mgt3900 final

Genchi genbutsu requires the implementation of a pull system. T or F

False. Gathering first-hand information from the situation works in any process environment.

Firms in the same industry will have the same inventory turns. T or F

False. There can be variation in inventory turns among the same firms within an industry.

Because of long setup times, a company chooses to run big production batches. Which of the following actions will level the production schedule? Using overtime Mixing the models on the final line Making sure that rework is kept low Reducing the waste of the process

Mixing the models on the final line

If the demand rate increases, the takt time: increases. decreases.

decreases

Which of the following statements about kanban are accurate? 1. Deploying the kanban system leads to pulling work through the system instead of pushing work. 2. Deploying the kanban system leads to pushing work through the system instead of pulling work. 3. The kanban system controls the work-in-process inventory. 4. Kanban will always reduce the amount of inventory in the process. 5. Kanban requires cross-training all workers.

1. Deploying the kanban system leads to pulling work through the system instead of pushing work. & 3. The kanban system controls the work-in-process inventory.

A company makes two models, A and B. Which of the following production schedules is more level? ABABABABAB AAAAABBBBB

ABABABABAB

Which of the following changes in the in-stock probability increases the order quantity the most? An increase in the in-stock probability from 70 Percent to 80 Percent. An increase in the in-stock probability from 70 Percent to 85 Percent. An increase in the in-stock probability from 80 Percent to 90 Percent. An increase in the in-stock probability from 80 Percent to 95 Percent.

An increase in the in-stock probability from 80 Percent to 95 Percent.

A manager is concerned that there isn't enough time spent on production and too much time spent on setups. The manager decides to double all production batch sizes. This change has no impact on demand. What impact will this likely have on the average inventory in the process? Average inventory will decrease because the capacity of the resources will increase. Average inventory will remain the same because demand has not changed. Average inventory will increase because larger batches require more time to be completed. Cannot determine from the given information.

Average inventory will increase because larger batches require more time to be completed.

Which reason for holding inventory enables a firm to reduce the impact of large fixed costs that the firm incurs whenever it places an order to a supplier? Seasonality Uncertain demand Buffers Batching

Batching

A retailer has two merchandizers, Sue and Bob, who are responsible for setting order quantities for the products they manage. For all of their products, the critical ratio is 0.7 and the coefficient of variation of their demand forecasts is 0.35. At the end of the season, Sue is proud to report that she has sold the entire inventory she purchased. Bob, on the other hand, sold only about a third of his products. Who is more likely to be choosing quantities that maximize expected profit? Sue because she doesn't incur the cost of salvaging inventory. Sue because she must have sold more units than Bob. Bob because even leftover inventory generates some additional revenue. Bob because he is probably ordering more than the mean of the demand forecast.

Bob because he is probably ordering more than the mean of the demand forecast.

Which reason for holding inventory guards against a reduction in the flow rate when one assembly station is disrupted in a production line? Seasonality Uncertain demand Buffers Batching

Buffers

What are the two pillars of the Toyota Production System? Just-in-time and waste reduction Waste reduction and built-in quality Built-in quality and just-in-time Process improvement and waste reduction

Built-in quality and just-in-time

If the order quantity doubles, what happens to the frequency of orders (i.e., the number of orders submitted per unit of time)? Decreases by more than 50 percent. Decreases by 50 percent. Remains unchanged. Increases by 100 percent or doubles. Increases by more than 50 percent.

Decreases by 50 percent.

Product X's demand is normally distributed with mean 150 and standard deviation 50. Product Y's demand is also normally distributed with a mean of 150 and a standard deviation of 50. The sum of demand for these two products is normally distributed with a mean of 300 and a standard deviation of 50. Which of the following results is most likely? Demands for these products are negatively correlated. Demands for these products are positively correlated. Demands for these products are independent. It is not possible to determine with this information the correlation of these products.

Demands for these products are negatively correlated.

Which of the following best explains why distributors help to reduce the space retailers need to store inventory? Distributors allow retailers to receive truckload shipments more frequently. Distributors decrease the total distance products travel in the supply chain. Distributors allow retailers to receive smaller quantities of each supplier's product. Distributors increase the time that inventory spends in the supply chain.

Distributors allow retailers to receive smaller quantities of each supplier's product.

Which of the following statements best explains why distributors tend to spend less on storage space per square meter per year than retailers? Distributors provide break bulk service. Distributors don't actually make products. Distributors can store more items per square meter and require space that is less aesthetically pleasing. Distributors enjoy higher gross margins than retailers.

