own comparisons (supermarket shopping)
  • Postponement: customizing at time of delivery or in the final stages of the process (dealer installed versus factory installed options on automobiles, boats, etc.; Wendy’s Hamburgers)
  • Focus: restricting the product offerings, options, or degree of customization allowed (limited number of factory installed options on a new automobile)
  • Modules: services selected from modular choices (health insurance programs)
  • Automation: identifying services that may lend themselves to automation (automatic teller machines)
  • Scheduling: precise personnel scheduling (keep close watch on how many checkout lanes are needed)
  • Training: clarifying options, teaching problem avoidance (maintenance personnel, counselors)

Diff: 3

Topic:  Service process design

Objective:  LO7-4

 

31) Explain, in your own words, what a flexible manufacturing system is. List the benefits of flexible manufacturing systems.

Answer:  An FMS is a system using an automated work cell controlled by electronic signals from a common centralized computer facility. Benefits of an FMS include improved capital utilization, low direct labor cost, reduced inventory, and consistent quality.

Diff: 2

Topic:  Production technology

AACSB:  Use of IT

Objective:  LO7-5

 

32) Describe some major challenges to implementing a successful build-to-order system?

Product design must be imaginative and fast.  Process design must be rapid, flexible, and able to accommodate changes in design and technology.  Inventory management requires tight control.  Tight schedules that track orders and material from design through delivery can be effectively implemented only with dedicated personnel.  Responsive partners in the supply chain yield effective collaboration.

Diff: 2

Topic:  Four process strategies

Objective:  LO7-1

33) Identify five examples of technology’s impact on services. Specifically, identify one of these that has led to labor cost reductions. Discuss briefly. Can you add an item, not identified in the textbook, to this list?

Answer:  Textbook identifies about three dozen examples. Students may add examples like PointCast (or other “push” information technologies), Amazon.com (fully electronic Internet-based shopping), or examples from entertainment (video gaming, network gaming).

Diff: 2

Topic:  Technology in services

AACSB:  Use of IT

Objective:  LO7-5

 

34) Why do modern operations managers look for flexibility in their equipment?

Answer:  Flexibility in equipment provides managers the ability to respond to changes in demand with little penalty in time, cost, or customer value.

Diff: 2

Topic:  Selection of equipment and technology

Objective:  LO7-5

 

35) How are environmental issues linked to the process choice? Won’t being an environmentally conscious firm drive up costs and take away any competitive advantage? Discuss, with examples to support your position.

Answer:  Environmental issues are directly on point in the process decision. The process choice selects equipment that has emissions, creates waste in work or in packaging, etc. Not all environmentally conscious activities are cost-adding. But even if they were, cost is not the only thing affected. Customers may be attracted to products that are made from recycled materials, or that are more recyclable. This translates into revenue enhancement, not an element of cost. The competitive advantage centers on the customer, not the cost.

Diff: 2

Topic:  Sustainability

AACSB:  Ethical Reasoning

Objective:  LO7-5

 

Essay

 

1) A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable cost is $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacture. The new process would have fixed costs of $90,000, and variable costs of $5. What is the crossover point for these processes? For what range of outputs is each process appropriate?

Answer:  The crossover is at 1800 units annually. For volumes under 1800, the process focus is cheaper; for volumes over 1800 units, the repetitive focus is cheaper.

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

2) Big John’s Manufacturing currently produces its lead product on a machine that has a variable cost of $0.32 per unit, and fixed costs of $75,000.  Big John is considering purchasing a new machine that will drop the variable cost to $.28 per unit, but has a fixed cost of $150,000.  What is the cross-over point between the two machines?

Answer:  1,875,000 units

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

3) The local convenience store makes personal pan pizzas.  Currently, their process makes complete pizzas, fully cooked, for the customer.  This process has a fixed cost of $20,000, and a variable cost of $1.75 per pizza.  The owner is considering a different process that can make pizzas in two ways:  completely cooked (as before), or partially cooked and then flash frozen, for the customer to finish at home. This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza.

  1. What is the crossover point between the existing process and the proposed process?
  2. If the owner expects to sell 9,000 pizzas, should he get the new oven?

Answer:

(a) the crossover is 8,000 units

(b) for production quantities of 8,000 or larger, the new, more flexible process has lower cost.

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

4) A firm is about to undertake the manufacture of a product, and is weighing the process configuration options. There are two intermittent processes under consideration, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month, and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 and variable costs of $1 per unit.

  1. At what output does the large intermittent process become cheaper than the small one?
  2. At what output does the repetitive process become cheaper than the larger intermittent process?

Answer:

(a) at 1125 units, the large job shop becomes cheaper than the small job shop

(b) at 38,000 units, the repetitive shop is cheaper than the larger job shop.

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

5) An organization is considering three process configuration options. There are two different intermittent processes, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month, and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 per month and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 and variable costs of $1 per unit.

  1. If the company produced 20,000 units, what would be its cost under each of the three choices?
  2. Which process offers the lowest cost to produce 40,000 units? What is that cost?

Answer:

(a) at 20,000 units, the costs are small intermittent = $203,000; large intermittent = $52,000; and repetitive = $70,000

(b) at 40,000 units, repetitive process is cheapest, at $90,000 (small intermittent = $403,000, and large intermittent = $92,000).

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

6) A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

Answer:  Old: TR = $40,000, TC = $16,000, therefore Profit = $24,000.

New: TR = $80 x 400 = $32,000, TC = $24,000 + $10 x 400 = $28,000, for a profit of $4,000.

Most will say NO; the larger repetitive process is less profitable than the smaller process-focused shop.

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

7) Brandon’s computer shop is considering two different configuration options.  The first one is to have each computer built by the sales associates when they have free time.  The second option is to hire a dedicated assembly technician.  Option A has variable costs of $50 per computer and no fixed costs.  Option B has a fixed cost of $1,000 but variable costs of only $5 per computer.  What is the cross-over point?

Answer:  50X=1000+5X, X(cross-over point) = 22.2 computers

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

8) A non-profit organization is planning a raffle to raise money.  It has two options for tickets.  The first option is to do the tickets by hand, with fixed costs of $50 and variable costs of $.05 per ticket.  The second option is to outsource production.  This would result in fixed costs of $500 and variable costs of $.01.  If the organization plans to sell 10,000 tickets which option should it choose?

Answer:  50+.05X=500+.01X, X = 11,250 tickets (students may solve for the cross-over point and realize higher VC option is cheaper at 10,000 since it is below the cross-over point).  Another viable method is to find the cost for each option, yielding Option 1 = 50 + .05(10000) = $550 and Option 2 = 500 + .01(10000) = $600.  Thus the organization should choose the first option.

