Chapter 15
A wide product variety makes it easier for a firm to increase its production efficiency and thus reduce its unit costs.
False
Flexible machine cells cannot be used for mass customization.
False
In international business, a relatively high level of fixed costs can make it economical to perform a particular activity in several locations at once.
False
In international business, production and supply chain functions accommodating demands for local responsiveness work independent of host-government demands.
False
In recent years, time-based competition has become less important in international business
False
In terms of Six Sigma, the higher the number of "sigmas," the greater the number of errors.
False
In terms of minimum efficient scale of output, the "unit cost curve" rises with output until a certain output level is reached, at which point further increases in output realize little reduction in unit costs.
False
Since refined sugar has a low value-to-weight ratio, even if it is shipped halfway around the world, the transportation costs would account for a very small percentage of total costs.
False
The drawback of a just-in-time inventory system is that it leaves a firm with excess unsold inventory that it has to write off against earnings or price low to sell.
False
The level of output at which most plant-level scale economies are exhausted is referred to as the maximum efficient scale of output.
False
The objectives of reducing costs and increasing quality in a firm are independent of each other.
False
The production and supply chain management of an international firm are independent of each other.
False
With flexible manufacturing technologies, a firm can manufacture products customized to various national markets at a single factory sited at the optimal location but will nevertheless incur a significant cost penalty.
False
Which of the following statements is true of Six Sigma?
It is almost impossible for a company to achieve Six Sigma perfection.
With the advent of flexible manufacturing technologies and mass customization, establishing manufacturing facilities in each major market in which the firm is active is becoming less attractive.
True
The total quality management philosophy was developed by a number of American consultants. Which of the following individuals is one of them?
W. Edward Deming
Amber Engineers Inc. wants to be able to customize products for different national markets and in turn increase its customer responsiveness. However, the fixed costs associated with its production are high. Hence, these functions will be performed most efficiently if Amber Engineers
adopts flexible manufacturing technologies to help achieve mass customization.
Which of the following holds true for products with low value-to-weight ratios?
It is advisable to manufacture them in multiple locations close to major markets.
Which of the following firms should concentrate its production in a centralized location?
Jupiter Inc. operates in an industry where the fixed costs are high and services of supporting industries are of prime importance.
_____ is a statistically based philosophy that aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout a company.
Six Sigma
_____ has caused proprietary software solutions to implement electronic data interchange systems become obsolete.
The Internet
A firm that improves its quality control cannot reduce its costs of value creation simultaneously.
False
Which of the following companies adheres to the total quality management steps identified by W. Edward Deming?
Galaxy Inc. empowers its employees to report problems or recommend improvements without any fear.
Which of the following is a result of using just-in-time inventory systems?
It can help firms improve product quality.
Which of the following is an implication of a mass production system?
It creates massive inventories that have to be stored in large warehouses.
Which of the following is a consequence of using flexible machine cells?
It improves capacity utilization and reduces wastes.
Which of the following is true of a product that serves universal needs?
It increases the attractiveness of concentrating production at an optimal location.
Manufacturing firms should typically aim at lowering the costs of value creation by
reducing production costs.
A second strategic objective shared by production and supply chain management is to increase product quality. In this context, quality means
reliability.
Which of the following is the process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposal?
reverse logistics
A major cost saving from just-in-time inventory systems comes from
speeding up inventory turnover.
Concentration of production makes most sense when
trade barriers are low.
When should a firm concentrate its production facilities in a centralized location?
when important exchange rates are expected to remain relatively stable
When is decentralization of manufacturing facilities most appropriate?
when the production technology has low minimum efficient scale
Currency appreciation can transform a low-cost location into a high-cost location.
True
Uvicon Inc. and Bionor Inc. are firms that compete against each other in the global market. Uvicon has a high level of fixed costs and high minimum efficient scale, whereas Bionor has a low level of fixed costs and low minimum efficient scale. In this scenario, which of the following is true?
Uvicon will benefit from centralizing its production activities and Bionor from decentralizing.
Under a more traditional system as opposed to a just-in-time inventory system, warehousing parts for weeks before they are used will
allow many defective parts to be produced before a problem is recognized.
When a company achieves mass customization via flexible manufacturing technologies, it increases the company's
customer responsiveness.
What do firms now typically use via the Internet to coordinate the flow of materials into manufacturing, through manufacturing, and out to customers?
electronic data interchange
Which of the following includes a grouping of various types of machinery, a common materials handler, and a computer to control the production of a family of parts or products?
flexible machine cell
Producing a standardized product in large volumes will
increase production efficiency.
Adopting flexible manufacturing technology to produce a wide variety of end products results in
increased utilization of individual machines.
The drawback of a just-in-time inventory system is that it
leaves a firm without a buffer stock of inventory.
