ISDS 3115 Test 3

8. Disaggregation is the process of breaking the aggregate plan into greater detail; one example of this detail is the Master Production Schedule.

true

26. A hotel room that goes unrented and an airline seat that goes unsold are both examples of perishability of services inventory.

true

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

true

26. Inventory has only one positive aspect, which is availability; inventory has several negatives, including increased material handling, obsolescence, and damage.

true

26. Nearshoring is the practice of choosing an outsource provider in the home country or in a nearby country.

true

27. Smoothing a resource requirements profile to stay within capacity limits may increase setup costs.

true

30. The 5S's—sort/segregate, simplify/straighten, shine/sweep, standardize, and sustain/self discipline—are important to lean production because they act as a means to reduce waste.

true

30. When safety stock is deemed absolutely necessary, the usual policy is to build it into the projected on-hand inventory of the MRP logic.

true

31. When implemented as a comprehensive manufacturing strategy, JIT, TPS, and lean systems sustain competitive advantage and result in increased overall returns.

true

32. DRP is a time-phased stock-replenishment plan for all levels of a distribution network.

true

34. Firms may discover that, rather than adapting ERP to the way they do business, they have to adapt the way they do business to accommodate the ERP software.

true

35. The supply chain systems that result from using ERP in the grocery industry are called efficient consumer response (ECR) systems.

true

8. Lead times, inventory availability, and purchase orders outstanding are among the five things operations managers must know for effective use of MRP.

true

48. The transfer of some of what are traditional internal activities and resources of a firm to outside vendors is a. a standard use of the make or buy decision b. not allowed by the ethics code of the Supply Management Institute c. offshoring d. outsourcing e. keiretsu

D outsourcing

71. Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of a. vendor managed inventory b. standardization c. backward integration d. postponement e. timely customization

D postponement

79. 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? a. 12.50 b. 10.00 c. 42.00 d. 4.16 e. 20.00

A 12.50 (COGS/ (Average Inventory))= inventory turnover (25 million / 20 million)= 12.50

81. Which one of the following distribution systems offers quickness and reliability when emergency supplies are needed overseas? a. trucking b. railroads c. airfreight d. waterways e. pipelines

C airfreight

86. Which one of the following performance measures is not true of a world class firm? a. short time placing an order b. high percentage of accepted material c. large lead time d. high percentage of on-time deliveries e. low number of shortages per year

C larger lead time

46. In the basic EOQ model, if the cost of placing an order doubles, and all other values remain constant, the EOQ will a. increase by about 41% b. increase by 100% c. increase by 200% d. increase, but more data is needed to say by how much e. either increase or decrease

a increased by about 41%

*Which of the following best describes a gross material requirements plan?* *a. a schedule that shows total demand for an item, and when it must be ordered from a supplier or when production must be started* b. an intermediate range plan for the scheduling of families of products c. a chart illustrating whether capacity has been exceeded d. a table that corrects scheduled quantities for inventory on hand e. a schedule showing which products are to be manufactured and in what quantities

a. a schedule that shows total demand for an item, and when it must be ordered from a supplier or when production must be started

74. The fixed-period inventory model requires more safety stock than the fixed-quantity models because a. a stockout can occur during the review period as well as during the lead time b. this model is used for products that have large standard deviations of demand c. this model is used for products that require very high service levels d. replenishment is not instantaneous e. setup costs and holding costs are large

a. a stockout can occur during the review period as well as during the lead time

*Which of the following actions is CONSISTENT with the use of pure level strategy?* a. use inventory to meet demand requirements b. vary the amount of subcontracting to meet demand requirements c. vary production levels to meet demand requirements d. vary work force to meet demand requirements e. none of the above

a. use inventory to meet demand requirements

*Which of the following aggregate planning strategies is a "demand option"?* a. changing price b. subcontracting c. varying production levels d. changing inventory levels e. using part-time workers

a. changing price

*Which of the following is specifically characterized by a focus on continuous improvement, respect for people, and standard work practices?* a. Just-in-time (JIT) b. Toyota Production System (TPS) c. Lean operations d. Material requirements planning (MRP) e. kanban

b. Toyota Production System (TPS)

*Which of these is among the DEMAND options of aggregate planning?* a. subcontracting b. back-ordering during high-demand periods c. changing inventory levels d. varying workforce size e. All of the above are demand options.

b. back-ordering during high-demand periods

*Characteristics of just-in-time partnerships DO NOT INCLUDE* a. removal of in-transit inventory *b. large lot sizes to save on setup costs and to gain quantity discounts* c. long-term contracts d. few suppliers e. buyer helps supplier to meet the quality requirements

b. large lot sizes to save on setup costs and to gain quantity discounts

76. An advantage of the fixed-period inventory system is that a. the supplier will be more cooperative b. there is no physical count of inventory items when an item is withdrawn c. no inventory records are required d. orders usually are for smaller order quantities e. the average inventory level is reduced

b. there is no physical count of inventory items when an item is withdrawn

47. In the basic EOQ model, if D=6000 per year, S=$100, H=$5 per unit per month, the economic order quantity is approximately a. 24 b. 100 c. 141 d. 490 e. 600

c 141

38. The practice of choosing an outsource provider in the home country or in a nearby country is referred to as a. homeshoring b. homesourcing c. nearshoring d. nearsourcing e. backsourcing

c nearshoring

83. A firm makes numerous models of mowers, garden tractors, and gasoline powered utility vehicles. Some assemblies and parts are common to many end items. To relieve the MPS of performing order releases on these common parts, the firm might choose to use the __________ technique. a. Wagner-Whitin b. economic part period c. supermarket d. gross material requirements e. resource requirements profile

c supermarket

73. In a safety stock problem where both demand and lead time are variable, demand averages 150 units per day with a daily standard deviation of 16, and lead time averages 5 days with a standard deviation of 1 day. The standard deviation of demand during lead time is approximately a. 15 units b. 100 units c. 154 units d. 500 units e. 13,125 units

c 154 units

57. When safety stock is deemed absolutely necessary, the usual policy is to build it into which category of the MRP logic? a. Gross Requirements b. Scheduled Receipts c. Projected On Hand d. Net Requirements e. Planned Order Receipts

c. Projected On Hand

*Which of the following is not one of the four things needed for aggregate planning?* a. a logical overall unit for measuring sales and output b. a method for determining costs, such as hiring, firing, and inventory costs, associated with production schedules c. a mathematical model that will minimize costs over the intermediate planning period d. an aggregate demand forecast for an intermediate planning period e. All of these are needed for aggregate planning.

c. a mathematical model that will minimize costs over the intermediate planning period

69. Which of these is not a characteristic that makes yield management attractive? a. demand can be segmented b. service can be sold in advance of consumption c. capacity is easily changed d. variable costs are low and fixed costs are high e. demand fluctuates

c. capacity is easily changed

67. Which one of the following scenarios represents the use of a kanban to reduce inventories? a. A supervisor tells the operators to stay busy and start producing parts for next month. b. A "supplier" work center signals the downstream workstation that a batch has been completed. c. A supervisor signals to several work centers that the production rate should be changed. d. A "customer" work center signals to the "supplier" workstation that more parts are needed. e. An operator asks the next station's operator to help him fix his machine.

d A "customer" work center signals to the "supplier" workstation that more parts are needed.

56. Which of the following is the author of the phrase "Inventory is evil"? a. Poka Yoke b. Pat "Keiretsu" Morita c. Kanban Polka d. Shigeo Shingo e. none of the above

d Shigeo Shingo

*The purpose of safety stock is to* a. replace failed units with good ones b. eliminate the possibility of a stockout c. eliminate the likelihood of a stockout due to erroneous inventory tally d. control the likelihood of a stockout due to the variability of demand during lead time e. protect the firm from a sudden decrease in demand

d control the likelihood of a stockout due to the variability of demand during lead time

*****Which of these statements about the production order quantity model is false?***** a. The production order quantity model is appropriate when the assumptions of the basic EOQ model are met, except that receipt is noninstantaneous. b. Because receipt is noninstantaneous, some units are used immediately, not stored in inventory. c. Average inventory is less than one-half of the production order quantity. d. All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity. e. None of the above is false.

d. All else equal, the smaller the ratio of demand rate to production rate, the larger is the production order quantity.

27. Which of the following statements regarding Anheuser-Busch is false? a. Aggregate planning is a major part of its competitive edge. b. All four stages of beer production are integrated into the aggregate plan. c. High facility utilization complements its successful aggregate planning. d. Its aggregate planning focuses entirely on facilities, ignoring employee issues. e. Even with excellent aggregate planning, its plants need to have high utilization.

d. Its aggregate planning focuses entirely on facilities, ignoring employee issues.

*Which of the following statements regarding MRP in services is true?* a. MRP is for manufacturing only, and is not applicable to services. b. MRP can be used in services, but only those that offer very limited customization. c. MRP does not work in services because there is no dependent demand. *d. Services such as restaurant meals illustrate dependent demand, and require product structure trees, bills-of-material, and scheduling.* e. None of the above is true.

d. Services such as restaurant meals illustrate dependent demand, and require product structure trees, bills-of-material, and scheduling.

**Which of the following statements about quantity discounts is FALSE?** a. The cost-minimizing solution may or may not be where annual holding costs equal annual ordering costs. b. In inventory management, item cost becomes relevant to inventory decisions only when a quantity discount is available. c. If carrying costs are expressed as a percentage of value, EOQ is larger at each lower price in the discount schedule. d. The larger annual demand, the less attractive a discount schedule will be. e. The smaller the ordering cost, the less attractive a discount schedule will be.

d. The LARGER ANNUAL DEMAND, the LESS ATTRACTIVE A DISCOUNT SCHEDULE will be.

