Chapter 15 International Business

As the inventory control manager for a group of shoe stores, Xin-Xu calls the Bossie Boots warehouse when he needs to restock this product because the manufacturer stores all of its products there. Another name for this warehouse would be a

Distribution center

A __________ includes a grouping of various types of machinery, a common materials handler, and a computer to control the production of a family of parts or products.

Flexible machine cell

Concentration of production makes most sense when

The product serves a universal need, Trade barriers are low, Exchange rates are expected to be stable, Product value to weight is HIGH, Externalities of like enterprises favor certain locations

Simpson Manufacturing purchased new equipment that reduces setup times when employees change templates between production runs. This equipment has also improved quality control measures throughout the entire manufacturing process. What type of technology is Simpson Manufacturing using?

Lean production

Heidi works in the after-market service department of Yummy Yogurt Inc. She recently worked on a product recall for one of the company's most popular brands. Which operational objective is Heidi responsible for within the global supply chain?

Life cycle support

Tri-Star Technologies Inc. has manufacturing units in Canada. The country's stable economic and political environment helps the firm gain competitive advantage by lowering production costs and improving product quality. Other things being equal, the benefits realized from such a strategy can be typically referred to as

Location economies

__________ is a statistically based philosophy that aims to reduce defects, boost productivity, eliminate waste, and cut costs throughout a company.

Six sigma

A major cost savings from just-in-time inventory systems comes from

Speeding up inventory turnover

Sasha accepted a job at Dexter Manufacturing. During her training, she was told that defective and poor-quality products are unacceptable, and the goal is to manufacture goods that meet 100 percent of standards. What methodology does this company use?

TQM?

source factories should be located where production costs are low, where infrastructure is well developed, and where it is relatively easy to find

a knowledgeable and skilled workforce to make the products

Carson Steel Inc. wants to be able to customize products for different national markets and, in turn, increase its customer responsiveness. However, the fixed costs associated with its production are high. These functions will be performed most efficiently if Carson Steel

adopts flexible manufacturing technologies to help achieve mass customization.

As the global market for sunscreen products with a high SPF has become extremely competitive in recent months, Block-It Sun Products newly appointed CFO believes the company should address its minimum efficient scale and attempt to lower it. What is a consequence of a low minimum efficient scale?

allows a firm to hedge against currency risk by manufacturing the same product in several locations

Products with high value-to-weight ratios tend to

be expensive and not weigh very much.

Two product features impact location decisions. Which of the two reduces the need for local responsiveness?

product's ability to serve universal needs

One of W. Edwards Deming's beliefs about the total quality management philosophy is that

quality of supervision should be improved by allowing more time for supervisors to work with employees.

One objective of lean production is to

reduce setup times for complex equipment. ???

Manufacturing firms should typically aim at lowering the costs of value creation by

reducing production costs

The __________ operational objective refers to integrating a control system across global supply chain functions to eliminate global supply chain disruptions.

Variance reductions

Small electronic parts have a high value-to-weight ratio, which means that they

Weigh very little but are expensive

As the number one source for refined sugar, All Sweet, Inc. ships product all over the world. Since the product it ships has a low value-to-weight ratio, transportation costs are

A large percentage of total costs

Beauty for All Skincare Corp. has wide variety in its product line. A firm with a wide product variety will find it

Difficult to reduce its unit costs

The part of the supply chain that plans, implements, and controls the effective flows and inventory of raw materials is known as purchasing.

False

When a company achieves mass customization via flexible manufacturing technologies, it increases the company's

Customer responsiveness

The effect of improved quality control is to lower the costs of value creation by reducing production costs and

Decreasing after sale service costs

How does a just-in-time inventory system help enhance product quality?

Defective parts are noticed more quickly than in a traditional warehouse system.

Best Brooms Corp. ships its products to thousands of retail stores all across the United States. These retail stores are part of the __________ portion of the global supply chain.

Downstream?

Built-Tough Inc., a manufacturer of construction equipment components, wants to set up a system that will send invoices to its customers once orders for input supply are placed. What should the company use to perform this function?

EDI?