Uniway Technologies Inc. has based its manufacturing units in the country of Lanthania. The country's stable economic and political environment has helped the firm gain competitive advantage by lowering its production costs and improving product quality. Other things being equal, the benefits realized from such a strategy can be typically referred to as
location economies.
An important objective shared by both production and logistics functions of an international firm is to
lower costs by dispersing production activities.
If a firm possesses proprietary product technology, the best option for that firm would be to
manufacture the product in-house so that it does not lose its competitive advantage.
The level of output at which most plant-level scale economies are exhausted is known as
minimum efficient scale.
Which of the following products is best manufactured in multiple locations close to major markets to reduce transportation costs?
petroleum products
Rinker Audio Products is looking to enter Europe. Toward this, the company is studying various European countries to see which ones to invest in. Which of the following location externalities is favorable for Rinker's foreign direct investment in a country?
presence of supporting industries
In entering the European market, Rinker Audio Products is aware that each country in Europe is different and that the company has to be responsive to local needs. The company's CFO, Neha Patel, believes that the company has to address its minimum efficient scale of output to be successful in Europe. Which of the following statements is true about minimum efficient scale of output?
An advantage of a low minimum efficient scale is that it allows the firm to accommodate demands for local responsiveness.
_____ was pioneered by Japanese firms during that country's remarkable economic transformation during the 1960s and 1970s.
Just-in-time inventory systems
Which of the following is the initial reason for the establishment of a foreign production facility?
Labor costs are low.
Ronen Argo, the head of manufacturing of Rinker Audio Products wants the company to centralize its manufacturing in one location in a single country. In contrast, Neha Patel, the company's CFO wants the company to operate several manufacturing facilities in various countries. Which of the following statements is true about performing a manufacturing activity in several locations at once?
Many firms disperse their manufacturing plants to different locations as a "real hedge" against potentially adverse moves in currencies.
Which of the following is true about firms using a just-in-time (JIT) inventory system
Parts enter the manufacturing process immediately; they are not warehoused.
_____ is a hidden cost to basing production in a foreign location.
Poor product quality
Rinker Audio Products wants to adopt the total quality management (TQM) philosophy as developed by, among others, W. Edwards Deming. The company employees are, however, confused as to what TQM entails. As a consultant, you are helping Rinker's employees understand TQM as it would impact them. Which of the following is true of W. Edward Deming's beliefs about the total quality management philosophy?
Quality of supervision should be improved by allowing more time for supervisors to work with employees.
Which of the following best describes the relationship between the number of "sigmas" and the number of errors?
The higher the number of "sigmas," the smaller the number of errors.
Which of the following is true of high value-to-weight ratio products?
Their transportation costs account for a very small percentage of total costs.
Which of the following statements is true of flexible manufacturing technologies?
They allow firms to customize products to national differences at a single facility.
Which of the following is true of products with high value-to-weight ratios?
They are expensive and do not weigh very much.
In an effort to enter the European market, Rinker Audio Products wants to get ISO 9000 certification. However, a segment of the company's top management team is not supportive of this and to make their case, they cite various drawbacks of ISO 9000 certification. Which of the following is a drawback of ISO 9000 certification?
It is bureaucratic and costly for many firms.
Which of the following is a recent trend among international businesses regarding make-or-buy decisions?
Outsourcing decisions are expanding to embrace the production of service activities.
Which of the following firms should spread its production over decentralized locations?
Saturn Inc. operates in an industry where volatile fluctuations in important exchange rates are expected.
Rinker Audio Products has had recurring problems in its product quality. The company's manufacturing vice president suggests that Rinker use a statistically based methodology that aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout the company and whose ultimate goal would be to have just 3.4 defects per million units that Rinker produces. What is the methodology that the manufacturing vice president is considering?
Six Sigma
Which of the following statements is true of industrial products such as steel?
They serve needs that are the same all over the world.
Firms now typically use electronic data interchange (EDI) via the Internet to coordinate the flow of materials into manufacturing, through manufacturing, and out to customers.
True
Flexible manufacturing technologies allow a company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.
True
In international business, when consumer demand is prone to large and unpredictable shifts, the firm that can adapt most quickly to these shifts will gain an advantage.
True
In recent years, the trend among U.S. firms is to outsource the "production" of certain service activities to developing nations where labor costs are lower.
True
Industrial products have few national differences in consumer taste and preference, hence the need for local responsiveness is reduced for such products.
True
Other things being equal, when fixed costs are substantial and minimum efficient scale of production is high, the arguments for concentrating production at a few choice locations are strong.
True
The concept of economies of scale tells us that as plant output expands, unit costs decrease.
True
Under a just-in-time inventory system, a company can reduce the amount of working capital it needs to finance inventory, freeing capital for other uses and/or lowering the total capital requirements of the enterprise.