70. If demand is not uniform and constant, then stockout risks can be controlled by a. increasing the EOQ b. placing an extra order c. raising the selling price to reduce demand d. adding safety stock e. reducing the reorder point

d. adding safety stock

29. Which of the following is the term used for medium range capacity planning with a time horizon of three to eighteen months? a. material requirements planning b. short-range planning c. strategic planning d. aggregate planning e. none of the above

d. aggregate planning

39. Among the advantages of cycle counting is that it a. makes the annual physical inventory more acceptable to management b. does not require the detailed records necessary when annual physical inventory is used c. does not require highly trained people d. allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory e. does not need to be performed for less expensive items

d. allows more rapid identification of errors and consequent remedial action than is possible with annual physical inventory

*Enterprise resource planning (ERP)* a. seldom requires software upgrade or enhancement b. does not integrate well with functional areas other than operations c. is inexpensive to implement d. automates and integrates the majority of business processes e. all of the above

d. automates and integrates the majority of business processes

68. "Yield management" is best described as a. a situation where management yields to labor demands b. a situation where the labor union yields to management demands c. a process designed to increase the rate of output d. capacity allocation to different classes of customers in order to maximize profits e. management's selection of a product mix yielding maximum profits

d. capacity allocation to different classes of customers in order to maximize profits

40. Which of the following aggregate planning strategies is a "capacity option"? a. influencing demand by changing price b. counterseasonal product mixing c. influencing demand by extending lead times d. changing inventory levels e. influencing demand by back ordering

d. changing inventory levels

55. A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. In following the chase strategy, the firm will a. add 100 units to inventory in the next period b. add 200 units to inventory in the next period c. hire workers to make up the 100 unit difference d. fire workers to make up the 200 unit difference e. implement a lower price point to increase demand

d. fire workers to make up the 200 unit difference

42. Which one of the following is a characteristic of a JIT partnership? a. large number of suppliers b. maximal product specifications imposed on supplier c. active pursuit of vertical integration d. removal of incoming inspection e. frequent deliveries in large lot quantities

d. removal of incoming inspection

*The proper quantity of safety stock is typically determined by* a. minimizing an expected stockout cost b. carrying sufficient safety stock so as to eliminate all stockouts c. meeting 95% of all demands d. setting the level of safety stock so that a given stockout risk is not exceeded e. minimizing total costs

d. setting the level of safety stock so that a given stockout risk is not exceeded

*"An optimal plan for minimizing the cost of allocating capacity to meet demand over several planning periods" best describes* a. the linear decision rule b. simulation c. the management coefficients model d. the transportation method e. graphical methods

d. the transportation method (does not work if hiring and firing is possible)

37. Demand for a given item is said to be dependent if a. it originates from the external customer b. there is a deep bill of material c. the finished products are mostly services (rather than goods) d. there is a clearly identifiable parent e. the item has several children

d. there is a clearly identifiable parent

*Distortion in MRP systems can be minimized when safety stock is held at the* a. purchased component or raw material level b. work-in-process level c. finished goods level d. a and b *e. a and c* <--WHAT THE HECK

e a and c

43. The aggregate plan gets input or feedback from which of the following areas? a. engineering b. finance, marketing, and human resources c. the master production schedule d. procurement, production, and general management e. all of the above

e all of the above

54. Just-in-time systems make demands on layouts, including a. distance reduction b. increased flexibility c. reduced space and inventory d. cross-trained, flexible employees e. All of the above are JIT influences on layout.

e all of the above are JIT influences on layout

*Which of the following statements regarding the gross material requirements plan is TRUE?* a. It shows total demand for an item. b. It shows when an item must be ordered from a supplier or when production must be started. c. It combines a master production schedule with the time-phased schedule. d. It requires several inputs, including an accurate bill of material. *e. All of the above are true*

e all of the above are true

57. Which of the following is not a condition that favors the success of vertical integration? a. availability of capital b. availability of managerial talent c. required demand d. small market share e. All of the above favor the success of vertical integration.

D small market share

28. What is the practice of procuring from external sources services or products that are normally part of an organization? a. nearshoring b. farshoring c. offshoring d. outsourcing e. backsourcing

D outsourcing

IN supply chain management, ethical issues a. are particularly important because of the enormous opportunities for abuse b. may be guided by company rules and codes of conduct c. become more complex the more global is the supply chain d. may be guided by the principles and standards of the Institute for Supply Management e. All of the above are true.

E all of the above are true

47. Outsourcing a. transfers traditional internal activities to outside vendors b. utilizes the efficiency which comes with specialization c. lets the outsourcing firm focus on its critical success factors d. None of the above are true of outsourcing. e. All of the above are true of outsourcing.

E all of the above are true of outsourcing

85. Which of the following devices represents an opportunity for technology to improve security of container shipments? a. devices that identify truck and container location b. devices that sense motion c. devices that measure radiation or temperature d. devices that can communicate the breaking of a container lock or seal e. all of the above

E all of the above

73. The 5S's a. have the "flavor" of a housekeeping list b. are a checklist for lean operations c. have become a list of seven items in American practice d. can be used to assist with necessary changes in organizational culture e. All of these are true.

e all of these are true

87. 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?

e. 4.16

*Which of the following statements regarding aggregate planning in services is false?* a. When outputs are intangible, aggregate planning deals mainly with human resources requirements and managing demand. b. Perishability of inventory is an important consideration of planning. c. Aggregate planning in some service industries can be simpler than in manufacturing. d. Labor is the primary aggregate planning vehicle. e. Level scheduling is far more common than chase.

e. Level scheduling is far more common than chase.

67. Yield management is most likely to be used in which one of the following situations? a. a fast food restaurant with wide demand fluctuations during the day b. a dental clinic that wants to fill its appointment book c. a firm with a good counterseasonal product mix d. a shipping company that can change its fleet size easily e. an airline attempting to fill "perishable" seats at maximum revenue

e. an airline attempting to fill "perishable" seats at maximum revenue

40. Manufacturing cycle time is best defined as the a. length of the work shift, expressed in minutes per day b. time it takes a unit to move from one workstation to the next c. time between the start of one unit and the start of the next unit d. sum of all the task times to make one unit of a product e. time from raw materials receipt to finished product exit

e. time from raw materials receipt to finished product exit

*a master production schedule contains information about*

quantities and required delivery dates of FINAL PRODUCTS

12. In aggregate planning, the amount of overtime and the size of the work force are both adjustable elements of capacity.

true

12. Many suppliers feel that having a variety of customers is better than being tied to long-term contracts with one customer.

true

12. Retail inventory that is unaccounted for between receipt and time of sale is known as shrinkage.

true

2. Aggregate planning occurs over the medium or intermediate future of 3 to 18 months.

true

2. MRP is generally practiced on items with dependent demand.

true

33. While ERP may provide a strategic advantage over competitors, it is so complex that many companies cannot adjust to it.

true

75. What is the average capacity utilization in the motor carrier (trucking) industry? a. 25% b. 50% c. 75% d. 95% e. 99%

B 50%

60. Vertical integration appears particularly advantageous when the organization has a. a very specialized product b. a large market share c. a very common, undifferentiated product d. little experience operating an acquired vendor e. purchases that are a relatively small percent of sales

B a large market share

74. A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing a. postponement b. drop shipping c. channel assembly d. passing the buck e. float reduction

B drop shipping

62. Japanese manufacturers often take a middle ground between purchasing from a few suppliers and vertical integration. This approach is a. kanban b. keiretsu c. samurai d. poka-yoke e. kaizen

B keiretsu

44. In make-or-buy decision, which of the following is a reason for MAKING an item? a. management can focus on its primary business b. lower production cost c. inadequate capacity d. reduce inventory costs e. None of the above is a reason for making an item.

B lower production cost

37. Visibility throughout the supply chain is a requirement among supply chain members for a. mutual agreement on goals b. mutual trust c. compatible organizational cultures d. local optimization e. the bullwhip effect

B mutual trust

64. Which of the following is not an advantage of a virtual company? a. speed b. total control over every aspect of the organization c. specialized management expertise d. low capital investment e. flexibility

B total control over every aspect of the organization

41. One dollar saved in purchasing is a. equivalent to a dollar earned in sales revenue b. worth even more than a dollar earned in sales revenue c. worth slightly more than a dollar earned because of taxes d. worth from 35% in the technical instrument industry to 70% in the food products industry e. only worthwhile if you are in the 50% tax bracket and still have a low profit margin

B worth even more than a dollar earned in sales revenue

28. Which of the following statements regarding Amazon.com is false? a. The company was opened by Jeff Bezos in 1995. b. The company was founded as, and still is, a "virtual retailer" with no inventory. c. The company is now a world-class leader in warehouse management and automation. d. The company uses both United Parcel Service and the U.S. Postal Service as shippers. e. Amazon obtains its competitive advantage through inventory management.

B The company was founded as, and still is, a "virtual retailer" with no inventory.

82. With the growth of JIT, which of the following distribution systems has been the biggest loser? a. trucking b. railroads c. airfreight d. waterways e. pipelines

B railroads

78. The three classic types of negotiation strategies are a. vendor evaluation, vendor development, and vendor selection b. Theory X, Theory Y, and Theory Z c. many suppliers, few suppliers, and keiretsu d. cost-based price model, market-based price model, and competitive bidding e. None of the above is correct.

