SCMA 331 Part 2

6) By which distribution system is more than 90 percent of U.S. coal shipped? A) railroads B) trucks C) waterways D) pipelines E) none of the above

A) railroads

5) Consider the disaster risk decision tree model. Using the notation from the model, what is the expected monetary value (cost) of choosing two suppliers? A) 2C B) [1-P(2)] × 2C + P(2) × (L + 2C) C) 2C + SL D) P(2) × 2C + [1-P(2)] × (L + 2C) E) 2C + (S+U2)L

B

15) The Japanese concept of a company coalition of suppliers is: A) poka-yoke. B) kaizen. C) keiretsu. D) dim sum. E) illegal.

C) keiretsu.

9) Which of the following would NOT typically be considered as part of a manufacturing firm's supply chain? A) suppliers B) distributors C) wholesalers D) retailers E) landscaping contractors

E) landscaping contractors

2) Balancing low-cost storage with low-cost material handling is important in which of the following? A) fixed-position layout B) process-oriented layout C) office layout D) repetitive and product-oriented layout E) warehouse layout

E) warehouse layout

1) When using the factor weighting approach, most companies will use the same list of criteria and the same criteria weights.

FALSE

For a location decision, labor productivity may be important in isolation, but low wage rates are a more important criterion.

False

3) ________ is the use of information technology to control a physical process.

Process control

3) ________ is the fundamental rethinking of business processes to bring about dramatic improvements in performance.

Process redesign

9) ________ is the pace (frequency) of production necessary (time per unit) to meet customer orders.

TAKT CELL

1) A value-stream map includes both (1) inventory quantities, and (2) symbols for customers and suppliers.

TRUE

1) Benchmark firms have driven down costs of supply-chain performance.

TRUE

1) Changes in capacity may lead, lag, or straddle the demand.

TRUE

10) State the fundamental objective of a firm's location strategy. How is this basic objective carried out by industrial or goods-producing firms; how does that differ for service firms?

The fundamental objective is to maximize the benefit of location to the firm. For industrial location decisions, the focus is frequently on minimizing cost, because cost often varies dramatically from one location to another. Service location decisions often focus on maximizing revenues.

8) FedEx schedules its aircraft using a(n) ________ system, which it credits with reducing package mishandling and delay in transit.

central hub

3) Databases containing such variables as street maps, utilities, population age and income, and the software that analyzes such data for location decisions, are referred to as ________.

geographic information systems or GIS

6) The ________ decision involves choosing between producing a component or a service internally and purchasing it externally.

make-or-buy

12) A special form of time-function mapping, which goes beyond the organization into its supply chain, is ________.

value-stream mapping

19) ________ is developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor.

Vertical integration

7) The techniques for addressing the fixed-position layout are complicated by what three factors? What is an alternative strategy to address these?

(1) There is limited space at virtually all sites. (2) At different stages of a project, different materials are needed; therefore, different items become critical as the project develops. (3) The volume of materials needed is dynamic.

Identify three common occurrences that contribute to distortions of information about what is really occurring in the supply chain.

(1) local optimization; (2) incentives (sales incentives, quantity discounts, quotas, and promotions); (3) large lots

22) A firm is considering adding a second secretary to answer phone calls and make appointments. The cost of the secretary will be $10/hour and she will work 200 hours each month. If each new client adds $400 of profit to the firm, how many clients must the secretary arrange for the firm to break even?

: BEP= 10(200)/(400) = 5 clients per month

21) A graphic design studio is considering three new computers. The first model, A, costs $5000. Model B and C cost $3000 and $1000 respectively. If each customer provides $50 of revenue and variable costs are $20/customer, find the number of customers required for each model to break even.

Answer: A: BEP = 5000/(50-20) = 166.7 customers B: BEP = 3000/(50-20) = 100 customers C: BEP = 1000/(50-20) = 33.3 customers

4) Identify McDonald's seven major innovations.

Answer: The seven major innovations are indoor seating, drive-through windows, breakfast menus, play areas, the "Made by You" kitchen system, the self-service kiosk, and the 21st century look.

12) The assumptions necessary for a successful product-oriented layout include all EXCEPT which of the following? A) adequate volume for high equipment utilization B) standardized product C) volatile product demand D) adequately standardized supplies of raw materials and components E) All of the above are appropriate assumptions.

