Business Economics - chapter 7
58) Describe the purpose of an assembly line layout and when a firm would choose to use this format.
A product layout (also called a same-steps layout or assembly line layout) is set up to provide one type of service or make one type of product in a fixed sequence of production steps. All units go through the same set of steps. It is efficient for large-volume make-to-stock operations that mass-produce many units of a product quickly. A partially finished product moves step by step through the plant on conveyor belts or other equipment, often in a straight line, as it passes through each stage until the product is completed.
117) What is a supply chain? How can supply chain management create competitive advantage?
A supply chain is the flow of information, materials, and services that starts with raw materials suppliers and continues through other steps in the operations process until the product reaches the end consumer. Supply chain management creates better value for the customer to produce a competitive advantage for the members of the chain. Dell, Inc. has used an innovative supply chain strategy to help lower prices and speed delivery of its PCs.
9) In which of the following is the customer part of the system during service delivery?
A) A high-contact system
42) Which of the following is the amount of a product that a company can produce under normal working conditions?
A) Capacity
70) In operations control, production managers monitor production performance by which method?
A) Comparing results with detailed plans and schedules
48) What is the main advantage of effective process layouts?
A) Flexibility
76) How can managers and employees support quality control efforts within the organization?
A) Identify and correct mistakes and failures
27) Which of the following supports a business strategy that incorporates the key operational capability of flexibility?
A) Maintaining excess production capability
60) Which of the following tracks which service or products will be produced and when?
A) Master operations schedule
1) Which term refers to all the activities involved in making products-goods and services-for customers?
A) Operations
110) Which term refers to the strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services?
A) Outsourcing
2) Which of the following is critical to the success or failure of service operations?
A) Provider-customer contact
26) What type of service is being given when a product performs reliably, has an appealing fit and consistently meets or exceeds customer expectations?
A) Quality
38) Which term is defined as the combination of "characteristics of a product or service that bear on its ability to satisfy stated or implied needs"?
A) Quality
94) Which term refers to collaborative groups of employees from various work areas who meet regularly to define, analyze, and solve common production problems?
A) Quality improvement teams
36) Which type of layout is designed to move resources through a smooth, fixed sequence of steps?
A) Same-steps
78) Material management requires the negotiation of terms of service and maintaining the relationship between the buyer and those who sell the firm goods. Which process supports this activity?
A) Supplier selection
11) Which of the following is the ability of a product to satisfy a human want or need?
A) Utility
88) What should a firm use to evaluate the work activities, materials flow and paperwork in an effort to determine how those activities provide benefit for the customers?
A) Value-added analysis
80) Which material management process stores incoming materials for production and finished goods for distribution?
A) Warehousing
96) Which of the following BEST describes ISO 14000?
B) A certification program attesting to the fact that a factory, laboratory, or office has improved environmental performance
97) Which term refers to the fundamental rethinking and radical redesign of a business activity to achieve dramatic improvements in performance?
B) Business process reengineering
35) Machine, woodworking, and dry cleaning shops typically use which type of layout?
B) Custom-products
13) In which type of system must the customer be actively involved in order to receive the good or service?
B) High-contact
74) Which of the following refers to the receiving, storing, handling, and counting of all raw materials, partly finished goods, and finished goods?
B) Inventory control
65) What is the main advantage of using a PERT chart on a large scale project?
B) It shows the most time-consuming path for project completion.
72) Which type of system is designed for smooth production flow to avoid inefficiencies, eliminate unnecessary inventories, and continuously improve production processes?
B) Lean system
14) What goods-producing operations method is designed around specific customer specifications?
B) Make-to-order
5) In a business, whose job is it to draw up plans to transform resources into products and bring together basic resources, such as knowledge, physical materials, equipment, and labor?
B) Operations manager
7) Which type of utility is created when a company makes products available where consumers want them?
B) Place
50) What can be used to identify the sequence of activities, movements of materials and work performed?
B) Process flowcharts
73) Which term refers to the acquisition of the raw materials a company needs to produce its products?
B) Purchasing
91) Which of the following is patterned after the successful Japanese concept of quality circles?
B) Quality improvement team
89) Which term describes the idea that quality belongs to each person who creates it while performing a job?
B) Quality ownership
109) Which term refers to the flow of information, materials, and services from raw-materials suppliers through stages in the operations process until the product reaches the end customer?
B) Supply chain
40) Consistency refers to which of the following?
B) The sameness of product quality from unit to unit
4) When a company produces products when consumers want them, it creates which type of utility?
B) Time
69) Describe how a Gantt chart and a PERT chart are similar, and how they are different.