D cost- based price model, market-based price model, and competitive bidding

66. The "bullwhip" effect a. occurs as orders are relayed from retailers to wholesalers b. results in increasing fluctuations at each step of the sequence c. increases the costs associated with inventory in the supply chain d. occurs because of distortions in information in the supply chain e. all of the above

E all of the above

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

True

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

True

46. What is the time required to move orders through the production process, from receipt to delivery? a. throughput b. manufacturing cycle time c. pull time d. push time e. queuing time

a throughput

79. What lot-sizing technique is generally preferred when inventory holding costs are extremely high? a. lot-for-lot b. EOQ c. part-period balancing d. the Wagner-Whitin algorithm e. All of the above are appropriate for the situation.

a lot-for-lot

41. The ______ is (are) the MRP input detailing which end items are to be produced, when they are needed, and in what quantities. a. master production schedule b. gross requirements c. inventory records d. assembly time chart e. bill of material

a. master production schedule

69. The number of kanbans is a. one b. the ratio of the reorder point to container size c. the same as EOQ d. one full day's production e. none of the above

b the ratio of the reorder point to container size

*For the lot-sizing technique known as lot-for-lot to be appropriate* a. future demand should be known for several weeks b. setup cost should be relatively small c. annual volume should be rather low d. item unit cost should be relatively small e. the independent demand rate should be very stable

b setup cost should be relatively small

*Which of the following statements about aggregate planning is false?* a. Hiring, layoffs, overtime, and subcontracting are methods of manipulating capacity. b. Aggregate planning produces a plan detailing which products are made and in what quantities. c. Yield management is a way of manipulating product or service demand. d. Aggregate planning uses the adjustable part of capacity to meet production requirements. e. The transportation method is an optimizing technique for aggregate planning.

b. Aggregate planning produces a plan detailing which products are made and in what quantities.

82. Which of the following statements regarding lot-sizing is true? a. EOQ principles should be followed whenever economical. b. Too much concern with lot-sizing results in false accuracy. c. Lot-for-lot cannot be modified for scrap allowance or process constraints. d. The Wagner-Whitin algorithm simplifies lot size calculations. e. All of the above are true.

b. Too much concern with lot-sizing results in false accuracy.

33. What does TPS stand for? a. Total Production Streamlining b. Toyota Production System c. Taguchi's Production S's d. Total Process Simplification e. None of the above

b. Toyota Production System

38. The phrase "demand related to the demand for other products" describes a. a dependent variable b. dependent demand c. recursive demand d. regression analysis e. independent demand

b. dependent demand

47. Which choice below best describes the counterseasonal demand option? a. producing such products as lawnmowers and sunglasses during the winter b. developing a mix of products that smoothes out their demands c. lowering prices when demand is slack d. using subcontractors only when demand is excessive e. the breaking of the aggregate plan into finer levels of detail

b. developing a mix of products that smoothes out their demands

51. A bill of material must be updated with the corrected dimensions of a part. The document that details this change is a(n) a. modular bill b. engineering change notice c. resource requirements profile d. lead time-offset product structure document e. planning bill

b. engineering change notice

87. The extension of MRP which extends to resources such as labor hours and machine hours, as well as to order entry, purchasing, and direct interface with customers and suppliers is a. MRP II b. enterprise resource planning c. the master production schedule d. closed-loop MRP e. not yet technically possible

b. enterprise resource planning

******A product whose EOQ is 400 experiences a 50% increase in demand. The new EOQ is***** a. unchanged b. increased by less than 50% c. increased by 50% d. increased by more than 50% e. cannot be determined

b. increased by less than 50%

33. The planning tasks associated with staffing, production, inventory, and sub-contracting levels typically fall under a. short-range plans b. intermediate-range plans c. long-range plans d. demand options e. strategic planning

b. intermediate-range plans

*Firms making many different final products use __________ to facilitate production scheduling* a. planning bills b. modular bills c. phantom bills d. overdue bills e. none of the above

b. modular bills

39. Which of the following aggregate planning strategies might direct your client to a competitor? a. using part-time workers b. subcontracting c. changing inventory level d. varying production rates through overtime or idle time e. varying work force size by hiring or layoffs

b. subcontracting

30. Aggregate planning is capacity planning for a. the long range b. the intermediate range c. the short range d. typically one to three months e. typically three or more years

b. the intermediate range

*Material requirements plans specify* a. the quantities of the product families that need to be produced b. the quantity and timing of planned order releases c. the capacity needed to provide the projected output rate d. the costs associated with alternative plans e. whether one should use phantom bills of material or not

b. the quantity and timing of planned order releases

34. ABC analysis is based upon the principle that a. all items in inventory must be monitored very closely b. there are usually a few critical items, and many items which are less critical c. an item is critical if its usage is high d. more time should be spent on class "C" items because there are more of them e. an item is critical if its unit price is high

b. there are usually a few critical items, and many items which are less critical

71. Which of the following is an illustration of employee empowerment? a. UPS drivers are trained to perform several motions smoothly and efficiently. b. Unionization of the work place brings better morale and therefore better quality. c. "No one knows the job better than those who do it." d. all of the above e. none of the above

c "no one knows the job better than those who do it"

52. For a certain item, the cost-minimizing order quantity obtained with the basic EOQ model was 200 units and the total annual inventory (carrying and setup) cost was $600. The inventory carrying cost per unit per year for this item is a. $1.50 b. $2.00 c. $3.00 d. $150.00 e. not enough data to determine

c $3.00

44. A certain type of computer costs $1,000, and the annual holding cost is 25%. Annual demand is 10,000 units, and the order cost is $150 per order. What is the approximate economic order quantity? a. 16 b. 70 c. 110 d. 183 e. 600

c 110 EOQ= square root of [(2DS)/(H)]

71. If daily demand is normally distributed with a mean of 15 and standard deviation of 5, and lead time is constant at 4 days, 90 percent service level will require safety stock of approximately a. 7 units b. 10 units c. 13 units d. 16 units e. 26 units

c 13 units

60. The assumptions of the production order quantity model are met in a situation where annual demand is 3650 units, setup cost is $50, holding cost is $12 per unit per year, the daily demand rate is 10 and the daily production rate is 100. The production order quantity for this problem is approximately a. 139 b. 174 c. 184 d. 365 e. 548

c 184

83. Which of the following statements regarding JIT in services is true? a. Restaurants do not use JIT layouts because they interfere with creation of a good servicescape. b. Excess customer demand in services such as air travel is met by dipping into safety stocks. c. All of the JIT techniques for dealing with suppliers, layout, inventory, and scheduling are used in services. d. Scheduling is not relevant to effective use of JIT in services. e. All of the above are false.

c All of the JIT techniques for dealing with suppliers, layout, inventory, and scheduling are used in services.

81. Which of the following is not one of the Seven Wastes? a. overproduction b. transportation c. assignment d. defective product e. motion

c assignment

66. The word "kanban" means a. low inventory b. employee empowerment c. card d. continuous improvement e. lot size of one

c card

43. Which of the following is specifically characterized by the elimination of waste through a focus on exactly what the customer wants? a. Just-in-time (JIT) b. Toyota Production System (TPS) c. Lean operations d. Material requirements planning (MRP) e. kanban

c lean operations

29. What is the practice of moving a business process to a foreign country but retaining control of it? a. exporting b. farshoring c. offshoring d. outsourcing e. backsourcing

c offshoring

71. Linking a part requirement with the parent component that caused the requirement is referred to as a. net requirements planning b. a time fence c. pegging d. kanban e. leveling

c pegging

50. Which one of the following is a concern expressed by suppliers? a. elimination of in-plant inventory b. delivery to the point of use c. production with zero defects d. large lot sizes e. customers' infrequent engineering changes

c production with zero defects

*Which of the following is NOT ASSOCIATED WITH MANIPULATION OF PRODUCT/SERVICE DEMAND?* a. price cuts or discounts b. promotion c. subcontracting d. counterseasonal products or services e. advertising

c subcontracting

*****The two most basic inventory questions answered by the typical inventory model are***** a. timing and cost of orders b. quantity and cost of orders c. timing and quantity of orders d. order quantity and service level e. ordering cost and carrying cost

c timing and quantity of orders

32. What theory states that you should allow another firm to perform work activities for your company if that company can do it more productively than you can? a. theory of competitive advantage b. theory of core competencies c. theory of comparative advantage d. theory of outsourcing e. theory of offshoring

c theory of COMPARATIVE advantage

73. One of the tools that is particularly useful in reducing the system nervousness in the MRP system is (are) a. modular bills b. time phasing c. time fences d. lot sizing e. closed loop system

c time fences

60. A firm practices the pure chase strategy. Production last quarter was 1000. Demand over the next four quarters is estimated to be 900, 700, 1000, and 1000. Hiring cost is $20 per unit, and firing cost is $5 per unit. Over the next year, the sum of hiring and firing costs will be a. $500 b. $2,500 c. $7,500 d. $7,000 e. $12,500

c. $7,500

28. The typical time horizon for aggregate planning is a. less than a month b. up to 3 months c. 3 to 18 months d. over one year e. over 5 years

c. 3 to 18 months

66. The MPS calls for 110 units of Product M. There are currently 30 of Product M on hand. Each M requires 4 of Component N. There are 20 units of N on hand. The net requirements for N are a. 150 b. 170 c. 300 d. 320 e. 440

c. 300

*********Which of the following statements regarding control of service inventories is true?********** a. Service inventory is a fictional concept, because services are intangible. b. Service inventory needs no safety stock, because there's no such thing as a service stockout. c. Effective control of all goods leaving the facility is one applicable technique. d. Service inventory has carrying costs but not setup costs. e. All of the above are true.

c. Effective control of all goods leaving the facility is one applicable technique.

36. Which of the following is not a reason for variability? a. Employees, machines, and suppliers produce units late. b. Customer demand is unknown. c. Employees, machines, and suppliers produce units that conform to standards. d. Engineering drawings are inaccurate. e. Drawings or specifications are incomplete.

c. Employees, machines, and suppliers produce units that conform to standards.

93. Which of the following is false concerning enterprise resource planning (ERP)? a. It attempts to automate and integrate the majority of business processes. b. It shares common data and practices across the enterprise. c. It is inexpensive to implement. d. It provides and accesses information in a real-time environment. e. All of the above are true.

c. It is inexpensive to implement.

*Which of the following statements regarding Wheeled Coach is false?* a. Wheeled Coach has found competitive advantage through MRP. b. Wheeled Coach builds ambulances in a repetitive process. c. Wheeled Coach's MRP system allowed the company to meet tight schedules, but caused inventory to rise. d. Wheeled Coach's MRP system maintains excellent record integrity. e. Low inventory and high quality are two positive outcomes of Wheeled Coach's use of MRP.

c. Wheeled Coach's MRP system allowed the company to meet tight schedules, but caused inventory to rise.