Distributors can store more items per square meter and require space that is less aesthetically pleasing.

Suppose the newsvendor model is used to manage inventory. Which of the following can happen when the order quantity is increased by one unit? Expected sales increases by more than one unit. Expected leftover inventory increases by more than one unit. Expected sales decrease by less than one unit. Expected leftover inventory increases by less than one unit.

Expected leftover inventory increases by less than one unit.

A newsvendor faces normally distributed demand and the critical ratio is 0.8. If the profit-maximizing quantity is ordered, which of the following statements is true? Expected sales are less than expected demand. Expected sales are greater than expected demand. Expected sales are exactly equal to expected demand. Expected sales could be less than, equal to, or greater than expected demand.

Expected sales are less than expected demand.

If customers want to have 1,000 units over 10 days, one should aim at producing 100 units per day instead of doing 111 units per day in the beginning and then having a little safety buffer at the end. T or F

False.

Taichi Ohno built the Toyota Production System with the metaphor of a tiger in mind. Rapid and decisive movements were, in his view, the best way to match supply with demand. T or F

False. Ohno had the slow but steady movement of the turtle (tortoise) in mind.

In a service operation, we can compute the value-added time by simply looking at the labor content. T or F

False. The labor content might include processing times that are not value add to the customer.

Kaizen favors automation and investment in technology. T or F

False. Kaizen favors continuous improvements driven by the employees.

A single inspection system with experts testing the output of the process will help reduce the information turnaround time. T or F

False. For a short information turnaround time, many inspection points throughout the process are needed.

Increasing the batch size on a resource with setups always increases the capacity of the process. T or F

False. The capacity of the resource with the setup time increases, but the bottleneck may be another process. So increasing the batch size does not necessarily increase the capacity of the process.

Tablets and laptops would be categorized as which type of inventory by an electronics retailer? Raw materials inventory Work-in-process inventory Finished goods inventory Seasonal inventory

Finished goods inventory

The EOQ minimizes the sum of the ordering cost and which of the following costs? Stockout cost Holding cost Purchasing cost Quality cost

Holding cost

Which of the following is likely to increase the utilization of a resource with a setup time? Increase the flow rate Decrease the processing time Decrease the batch size Increase the setup time

Increase the flow rate

If the order quantity doubles but the flow rate remains constant, what happens to the sum of ordering and holding costs? Decreases by 50 percent. Decreases by less than 50 percent. Remains unchanged. Increases by less than 50 percent. Increases by 50 percent.

Increases by less than 50 percent.

If the order quantity doubles but the flow rate remains constant, what happens to the average amount of time a unit spends in inventory? Decreases by more than 50 percent. Decreases by 50 percent. Remains unchanged. Increases by 50 percent. Increases by more than 50 percent.

Increases by more than 50 percent.

Suppose a resource has setup times and a setup time must be incurred each time the resource switches production to a different product. Requiring the resource to make a new product (that requires its own setup) is likely to have what effect on the process? Inventory for existing products remains the same, but the process must now carry inventory of the new product. Inventory of all products is likely to increase. Inventory of existing products decreases even though the process must now carry inventory of the new product. Inventory of products with short setup times will decrease, while inventory of products with long setup times will increase.

Inventory of all products is likely to increase.

Which of the following is most likely to be a concern if batches are very large? The flow rate will be too high. Utilization will be too high. Inventory will be too high. Too much time will be spent on product changeovers.

Inventory will be too high.

Which of the following is NOT true about the distribution function for a normal distribution? It ranges from 0 to 1. It increases as the quantity increases. It generally has a bell shape when graphed. It returns the probability that the outcome from the normal distribution is a certain quantity or lower.

It generally has a bell shape when graphed.

Which of the following is NOT an assumption of the EOQ model? It is possible to receive a purchase discount if the order quantity is sufficiently large. There is a fixed cost to submit each order that is independent of the amount ordered. Demand occurs at a constant rate per unit of time. There is a cost to hold each unit of inventory per unit of time.

It is possible to receive a purchase discount if the order quantity is sufficiently large.

Retailers order in full truckload quantities from a distributor. Suppose, due to a slowdown in the economy, there is an industrywide decline in demand (i.e., each retailer experiences a reduction in its sales). If retailers continue to order in full truckload quantities, what will happen to the frequency of their orders? It will decrease. It will not change. It will increase. We cannot determine how it will change from the given information.

It will decrease.