Both are scheduling tools used in project management, and both break down a project into the steps to be performed and show the time needed for each step. The PERT chart shows the necessary sequence of activities and identifies the critical path, which is the most time-consuming set of activities and the Gantt chart doesn't. Thus, the PERT chart provides even more information than the Gantt chart. Project managers may use these tools to reassign workers and equipment to speed up late activities and stay on schedule.
95) Which of the following BEST describes ISO 9000?
C) A program certifying that a factory, laboratory, or office has met the quality management standards of the International Organization for Standardization
24) Which of the following helps to determine operations capabilities?
C) Business strategy
43) Equipment and people are grouped according to function in which type of production layout? A) Fixed position
C) Custom-products
59) Which of the following is a scheduling tool that breaks down large projects into steps to be performed and specifies the time required to perform each one?
C) Gantt chart
63) Which of the following breaks large tasks down to a series of smaller steps and includes all activities to successfully perform the task?
C) Gantt chart
39) Performance refers to which of the following?
C) How well the product does what it is supposed to do
71) What is the name for a production system in which all the needed materials and parts arrive at the precise moment they are required for each production stage?
C) Just-in-time production
29) Which type of strategy emphasizes low overhead and inventory, and a limited assortment of products to attract customers?
C) Low-cost
41) Managers can work to reduce waste, inefficiency, and poor performance by examining procedures on a step-by-step basis. Which term describes this process?
C) Methods improvement
10) When a company makes products available conveniently for consumers, based on where they are, which type of utility is created?
C) Place
75) Which department is responsible for ensuring that operations departments produce products that meet specific, predetermined standards?
C) Quality control
112) When a company shares information to improve the overall flow through a system composed of companies working together, it is engaging in which of the following?
C) Supply chain management
93) Which of the following BEST describes competitive product analysis?
C) The process by which a company analyzes a different company's products to identify desirable improvements
92) Which of the following BEST describes total quality management?
C) The sum of all activities involved in getting high-quality products into the marketplace
87) Which of the following terms includes all activities involved in getting quality products into the marketplace?
C) Total quality management
6) Which term describes services that cannot be produced ahead of time?
C) Unstorable
105) Explain competitive product analysis.
Competitive product analysis is a process by which a company analyzes a competitor's products to identify desirable improvements in its own products. For example, a small business owner might study a competitor's Web site to find ways to improve her own site.
90) What name is given to the process by which a company analyzes another company's product to identify desirable improvements in its own product?
D) Competitive product analysis
45) The sameness of product quality from unit to unit is referred to by which term?
D) Consistency
25) What type of strategy is a firm using when promoting quick, consistent and on time delivery, for every order?
D) Dependability
28) What type of strategy to attract customers should a firm that promotes quick and on time delivery utilize?
D) Dependability
46) What type of planning has the greatest effect on production costs and flexibility?
D) Location
34) Examining step-by-step procedures to reduce inefficiency most centrally involves which approach?
D) Methods improvement
23) What term describes a special ability that production does especially well allowing the company to outperform the competition?
D) Operations capability
44) Which term refers to how well a product does what it is supposed to do?
D) Performance
62) Which of the following would be used to provide coordination for completing large-scale projects?
D) Project schedules
79) Which material management process describes the movement of finished goods from a business to the customer?
D) Transportation
52) Why do organizations use fixed-position layouts for some goods or services?
D) When it is difficult to move the good or service
98) Successful companies often focus total quality management efforts on both the quantity and quality of goods produced or delivered, known as
D) productivity.
51) Which of the following would be best used when producing make-to-stock operations or mass production of a product?
E) Assembly line layout
47) Which of the following affects how efficiently a company can respond to demand for more or different products and their ability to match competitors speed and convenience?
E) Layout planning
12) When a firm produces goods for mass consumption, what type of goods production method is generally used?
E) Make-to-stock
8) Which of the following refers to a set of methods and technologies used to produce a good or service?
E) Operations process
61) Which scheduling tool shows the necessary sequence of activities in a project and identifies the critical path?
E) PERT chart
64) Which of the following indicates the critical path needed for the completion of large projects?
E) PERT chart
77) Which of the following identifies the process of determining which outside firm will provide service and materials for the production process?
E) Supplier selection
111) Which of the following BEST describes supply chain management?
E) The principle of looking at the supply chain as a whole in order to improve the overall flow through the system
37) Which of the following is an advantage of using a product layout plan?
E) Unskilled labor can be utilized.
49) When planning for quality, two key elements are
E) performance and consistency.
33) Why does each company's operations capability match up with its business strategy?