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

9) Kirstin is thinking about opening a Chinese restaurant and needs to buy a rice cooker.  Machine A has fixed costs of $100 and variable costs of $1/pound.  Machine B has fixed costs of $500 and variable costs of $.1/pound.  If Kirstin plans to sell 100 pounds of rice which machine should she choose?  What is the cross-over point?

Answer:

Machine A costs 100+1(100) = $200

Machine B costs $500 + .1(100) = $510

Thus she should buy machine A.

Cross over is when 100+X=500+.1X, X=444.4 pounds of rice

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

10) Bridget is considering how to get to work over the summer.  She has two options.  Option A is to buy a seasonal bus pass for $100.  Option B is to pay $.25 for each ride.  Identify the fixed and variable costs for each option.  If she has to ride both to and from work, how many days of work would it take for the seasonal pass to cost the same amount as Option B?

Answer:

Option A: VC=0 FC=100

Option B: VC=.25 FC=0

100=.25X, X=400 rides, since she has to take 2 rides each time she works, she would need to work 200 days for the two options to cost the same amount.

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

 

11) Karla’s candle factory is considering two different machines.  Machine A is highly automated with FC of $25,000 and VC of $.1/candle.  Machine B is actually no machine but rather hand labor with FC of $10,000 and VC of $.5/candle.  If demand for Karla’s candles is 25,000, which machine should she pick?

Answer:

Machine A: $25,000+.1(25000)= $27,500

Machine B: $10,000 + .5(25000) = $22,500

Karla should pick Machine B

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

12) Mary is considering purchasing a machine from two suppliers.  Supplier A’s machine has an annual fixed cost of $10,000 and a unit variable cost of $2.10.  Supplier B’s machine has an annual fixed cost of $16,000 and a unit variable cost of $3.00.  How large should Mary’s annual demand be in order to make Supplier B’s machine the better choice?

Answer:  The answer is that there is no demand for which Supplier B’s machine will be better.  Both Supplier B’s fixed and variable costs are higher than Supplier A’s.

Diff: 2

Topic:  Four process strategies

AACSB:  Analytic Skills

Objective:  LO7-2

Operations Management, 11e (Heizer/Render)

Chapter 11  Supply-Chain Management

 

True/False

 

1) Operations managers are finding online auctions a fertile area for disposing of discontinued inventory

Answer:  TRUE

Diff: 2

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

 

2) The key to effective supply-chain management is to get many suppliers to compete with each other, in order to drive down prices.

Answer:  FALSE

Diff: 1

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

3) Even though a firm may have a low cost strategy, supply-chain strategy can select suppliers primarily on response or differentiation.

Answer:  FALSE

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

4) The supply chain for a brewery would include raw ingredients such as hops and barley but not the manufactured goods such as bottles and cans.

Answer:  FALSE

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

5) Supply-chain management faces additional challenges, such as those related to quality production and distribution systems, when companies enter growing global markets.

Answer:  TRUE

Diff: 2

Topic:  The supply chain’s strategic importance

AACSB:  Multicultural and Diversity

Objective:  LO11-1

 

6) McDonald’s was able to utilize existing plants and transportation systems in preparing the supply chain for opening its stores in Moscow.

Answer:  FALSE

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

7) When using the low-cost strategy for supply chain-management, the firm should invest aggressively to reduce production lead time.

Answer:  FALSE

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

8) Savings in the supply chain exert more leverage as the firm has a lower net profit margin.

Answer:  TRUE

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

 

9) A firm that employs a “response strategy” should minimize inventory throughout the supply chain.

Answer:  FALSE

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

10) Outsourcing refers to transferring a firm’s activities that have traditionally been internal to external suppliers.

Answer:  TRUE

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

 

11) Outsourcing is a form of specialization that allows the outsourcing firm to focus on its key success factors.

Answer:  TRUE

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

 

12) Supply-chain decisions are not generally strategic in nature, because purchasing is an ordinary expense to most firms.

Answer:  FALSE

Diff: 1

Topic:  Supply-chain economics

Objective:  LO11-1

 

13) The objective of the make-or-buy decision is to help identify the products and services that can be obtained externally.

Answer:  TRUE

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

14) Because service firms do not acquire goods and services externally, their supply-chain management issues are insignificant.

Answer:  FALSE

Diff: 1

Topic:  Supply-chain economics

Objective:  LO11-1

 

15) Because the supply chain has become so electronic and automated, opportunities for unethical behavior have been greatly reduced.

Answer:  FALSE

Diff: 1

Topic:  Ethics and sustainability

AACSB:  Ethical Reasoning

Objective:  LO11-1

 

16) With the many-suppliers strategy, the order usually goes to the supplier that offers the best quality.

Answer:  FALSE

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

17) Developing long-term, “partnering” relationships with a few suppliers is a long-standing American purchasing strategy.

Answer:  FALSE

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

18) Vertical integration, whether forward or backward, requires the firm to become more specialized.

Answer:  FALSE

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

19) A fast-food retailer that acquired a spice manufacturer would be practicing backward integration.

Answer:  TRUE

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

20) Keiretsus offer a middle ground between few suppliers and vertical integration.

Answer:  TRUE

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

21) In several industries, online exchanges have been created by buyers.

Answer:  TRUE

Diff: 2

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

 

22) The bullwhip effect refers to the increasing fluctuations in orders that often occur as orders move through the supply chain.

Answer:  TRUE

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

23) Vendor-Managed Inventory is a form of outsourcing.

Answer:  TRUE

Diff: 1

Topic:  Managing the supply chain

Objective:  LO11-3

 

24) In the vendor evaluation phase, most companies will use the same list of criteria and the same criteria weights.

Answer:  FALSE

Diff: 2

Topic:  Vendor selection

Objective:  LO11-4

 

25) One classic type of negotiation strategy is the market-based price model.

Answer:  TRUE

Diff: 2

Topic:  Vendor selection

Objective:  LO11-4

 

26)  Drop shipping results in time and shipping cost savings.

Answer:  TRUE

Diff: 1

Topic:  Managing the supply chain

Objective:  LO11-3

 

27) The supply-chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer’s site.

Answer:  FALSE

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

28) Channel assembly, which sends components and modules to be assembled by a distributor, treats these distributors as manufacturing partners.

Answer:  TRUE

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

29) Blanket orders are a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship.

Answer:  TRUE

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

30) Bar code and radio frequency technology, like that used to track UPS or FedEx packages on their global journeys, can also be used to track objects within the boundaries of a warehouse or shop.