*Low level coding means that* a. a final item has only a few levels in the BOM structure b. it is the code for the lowest level in the BOM structure *c. a component item is coded at the lowest level at which it appears in the BOM structure* d. the top level of the BOM is below level zero and that BOMs are not organized around the finished product e. none of the above

c. a component item is coded at the lowest level at which it appears in the BOM structure

******If the actual order quantity is the economic order quantity in a problem that meets the assumptions of the economic order quantity model shown below, the average amount of inventory on hand ***** 2DS/H a. is smaller the smaller is the holding cost per unit b. is zero c. is one-half of the economic order quantity d. is affected by the amount of product cost e. All of the above are true.

c. is one-half of the economic order quantity

*A firm uses graphical techniques in its aggregate planning efforts. Over the next twelve months (its intermediate period) it estimates the sum of demands to be 105,000 units. The firm has 250 production days per year. In January, which has 22 production days, demand is estimated to be 11,000 units. A graph of demand versus level production will show that* a. the January requirement is below level production of 420 units b. level production is approximately 1000 units per day *c. level production of 420 units per day is below the January requirement* d. level production is approximately 420 units per month e. the firm must hire workers between December and January

c. level production of 420 units per day is below the January requirement

61. Which of the following aggregate planning models is based primarily upon a manager's past experience? a. the linear decision rule b. simulation c. the management coefficients model d. the transportation method e. graphical methods

c. the management coefficients model

65. Kanban is associated with all of the following EXCEPT a. small lot sizes b. signals, such as cards, lights, or flags c. moving inventory only as needed d. increased material handling e. reductions in inventory

d increase material handling

30. Which of the following would not generally be a motive for a firm to hold inventories? a. to decouple or separate parts of the production process b. to provide a stock of goods that will provide a selection for customers c. to take advantage of quantity discounts d. to minimize holding costs e. All of the above are functions of inventory.

d to minimize holding costs

34. The term "China price" has become interchangeable with a. negotiated price b. fixed exchange rates c. price of the lowest quality item d. lowest price possible e. price multiplier based on the Hong Kong stock exchange level

d lowest price possible

31. Which of the following is not one of the four main types of inventory? a. raw material inventory b. work-in-process inventory c. maintenance/repair/operating supply inventory d. safety stock inventory e. All of these are main types of inventory.

d safety stock inventory

39. Dependent demand and independent demand items differ in that a. for any product, all components are dependent-demand items b. the need for independent-demand items is forecast c. the need for dependent-demand items is calculated d. All of the above are true. e. None of the above is true.

d. All of the above are true.

45. In job shop (make-to-order) operations, the master production schedule is usually expressed in a. end items b. modules c. kits d. customer orders e. warehouse orders

d. customer orders

33. All of the following statements about ABC analysis are true except a. inventory may be categorized by measures other than dollar volume b. it categorizes on-hand inventory into three groups based on annual dollar volume c. it is an application of the Pareto principle d. it states that all items require the same degree of control e. it states that there are the critical few and the trivial many inventory items

d. it states that all items require the same degree of control

63. Which of the following uses regression to incorporate historical managerial performance into aggregate planning? a. transportation method b. simulation c. linear decision rule d. management coefficients model e. keiretsu

d. management coefficients model

75. A disadvantage of the fixed-period inventory system is that a. it involves higher ordering costs than the fixed quantity inventory system b. additional inventory records are required c. the average inventory level is decreased d. since there is no count of inventory during the review period, a stockout is possible e. orders usually are for larger quantities

d. since there is no count of inventory during the review period, a stockout is possible

62. Which of the following aggregate planning methods does not work if hiring and layoffs are possible? a. the linear decision rule b. simulation c. the management coefficients model d. the transportation method e. graphical methods

d. the transportation method

39. Which of the following is not an advantage of outsourcing? a. cost savings b. gaining outside expertise c. improving operations and service d. outsourcing core competencies e. gaining outside technology

d. outsourcing core competencies

64. Which one of the following statements is true about the kanban system? a. The quantities in the containers are usually large to reduce setup costs. b. It is associated with a push system. c. It is useful to smooth operations when numerous quality problems occur. d. The supplier workstation signals the customer workstation as soon as a batch is completed. e. The customer workstation signals to the supplier workstation when production is needed.

e The customer workstation signals to the supplier workstation when production is needed.

81. An item's holding cost is 60 cents per week. Each setup costs $120. Lead time is 2 weeks. EPP is a. .005 b. 60 c. 72 d. 100 e. 200

e 200

70. Which of the following is FALSE regarding the links between JIT and quality? a. Inventory hides bad quality; JIT immediately exposes it. b. JIT reduces the number of potential sources of error by shrinking queues and lead times. c. As quality improves, fewer inventory buffers are needed; in turn, JIT performs better. d. If consistent quality exists, JIT allows firms to reduce all costs associated with inventory. e. All of the above are true.

e all of the above are true

94. Which of the following regarding enterprise resource planning (ERP) is true? a. It involves an ongoing process for implementation. b. It can incorporate improved, reengineered "best processes." c. It has a software database that is off-the-shelf coding. d. ERP systems usually include MRP, financial and human resource information. e. All of the above are true.

e all of the above are true

53. Which of the following is NOT a concern of suppliers as they prepare to enter into JIT partnerships? a. Suppliers feel that they would be less at risk if they contracted with more than one customer. b. Suppliers are concerned that customers will present frequent engineering changes with inadequate lead time to deal with them. c. Suppliers feel that their processes are suited for larger lot sizes than the customer wants. d. Suppliers are concerned that frequent delivery of small quantities is economically prohibitive. e. All of the above represent JIT supplier concerns.

e all of the above represent JIP supplier concerns

*****When quantity discounts are allowed, the cost-minimizing order quantity***** a. is always an EOQ quantity b. minimizes the sum of holding and ordering costs c. minimizes the unit purchase price d. may be a quantity below that at which one qualifies for that price e. minimizes the sum of holding, ordering, and product costs

e minimizes the sum of holding, ordering, and product costs

67. Demand for dishwasher water pumps is 8 per day. The standard deviation of demand is 3 per day, and the order lead time is four days. The service level is 95%. What should the reorder point be? a. about 18 b. about 24 c. about 32 d. about 38 e. more than 40

e more than 40

62. Which category of inventory holding costs is much higher than average for rapid-change industries such as PCs and cell phones? a. housing costs b. material handling costs c. labor cost d. parts cost e. pilferage, scrap, and obsolescence

e pilferage, scrap, and obsolescence

*Which of the following attempts TO MANIPULATE product or service DEMAND?* a. inventories b. part-time workers c. subcontracting d. overtime/idle time e. price cuts

e. price cuts

1. TPS stands for Toyota Production System.

true

1. The first step in reducing setup times is the separation of setup into preparation activities and actual setup, so that as much work as possible can be done while the machine or process is operating.

true

1. Wheeled Coach obtains competitive advantage through MRP in part because of their excellent record integrity and insistence on record accuracy.

true

11. In cycle counting, the frequency of item counting and stock verification usually varies from item to item depending upon the item's classification.

true

11. One goal of JIT partnerships is the removal of in-plant inventory by delivery in small lots directly to the using department as needed.t

true

11. Planning bills of material are bills of material for "kits" of inexpensive items such as washers, nuts, and bolts.

true

11. The strategies of aggregate planning are broadly divided into demand options and capacity options.

true

14. Reducing distance is a common JIT goal.

true

15. Cross-training is a common JIT tactic to improve flexibility.

true

15. If 100 units of Q are needed and 10 are already in stock, then the gross requirement is 100 and the net requirement is 90.

true

15. If setup costs are reduced by substantial reductions in setup time, the production order quantity is also reduced.

true

15. The use of part-time workers as an aggregate planning option may be less costly than using full- time workers, but may also reduce quality levels.

true

16. The theory of comparative advantage states that you should allow another firm to perform work activities for your company if that company can do it more productively than you can.

true

17. Hidden problems are generally uncovered during the process of reducing inventory.

true

17. The term "China price" has become the global benchmark—interchangeable with "lowest price possible."

true

18. Lower average inventory is feasible only if setup times are short.

true

18. Time fences divide that segment of the MPS that can be revised from that section that is "frozen."

true

19. If setup times and costs can be reduced enough, the JIT ideal of "Lot Size = 1" can be achieved.

true

20. A scheduler may find that freezing the portion of the schedule closest to the due dates allows the production system to function and the schedule to be met.

true

20. Finding an ideal mixed strategy is complicated by the huge number of possible strategies.

true

20. Finite capacity scheduling, unlike MRP, recognizes the capacity limitations of departments and machines when building schedules.

true

20. In the production order quantity (POQ) model, inventory does not arrive in a single moment but flows in at a steady rate, resulting in a larger lot size than in an otherwise identical EOQ problem.

true

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

true

20. U.S. government data suggest that foreigners outsource far more services to the U.S. than American companies send abroad.

true

21. Graphical techniques are easy to understand and use, but are not well-suited for generating optimal strategies.

true

21. If parts and subassemblies common to a variety of products are managed through the supermarket concept, formal order releases for such parts are not necessary.

true

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

true

21. The reorder point is the inventory level at which action is taken to replenish the stocked item.

true

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

true

22. The lot-for-lot lot-sizing technique is particularly appropriate when demand is not very smooth and set up cost is small compared to holding cost.

true

27. The fixed-period inventory model can have a stockout during the review period as well as during the reorder period, which is why fixed-period models require more safety stock than fixed-quantity models.

true

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

true

28. Closed-loop MRP systems allow production planners to move work between time periods to smooth the load or to at least bring it within capacity.

true

3. Product storage is an example of waste, in the sense that no value is added.

true

3. Reduced inventory levels and faster response to market changes are both benefits of MRP.

true

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.