Each company's operations capability matches up with its business strategy so that the firm's activities, from top to bottom, are focused in a particular direction. Aligning operations capability with business strategy helps to improve profitability. For example, FedEx focuses on dependability, which has made it a leader with business customers.
102) ISO 9000 is a certification program attesting to the fact that a factory, laboratory, or office has improved its environmental performance.
FALSE
103) Japanese companies adapted the concept of quality circles from quality improvement teams used by U.S. companies.
FALSE
113) A value chain includes an entire network of firms, beginning with suppliers and ending when production is complete.
FALSE
114) Because supply chain strategy is based on the collective effort of a number of firms, no one firm in the chain gains a competitive advantage.
FALSE
15) In a low-contact system, the customer must be a part of the system to receive the service.
FALSE
3) Services are more tangible, more customized, and more storable than most products.
FALSE
30) A company should select the same kind of production used by most of its competitors.
FALSE
56) A fixed-position layout is most effective when there is a large-volume make-to-stock operation in place.
FALSE
66) Staff schedules identify which products will be produced and when.
FALSE
67) A detailed schedule will consider employees' needs and the company's efficiency and cost, including demand for production.
FALSE
81) Just-in-time (JIT) production systems normally require large amounts of safety stock to be maintained in a firm's warehouse.
FALSE
83) Materials management involves the flow of materials inside of the production facility, while distribution management involves the flow of finished goods.
FALSE
84) Inventory control is the means of moving resources to the producer and finished goods to the customer.
FALSE
21) Differentiate between goods production and service operations.
Goods production involves tangible products, such as radios, newspapers, buses, and textbooks. Through service operations, firms produce tangible and intangible service products such as entertainment, transportation, and education. General Electric is a company that produces goods and provides services.
57) Describe two alternatives for production facility layouts.
In a custom-products layout, equipment and people are grouped according to function; in a same-steps layout, equipment and people are set up to produce one type of product in a fixed sequence of steps and are arranged according to production requirements. A custom-products layout is well suited for make-to-order shops while a same-steps layout is efficient for make-to-stock operations.
85) Explain how JIT production and lean manufacturing are related.
Lean manufacturing is designed for smooth production flows that avoid inefficiencies, eliminate unnecessary inventories, and continuously improve production processes. Just-in-time (JIT) production, a type of lean system, brings together all needed materials at the precise moment they are required for each production stage. With JIT production, disruptions are more visible and are resolved more quickly.
32) What is an operations capability?
Operations capability refers to the activity or process that production does especially well. Each company's operations capability matches up with its business strategy so that the firm's activities, from top to bottom, are focused in a particular direction. For example, the operations capability of FedEx is dependability.
118) How does outsourcing affect global supply chain management?
Outsourcing is the strategy of paying suppliers and distributors to perform certain business processes or to provide needed materials or services. Arrangements for cross-border materials flows require compliance with each country's commerce regulations. Production and global transportation scheduling are coordinated with U.S. market demand so that outsourced products arrive in the correct amount and on time without harming the manufacturer's image. Outsourcing has been a growing trend in American business. Outsourcers have a greater need of operations skills for integration among dispersed facilities.
18) Differentiate between high- and low-contact processes. Give an example of each.
Processes may be classified according to the extent of customer contact as either high-or low-contact processes. In a high-contact process, the customer must be a part of the system. Examples of high-contact processes include public transportation, medical services, and most legal services. With a low-contact process, customers need not be a part of the system to receive the service. Examples include check-processing operations at the bank and lawn-care services. The manager of a high-contact process must be more concerned with the customer experience.
108) Describe the relationship between a firm's productivity level and a country's GDP.
Productivity is a measure of economic performance: It compares how much we produce with the resources we use to produce it. The formula is fairly simple. The more services and goods we can produce while using fewer resources, the more productivity grows and the more everyone—the economy, businesses, and workers—benefits. At the national level, the most common measure is called labor productivity, because it uses the amount of labor worked as the resource to compare against the benefits, the country's GDP, resulting from using that resource. When consumers buy, or don't buy what is produced, GDP increases, or suffers and productivity falls. Producing quality, then, means creating fitness for use—offering features that customers want.
100) The biggest challenge of total quality management is motivating employees throughout the company to achieve quality goals.
TRUE
101) Value-added analysis might focus on both the elimination of waste and cost minimization.
TRUE
104) The sales department relies on the engineering department to send samples and quotes to prospective customers on a timely basis. The sales department may be considered the engineering department's internal customer.
TRUE
115) Each stage in the supply chain adds value for the final customer.
TRUE
116) The goal of supply chain management is better overall flow in the system.