Answer:  TRUE

Diff: 1

Topic:  Logistics management

AACSB:  Use of IT

Objective:  LO11-5

 

31) Waterways are an attractive distribution system when speed is more important than shipping cost.

Answer:  FALSE

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

 

32) Logistics management can provide a competitive advantage through improved customer service.

Answer:  TRUE

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

 

33) With the growth of just-in-time practices, railroads have made large gains in the share of the nation’s transport that they haul.

Answer:  FALSE

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

 

34) Improvements in security, especially regarding the millions of shipping containers that enter the U.S. each year, are being held back by the lack of technological advances.

Answer:  FALSE

Diff: 1

Topic:  Logistics management

Objective:  LO11-5

 

35) Benchmark firms have driven down costs of supply-chain performance.

Answer:  TRUE

Diff: 2

Topic:  Measuring supply-chain performance

Objective:  LO11-6

Multiple Choice

 

1) The three major variations of online catalogs are

  1. A) catalogs by vendors, catalogs by intermediaries, and exchanges provided by buyers
  2. B) EDI, ERP, and ASN
  3. C) cost-based, market-based, and competitive bidding
  4. D) drop shipping, channel assembly, and postponement
  5. E) all auction-based

Answer:  A

Diff: 2

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

 

2) Visibility throughout the supply chain is a requirement among supply-chain members for

  1. A) mutual agreement on goals
  2. B) mutual trust
  3. C) compatible organizational cultures
  4. D) local optimization
  5. E) the bullwhip effect

Answer:  B

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

3) Which of the following is not a concern of the supply chain?

  1. A) warehousing and inventory levels
  2. B) credit and cash transfers
  3. C) suppliers
  4. D) distributors and banks
  5. E) maintenance scheduling

Answer:  E

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

4) Which of the following is an aspect of environmental risk in supply-chain management?

  1. A) political issues
  2. B) management metrics
  3. C) secure financial transactions
  4. D) raw material availability
  5. E) All of the above are environmental risks.

Answer:  A

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

5) Toyota’s policy of having two suppliers per component after its experience with fire and earthquakes is similar to Hark Rock Café’s franchising in societies that have significant cultural or environmental barriers because

  1. A) both companies are coping with environmental supply-chain risks
  2. B) both companies are coping with process supply-chain risks
  3. C) both companies are coping with control supply-chain risks
  4. D) both companies are addressing outsourcing
  5. E) None of the above accurately reflect the main similarity

Answer:  A

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

6) McDonald’s Russian “food town” is to __________ risk as Hard Rock Café’s franchising in diverse political and cultural environments to overcome barriers is to __________ risk.

  1. A) process, environmental
  2. B) control, environmental
  3. C) control, process
  4. D) process, control
  5. E) environmental, control

Answer:  A

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

7) What type of negotiating strategy requires the supplier to open its books to the purchasers?

  1. A) cost-based price model
  2. B) market-based price model
  3. C) competitive bidding
  4. D) price-based model
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Vendor selection

Objective:  LO11-4

 

8) Which of the following statements is true regarding the leverage of supply-chain savings?

  1. A) Supply chain leverage is about the same for all industries.
  2. B) Supply chain savings exert more leverage as the firm’s purchases are a smaller percent of sales.
  3. C) Supply chain savings exert more leverage as the firm has a lower net profit margin.
  4. D) Supply chain leverage depends only upon the percent of sales spent in the supply chain.
  5. E) None of the above is true.

Answer:  C

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

9) One dollar saved in purchasing is

  1. A) equivalent to a dollar earned in sales revenue
  2. B) worth even more than a dollar earned in sales revenue
  3. C) worth slightly more than a dollar earned because of taxes
  4. D) worth from 35% in the technical instrument industry to 70% in the food products industry
  5. E) only worthwhile if you are in the 50% tax bracket and still have a low profit margin

Answer:  B

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

 

10) Which one of the following statements about purchasing is true?

  1. A) The cost of purchases as a percent of sales is often small.
  2. B) Purchasing provides a major opportunity for price increases.
  3. C) Purchasing is always more efficient than making an item.
  4. D) Purchasing has an impact on the quality of the goods and services sold.
  5. E) Competitive bidding is a major factor in long-term cost reductions.

Answer:  D

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

 

11) Outsourcing

  1. A) transfers traditional internal activities to outside vendors
  2. B) utilizes the efficiency which comes with specialization
  3. C) lets the outsourcing firm focus on its key success factors
  4. D) None of the above are true of outsourcing.
  5. E) All of the above are true of outsourcing.

Answer:  E

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

 

12) The transfer of some of what are traditional internal activities and resources of a firm to outside vendors is

  1. A) a standard use of the make or buy decision
  2. B) not allowed by the ethics code of the Supply Management Institute
  3. C) offshoring
  4. D) outsourcing
  5. E) keiretsu

Answer:  D

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

13) The Institute for Supply Management

  1. A) establishes laws and regulations for supply management
  2. B) is an agency of the United Nations charged with promoting ethical conduct globally
  3. C) publishes the principles and standards for ethical supply management conduct
  4. D) prohibits backward integration into developing economies
  5. E) All of the above are true.

Answer:  C

Diff: 2

Topic:  Ethics and sustainability

AACSB:  Ethical Reasoning

Objective:  LO11-1

 

14) In supply-chain management, ethical issues

  1. A) are particularly important because of the enormous opportunities for abuse
  2. B) may be guided by company rules and codes of conduct
  3. C) become more complex the more global is the supply chain
  4. D) may be guided by the principles and standards of the Institute for Supply Management
  5. E) All of the above are true.

Answer:  E

Diff: 2

Topic:  Ethics and sustainability

AACSB:  Ethical Reasoning

Objective:  LO11-1

 

15) Keeping a product generic as long as possible before customizing is known as

  1. A) postponement
  2. B) keiretsu
  3. C) vendor-managed inventory
  4. D) forward integration
  5. E) backward integration

Answer:  A

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

16) Which one of the following is not a supply-chain strategy?

  1. A) negotiation with many suppliers
  2. B) vertical integration
  3. C) keiretsu
  4. D) short-term relationships with few suppliers
  5. E) virtual companies

Answer:  D

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

17) A disadvantage of the “few suppliers” strategy is

  1. A) the risk of not being ready for technological change
  2. B) the lack of cost savings for customers and suppliers
  3. C) possible violations of the Sherman Antitrust Act
  4. D) the high cost of changing partners
  5. E) All of the above are disadvantages of the “few suppliers” strategy.