true

4. Aggregate planning in manufacturing ties organizational strategic goals to a production plan.

true

4. One function of inventory is to take advantage of quantity discounts.

true

5. The quantity required of a dependent demand item is computed from the demand for the final products in which the item is used.

true

6. A firm that outsources its internal business activities is called the client firm.

true

6. Variability in manufacturing can occur because engineering drawings or specifications are incomplete or inaccurate.

true

7. In ABC analysis, "A" Items are the most tightly controlled.

true

8. Waste is anything that does not add value, such as storage or inspection of items; waste also includes any activity that does not add value from the consumer's perspective.

true

9. A bill of material lists all components, ingredients, and materials needed to produce one unit of an end item.

true

9. One question that operations managers must ask when generating an aggregate plan is what factors are likely to influence demand and by how much.

true

9. The Toyota Production System requires that activities have built-in, automatic tests so that gaps between expectations and actuality are immediately evident.

true

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

true

High levels of efficiency at Anheuser-Busch are the result of excellence in aggregate planning and in high facility utilization.

true

Offshoring is the practice of moving a business process to a foreign country but retaining control of it.

true

Outsourcing has expanded to become a major strategy in business due to the continuing move toward specialization in an increasingly technological society.

true

Outsourcing is not a new concept; it is simply an extension of the long-standing practice of subcontracting production activities.

true

Outsouring is the practice of procuring from external sources services or products that are normally part of an organization.

true

Some organizations use outsourcing to replace entire purchasing, information systems, marketing, finance, and operations departments.

true

16. Gross material requirements do not take into account the amount of inventory on hand.

true

76. What term is used to describe the outsourcing of logistics? a. E-Logistics b. Shipper Managed Inventory (SMI) c. Hollow Logistics d. Sub-Logistics e. Third-Party Logistics

E Third-Party Logistics

68. Which of the following is an opportunity for effective management in the supply chain? a. random "pull" data b. multistage control of replenishment c. the bullwhip effect d. customer managed inventory e. channel assembly

E channel assembly

10. One advantage of cycle counting is that it maintains accurate inventory records.

xtrue

77. E-procurement a. works best in long-term contract situations, and is not suited for auctions b. is the same thing as Internet purchasing c. represents only the auction and bidding components of Internet purchasing d. is illegal in all states except Nevada and New Jersey e. All of the above are true of e-procurement.

B is the same thing as internet purchasing

49. The Institute for Supply Management a. establishes laws and regulations for supply management b. is an agency of the United Nations charged with promoting ethical conduct globally c. publishes the principles and standards for ethical supply management conduct d. prohibits backward integration into developing economies e. All of the above are true.

C publishes the principles and standards for ethical supply management conduct

42. Which one of the following statements about purchasing is true? a. The cost of purchases as a percent of sales is often small. b. Purchasing provides a major opportunity for price increases. c. Purchasing is always more efficient than making an item. d. Purchasing has an impact on the quality of the goods and services sold. e. Competitive bidding is a major factor in long-term cost reductions.

D Purchasing has an impact on the quality of the goods and services sold.

38. Which of the following is not a concern of the supply chain? a. warehousing and inventory levels b. credit and cash transfers c. suppliers d. distributors and banks e. maintenance scheduling

E maintenance scheduling

73. Which of the following is anADVANTAGE of the postponement technique? a. reduction in automation b. early customization of the product c. better quality of the product d. reduction in training costs e. reduction in inventory investment

E reduction in inventory investment

33. Which term has become interchangeable with "lowest price possible?" a. "China price" b. "Mexico price" c. "India price" d. "Russia price" e. "Korea price"

a "china price"

66. A specific product has demand during lead time of 100 units, with a standard deviation of 25 units. What safety stock (approximately) provides a 95% service level? a. 41 b. 55 c. 133 d. 140 e. 165

a 41

*Which one of the following is an example of JIT being used for competitive advantage?* *a. Jones Company has decreased the number of job classifications to just a few.* b. Lafourche Metals increases the number of its suppliers to be less dependent on just a few. c. Houma Fabricators is proud to announce that incoming goods are inspected. d. Acme Company tells its maintenance department to intervene only if a machine breaks down. e. Caro Specialty Metals, Inc. has built a new, huge warehouse to store inventory.

a Jones Company has decreased the number of job classifications to just a few.

*Factory X is trying to use level use scheduling. If their first target were to cut the current lot size in half, by what proportion must setup cost change?* *a. Setup cost must be cut to one fourth its current value.* b. Setup cost must also be cut in half from its current value. c. Setup cost must double from its current value. d. cannot be determined e. none of the above

a Setup cost must be cut to one fourth its current value.

82. Concerning relationships with suppliers, which of the following combinations is critical to the success of JIT? a. close relationships with trust b. close relationships with skepticism c. distant relationships with trust d. distant relationships with skepticism e. none of the above

a close relationships with trust

*A characteristic of JIT partnerships WITH RESPECT TO QUALITY is to* *a. help suppliers meet quality requirement* b. inspect all incoming parts c. maintain a steady output rate d. impose maximum product specifications on the supplier e. draw up strict contracts ensuring that all defectives will be immediately replaced

a help suppliers meet quality requirement

*The list of 5S's, although it looks like a housekeeping directive, supports lean production by* a. identifying non-value items and removing them, in the "sort/segregate" item b. reducing inventory, in the "standardize" item c. increasing variability through standardized procedures, in the "standardize" item d. eliminating wasted motion through ergonomic studies, in the "support" item e. building good safety practices, in the "shine/sweep" item

a identifying non-value items and removing them, in the "sort/segregate" item

90. By convention, the top level in a bill of material is a. level 0 b. level 1 c. level T d. level 10 e. level 100

a level 0

77. Which of the following lot-sizing techniques results in the lowest holding costs? a. lot-for-lot b. EOQ c. part-period balancing d. Wagner-Whitin algorithm e. the quantity discount model

a lot-for-lot

51. Reduction of in-transit inventory can be encouraged through use of a. supplier location near plants b. low setup costs c. low carrying costs d. use of trains, not trucks e. low-cost, global suppliers

a supplier location near plants

67. The MPS calls for 50 units of Product A and 60 of B. There are currently 25 of Product B on hand. Each A requires 2 of Part C; each B requires 5 of C. There are 160 units of C available. The net requirements for C are a. 115 b. 175 c. 240 d. 690 e. 700

a. 115

76. Which of the following best differentiates material requirements planning (MRP) from finite capacity scheduling (FCS)? a. FCS recognizes the finite nature of capacity while MRP does not. b. FCS works in services while MRP does not. c. MRP requires time buckets while FCS does not. d. FCS is an input into traditional MRP systems. e. FCS uses the Wagner-Whitin algorithm while MRP uses lot-for-lot and EOQ.

a. FCS recognizes the finite nature of capacity while MRP does not.

38. Which of the following is specifically characterized by continuous and forced problem solving via a focus on throughput and reduced inventory? a. Just-in-time (JIT) b. Toyota Production System (TPS) c. Lean operations d. Material requirements planning (MRP) e. kanban

a. Just-in-time (JIT)

48. The ______ is the input to material requirements planning which lists the assemblies, subassemblies, parts, and raw materials needed to produce one unit of finished product. a. bill of material b. master production schedule c. inventory records d. assembly time chart e. net requirements chart

a. bill of material

36. Disaggregation a. breaks the aggregate plan into greater detail b. transforms the master production schedule into an aggregate plan c. calculates the optimal price points for yield management d. converts product schedules and labor assignments to a facility-wide plan e. is an assumption required for the use of the transportation model in aggregate planning

a. breaks the aggregate plan into greater detail

44. In continuous (make-to-stock) operations, the master production schedule is usually expressed in terms of a. end items b. modules c. kits d. customer orders e. warehouse orders

a. end items

56. A firm's demand in the next four quarters (its aggregate planning horizon) is forecast to be 80, 50, 40, and 90 units. Last quarter, the firm produced 60 units. If it uses level scheduling, the firm will. a. hire workers to permit production of 65 units per quarter for the next four quarters b. hire 20 workers c. have an increase in inventory of 20 units in the next quarter d. have a decrease in inventory of 5 units in the next quarter e. change its workforce each quarter so that inventory does not change

a. hire workers to permit production of 65 units per quarter for the next four quarters

72. In MRP, system nervousness is caused by a. management's attempt to continually respond to minor changes in production requirements b. the use of the lot-for-lot approach c. management's marking part of the master production schedule as "not to be rescheduled" d. the use of phantom bills of material e. management's attempt to evaluate alternative plans before making a decision

a. management's attempt to continually respond to minor changes in production requirements

32. Planning tasks associated with loading, sequencing, expediting, and dispatching typically fall under a. short-range plans b. intermediate-range plans c. long-range plans d. mission-related planning e. strategic planning

a. short-range plans

53. A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The EOQ model is appropriate. The cost-minimizing solution for this product will cost _____ per year in total annual inventory costs. a. $400 b. $800 c. $1200 d. zero; this is a class C item e. cannot be determined because unit price is not known

b $800

54. A product has demand of 4000 units per year. Ordering cost is $20 and holding cost is $4 per unit per year. The cost-minimizing solution for this product is to order a. all 4000 units at one time b. 200 units per order c. every 20 days d. 10 times per year e. none of the above

b 200 units per order

61. A production order quantity problem has daily demand rate = 10 and daily production rate = 50. The production order quantity for this problem is approximately 612 units. The average inventory for this problem is approximately a. 61 b. 245 c. 300 d. 306 e. 490

b 245

59. A product has annual demand of 100,000 units. The plant manager wants production to follow a four-hour cycle. Based on the following data, what setup cost will enable the desired production cycle? d=400 per day (250 days per year), p=4000 units per day, H=$40 per unit per year, and Q=200 (demand for four hours, half a day). a. $2.00 b. $7.20 c. $18.00 d. $64.00 e. $1,036.80

b 7.20

55. Which one of the following is not a layout tactic in a JIT environment? a. work cells for families of products b. fixed equipment c. minimizing distance d. little space for inventory e. poka-yoke devices

b fixed equipment

68. If a casual-dining restaurant is attempting to practice JIT and lean operations, which of the following would not be present? a. close relationship with the restaurant's suppliers of food, utensils, and equipment b. food preparation in large batches c. a kitchen set up to minimize wasteful movements d. lean inventories of food e. All of the above should be present.