The cost to manufacture one unit of Boxer Packaging's best-selling large shipping container is $94. The CFO of the company determines that if the company expands the output of its biggest U.S. plant by 20 percent, the unit cost would be reduced to $73. This analysis is based on the concept of

Economies of scale

A business would incorporate the Six Sigma philosophy as a way to

Eliminate waste

A "buy" decision is favored when there is a chance that supply cannot be guaranteed if the firm moves production overseas.

False

A JIT system provides a company with enough buffer stock to meet any product demands.

False

A business that supplies parts to a manufacturer would be part of the downstream supply chain

False

Flexible manufacturing technologies force a company to establish manufacturing facilities in each major national market in order to meet demand.

False

In international business, a relatively high level of fixed costs makes it economical for a company to perform a particular activity in several locations at once.

False

In terms of minimum efficient scale of output, the "unit cost curve" rises with output until a certain output level is reached, at which point further increases in output realize little reduction in unit costs.

False

One downfall of flexible manufacturing technology is that it does not help a company customize products for different national markets.

False

The ISO 9000 system used in the European marketplace provides small companies with information regarding export opportunities.

False

The inform function of packaging refers to the package's ability to contain the products properly.

False

Producing a standardized product in large volumes will

Increase production efficiency

Under a just-in-time (JIT) inventory system, it is likely that the __________ will increase.

Inventory turnover

What is a consequence of using flexible machine cells?

It improves capacity utilization and reduces wastes.

What is an accurate depiction of Six Sigma?

It is almost impossible for a company to achieve Six Sigma perfection.

What is a drawback of ISO 9000 certification?

It is bureaucratic and costly for many firms.

Which country pioneered the concept of just-in-time inventory?

Japan

Luxury Lighting Group Inc. does not keep excess stock on hand. When orders are received, the company brings in parts from suppliers, creates products, and fulfils the order. This represents a(n) __________ system

Just in time inventory

Which company is using the total quality management steps identified by W. Edwards Deming?

LaPlaya Inc. empowers its employees to report problems or recommend improvements without any fear.

Rhoden Corp. is an electronics retail giant with offices in Chicago. The company decides to build a facility in Silicon Valley where new products can be developed since this area is known for technological innovation. Which type of facility is Rhoden Corp. building?

Lead factory

Selena works for a major video components manufacturer. It is her job to plan and control how the raw materials used to make the components come into the company and how the finished parts are shipped to end-users. Which part of the supply chain does Selena work in?

Logistics

Mass customization provides companies with the ability to meet which two goals?

Low cost and product customization

RockWay Tile Inc. prides itself on quality control and advertises that "we won't ship a product unless we make it the way you want." Based on this, RockWay Tile Inc. most likely

Make all the products it ships

If a firm possesses proprietary product technology, the best option for that firm would be to

Manufacture the product in-house so that it does not lose its competitive advantage

What term refers to the production of a variety of end products at a unit cost that could once be achieved only through bulk production of a standardized output?

Mass customization

One problem companies have when using a mass production system is

Massive inventories that have to be stored in large warehouses

The decentralization of production would be the best choice for

MayDay Inc., which operates in an industry where volatile fluctuations in important exchange rates are expected.

The level of output at which most plant-level scale economies are exhausted is known as

Minimum efficient scale

Based on the information provided, which of these firms should concentrate its production in a centralized location?

Nazer Inc. operates in an industry where the fixed costs are high, and services of supporting industries are of prime importance.

Freeman Fiber Optics is based in the United States and has transferred its information technology processes to suppliers in Canada. What is this an example of?

Nearshoring

As a way to save costs, Get-Away Motorcycles Inc. set up a factory in a foreign country to produce the component parts it uses to manufacture motorcycles. The technology at this factory is kept to a minimum and management has no say in purchasing or production decisions. What type of factory is Get-Away Inc. using?

Offshore

What is an example of a product with a low value-to-weight ratio?

Paint

The __________ function of packaging refers to the ability of a product in a package to handle being transported between areas within the global supply chain.

Perform Packaging performs five basic functions: 1) Protection 2) Containment 3) Information 4) Utility of use 5) Promotion

Which product is best manufactured in multiple locations close to major markets to reduce transportation costs?

Petroleum products

__________ is a hidden cost to basing production in a foreign location.

Poor product quality

When considering foreign direct investment in a country, what is one situation that will benefit a company?