Answer:  D

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

18) The purchasing approach that holds the suppliers responsible for maintaining the necessary technology, expertise, and forecasting ability plus cost, quality, and delivery competencies is

  1. A) few suppliers
  2. B) many suppliers
  3. C) Keiretsu
  4. D) vertical integration
  5. E) virtual companies

Answer:  B

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

19) Which of the following is not an advantage of the “few suppliers” concept?

  1. A) suppliers’ willingness to participate in JIT systems
  2. B) trust
  3. C) vulnerability of trade secrets
  4. D) creation of value by allowing suppliers to have economies of scale
  5. E) suppliers’ willingness to provide technological expertise

Answer:  C

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

20) Which of the following supply-chain strategies creates value by allowing suppliers to have economies of scale?

  1. A) suppliers becoming part of a company coalition
  2. B) vertical integration
  3. C) long-term partnering with a few suppliers
  4. D) negotiating with many suppliers
  5. E) developing virtual companies

Answer:  C

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

21) Which of the following is not a condition that favors the success of vertical integration?

  1. A) availability of capital
  2. B) availability of managerial talent
  3. C) required demand
  4. D) small market share
  5. E) All of the above favor the success of vertical integration.

Answer:  D

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

22) Which of the following best describes vertical integration?

  1. A) to sell products to a supplier or a distributor
  2. B) to develop the ability to produce products which complement the original product
  3. C) to produce goods or services previously purchased
  4. D) to develop the ability to produce the specified good more efficiently than before
  5. E) to build long-term partnerships with a few suppliers

Answer:  C

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

23) A fried chicken fast-food chain that acquired feed mills and poultry farms has performed

  1. A) horizontal integration
  2. B) forward integration
  3. C) backward integration
  4. D) current transformation
  5. E) job expansion

Answer:  C

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

24) Vertical integration appears particularly advantageous when the organization has

  1. A) a very specialized product
  2. B) a large market share
  3. C) a very common, undifferentiated product
  4. D) little experience operating an acquired vendor
  5. E) purchases that are a relatively small percent of sales

Answer:  B

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

25) A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of

  1. A) horizontal integration
  2. B) forward integration
  3. C) backward integration
  4. D) current transformation
  5. E) keiretsu

Answer:  B

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

26) Japanese manufacturers often take a middle ground between purchasing from a few suppliers and vertical integration. This approach is

  1. A) kanban
  2. B) keiretsu
  3. C) samurai
  4. D) poka-yoke
  5. E) kaizen

Answer:  B

Diff: 2

Topic:  Supply-chain strategies

AACSB:  Multicultural and Diversity

Objective:  LO11-2

 

27) The Japanese concept of a company coalition of suppliers is

  1. A) poka-yoke
  2. B) kaizen
  3. C) keiretsu
  4. D) dim sum
  5. E) illegal

Answer:  C

Diff: 2

Topic:  Supply-chain strategies

AACSB:  Multicultural and Diversity

Objective:  LO11-2

 

28) Which of the following is not an advantage of a virtual company?

  1. A) speed
  2. B) total control over every aspect of the organization
  3. C) specialized management expertise
  4. D) low capital investment
  5. E) flexibility

Answer:  B

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

29) An advantage of a joint venture over vertical integration is

  1. A) reduced risk
  2. B) reduced costs
  3. C) compromised competitive advantages
  4. D) globalization
  5. E) flexibility

Answer:  A

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

30) When Daimler and BMW pooled resources to develop standardized auto components the supply-chain strategy could best be described by

  1. A) keiretsu
  2. B) virtual companies
  3. C) joint venture
  4. D) vertical integration
  5. E) few suppliers

Answer:  C

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

31) Which of the following best describes Vizio’s supply chain

  1. A) few suppliers
  2. B) keiretsu
  3. C) joint venture
  4. D) vertical integration
  5. E) virtual company

Answer:  E

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

32) Local optimization is a supply-chain complication best described as

  1. A) optimizing one’s local area without full knowledge of organizational needs
  2. B) obtaining very high production efficiency in a decentralized supply chain
  3. C) the prerequisite of global optimization
  4. D) the result of supply chains built on suppliers with compatible corporate cultures
  5. E) the opposite of the bullwhip effect

Answer:  A

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

33) The “bullwhip” effect

  1. A) occurs as orders are relayed from retailers to wholesalers
  2. B) results in increasing fluctuations at each step of the sequence
  3. C) increases the costs associated with inventory in the supply chain
  4. D) occurs because of distortions in information in the supply chain
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

34) A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual.  When this large order is sent to the distributer, the distributer assumes the large size is a trend, not a one-time event.  The distributer therefore places an even larger order with the lobsterman. This is the result of

  1. A) double marginalization
  2. B) the bullwhip effect
  3. C) CPFR
  4. D) a pass-through facility
  5. E) vendor-managed inventory

Answer:  B

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

35) Giving quantity discounts based on annual volume instead of single order size helps to control which supply-chain issue?

  1. A) control risk
  2. B) environmental risk
  3. C) the bullwhip effect
  4. D) unethical supplier behavior
  5. E) vendor-managed inventory

Answer:  C

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

36) Which of the following is not an opportunity for effective management in the supply chain?

  1. A) accurate “pull” data
  2. B) vendor-managed inventory
  3. C) postponement
  4. D) local optimization
  5. E) channel assembly

Answer:  D

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

37) Which of the following is an opportunity for effective management in the supply chain?

  1. A) random “pull” data
  2. B) multistage control of replenishment
  3. C) the bullwhip effect
  4. D) customer managed inventory
  5. E) channel assembly

Answer:  E

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

38) Drop shipment

  1. A) is equivalent to cross-docking
  2. B) is the opposite of a blanket order
  3. C) means the supplier will ship directly to the end consumer, rather than to the seller
  4. D) is the same thing as keiretsu
  5. E) is a good reason to find a new firm to ship your products

Answer:  C

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

39) A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing

  1. A) postponement
  2. B) cross-docking
  3. C) channel assembly
  4. D) drop shipping
  5. E) float reduction

Answer:  D

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

40) Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of

  1. A) vendor-managed inventory
  2. B) standardization
  3. C) backward integration
  4. D) postponement
  5. E) timely customization

Answer:  D

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

41) All of the following are “opportunities” for supply-chain management except

  1. A) postponement
  2. B) drop shipment
  3. C) blanket orders
  4. D) channel assembly
  5. E) line balancing

Answer:  E

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

42) Which of the following is an advantage of the postponement technique?