For which of the following products is there the highest probability that demand is within 50 percent of the mean of the demand forecast? Mean = 1,000, standard deviation = 200 Mean = 1,000, standard deviation = 300 Mean = 2,000, standard deviation = 300 Mean = 2,000, standard deviation = 500 Mean = 4,000, standard deviation = 1,600 Mean = 4,000, standard deviation = 2,000

Mean = 2,000, standard deviation = 300

An orthopedic surgeon has read an article about the Toyota Production System and now wants to organize her surgery operation based on lean principles. To eliminate all idle time in the operating room, she decides to call in patients six hours before the scheduled surgery time. Is this a lean process? Yes No Cannot be determined

No

Computers lose value as they are stored in inventory. This is an example of which component of a firm's inventory holding cost? Opportunity cost of capital Storage cost Spoilage cost Obsolescence cost

Obsolescence cost

Which of the following does not belong to the seven sources of waste? Rework Overtime Transportation Inventory

Overtime

Which of the following objectives is more important in a pull system? Producing at the rate of demand Keeping the equipment utilization

Producing at the rate of demand

A newsvendor orders the quantity that maximizes expected profit for two products, X and Y. The critical ratio for both products is 0.8. The demand forecast for both products is 9,000 units and both are normally distributed. Product X has more uncertain demand in the sense that it has the larger standard deviation. Of which of the two products does the newsvendor order more? Product X because it has less certain demand. Product Y because it has more certain demand. The order quantities are the same because they have the same critical ratio. More information is needed to determine which has the higher order quantity.

Product X because it has less certain demand.

If a firm wanted to reduce the annual EOQ cost as a percentage of the annual purchase cost by 50 percent, how would the demand rate have to change? Decrease by 50 percent. Remain unchanged. Increase by 50 percent. Double. Quadruple.

Quadruple

A delivery truck from a food wholesaler has just delivered fresh meat and produce to a local restaurant. This meat and produce would be categorized as which type of inventory by the restaurant? Raw materials inventory Work-in-process inventory Finished goods inventory Seasonal inventory

Raw materials inventory

Sarah is a buyer for a department store. A supplier offers her a 5 percent discount if she triples her usual order quantity. Which of the following best explains why Sarah should take the deal? Even though the increase in the operating costs is likely to exceed the benefit of the 5 percent discount, Sarah feels that her customers expect the lowest possible price. Sarah hopes that customers are likely to purchase more if they see an increase in the inventory in the store. Sarah knows that even though she may triple her order quantity, this would increase her operating costs by far less than a factor of three. Sarah knows that the sum of operating costs is probably less than 5 percent of the purchase cost, so an increase in the operating costs is unlikely to be a concern.

Sarah knows that even though she may triple her order quantity, this would increase her operating costs by far less than a factor of three.

Characterize the following decision as either tactical or strategic: To operate make-to-stock or make-to-order. Tactical Strategic

Strategic

Characterize the following decision as either tactical or strategic: Which tier 1 supplier should be used for a particular component system? Tactical Strategic

Strategic

Characterize the following decision as either tactical or strategic: The discounts to offer on inventory available for an end-of-season sale. Tactical Strategic

Tactical

A worker in charge of assembling a bicycle finds a faster way to mount the pedals. He turns to his supervisor. The supervisor explains that the process had been optimized by the engineering department and so the worker should make sure to stick with the existing procedures. Which management scholar's work does this fit best? Taylor Ohno Womack Fujimoto

Taylor

What is the relationship between the average inventory and the in-stock probability? The more inventory, the lower the in-stock probability. There isn't a definitive relationship - more inventory could mean a lower or a higher in-stock probability. The more inventory, the higher the in-stock probability.

The more inventory, the higher the in-stock probability.

What happens to the number of Kanban cards in the process if the replenishment time goes up? The number of kanban cards increases. The number of kanban cards stays the same. The number of kanban cards decreases. Cannot determine from the given information

The number of kanban cards increases.

Which of the following is the best reason to add a second supplier for a critical component? The primary supplier is located in a flood-prone region, while the second supplier's location is not subject to flooding. The second supplier is able to offer the same lead time as the first supplier. Adding a second supplier helps reduce the bullwhip effect. Adding a second supplier will increase the firm's purchasing power for the component.

The primary supplier is located in a flood-prone region, while the second supplier's location is not subject to flooding.

A change in which of the following does not result in a change in the mismatch costs incurred by a newsvendor? The quantity ordered. The revenue received from salvaging inventory. The regular selling price of the product. The coefficient of variation of the demand forecast. The quality of the product.

The quality of the product.