b food preparation in large batches

57. An inventory decision rule states "when the inventory level goes down to 14 gearboxes, 100 gearboxes will be ordered." Which of the following statements is true? a. One hundred is the reorder point, and 14 is the order quantity. b. Fourteen is the reorder point, and 100 is the order quantity. c. The number 100 is a function of demand during lead time. d. Fourteen is the safety stock, and 100 is the reorder point. e. None of the above is true.

b fourteen is the reorder point, and 100 is the order quantity

*****Which of the following statements regarding the production order quantity model is true?***** a. It applies only to items produced in the firm's own production departments. b. It relaxes the assumption that all the order quantity is received at one time. c. It relaxes the assumption that the demand rate is constant. d. It minimizes the total production costs. e. It minimizes inventory.

b it relaxes the assumptions that all the order quantity is received at one time

78. Great Lakes Barge and Baggage Company makes, among other things, battery-operated bilge pumps. Which of the following activities is not part of JIT? They a. communicate their schedules to suppliers b. produce in long production runs to reduce the impact of setup costs c. use a pull system to move inventory d. continuously work on reducing setup time e. produce in small lots

b produce in long production runs to reduce the impact of setup costs

36. Cycle counting a. is a process by which inventory records are verified once a year b. provides a measure of inventory accuracy c. provides a measure of inventory turnover d. assumes that all inventory records must be verified with the same frequency e. assumes that the most frequently used items must be counted more frequently

b provides a measure of inventory accuracy

35. Which one of the following is not a benefit of the implementation of JIT? a. cost reduction b. variability increase c. rapid throughput d. quality improvement e. rework reduction

b variability increase

*If the goals of JIT partnerships are met, which of the following is a result? * a. For incoming goods, receiving activity and inspection are outsourced. b. In-transit inventory falls as suppliers are located closer to facilities. c. The number of suppliers increases. d. In-plant inventory replaces in-transit inventory. e. All of the above are consequences of meeting the JIT partnership goals.

b. In-transit inventory falls as suppliers are located closer to facilities.

57. Which one of the following statements is true regarding JIT inventory? a. It exists just in case something goes wrong. b. It is the minimum inventory necessary to keep a perfect system running. c. It hides variability. d. It is minimized with large lot production. e. It increases if setup costs decrease.

b. It is the minimum inventory necessary to keep a perfect system running.

*Which of the following statement is TRUE about the MRP plan when using lot-for-lot ordering?* a. The quantity of gross requirements for a child item is always equal to the quantity of planned order releases for its parent. *b. The quantity of gross requirements for a child item is equal to the quantity of planned order release(s) multiplied by the number of child items used in the parent assembly.* c. The quantity of gross requirements for a child item is always equal to the quantity of gross requirements for its parent. d. The quantity and gross requirements for a child item is always equal to the quantity of net requirements for its parent. e. All of the above are true.

b. The quantity of gross requirements for a child item is equal to the quantity of planned order release(s) multiplied by the number of child items used in the parent assembly.

*Distribution resource planning (DRP) is* a. a transportation plan to ship materials to warehouses *b. a time-phased stock replenishment plan for all levels of a distribution network* c. a shipping plan from a central warehouse to retail warehouses d. material requirements planning with feedback loop from distribution centers e. a material requirements planning package used exclusively by warehouses

b. a time-phased stock replenishment plan for all levels of a distribution network

*****A product whose EOQ is 40 experiences a decrease in ordering cost from $90 per order to $10. The revised EOQ is***** a. three times as large b. one-third as large c. nine times as large d. one-ninth as large e. cannot be determined

b. one-third as large

*In aggregate planning, which one of the following is NOT A BASIC OPTION FOR ALTERING DEMAND?* a. promotion b. subcontracting c. back ordering d. pricing e. All are demand options.

b. subcontracting

37. Dependence on an external source of supply is found in which of the following aggregate planning strategies? a. varying production rates through overtime or idle time b. subcontracting c. using part-time workers d. back ordering during high demand periods e. hiring and laying off

b. subcontracting

*Which of these aggregate planning strategies ADJUSTS CAPACITY TO MATCH DEMAND?* a. back ordering b. using part-time workers c. counterseasonal product mixing d. changing price e. None of the above is a capacity option.

b. using part-time workers

*Which of the following is NOT AN ATTRIBUTE of lean operators?* a. eliminating almost all inventory through just-in-time techniques b. minimizing space requirements by reducing the distance a part travels c. pushing responsibility to the highest level possible through centralized decision making d. educating suppliers to accept responsibility for helping meet customer needs e. All of the above are attributes of lean producers.

c pushing responsibility to the highest level possible through centralized decision making

45. Most inventory models attempt to minimize a. the likelihood of a stockout b. the number of items ordered c. total inventory based costs d. the number of orders placed e. the safety stock

c total inventory based casts

72. If daily demand is constant at 10 units per day, and lead time averages 12 days with a standard deviation of 3 days, 95 percent service requires a safety stock of approximately a. 28 units b. 30 units c. 49 units d. 59 units e. 114 units

c 49 units

*If a load report (resource requirements profile) shows a work center scheduled beyond capacity* ......... C. the work center's load may be smoothed by such tactics as operations splitting or lot splitting

c the work center's load may be smoothed by such tactics as operations splitting or lot splitting

68. The MPS calls for 110 units of Product A. There are currently 60 of Product A on hand. Each A requires 4 of Part B. There are 20 units of B available. The net requirements for B are a. 20 b. 120 c. 180 d. 240 e. 440

c. 180

*Which of the following statements about aggregate planning is true?* a. The development of mathematical models has allowed aggregate planners to discontinue use of trial-and-error methods. b. In aggregate planning, back orders are a means of manipulating supply while part-time workers are a way of manipulating product or service demand. c. A pure chase strategy allows lower inventories when compared to pure level scheduling. d. Disaggregation turns the master production schedule into an intermediate term master plan. e. All of the above are true.

c. A pure chase strategy allows lower inventories when compared to pure level scheduling.

*Which of the following statements regarding aggregate planning is true?* a. In a pure level strategy, production rates or work force levels are adjusted to match demand requirements over the planning horizon. b. A pure level strategy allows lower inventories when compared to pure chase and hybrid strategies. c. In a mixed strategy, there are changes in both inventory and in work force and production rate over the planning horizon. d. Because service firms have no inventory, the pure chase strategy does not apply. e. All of the above are true.

c. In a mixed strategy, there are changes in both inventory and in work force and production rate over the planning horizon.

*MRP II is accurately described as* a. MRP software designed for services b. MRP with a new set of computer programs that execute on microcomputers *c. MRP augmented by other resource variables* d. an enhancement of MRP that plans for all levels of the supply chain e. a new generation of MRP software that extends MRP to planning and scheduling functions

c. MRP augmented by other resource variables

*A bill of material lists the* a. times needed to perform all phases of production b. production schedules for all products c. components, ingredients, and materials required to produce an item d. operations required to produce an item e. components, ingredients, materials, and assembly operations required to produce an item

c. components, ingredients, and materials required to produce an item

64. Which of the following is not an ingredient for controlling labor cost in services? a. accurate scheduling of labor-hours to assure quick response to customer demand b. an on-call labor resource that can be added or deleted to meet unexpected demand c. contract overseas labor to obtain a lower wage scale d. flexibility of individual worker skills that permits reallocation of available labor e. flexibility in rate of output or hours of work to meet changing demand

c. contract overseas labor to obtain a lower wage scale

*Which of the following is NOT AN ADVANTAGE OF LEVEL SCHEDULING?* a. stable employment b. lower absenteeism c. matching production exactly with sales d. lower turnover e. more employee commitment

c. matching production exactly with sales

*In level scheduling, what is kept uniform from month to month?* a. product mix b. inventory levels c. production/workforce levels d. demand levels e. sub-contracting levels

c. production/workforce levels

*Characteristics of JIT partnerships with respect to suppliers INCLUDE* a. competitive bidding encouraged b. buyer plant pursues vertical integration to reduce the number of suppliers *c. support suppliers so they become or remain price competitive* d. most suppliers at considerable distance from purchasing organization e. All of the above are characteristics of JIT partnerships.

c. support suppliers so they become or remain price competitive

*material requirements plan contains information with regard to all of the following except* a. quantities and required delivery dates of all subassemblies b. quantities and required delivery dates of final products *c. the capacity needed to provide the projected output rate* d. inventory on hand for each final product e. inventory on hand for each subassembly

c. the capacity needed to provide the projected output rate

40. A master production schedule specifies a. the raw materials required to complete the product b. what component is to be made, and when c. what product is to be made, and when d. the labor hours required for production e. the financial resources required for production

c. what product is to be made, and when

32. Which of the following statements about ABC analysis is false? a. ABC analysis is based on the presumption that controlling the few most important items produces the vast majority of inventory savings. b. In ABC analysis, "A" Items are tightly controlled, have accurate records, and receive regularreview by major decision makers. c. In ABC analysis, "C" Items have minimal records, periodic review, and simple controls. d. ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings. e. All of the above statements are true.

d ABC analysis is based on the presumption that all items must be tightly controlled to produce important cost savings.

76. Which one of the following does not exemplify JIT used for competitive advantage? a. Acme Foods decides to decrease the number of its suppliers to just a few. b. Ajax, Inc. is proud to announce that incoming goods are delivered directly to the point of use. c. Ardoyne Builders has a scheduled preventive maintenance program. d. Cheramie Trucking trains workers to specialize and become very efficient in one job. e. Cajun Contractors has reduced the amount of space for inventory.

d Cheramie Trucking trains workers to specialize and become very efficient in one job.