  1. A) reduction in automation
  2. B) early customization of the product
  3. C) better quality of the product
  4. D) reduction in training costs
  5. E) reduction in inventory investment

Answer:  E

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

43) A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing

  1. A) postponement
  2. B) drop shipping
  3. C) channel assembly
  4. D) passing the buck
  5. E) float reduction

Answer:  B

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

44) TAL Apparel’s management of its supply chain for Stafford shirts sold in JCPenney in an example of

  1. A) blanket orders
  2. B) standardization
  3. C) postponement
  4. D) lot size reduction
  5. E) single stage control of replenishment

Answer:  E

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

45) A grocery store is trying to find a new vendor for carrots.  Its three criteria are 1. Freshness, 2. Lot Size, and 3. Cost with factor weights of .6, .1, and .3 respectively. What would a vendor with ratings of 6, 8, and 10 in the three respective categories score as a weighted total?

  1. A) 24
  2. B) 1
  3. C) 7.4
  4. D) 9.8
  5. E) none of the above

Answer:  C

Diff: 2

Topic:  Vendor selection

AACSB:  Analytic Skills

Objective:  LO11-4

46) What is the average capacity utilization in the motor carrier (trucking) industry?

  1. A) 25%
  2. B) 50%
  3. C) 75%
  4. D) 95%
  5. E) 99%

Answer:  B

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

 

47) What term is used to describe the outsourcing of logistics?

  1. A) E-Logistics
  2. B) Shipper Managed Inventory (SMI)
  3. C) Hollow Logistics
  4. D) Sub-Logistics
  5. E) Third-Party Logistics

Answer:  E

Diff: 1

Topic:  Logistics management

Objective:  LO11-5

 

48) E-procurement

  1. A) works best in long-term contract situations, and is not suited for auctions
  2. B) is the same thing as Internet purchasing
  3. C) represents only the auction and bidding components of Internet purchasing
  4. D) is illegal in all states except Nevada and New Jersey
  5. E) All of the above are true of e-procurement.

Answer:  B

Diff: 2

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

49) The three classic types of negotiation strategies are

  1. A) vendor evaluation, vendor development, and vendor selection
  2. B) Theory X, Theory Y, and Theory Z
  3. C) many suppliers, few suppliers, and keiretsu
  4. D) cost-based price model, market-based price model, and competitive bidding
  5. E) None of the above is correct.

Answer:  D

Diff: 2

Topic:  Vendor selection

Objective:  LO11-4

 

50) Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million.  If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, what is the inventory turnover?

  1. A) 12.50
  2. B) 10.00
  3. C) 42.00
  4. D) 4.16
  5. E) 20.00

Answer:  A

Diff: 2

Topic:  Measuring supply-chain performance

AACSB:  Analytic Skills

Objective:  LO11-6

 

51) The three stages of vendor selection, in order, are

  1. A) vendor evaluation, vendor development, and negotiations
  2. B) vendor development, vendor evaluation, and vendor acquisition
  3. C) introduction, growth, and maturity
  4. D) vendor evaluation, negotiations, and vendor development
  5. E) EDI, ERP, and ASN

Answer:  A

Diff: 1

Topic:  Vendor selection

Objective:  LO11-4

 

52) Which one of the following distribution systems offers quickness and reliability when emergency supplies are needed overseas?

  1. A) trucking
  2. B) railroads
  3. C) airfreight
  4. D) waterways
  5. E) pipelines

Answer:  C

Diff: 1

Topic:  Logistics management

Objective:  LO11-5

53) With the growth of JIT, which of the following distribution systems has been the biggest loser?

  1. A) trucking
  2. B) railroads
  3. C) airfreight
  4. D) waterways
  5. E) pipelines

Answer:  B

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

54) By which distribution system is 90 percent of U.S. coal shipped?

  1. A) railroads
  2. B) trucks
  3. C) waterways
  4. D) pipelines
  5. E) none of the above

Answer:  A

Diff: 1

Topic:  Logistics management

Objective:  LO11-5

 

55) Which distribution system is the fastest growing mode of shipping?

  1. A) railroads
  2. B) trucks
  3. C) airfreight
  4. D) waterways
  5. E) pipelines

Answer:  C

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

 

56) Which of the following devices represents an opportunity for technology to improve security of container shipments?

  1. A) devices that identify truck and container location
  2. B) devices that sense motion
  3. C) devices that measure radiation or temperature
  4. D) devices that can communicate the breaking of a container lock or seal
  5. E) all of the above

Answer:  E

Diff: 1

Topic:  Logistics management

Objective:  LO11-5

57) Which one of the following performance measures is not true of a world class firm?

  1. A) short time placing an order
  2. B) high percentage of accepted material
  3. C) large lead time
  4. D) high percentage of on-time deliveries
  5. E) low number of shortages per year

Answer:  C

Diff: 1

Topic:  Measuring supply-chain performance

Objective:  LO11-6

 

58) Consider a firm with a 2007 net income of $20 million, revenue of $60 million and cost of goods sold of $25 million.  If the balance sheet amounts show $2 million of inventory and $500,000 of property, plant & equipment, how many weeks of supply does the firm hold?

  1. A) 12.50
  2. B) 20
  3. C) 60
  4. D) 08
  5. E) 16

Answer:  E

Diff: 2

Topic:  Measuring supply-chain performance

AACSB:  Analytic Skills

Objective:  LO11-6

 

Short Answer

 

1) __________ is the management of activities that procure raw materials, transform those materials into intermediate goods and final products, and deliver the products through a distribution system.

Answer:  Supply-chain management

Diff: 1

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

2) The __________ decision involves choosing between producing a component or a service internally and purchasing it externally.

Answer:  make-or-buy

Diff: 1

Topic:  Supply-chain economics

Objective:  LO11-1

 

3) Transferring to external vendors a firm’s activities that have traditionally been internal is known as __________.

Answer:  outsourcing

Diff: 1

Topic:  Supply-chain economics

Objective:  LO11-1

4) The __________ is an organization that has published principles and standards for ethical supply management conduct.

Answer:  Institute for Supply Management

Diff: 1

Topic:  Ethics and sustainability

AACSB:  Ethical Reasoning

Objective:  LO11-1

 

5) The supply-chain strategy of __________ increases the willingness to participate in JIT.

Answer:  few suppliers

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

6) __________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.

Answer:  Vertical integration

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

7) __________ is a Japanese term to describe suppliers who become part of a company coalition.

Answer:  Keiretsu

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

8) __________ rely on a variety of supplier relationships to provide services on demand.

Answer:  Virtual companies

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

9) Local optimization, incentives, and large lots all contribute to __________ about what is really occurring in the supply chain.