Consider two products, X and Y, that have identical cost, retail price, and demand parameters and the same short selling season (the summer months from May through August). The newsvendor model is used to manage inventory for both products. Product X is to be discontinued at the end of the season this year and the leftover inventory will be salvaged at 75 percent of the cost. Product Y will be reoffered next summer, so any leftovers this year can be carried over to the next year while incurring a holding cost on each unit left over equal to 20 percent of the product's cost. The quantity of each product is selected to maximize expected profit. How do those quantities compare? The quantity of product X is higher. The quantity of product Y is higher. The quantities are equal. The answer cannot be determined from the data provided.

The quantity of product Y is higher.

A change in which of the following results in a change in the maximum profit in a newsvendor setting? The revenue received from salvaging inventory. The regular selling price of the product. The standard deviation of the demand forecast. The coefficient of variation of the demand forecast.

The regular selling price of the product.

Sorlini Pasta sells pasta throughout Italy. Which of the following is the strongest evidence that Sorlini Pasta is suffering from the bullwhip effect? They hold a considerable amount of inventory, enough to satisfy their average demand for the next four weeks. Just before a snowstorm in the northern part of the country, sales of pasta increased considerably. Sorlini sells both fresh and dry pasta products through different types of retailers. Most retailers only carry a subset of all of the pastas Sorlini offers. The volatility of the orders Sorlini receives from its distributors is greater than the volatility of pasta demand at retailers. Pasta consumption per capita in southern Italy is higher than in northern Italy.

The volatility of the orders Sorlini receives from its distributors is greater than the volatility of pasta demand at retailers.

A company uses the newsvendor model to manage its inventories and faces normally distributed demand with a coefficient of variation of 0.75. The company decides to order a quantity that exactly equals the mean of its demand forecast. Which of the following is true regarding this company's performance measures? There is a 0.50 probability that there is enough inventory to serve all demand. Expected inventory equals 50 percent of the mean of the demand forecast. The stockout probability is 0.25. Expected inventory is 0.

There is a 0.50 probability that there is enough inventory to serve all demand.

What is the relationship between a location's in-stock probability and the lead time that location delivers on shipments to its customers? The higher the in-stock probability, the smaller the lead time. There isn't a definitive relationship—a higher in-stock probability could mean a smaller or a greater lead time. The higher the in-stock probability, the greater the lead time.

There isn't a definitive relationship—a higher in-stock probability could mean a smaller or a greater lead time.

What is the relationship between the number of kanban cards in a process and the inventory level? There is no relationship between the two. There never can be more inventory in the process than what was authorized via Kanban cards. The inventory of the process grows with the square root of the number of Kanban cards. The inventory of the process can be reduced by adding more Kanban cards.

There never can be more inventory in the process than what was authorized via Kanban cards.

Vetox sells industrial chemicals. One of their inputs can be purchased in either jugs or barrels. A jug contains one gallon, while a barrel contains 55 gallons. The price per gallon is the same with either container. Vetox is charged a fixed amount per order whether it purchases jugs or barrels. The inventory holding cost per gallon per month is the same with either jugs or barrels. Vetox chooses an order quantity to minimize ordering and holding costs per year. Would Vetox purchase a greater number of gallons with each order if it purchased with jugs or with barrels? They would order a greater number of gallons with barrels. They would order the same number of gallons with either container. They would order a greater number of gallons with jugs. They might order a greater number of gallons with jugs or with barrels, depending on various factors like the demand rate, ordering cost, and holding cost.

They might order a greater number of gallons with jugs or with barrels, depending on various factors like the demand rate, ordering cost, and holding cost.

Which car company is most often associated with the term lean operations? General Motors Ford Toyota Honda

Toyota

If two firms have the same annual inventory turns, they also have the same days-of-supply. T or F

True If two firms have the same annual inventory turns, then they have the same years-of-supply because years-of-supply = 1 ÷ annual inventory turns. If they have the same years-of-supply, then they must have the same days-of-supply as well because Days-of-supply = Years-of-supply × 365.

If the batch size is increased, inventory increases, which implies that flow units are likely to spend more time in the process. T or F

True.

All else being equal, a larger item is likely to have a higher annual holding cost percentage than a smaller item. T or F

True. A larger item requires more storage space, which is costly and this contributes to higher holding costs.

Increasing the batch size on a resource with setups always increases the capacity of the resource. T or F

True. A resource's capacity always increases with its batch size.

If the flow rate of a process increases, then the utilization of a resource with a setup time must also increase.

True. Utilization of the resource with a setup time equals the flow rate times the processing time. So an increase in the flow rate means an increase in utilization.