C) volatile product demand

9) ________ avoids placing materials or supplies in storage by processing them as they are received for shipment.

Cross-docking

13) ________ cost is the cost that continues even if no units are produced.

Fixed

15) Define fixed costs.

Fixed costs are those that continue even if no units are produced.

13) ________ is a process analysis technique that focuses on the customer and the producer's interaction with the customer.

Service blueprinting

1) A process-oriented layout is the traditional way to support a product differentiation strategy.

True

1) When selecting new equipment and technology, decision makers look for flexibility—the ability to respond with little penalty in time, cost, or customer value.

True

22) The ________ is used to determine the best pattern of shipments from several points of supply to several points of demand.

transportation model

6) The project remains in one place and workers and equipment come to that one work area in a(n) ________ layout.

: fixed-position

33) Identify five factors that have fostered globalization.

Answer: Globalization has taken place because of the development of: (1) market economics; (2) better international communications; (3) more rapid, reliable travel and shipping; (4) ease of capital flow between countries; and (5) high differences in labor costs.

17) Explain how a load-distance model helps solve problems in process layout.

Answer: The problem in process layout is to arrange departments or work centers so as to minimize the costs of material handling. The load-distance model calculates the amount shipped multiplied by the cost per load of these movements from department to department, and so it can find that set of departmental space assignments that minimizes the aggregate material handling cost.

1) What describes a system that stores and displays information that can be linked to a geographic location? A) AIS B) LOC C) GLOC D) LIS E) GIS

E) GIS

1) The bottleneck time is always at least as long as the throughput time.

FALSE

6) The ________ is an organization that has developed principles and standards for ethical supply management conduct.

Institute for Supply Management

29) ________ costs are readily identifiable and can be measured with precision.

Tangible

) A(n) ________ groups workers, their equipment, and spaces/offices to provide for comfort, safety, and movement of information.

office layout

7) The ________ uses non-numeric "closeness" ratings to determine which departments should be located near one another and which departments should be kept farther apart.

office relationship chart or relationship chart

9) 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) CPFR

D) local optimization

1) A fabrication line and an assembly line are both types of repetitive and product-focused layout, but only the fabrication line utilizes workstations.

False

1) Utilization is the number of units a facility can hold, receive, store, or produce in a period of time.

False

3) Process-oriented layouts typically have low levels of work-in-process inventory.

False

3) The center-of-gravity method finds the location of a centralized facility, such as a distribution center, that will maximize the organization's revenue.

False

3) The minimum number of workstations depends upon the set of task times and the precedence chart, but not the number of units scheduled.

False

4) The transportation model calculates an optimal shipping system between a central facility and several outlying customers.

False

4) ________ involves the ability to respond with little penalty in time, cost, or customer value.

Flexibility

11) A(n) ________ uses symbols to analyze the movement of people or material.

Flowchart

37) ________ represent an organization's attempt to gain increased efficiency through specialization, which can include, for example, concentrating on certain classes of customers.

Focused processes

7) ________ is a means of determining the discounted value of a series of future cash receipts.

Net present value or NPV

1) Unfortunately, not many supply chain metrics exist that can be effectively used to evaluate performance within a company and for its supply chain partners.

FALSE

1) Utilization of the total "cube" is the dominant consideration in office layout.

FALSE

1) With the "many suppliers" sourcing strategy, the order usually goes to the supplier that offers the highest quality

FALSE

2) An example of the postponement strategy for improving service productivity is having the customer wait until you have sufficient time to serve the customer.

FALSE

2) Break-even analysis identifies the volume at which fixed costs and revenue are equal.

FALSE

2) Designing distribution networks to meet customer expectations suggests three criteria: (1) rapid response, (2) cost, and (3) service.

FALSE

2) In the disaster risk model, as the probability of a super-event (S) increases, the advantage of utilizing multiple suppliers increases.

FALSE

2) The biggest advantage of a product layout is its flexibility to handle a varied product mix.

FALSE

2) The factor weighting model is an attempt to add subjectivity to decision making when selecting among suppliers.

FALSE

2) The location decisions of goods-producing firms will generally pay more attention to parking, access, and traffic counts than will service location decisions.