Answer:  distortion of information

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

10) __________ involves delaying any modifications or customization to the product as long as possible in the production process.

Answer:  Postponement

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

11) __________ postpones final assembly of a product so the distribution channel can assemble it.

Answer:  Channel assembly

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

12) __________ involves reducing the number of variations in materials and components as an aid to cost management.

Answer:  Standardization

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

13) __________ is a standardized data-transmittal format for computerized communications between organizations.

Answer:  Electronic data interchange (EDI)

Diff: 2

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

 

14) __________ is the term describing purchasing facilitated through the internet.

Answer:  E-Procurement

Diff: 1

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

 

15) Of the three stages of vendor selection, the stage at which criteria, weights, and scores allow a numeric comparison is __________.

Answer:  vendor evaluation

Diff: 2

Topic:  Vendor selection

Objective:  LO11-4

 

16) __________ is an approach that seeks efficiency of operations through the integration of all material acquisition, movement, and storage activities.

Answer:  Logistics management

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

 

17) The fastest growing mode of shipping is __________.

Answer:  airfreight

Diff: 1

Topic:  Logistics management

Objective:  LO11-5

 

18) What is e-procurement?

Answer:  Purchasing facilitated through the Internet.

Diff: 1

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

19) As the firm strategies vary from low-cost to response to differentiation, how does this impact the criteria used for selection of a supply-chain strategy?

Answer:  The supply chain must support the operations management strategy. For a firm using the low-cost strategy, supplier selection should be based primarily on cost.  When using the response strategy, the selection criteria are capacity, speed, and flexibility.  For differentiation strategy, the supplier is selected based on product development skills.

Diff: 2

Topic:  The supply chain’s strategic importance

Objective:  LO11-1

 

20) What are the three versions of online catalogs?

Answer:  The three versions of online catalogues are: (1) catalogs provided by vendors, (2) catalogs provided by intermediaries, and (3) exchanges provided by buyers.

Diff: 2

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

 

21) What are the special requirements of supply-chain systems in global environments?

Answer:  Supply chains in a global environment must be flexible, so that the firm can react to sudden changes that might occur in parts availability or currency rates. They must be able to use latest information technology for scheduling and managing shipments of parts and products. And they must be staffed with specialists to handle duties, customs, and political issues in other countries.

Diff: 2

Topic:  The supply chain’s strategic importance

AACSB:  Multicultural and Diversity

Objective:  LO11-1

 

22) Identify the reasons for making in the make-or-buy decision.

Answer:  The reasons for making in the make-or-buy decision include: (1) maintain core competence, (2) lower production cost, (3) unsuitable suppliers, (4) assure adequate supply, (5) utilize surplus labor or facilities and make a marginal contribution, (6) obtain desired quality, (7)  remove supplier collusion, (8) obtain unique item that would entail a prohibitive commitment for a supplier, (9) protect personnel from a layoff, (10) protect proprietary design or quality, and (11) increase or maintain size of the company (management preference)

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

 

23) Identify the reasons for buying in the make-or-buy decision.

Answer:  The reasons for buying in the make-or-buy decision include freeing management to focus on primary business; lower acquisition cost; preserve supplier commitment; obtain technical or managerial ability; inadequate capacity; reduce inventory costs; ensure alternative sources of supply; inadequate managerial or technical resources; reciprocity; and item is protected by patent or trade secret.

Diff: 2

Topic:  Supply-chain economics

Objective:  LO11-1

24) How are outsourcing and vertical integration related? Can a single firm successfully do both?

Answer:  Outsourcing transfers what were traditional internal activities to outside vendors. It is a way of increasing specialization which allows the firm to focus on its core strengths, and not try to do all possible tasks. Vertical integration is much the opposite, decreasing a firm’s specialization so that it can perform additional functions along its supply chain. Vertical integration has become increasingly difficult in the face of increasing specialization. It seems unlikely that firms which make significant use of outsourcing would do much vertical integration, but it is possible that a firm’s set of competitive advantages would support outsourcing in some functions and vertical integration in others.

Diff: 3

Topic:  Managing the supply chain

AACSB:  Reflective Thinking

Objective:  LO11-3

 

25) Of all areas of the organization, why is the supply chain especially vulnerable to ethical lapses?

Answer:  The supply chain offers more opportunities for ethical issues than some other functions in the organization. Some of these opportunities arise from the large sums of money involved. Perhaps these opportunities arise because of the close and long-term personal contact between buyer and seller. Globalization adds even more complexity to the decisions made in the supply chain.

Diff: 2

Topic:  Ethics and sustainability

AACSB:  Ethical Reasoning

Objective:  LO11-1

 

26) Identify and describe briefly the five supply-chain strategies.

Answer:

  1. Many suppliers is the traditional American approach of negotiating with many suppliers and playing one supplier off against another.
  2. The strategy of few suppliers develops long, “partnering” relationships with a few suppliers who will work with the purchaser in satisfying the end customer.
  3. Firms that practice vertical integration may decide to pursue backward integration by actually buying the supplier.
  4. Suppliers become part of a company coalition in the keiretsu strategy.
  5. With the virtual companies strategy, firms use suppliers on an as-needed basis.

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

27) Can an organization’s plans for vertical integration be supported by the tools of make-or-buy analysis? Explain; provide an example.

Answer:  Yes; the decision to acquire the provider of an upstream operation is the same as choosing to make whatever has been provided. Not to acquire is the equivalent of “buy.” The analysis also holds for downstream operations: the acquisition of a delivery fleet is equivalent to “make” in the downstream operation of distribution.

Diff: 2

Topic:  Supply-chain strategies

AACSB:  Reflective Thinking

Objective:  LO11-2

28) Identify the advantages and disadvantages of using the few suppliers approach.

Answer:  Advantages: long-term suppliers better understand the firm; suppliers may gain economies of scale, trust; and willingness to participate in JIT.  Disadvantages: concern about trade secrets and suppliers venturing out; high cost of changing partners; and risk of poor supplier performance.

Diff: 2

Topic:  Supply-chain strategies

Objective:  LO11-2

 

29) Describe some ways that effective supply-chain partners build and utilize mutual trust.

Answer:  Members of the chain must enter into a relationship that shares information.  Visibility throughout the supply chain is a requirement.  Risk and cost savings should be shared.  Activities such as end-customer research, sales analysis, forecasting, and production planning should be joint activities.

Diff: 2

Topic:  Managing the supply chain

AACSB:  Communication

Objective:  LO11-3

 

30) What opportunities exist for reducing the “bullwhip” effect, and improving the supply chain?