Which of the following are likely to be symptoms of the bullwhip effect in a supply chain comprised of consumers, a retailer, a wholesaler, and a factory? Variability of orders from the retailer to the wholesaler is higher than variability of orders from the wholesaler to the factory. Variability of orders from the wholesaler to the factory is lower than the variability in consumer demand to the retailer. Variability in consumer demand is lower than the variability of orders from the retailer to the wholesaler.

Variability in consumer demand is lower than the variability of orders from the retailer to the wholesaler.

What is the roof in the "house-shaped" representation of the Toyota Production System? Just-in-time Waste reduction Built-in quality Process improvement

Waste reduction

Henry Ford proclaimed about the Model T, "You can have any color you want, as long as it is black." Which of the following best reflects his motivation for this position? He believed that customers didn't actually like other colors, so why go through the hassle of making different color cars? With more than one color, the process would have switchover times and that could reduce the overall utilization of the process. He wanted to establish "black" cars as part of his company's brand image at that time. Assembling nonblack cars takes longer than black cars. He understood that increasing inventory in a process can lead to a longer flow time through the process.

With more than one color, the process would have switchover times and that could reduce the overall utilization of the process.

Which of the following terms is not part of the Toyota Production System (TPS)? Ikko-nagashi Kanban Jidoka Yakimono Genchi genbutsu

Yakimono

Suppose the newsvendor model describes a firm's operations decision. Is it possible to have positive stockout probability and positive expected leftover inventory? Choose the best answer. No. If there is leftover inventory, then a stockout doesn't occur. No. If the stockout probability is positive, then expected inventory must be negative. No. Actual demand can differ from sales. Yes. A firm does not stock out and have leftover inventory at the same time, but the stockout probability can be positive even though there is positive expected leftover inventory. Yes, as long as the underage cost is greater than the overage cost.

Yes. A firm does not stock out and have leftover inventory at the same time, but the stockout probability can be positive even though there is positive expected leftover inventory.

It is costly to hold inventory, but inventory can also be useful in a process because: adding inventory to a process will shorten the average time a unit spends in a process. adding inventory to a process can help reduce situations in which sales are lost due to uncertain demand. adding inventory to a process is likely to increase quality. adding inventory to a process will increase the profit margin of the item.

adding inventory to a process can help reduce situations in which sales are lost due to uncertain demand.

If the takt time increases, the operation requires: more workers. fewer workers.

fewer workers.

A firm evaluates its EOQ quantity to equal 180 cases, but it chooses an order quantity of 200 cases. Relative to the order quantity of 180 cases, the order quantity of 200 cases has higher ordering cost and higher holding cost. higher ordering cost and lower holding cost. lower ordering cost and higher holding cost. lower ordering cost and lower holding cost.

lower ordering cost and higher holding cost.

Each day, QBlitz, a Seattle-based startup, offers a single product through its website. The product is available for order only on one day, and no other products are available during that day. To add to this odd selling strategy, QBlitz does not post prices for its products. Instead, for each product there is a reserve price. On the day a product is available, customers can submit bids. All of the bids that exceed the reserve price are told at the end of the day that they "won" the product and they pay the price they bid. QBlitz then adds up all of the winning bids and submits an order to a supplier for the needed quantity. If the supplier delivers that quantity, then QBlitz ships the product to the winners once the product is received. However, if the supplier delivers only a portion of the ordered quantity, then QBlitz ships the product to the highest bidders that it can satisfy and notifies the others that they will receive a refund because they will not in fact receive the product. The QBlitz system is best described as make-to-stock. make-to-order. assemble-to-order. mass customization.

make-to-order.

Students have to change buildings between classes, which often involves walks of 5 minutes or more. Walking from one building to another is: waste. non-value-added time. value-added time. Cannot determine from the given infomation

non-value-added time.

The primary purpose of the "Single-Minute Exchange of Die" philosophy is to:

reduce the setup time for a resource.

The information turnaround time is driven primarily by: the number of workers. the IT system. the inventory in the process. the amount of waste in the process.

the inventory in the process.

Firm A manufactures brake pads, a component of a braking system, and sells them to Firm B, who sells braking systems used in vehicles. Firm A is best described as a tier 2 supplier. tier 1 supplier. manufacturer. distributor. retailer.

tier 2 supplier.

Pulling the andon cord can cause a loss of output. In TPS, an employee should pull the Andon cord: whenever a problem occurs. whenever the employee sees the cost of stopping the line as lower than the costs of not stopping it. whenever he or she needs to go on a break. at no time.

whenever a problem occurs.