Presence of supporting industries

Johan works for Stafford Office Furniture Group. It is his job to source the raw materials, component parts, and products the company uses to manufacture office desks, filing systems, and storage units. Which part of the supply chain does Johan work in

Purchasing

A second strategic objective shared by production and supply chain management is to increase product quality and assure that a product has no defects and performs as expected. In this context, quality means

Reliability

During a planning meeting, the environmental team discusses how returned items should be disposed of or recycled. What aspect of the global supply chain are they discussing?

Reverse logistics

The Handell Group decides that the best way to get around the exorbitant tariff barriers it encounters when shipping products to Malaysia is to build a factory there, which will have the same standards as the home factory and allow that factory to serve the Malaysian market. What type of factory is the Handell Group going to build?

Server?

When determining the location decision for industrial products like steel, what should a company keep in mind?

They serve needs that are the same all over the world.

Maxwell Maritime Inc. was ready to sign an agreement to build a new facility in a foreign nation when it learned that the local currency in that nation had appreciated significantly in the past week. How might this affect the company's decision to build the new facility?

This will diminish the attractiveness of this country as a manufacturing base for Maxwell Maritime.

A business would want to concentrate its production facilities in a centralized location when

Trade barriers are low

A product's value-to-weight ratio affects location decisions primarily because of its influence on

Transportation costs

A contributor factory acts as a stand-alone unit and has its own infrastructure for development, engineering, and production.

True

Flexible machine cells enhance a company's ability to provide mass customization.

True

Flexible manufacturing technologies allow a company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.

True

In international business, when consumer demand is prone to large and unpredictable shifts, the firm that can adapt most quickly to these shifts will gain an advantage.

True

In recent years, the trend among U.S. firms is to outsource the "production" of some service activities to developing nations to take advantage of lower labor costs.

True

In recent years, time-based competition has become more important in international business.

True

Industrial products have few national differences in consumer taste and preference, hence the need for local responsiveness is reduced for such products

True

Location externalities, such as the presence of supporting industries, can affect a company's foreign direct investment decision.

True

Source factories should be located where production costs are low.

True

When applying the Six Sigma approach, when there are a lower number of "sigmas," there are a greater number of errors.

True

Minimum efficient scale refers to the level of output at which most plant-level scale economies are exhausted.

True - The level of output at which most plant-level scale economies are exhausted is referred to as the minimum efficient scale of output. This is the scale of output a plant must operate to realize all major plant-level scale economies.

An advantage of a low minimum efficient scale is it allows a company to accommodate demands for local responsiveness.

True??

Mobile Chair Corp. sources casters from E-Z Roll Inc. In this situation, E-Z Roll Inc. is part of the __________ portion of the global supply chain.

Upstream?

Triple Root, Inc. a maker of high-end salon hair care products, plans to expand in the EU marketplace. To do so, the EU requires the company to

certify its products under ISO 9000.

What action did Deming suggest management take in order to achieve total quality management?

create an environment where employees did not fear reporting problems

Fitz Electronics Group wants to enter the European market but realizes that consumer tastes are not uniform across countries. To be able to accommodate demands for local responsiveness, Fitz Electronics should

decentralize production activities to the major national or regional markets.

What are some automobile companies doing in situations where neither centralization nor decentralization of production is feasible?

establishing top-to-bottom manufacturing operations

Companies rely on an EDI system to

exchange data between two or more companies.

When manufacturing a product that serves universal needs, a company should remember that it

increases the attractiveness of concentrating production at an optimal location.

An important objective shared by both production and logistics functions of an international firm is to

lower costs by dispersing production activities.

One characteristic of a just-in-time (JIT) inventory system is that

parts enter the manufacturing process immediately; they are not warehoused.

One way to reduce the risks for a business that operates on just-in-time principles is to

source inputs from several suppliers located in different countries.

The relationship between the number of "sigmas" and the number of errors in the Six Sigma approach is best described as

the higher the number of "sigmas," the smaller the number of errors.

What philosophy was widely adopted first by Japanese companies and then American companies during the 1980s and early 1990s, and from which the Six Sigma methodology directly descended?

total quality management

When is decentralization of manufacturing facilities most appropriate?

when the production technology has low fixed costs