80. A manufacturer took the following actions to reduce inventory. Which of these is generally NOT accepted as a JIT action? a. It used a pull system to move inventory. b. It produced in ever smaller lots. c. It required deliveries directly to the point of use. d. It picked the supplier that offered the lowest price based on quantity discounts. e. It worked to reduce the company's in-transit inventory.

d It picked the supplier that offered the lowest price based on quantity discounts.

56. The EOQ model with quantity discounts attempts to determine a. what is the lowest amount of inventory necessary to satisfy a certain service level b. what is the lowest purchasing price c. whether to use fixed-quantity or fixed-period order policy d. how many units should be ordered e. what is the shortest lead time

d how many units should be ordered

60. Throughput measures the time a. that it takes to process one unit at a station b. between the arrival of raw materials and the shipping of finished products c. to produce one whole product through an empty system (i.e., with no waiting) d. required to move orders through the production process, from receipt to delivery e. none of the above

d required to move orders through the production process, from receipt to delivery

77. Which one of the following is not a requirement of JIT systems? a. quality deliveries on time b. low setup time c. training support d. strong job specialization e. employee empowerment

d strong job specialization

70. The number of units projected to be available at the end of each time period refers to a. net requirements b. scheduled receipts c. the projected usage of the item d. the amount projected to be on hand e. the amount necessary to cover a shortage

d the amount projected to be on hand

*Which of the following statements about aggregate planning is true?* a. Advertising/promotion is a way of manipulating product or service supply. b. Work station loading and job assignments are examples of aggregate planning. c. Overtime/idle time is a way of manipulating product or service demand. d. Aggregate planning uses the adjustable part of capacity to meet production requirements. e. All of the above are true.

d. Aggregate planning uses the adjustable part of capacity to meet production requirements.

49. Which of the following statements about the basic EOQ model is false? a. If the setup cost were to decrease, the EOQ would fall. b. If annual demand were to increase, the EOQ would increase. c. If the ordering cost were to increase, the EOQ would rise. d. If annual demand were to double, the EOQ would also double. e. All of the above statements are true.

d. If annual demand were to double, the EOQ would also double.

49. Which choice best describes level scheduling? a. Daily production is variable from period to period. b. Subcontracting, hiring, and firing manipulate supply. c. Price points are calculated to match demand to capacity. d. Inventory goes up or down to buffer the difference between demand and production. e. Seasonal demand fluctuations are matched without hirings or layoffs.

d. Inventory goes up or down to buffer the difference between demand and production.

39. Which of the following statements regarding a pull system is true? a. Large lots are pulled from upstream stations. b. Work is pulled to the downstream stations before it is actually needed. c. Manufacturing cycle time is increased. d. Problems become more obvious. e. None of the above is true of a pull system.

d. Problems become more obvious.

******Which of the following is not an assumption of the economic order quantity model shown below?****** (2DS)/H a. Demand is known, constant, and independent. b. Lead time is known and constant. c. Quantity discounts are not possible. d. Production and use can occur simultaneously. e. The only variable costs are setup cost and holding (or carrying) cost.

d. Production and use can occur simultaneously.

*Which of the following is NOT a goal of JIT partnerships?* a. removal of unnecessary activities b. removal of in-plant inventory c. removal of in-transit inventory d. obtain improved quality and reliability e. All of the above are goals of JIT partnerships.

e all of the above are goals of JIT partnerships

69. In MRP record calculations, the appearance of a negative value for the gross requirements of an end item in a specific time bucket a. signals the need to purchase that end item in that period b. implies that value was scheduled by the MPS c. signals the need for a negative planned order receipt in that period d. is impossible e. All of the above are true.

d. is impossible

*A document calls for the production of 50 small garden tractors in week 1; 50 small garden tractors and 100 riding mowers in week 2; 100 riding mowers and 200 garden utility carts in week 3; and 100 riding mowers in week 4. This document is most likely a(n)* a. net requirements document b. resource requirements profile c. aggregate plan d. master production schedule e. Wagner-Whitin finite capacity document

d. master production schedule

47. Which of the following is not a goal of JIT partnerships? a. removal of unnecessary activities b. removal of in-plant inventory c. removal of in-transit inventory d. removal of engineering changes e. All of the above are goals of JIT partnerships.

d. removal of engineering changes

95. All of the following are advantages of enterprise resource planning (ERP) except it a. creates commonality of databases b. increases communications and collaboration worldwide c. helps integrate multiple sites and business units d. requires major changes in the company and its processes to implement e. can provide a strategic advantage over competitors

d. requires major changes in the company and its processes to implement

42. The primary purpose of the basic economic order quantity model shown below is 2&D&S H a. to calculate the reorder point, so that replenishments take place at the proper time b. to minimize the sum of carrying cost and holding cost c. to maximize the customer service level d. to minimize the sum of setup cost and holding cost e. to calculate the optimum safety stock

d. to minimize the sum of setup cost and holding cost

42. Which of the following aggregate planning strategies is known to lower employee morale? a. yield management b. counterseasonal product and service mixing c. changing inventory levels d. varying work force size by hiring or layoffs e. back ordering during high demand periods

d. varying work force size by hiring or layoffs

54. The minimum record accuracy required for successful MRP is approximately a. lower than 90% b. 90% c. 95% d. 97% e. 99%

e 99%

63. The technique known as level schedules a. requires that schedules be met without variation b. processes many small batches rather than one large one c. is known as "jelly bean" scheduling d. is based on meeting one day's demand with that day's production e. All of the above are true regarding level scheduling.

e All of the above are true regarding level scheduling.

75. In the quest for competitive advantage, which of the following is a JIT requirement? a. small number of job classifications b. reduced number of vendors c. reduced space for inventory d. quality by suppliers e. All of the above are JIT requirements.

e all of the above are JIT requirements

29. Which of the following is a function of inventory? a. to decouple or separate parts of the production process b. to decouple the firm from fluctuations in demand and provide a stock of goods that will provide a selection for customers c. to take advantage of quantity discounts d. to hedge against inflation e. All of the above are functions of inventory.

e all of the above are functions of inventory

55. Which of the following statements regarding the reorder point is true? a. The reorder point is that quantity that triggers an action to restock an item. b. There is a reorder point even if lead time and demand during lead time are constant. c. The reorder point is larger than d x L if safety stock is present. d. The fixed-period model has no reorder point. e. All of the above are true.

e all of the above are true

61. Which of the following is true regarding the steps to reducing setup times? a. The first step involves performing as much setup preparation as possible while the process/machine is operating. b. The cycle of steps is repeated until setup time is reduced to under a minute. c. Standardize tooling and standardize training are included in the same step. d. Improved material handling and move material closer are done before operator training. e. All of the above are true.

e all of the above are true

35. ABC analysis divides on-hand inventory into three classes, generally based upon a. item quality b. unit price c. the number of units on hand d. annual demand e. annual dollar volume

e annual dollar volume

65. If the standard deviation of demand is six per week, demand is 50 per week, and the desired service level is 95%, approximately what is the statistical safety stock? a. 8 units b. 10 units c. 16 units d. 64 units e. cannot be determined without lead time data

e cannot be determined without lead time data

JIT partnerships, suppliers have several concerns. Which of the following is not such a concern? a. desire for diversification b. poor customer scheduling c. small lot sizes d. producing high enough quality levels e. customers' infrequent engineering changes

e customers' infrequent engineering changes

*Which of the following is generally found in most JIT environments?* a. a push or pull system, depending upon the rate of demand b. a push system for high margin items and a pull system for low margin items c. a push system for purchased parts and a pull system for manufactured parts d. push systems e. pull systems

e pull systems

*Capacity planning in closed-loop MRP* a. utilizes feedback about workload from each work center b. may make use of resource requirements profiles (load reports) c. may smooth work center loads with such tactics as overlapping and lot splitting d. does not add capacity, but rather seeks effective use of existing capacity e. All of the above are true.

e all of the above are true

48. Which of the following statements about the basic EOQ model is true? a. If the ordering cost were to double, the EOQ would rise. b. If annual demand were to double, the EOQ would increase. c. If the carrying cost were to increase, the EOQ would fall. d. If annual demand were to double, the number of orders per year would increase. e. All of the above statements are true.

e all of the above statements are true

*Which of the following is CONSISTENT WITH A PURE CHASE STRATEGY?* a. vary production levels to meet demand requirements b. vary work force to meet demand requirements c. vary production levels and work force to meet demand requirements d. little or no use of inventory to meet demand requirements e. All of the above are consistent with a pure chase strategy.

e. All of the above are consistent with a pure chase strategy.

40. Which of the following are elements of inventory holding costs? a. housing costs b. material handling costs c. investment costs d. pilferage, scrap, and obsolescence e. All of the above are elements of inventory holding cost.

e. All of the above are elements of inventory holding cost.

*Which of the following is NOT CONSISTENT WITH A PURE LEVEL STRATEGY?* a. varying the use of subcontracting b. variable work force levels c. little or no use of inventory to meet demand requirements d. varying production levels and/or work force to meet demand requirements e. All of the above are inconsistent with the pure level strategy.

e. All of the above are inconsistent with the pure level strategy.

*Enterprise resource planning (ERP)* a. has been made possible because of advances in hardware and software b. uses client/server networks c. creates commonality of databases d. uses business application-programming interfaces (BAPI) to access their database e. All of the above are true of ERP.

e. All of the above are true of ERP.

53. Which of the following statements best compares modular bills and phantom bills? a. Both pertain to assemblies that are not inventoried. b. There is no difference between the two. c. Both pertain to assemblies that are inventoried. d. Modular bills are used for assemblies that are not inventoried, unlike phantom bills. e. Modular bills represent subassemblies that actually exist and are inventoried, while phantom bills represent subassemblies that exist only temporarily and are not inventoried.

e. Modular bills represent subassemblies that actually exist and are inventoried, while phantom bills represent subassemblies that exist only temporarily and are not inventoried.