Answer:  The opportunities include accurate “pull” data, lot size reduction, single control of replenishment, vendor managed inventory (VMI), blanket orders, standardization, postponement, drop shipping and special packaging, pass-through facility, and channel assembly.

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

31) What is a keiretsu?

Answer:  A keiretsu is a network of suppliers. Usually the suppliers are partially owned or debtors to the purchasing organization. This structure is quite common in Japan.

Diff: 1

Topic:  Supply-chain strategies

Objective:  LO11-2

 

32) Describe the state of capacity utilization in the motor carrier (trucking) industry.  What, if anything, has been implemented by the industry to address the issue?

Answer:  The motor carrier industry averages a capacity utilization of only 50%.  That underutilized space costs the U.S. economy over $31 billion per year.  To improve logistics efficiency, the industry is establishing Web sites that let shippers and truckers find each other to use some of this idle capacity.  Shippers may pick from thousands of approved North American carriers that have registered.

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

33) Describe vendor managed inventory (VMI). How is it related to outsourcing? Cite an example from your experiences as a shopper.

Answer:  In vendor managed inventory, the supplier maintains material for the buyer, often delivering directly to the buyer’s using department.  It is a form of outsourcing, because the buying firm has transferred the shipping, stocking, and receiving tasks to an external vendor. There are many instances of VMI in today’s retail model; shelves of snack foods and soft drinks are routinely managed by the distributor, not the retailer.

Diff: 1

Topic:  Managing the supply chain

AACSB:  Reflective Thinking

Objective:  LO11-3

 

34) Name three common things that contribute to distortion of information about the supply chain?

Answer:  The occurrences include local optimization, incentives (sales incentives, quantity discounts, and promotions), and large lots.

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

35) Why is channel assembly popular in the personal computer industry?

Answer:  Channel assembly is popular in the personal computer industry because of better market response with less investment. This is possible because the late-stage assembly and customization is a natural part of a rapidly changing industry.

Diff: 2

Topic:  Managing the supply chain

Objective:  LO11-3

 

36) Define EDI.

Answer:  Electronic data interchange is a standardized data transmittal format for computerized communications between organizations.

Diff: 2

Topic:  E-Procurement

AACSB:  Use of IT

Objective:  LO11-3

 

37) What advantages may result from effectively outsourcing the logistics function to a third party?

Answer:  Driving down inventory investment and costs while improving delivery reliability and speed.

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

38) What are the three negotiation strategies? Briefly describe each of them.

Answer:  The three strategies for negotiating with vendors are the cost-based model, the market-based price model, and competitive bidding.  In the cost-based model, contract price is a function of vendor costs, such as those for time and materials. In the market-based price model, price is set by some form of published, auction, or index price. Competitive bidding may be used when vendors are not open to the cost-based model, or where information is not perfect enough for market-based pricing.

Diff: 2

Topic:  Vendor selection

Objective:  LO11-4

 

39) Identify three specific measures that indicate how well assets are utilized.  What are the formulas for each measure?

Answer:  Percent invested in inventory = (Total inventory investment/Total assets) × 100

Inventory turnover = Cost of goods sold/Inventory investment

Weeks of supply = Inventory investment/(Annual cost of goods sold/52 weeks)

Diff: 2

Topic:  Measuring supply-chain performance

Objective:  LO11-6

 

40) What are the advantages of shipping by truck?

Answer:  The advantages of shipping by truck include flexibility, on-time behavior, no damage, paperwork in order, and low cost.

Diff: 2

Topic:  Logistics management

Objective:  LO11-5

 

41) Identify some technological advances that can serve to improve logistics management and also improve shipping security.

Answer:  Several technological advances can serve both security and logistics purposes. They may provide environmental information that is useful for product quality as well as security, or geospatial information useful to JIT as well as security.  They include devices that can detect a broken seal on a shipping container, devices that can detect whether a container is in motion, devices that sense and transmit temperature and humidity, and devices that can transmit truck or container location.

Diff: 2

Topic:  Logistics management

AACSB:  Use of IT

Objective:  LO11-5

Essay

 

1) A regional grocery chain spends 70 percent of its sales in the supply chain, and has a net profit margin of 2 percent. They have just initiated an Internet-based inventory management program that is expected to save the chain $500,000 per year. What is the equivalent increase in sales to this saving? Use Table 11.3, reproduced below.

 

Answer:  The relevant entry in Table 11.3, 70% of sales and 2% net profit, is $6.25. If $500,000 can be saved, the equivalent value of increased sales is $500,000 x 6.25 = $3,125,000.

Diff: 2

Topic:  Supply-chain economics

AACSB:  Analytic Skills

Objective:  LO11-1

 

2) A shipment of parts valued at $75,000 needs to be shipped from Tampa, FL, to Chicago, IL.  They could be shipped by rail, taking 15 days at a cost of $1,575, or by truck, taking 4 days at a cost of $2,640.  The annual holding cost rate for this type of item has been estimated at 22%.  What option is more economical?

Answer:  Daily cost of holding the item is .22(75,000)/365 = $45.21

Days saved by using truck is 15-5=11 days

11 days x $45.21 = $497.27

Extra shipping cost = $2,640 – $1,575 = $1,065

The $497.27 savings does not offset the extra shipping cost of $1,065.  Send the shipment by rail.

Diff: 2

Topic:  Logistics management

AACSB:  Analytic Skills

Objective:  LO11-5

3) A transportation firm spends 60 percent of its sales in the supply chain, and has a net profit margin of 6 percent. The company is about to invest $100,000 in one of two ventures. One venture is advertising-based, and is expected to increase revenues (sales) by $600,000 (after spending the $100,000). The other venture applies the money in supply-chain efficiencies that are expected to save $200,000 (again, after spending the $100,000). Which of these two ventures offers the larger increase in profit to the firm? Use Table 11.3, reproduced below.

Answer:  The relevant entry in Table 11.3, 60% of sales and 6% net profit, is $4.35. If $200,000 can be saved, the equivalent value of increased sales is $200,000 x 4.35 = $870,000. In other words, $200,000 in supply-chain savings and $870,000 in increased sales yield the same increase in profit. Since the expected increase in sales is only $600,000, the better use of the $100,000 is to pursue the supply-chain efficiencies.

Diff: 2

Topic:  Supply-chain economics

AACSB:  Analytic Skills

Objective:  LO11-1

 

4) A company is about to select a vendor for the outsourcing of all of its engineering, environmental, and CAD requirements. It has identified four criteria critical to the selection. These criteria, and their importance weights, appear below. Three firms, A, C, and E, have indicated that they are interested in this position. The company has scored each of the three candidates on these criteria, using a 1-10 scale, where 10 is best. Candidate A scored 7, 7, 7, and 5 on the four criteria. Candidate C scored 9, 4, 8, and 6. Candidate E scored 5, 10, 10, and 7. Which vendor has the highest composite score?