TRUE
16) By turning raw materials into finished goods, production creates form utility.
TRUE
17) Firms that make only tangible products are engaged in goods production.
TRUE
31) Operations capability is a special ability that production does especially well to outperform the competition.
TRUE
53) A firm's capacity depends on both how many people it employs and the number and size of its facilities.
TRUE
54) In a same-steps layout, equipment and people are set up to produce one type of good in a fixed sequence of steps and are arranged according to its production requirements.
TRUE
55) A process flowchart identifies the sequence of production activities, movements of materials, and work performed at each stage of the process.
TRUE
68) If parts A, B, and C must be produced this week, a detailed schedule will indicate the sequence of work.
TRUE
82) Operations control includes materials management and quality control.
TRUE
99) Quality improvement teams are groups of employees from various work areas who define, analyze, and solve common production problems.
TRUE
107) Describe the five most commonly used tools for TQM.
The most commonly used tools for TQM are valued-added analysis, quality improvement teams, getting closer to the customer, the ISO series, and business process reengineering. Value-added analysis refers to the evaluation of all work activities, material flows, and paperwork to determine the value that they add for customers. Quality improvement teams are groups of employees from various work areas who meet regularly to define, analyze, and solve common production problems. Getting closer to the customer involves taking steps to know what customers want in the products they consume. The ISO series pertains to a series of certifications attesting that a factory, laboratory, or office adheres to rigorous quality management requirements set by the International Organization for Standardization. Business process reengineering focuses on improving a business process-rethinking each of the process's steps by starting from scratch. The process yields improvements as measured by cost, quality, speed, and service. TQM begins with leadership and a desire for continuously improving both processes and products. It must consider all aspects of a business, including customers, suppliers, and employees.
20) Explain time, place, and form utility and provide an example of each.
Time utility is created when a company makes products available when consumers want them. Examples may include seasonal items such as Christmas ornaments, bathing suits, and mosquito repellent. Place utility is created when a company makes a product's location convenient for consumers. An example is the placement of routinely purchased items in convenience stores or conveniently located discount stores. Form utility is created when a company combines materials to create products. A business adds customer value by providing utility.
106) In a total quality management environment, what are some steps that companies use to emphasize the importance of quality?
To ensure high-quality goods and services, many firms assign responsibility for some aspects of TQM to specific departments or positions. More broadly, leaders of the quality movement use various methods and resources to foster a quality focus-training, verbal encouragement, teamwork, and tying compensation to work quality. Total quality management (TQM) includes all the activities necessary for getting high-quality goods and services into the marketplace.
86) Describe the activities associated with transportation, warehousing, and inventory control in the materials management process.
Transportation is the means of moving resources to the producer and finished goods to customers. Warehousing is the storage of both incoming materials for production and finished goods for distribution to customers. Inventory control includes the receiving, storing, handling, and counting of all raw materials, partly finished goods, and finished goods. It ensures that enough materials inventories are available to meet production schedules, while at the same time avoiding expensive excess inventories.
19) Explain what is meant by the term utility. What type of utility is created when a pharmacy changes its evening schedule to remain open for an extra hour in response to customer needs?
Utility is a product's ability to satisfy a human want or need. The pharmacy creates time utility by being open at a convenient time for customers.
22) Describe the difference between the make-to-order and make-to-stock production processes.
We can classify goods production into broad groupings by asking whether its operations process has a make-to-order or a make-to-stock emphasis. We can classify services according to the extent of customer contact required. Clothing, such as evening gowns, is available either off-the-shelf in department stores or custom-made at a designer or tailor shop. The designer or tailor's make-to-order operations respond to one-of-a-kind gown requirements including unique patterns, materials, sizes, and shapes, depending on customers' characteristics. Make-to-stock operations, in contrast, produce standard gowns in large quantities to be stocked on store shelves or in displays for mass consumption. The production processes are quite different for the two settings, including procedures for designing gowns; planning for materials purchases; equipment and work methods for cutting, sewing, and assembling gowns; and employee skills for production.
119) Outsourcing has led to increasingly global supply chains. Describe three ways that a more global supply chain might be risky for a company that outsources.
While outsourcing has usually been profitable, it has some risks. Global supply chains are more vulnerable to natural disasters, such as the earthquake and tsunami in Japan and flooding in Thailand. Political unrest in other countries is also a risk. Some countries have nationalized businesses without warning to the companies. It is possible that U.S. lawmakers could impose laws discouraging outsourcing. Criminal activities and even war could also disrupt supply chains. Outsourcing expands supply chains and increases their complexity.