True
W. Edward Deming believed that achieving better quality requires the commitment of everyone in a company.
True
Which of the following refers to a logistics system designed to deliver parts to a production process as they are needed, not before?
just-in time inventory system
As the global market for hearing products has become extremely competitive in recent months, Rinker Audio Products' newly appointed CFO, Neha Patel believes that the company should address its minimum efficient scale and attempt to lower it. Which of the following is a consequence of a low minimum efficient scale?
allowing a firm to hedge against currency risk by manufacturing the same product in several locations
Pink Polka Fashion Inc., a multinational clothing brand, has plans to expand in the European Union (EU) marketplace. To do so, the EU requires the company to
certify its products under ISO 9000.
Rinker Audio Products wants to enter the European market but realizes that European consumer tastes are not uniform across countries. To be able to accommodate demands for local responsiveness, Rinker should
decentralize production activities to the major national or regional markets.
The effect of improved quality control is to lower the costs of value creation by reducing production costs and
decreasing after-sales service costs.
Rinker Audio Products has wide product variety in its product line. A firm with a wide product variety will find it
difficult to reduce its unit costs.
In studying various European countries to identify the one where Rinker Audio Products can manufacture and use as the base for a pan-Europe launch, the company found out that the country of Marunia changed its foreign exchange rate that resulted in a significant appreciation of the Marun, its local currency. Which of the following is a consequence of Marunia's change in exchange rate that results in appreciation of the local currency?
diminishing of Marunia's attractiveness as a manufacturing base
Rinker Audio Products stores its finished goods in various warehouses around the United States and in international locations. The company's sales function coordinates with 47 wholesalers who, in turn, ensure that Rinker's products are available in 750 retail outlets worldwide. When taken together, what portion of Rinker's global supply chain do its distributors and retailers constitute?
downstream
The cost to manufacture one unit of Rinker Audio Products' bestselling hearing aid, the Magnifier, is $87.50. The CFO of the company, Neha Patel, has determined that if the company expands the output of its biggest U.S. plant by 20 percent, the unit cost would be only $82.50. The concept that as plant output expands, unit costs decrease, is known as
economies of scale.
Rinker Audio Products is uncertain whether or not to introduce a just-in-time (JIT) inventory system. While the head of manufacturing is opposed to it, its CFO is pushing for its adoption. The basic philosophy behind just-in-time (JIT) inventory systems is to
economize on inventory holding costs.
Geminia Systems, a manufacturer of car components, wants to set up a system that will help in sending invoices to its customers once orders for input supply are placed. Which of the following should the company use to perform this function?
electronic data interchange
Which of the following allows suppliers, shippers, and the purchasing firm to communicate with each other via the Internet with no time delay?
electronic data interchange system
Six Sigma refers to a statistically based philosophy that aims to
eliminate waste.
Which of the following is a step taken by automobile companies in situations where neither centralization nor decentralization of production is feasible?
establishing top-to-bottom manufacturing operations
Under a just-in-time (JIT) inventory system, it is likely that the _____ will increase.
inventory turnover
Rinker Audio Products has a fully-staffed purchasing department that procures various inputs. It also has various domestic manufacturing facilities that coordinate with the purchasing department. Rinker's distribution function coordinates the shipment of finished products. Taken together, Rinker Audio Products' purchasing, manufacturing, and distribution functions constitute the company's
logistics.
Mass customization reconciles the two goals of
low cost and product customization.
Champion Works Inc. is an animation company, headquartered in the United States. The CEO of the company has decided to outsource some of the production to companies in developing countries, as the firm seems to be losing out on its competitive advantage. This decision to shift functions or processes to less developed countries is most likely due to their
lower labor costs.
Which of the following is an objective of logistics?
manage a firm's global supply chain at a low cost
Which of the following terms refers to the production of a variety of end products at a unit cost that could once be achieved only through bulk production of a standardized output?
mass customization
Flexible manufacturing technologies are specially targeted at enabling companies to
produce customized products without a significant cost penalty.
Two product features impact location decisions. Which of the two reduces the need for local responsiveness?
product's ability to serve universal needs
Which of the following is an objective of lean production?
reducing setup times for complex equipment
One way to reduce the risks associated with a global supply chain that operates on just-in-time principles is to
source inputs from several suppliers located in different countries.
Which of the following is a philosophy that was widely adopted, first by Japanese companies and then American companies during the 1980s and early 1990s and from which the Six Sigma methodology directly descended?
total quality management
Technological factors are making it feasible for firms to concentrate manufacturing facilities at optimal locations. The major brakes on this trend are
transportation costs and trade barriers.
A product's value-to-weight ratio affects location decisions primarily because of its influence on
transportation costs.
Rinker Audio Products sources raw materials from six different suppliers around the world. These inputs are stored in Rinker-owned warehouses close to its manufacturing facility in Canton, Ohio. What part of the global supply chain do the suppliers and inputs warehouse together constitute?
upstream