52. The bill of material contains information necessary to a. place an order to replenish the item b. calculate quantities on hand and on order c. convert net requirements into higher level gross requirements d. convert gross requirements into net requirements e. convert (explode) net requirements at one level into gross requirements at the next level

e. convert (explode) net requirements at one level into gross requirements at the next level

*Aggregate planning for service firms that provide intangible output deals mainly with* a. smoothing the production rate and finding the optimal size of the workforce b. yield management c. centralized purchasing d. centralized production e. planning for human resource requirements and managing demand

e. planning for human resource requirements and managing demand

25. Units of safety stock are additions to the reorder point that allow for variability in the rate of demand, the length of lead time, or both.

true

13. In aggregate planning, one of the adjustable elements of capacity is the extent of subcontracting.

true

13. JIT suppliers have concerns that the JIT firm's demands for small lot sizes are simply a way of transferring holding cost from manufacturer firm to the supplier firm.

true

13. The demand for automobiles would be considered an independent demand.

true

13. The time phased product structure, unlike the bill of material, adds the concept of lead times.

true

14. If X consists of one A and one B, and each A consists of one F and two Gs, then A is the "parent" component of G.

true

14. One motive for using demand-influencing aggregate planning options is to create uses for excess capacity within an organization.

true

19. Mixed strategies in aggregate planning utilize inventory, work force, and production rate changes over the planning horizon.

true

22. In the quantity discount model, it is possible to have a cost-minimizing solution where annual ordering costs do not equal annual carrying costs.

true

22. The transportation method of linear programming is an optimizing approach to aggregate planning.

true

23. In general, the lot-for-lot approach should be used whenever economical.

true

23. The management coefficients model is a formal planning model built around a manager's experience and performance.

true

24. Controlling the cost of labor in services involves quick response to consumer demand, on-call labor for unexpected demand, flexibility of labor for reallocation, and flexibility of hours or rate of output of individual workers.

true

24. Service level is the complement of the probability of a stockout.

true

25. A kanban system requires little variability in lead time because shortages have their impact on the entire productive system.

true

25. Aggregate planning for fast food restaurants is very similar to aggregate planning in manufacturing, but with much smaller units of time.

true

One of the four things needed for aggregate planning is a logical overall unit for measuring sales and output.

true

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

True

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

True

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

True

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

True

40. Which of the following is the number-one reason driving outsourcing for many firms? a. cost savings b. gaining outside expertise c. improving operations and service d. focusing on core competencies e. gaining outside technology

a cost savings

36. The three major variations of online catalogs are a. catalogs by vendors, catalogs by intermediaries, and exchanges provided by buyers b. EDI, ERP, and ASN c. cost-based, market-based, and competitive bidding d. drop shipping, channel assembly, and postponement e. all auction-based

A catalogs by vendors, catalogs by intermediaries, and exchanges provided by buyers

39. What type of negotiating strategy requires the supplier to open its books to the purchasers? a. cost-based price model b. market-based price model c. competitive bidding d. price-based model e. none of the above

A cost-based price model

Keeping a product generic as long as possible before customizing is known as a. postponement b. keiretsu c. channel assembly d. forward integration e. backward integration

A postponement

83. By which distribution system is 90 percent of the nation's coal shipped? a. railroads b. trucks c. waterways d. pipelines e. none of the above

A railroads

72. All of the following are "opportunities" for supply chain management except a. postponement b. drop shipment c. blanket orders d. channel assembly e. line balancing

E line balancing

43. In the make-or-buy decision, one of the reasons for making is a. to reduce inventory costs b. to obtain technical or management ability c. inadequate capacity d. reciprocity e. to assure adequate supply in terms of quantity

E to assure adequate supply in terms of quantity

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

True

35. What term has been created to describe the return of business activity to the client firm? a. renewal b. backsourcing c. reversal d. reversesourcing e. insourcing

b backsourcing

36. Which of the following statements is most accurate? a. Nearly all outsourcing relationships do not last beyond two years. b. Nearly all U.S. firms that outsourced processes to India have backsourced them. c. Approximately half of all outsourcing agreements fail. d. Outsourcing is a relatively risk-free activity. e. More than 90% of outsourcing agreements succeed.

c. Approximately half of all outsourcing agreements fail.

31. Which of the following is not true regarding core competencies? a. They may include specialized knowledge. b. They may represent a small portion of an organization's total business. c. They may include proprietary technology or information. d. They may be good candidates for outsourcing. e. They may include unique production methods.

d they may be good candidates for outsourcing

41. Outsourcing manufacturing is also known as a. license manufacturing b. sublease manufacturing c. concurrent manufacturing d. hollow manufacturing e. contract manufacturing

e contract manufactoring

12. Nearly any business activity can be outsourced.

true

13. An organization's unique skills, talents, and capabilities are referred to as its core competencies.

true

2. A major challenge in inventory management is to maintain a balance between inventory investment and customer service.

true

23. Research indicates that of all the reasons given for outsourcing failure, the most common is that the decision was made without sufficient understanding of the options through quantitative analysis.

true

23. Vendor Managed Inventory is a form of outsourcing.

true

24. The factor-rating method is an excellent tool for dealing with both country risk assessment and source provider selection problems.

true

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

true

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

true

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

true

61. A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of a. horizontal integration b. forward integration c. backward integration d. current transformation e. keiretsu

B forward integration

. The purchasing approach that holds the suppliers responsible for maintaining the necessary technology, expertise, and forecasting ability plus cost, quality, and delivery competencies is a. few suppliers b. many suppliers c. Keiretsu d. vertical integration e. virtual companies

B many suppliers

46. In the make-or-buy decision, which of the following is NOT A REASON FOR BUYING? a. inadequate capacity b. to obtain desired quality c. patents or trade secrets d. lower inventory costs e. All of the above are reasons for buyin

B to obtain desire quality

40. Which of the following statements is true regarding the leverage of supply chain savings? a. Supply chain leverage is about the same for all industries. b. Supply chain savings exert more leverage as the firm's purchases are a smaller percent of sales. c. Supply chain savings exert more leverage as the firm has a lower net profit margin. d. Supply chain leverage depends only upon the percent of sales spent in the supply chain. e. None of the above is true.

C Supply chain savings exert more leverage as the firm has a lower net profit margin.

55. Which of the following is not an advantage of the "few suppliers" concept? a. suppliers' willingness to participate in JIT systems b. trust c. vulnerability of trade secrets d. creation of value by allowing suppliers to have economies of scale e. suppliers' willingness to provide technological expertise

C vulnerability to trade secrets

70. A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing a. postponement b. cross-docking c. channel assembly d. drop shipping e. float reduction

D drop shipping

IN the make-or-buy decision, one of the reasons for BUYING is a. to assure adequate supply b. to obtain desired quality c. to remove supplier collusion d. inadequate capacity e. to maintain organizational talents

D inadequate capacity

67. Which of the following is not an opportunity for effective management in the supply chain? a. accurate "pull" data b. vendor managed inventory c. postponement d. local optimization e. channel assembly

D local optimization

65. Local optimization is a supply chain complication best described as a. optimizing one's local area without full knowledge of organizational needs b. obtaining very high production efficiency in a decentralized supply chain c. the prerequisite of global optimization d. the result of supply chains built on suppliers with compatible corporate cultures e. the opposite of the bullwhip effect

A optimizing one's local area without full knowledge of organizational needs

80. The three stages of vendor selection, in order, are a. vendor evaluation, vendor development, and negotiations b. vendor development, vendor evaluation, and vendor acquisition c. introduction, growth, and maturity d. vendor evaluation, negotiations, and vendor development e. EDI, ERP , and ASN

A vendor evaluation, vendor development, and negotiations

84. Which distribution system is the fastest growing mode of shipping? a. railroads b. trucks c. airfreight d. waterways e. pipelines

C airfreight

59. A fried chicken fast-food chain that acquired feed mills and poultry farms has performed a. horizontal integration b. forward integration c. backward integration d. current transformation e. job expansion

C backward integration

63. The Japanese concept of a company coalition of suppliers is a. poka-yoke b. kaizen c. keiretsu d. dim sum e. illegal

C keiretsu

56. Which of the following supply chain strategies creates value by allowing suppliers to have economies of scale? a. suppliers becoming part of a company coalition b. vertical integration c. long-term partnering with a few suppliers d. negotiating with many suppliers e. developing virtual companies

C long-tern partnering with a few suppliers

69. Drop shipment a. is equivalent to cross-docking b. is the opposite of a blanket order c. means the supplier will ship directly to the end consumer, rather than to the seller d. is the same thing as keiretsu e. is a good reason to find a new firm to ship your products

C means the supplier will shop directly to the end consumer, rather than to the seller

58. Which of the following best describes vertical integration? a. to sell products to a supplier or a distributor b. to develop the ability to produce products which complement the original product c. to produce goods or services previously purchased d. to develop the ability to produce the specified good more efficiently than before e. to build long-term partnerships with a few suppliers

C to product goods and services previously purchased

. Which one of the following is not a supply chain strategy? a. negotiation with many suppliers b. vertical integration c. keiretsu d. short-term relationships with few suppliers e. virtual companies

D short-term relationship with few suppliers

disadvantage of the "few suppliers" strategy is a. the risk of not being ready for technological change b. the lack of cost savings for customers and suppliers c. possible violations of the Sherman Antitrust Act d. the high cost of changing partners e. All of the above are disadvantages of the "few suppliers" strategy.

D the high cost of changing partners

30. Outsourcing is simply an extension of the long-standing practice of a. subcontracting b. importing c. exporting d. postponement e. e-procurement

a subcontracting

37. According to research, which of the following is the most common reason cited for outsourcing failure? a. core competencies identified as non-core b. erratic power grids in foreign countries c. unable to control product development, schedules, and quality d. decisions made without sufficient understanding of the options through quantitative analysis e. political and exchange rate uncertainty

d. decisions made without sufficient understanding of the options through quantitative analysis