 

Criterion Weight
Engineering expertise .40
Financial and managerial strength .20
Integrity .15
Staff experience and qualifications .25

 

Answer:

Diff: 2

Topic:  Vendor selection

AACSB:  Analytic Skills

Objective:  LO11-4

5) The following data are pulled from a recent Walsh Manufacturing annual report.

 

Assets

Raw material inventory                    $120,000

Work-in-process inventory                 $50,000

Finished goods inventory                $300,000

Property, plant & equipment            $500,000

Other assets                                      $200,000

Total assets                                    $1,170,000

 

Condensed Income Statement

Revenue                                        $2,000,000

Cost of goods sold                           $600,000

Other expenses                              $1,000,000

Net income                                       $400,000

 

Calculate: (a) Percent invested in inventory, (b) Inventory turnover, and (c) Weeks of supply.

Answer:  (a) Percent invested in inventory = (120,000+50,000+300,000)/1,170,000 = 40.17%

(b) Inventory turnover = 600,000/(120,000+50,000+300,000) = 1.28

(c) Weeks of supply = (120,000+50,000+300,000)/(600,000/52) = 40.73

Diff: 2

Topic:  Measuring supply-chain performance

AACSB:  Analytic Skills

Objective:  LO11-6

 

6) A grocery chain is interested in exploring the impact effective supply-chain management would have.  Suppose that for every $1 of sales 4% is profit, 50% is spent in the supply chain, and the remaining 46% is evenly divided between fixed and variable costs.  If the chain can save $1 in the supply chain it would take how many dollars of increased sales to have the same increase in profit?  Assume that fixed costs are fixed so that the portion of increased sales allocated to fixed costs is instead profit (27% profit margin combined now).

Answer:  Suppose initially the firm sells $100 of merchandise.  $50 is spent in the supply chain, $23 in fixed costs, $23 in variable costs, and $4 is profit.  An increase in sales of $X would increase revenue by X but increase costs by X*(.5+.23).  Therefore profit would be increased by revenue-costs= X-(.73X).  Therefore .27X(profit % * sales) = 1(profit req) and solving gives X= $ 3.70 of increased sales yields an additional $1 of profit.

 

*Note- Problem derived from Example 1 in the text, however students are asked to do the derivation instead of simply reading a chart (the derivation process is shown in the example as support for the chart

Diff: 2

Topic:  Supply-chain economics

AACSB:  Analytic Skills

Objective:  LO11-1

7) A company is deciding where to assign its summer intern.  The manager estimates that the intern can save $10,000 in the supply chain or increase sales (revenue) by $25,000.  If sales (revenue) is divided into the three categories shown in the table where should the manager assign the intern to maximize profits?

 

Supply Chain costs Variable Costs (materials) Profits
% of current sales (revenue) 35 25 40

 

Answer:  Intern would save $10,000 in the supply chain, or show a profit of $10k.  Profit from the increase in sales would be equal to revenue-costs.  If revenue is X, then costs would be (.35+.25)X.  Thus profit would be X-.6X or simply .4X.  $25,000*.4= $10,000 so the manager is neutral on where to assign the intern.

 

*Note- Problem derived from Example 1 in the text, however students are asked to do the derivation instead of simply reading a chart (the derivation process is shown in the example as support for the chart)

Diff: 2

Topic:  Supply-chain economics

AACSB:  Analytic Skills

Objective:  LO11-1

 

8) A company is deciding where to assign its summer intern.  The manager estimates that the intern can save the company $10,000 in supply chain costs.  What increase in sales (revenue) by the intern is required to show an equal profit?

 

Supply Chain costs Variable Costs (materials) Profits
% of current sales (revenue) 35 25 40

 

Answer:  Additional sales would increase costs by (.35+.25)* Sales.  Profit would therefore be X-.6X =.4X where X is the increase in sales (revenue).  Solve for when .4X=10,000 or X =$25,000 required in increased Revenue/Sales to account for the same profit level.

 

*Note- Problem derived from Example 1 in the text, however students are asked to do the derivation instead of simply reading a chart (the derivation process is shown in the example as support for the chart)

Diff: 2

Topic:  Supply-chain economics

AACSB:  Analytic Skills

Objective:  LO11-1

9) A car dealer is trying to reduce the number of days of inventory held at any given time on the lot.  Assume that he projects the daily sales rate as the last two months averaged.  Assume that the monthly sales rate for August was 12 cars/day, September was 14 cars/day, October was 12 cars/day, and November was 8 cars/day.  Given an inventory of 500 cars at the start of November and 400 at the start of December, determine the number of days of inventory on hand at the start of November and December (also assume each month has EXACTLY 30 days of sales).

Answer:  November sell rate = (Sep+Oct)/2 = (14+12)/2 = 13 cars/day

December sell rate = (Oct+Nov)/2 = (12+8)/2 = 10 cars/day

November on hand = inventory/daily sales rate = 500/13 = 38.5 days

December on hand = inventory/daily sales rate = 400/10 = 40 days

 

*Note- August data is given despite the fact that it is not required, students must be able to selectively pick the data required.

Diff: 2

Topic:  Measuring supply-chain performance

AACSB:  Analytic Skills

Objective:  LO11-6

 

10) A manufacturing plant had $.74 of raw materials, $.23 of in-progress inventory, and $1.03 of finished goods inventory at month’s end.  If monthly sales were $10, what is the turnover? (assume all units are in thousands, i.e. $1 is actually $1000)

Answer:  Turnover=Cost of Goods sold/ Inventory Investment = 10/(.74+.23+1.03) = 5

Diff: 2

Topic:  Measuring supply-chain performance

AACSB:  Analytic Skills

Objective:  LO11-6

 

11) A container of ball-bearings valued at $25,000, currently located in Houston, TX, needs to be delivered to the Morton, IL, plant.  The standard shipment method takes two days.  However, for an additional charge of $500, the container can be sent overnight.  The annual holding cost rate for this type of item has been estimated at 28%.  What option is more economical?

Answer:  Daily cost of holding the item is .28(25,000)/365 = $19.18.  Since the extra shipping cost is $500, the $19.18 savings does not offset the extra shipping cost.  Send the shipment using the standard method.

Diff: 2

Topic:  Logistics management

AACSB:  Analytic Skills

Objective:  LO11-5