FALSE

2) The net present value of $10,000 to be received in exactly three years is considerably greater than $10,000.

FALSE

2) The new model of a tight, fast, low-inventory supply chain, operating across political and cultural boundaries, has reduced the overall level of supply chain risk.

FALSE

2) The supply chain for a brewery would include raw ingredients such as hops and barley but not the manufactured goods such as bottles and cans.

FALSE

2) To find the throughput time with simultaneous processes, compute the time over all paths and choose the shortest path through the system.

FALSE

2) Vertical integration, whether forward or backward, requires the firm to become more specialized.

FALSE

2) Waterways are an attractive distribution system when speed is more important than shipping cost.

FALSE

3) A focused work center is well suited to the production of a large family of products requiring similar processing, even if their demands are not very stable.

FALSE

3) Break-even analysis is a powerful analytical tool, but is useful only when the organization produces a single product.

FALSE

3) Capacity decisions are based on technological concerns, not demand forecasts.

FALSE

3) Cross-sourcing describes the practice of having two suppliers provide every component.

FALSE

3) Location decisions of goods-producing companies often assume that costs are relatively constant for a given area; therefore, the revenue function is critical.

FALSE

3) Once revenue and total logistics costs are considered together, the optimal number of facilities in a distribution network may decrease compared to the optimal number of facilities based on total logistics costs only.

FALSE

3) The supply chain management opportunity called postponement involves delaying deliveries to avoid accumulation of inventory at the customer's site.

FALSE

3) When using the low-cost strategy for supply chain management, a firm should use buffer stocks to ensure speedy supply.

FALSE

4) A bullwhip measure value greater than zero indicates that the bullwhip effect exists.

FALSE

4) A product requires 24 separate tasks, and the sum of those task times is 14 minutes. If the cycle time is 2 minutes, then at least 12 workstations will be needed.

FALSE

4) Improvements in security, especially regarding the millions of shipping containers that enter the U.S. each year, are being held back by the lack of technological advances.

FALSE

4) Keiretsu refers to a company coalition that is part collaboration, part purchasing from many suppliers, and part vertical integration.

FALSE

4) Substantial research has proved that the only successful method of dealing with bottlenecks is to increase the bottleneck's capacity.

FALSE

5) A firm that employs a response strategy should minimize inventory throughout the supply chain.

FALSE

6) In location decisions, intangible costs are easier to measure than tangible costs.

FALSE

6) Product-oriented layouts tend to have high levels of work-in-process inventories.

FALSE

6) Supply chain decisions are not generally strategic in nature, because purchasing is not a large expense for most firms.

FALSE

7) Because service firms do not acquire goods and services externally, their supply chain management issues are insignificant.

FALSE

7) Location decisions are based on many things, including costs, revenues, incentives, attitudes, and intangibles, but not on ethical considerations.

FALSE

9) Heuristics are problem-solving procedures that mathematically optimize the solution.

FALSE

1) One limitation of the net present value approach to investments is that investments with identical net present values may have very different cash flows.

TRUE

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

TRUE

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

TRUE

1) Service firms choose locations based, in part, on the revenue potential of a site.

TRUE

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

TRUE

1) The graphic approach to locational cost-volume analysis displays the range of volume over which each location is preferable.

TRUE

1) The objective of layout strategy is to develop an effective and efficient layout that will meet the firm's competitive requirements.

TRUE

1) The primary trade-off in transportation mode analysis involves evaluating holding cost against the cost of shipping.

TRUE

1) Use of a diversified supply base represents one of the most common supply chain risk reduction tactics for several different supply chain risk categories.

TRUE

2) Category management is the use of computer software to evaluate the profitability of various merchandising plans for hundreds of categories.

TRUE

2) Design capacity is the theoretical maximum output of a system in a given period under ideal conditions.

TRUE

2) Drop shipping results in time and shipping cost savings.

TRUE

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

TRUE

2) Optical checkout scanners and ATMs are examples of technology's impact on services.

TRUE

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

TRUE

2) The bullwhip effect can occur when orders decrease as well as when they increase.

TRUE

2) The factor-rating method can consider both tangible and intangible costs.

TRUE

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

TRUE

3) Choosing suppliers simply based on the lowest bid has become a somewhat rare approach.

TRUE

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

TRUE

3) Servicescape refers to the physical surrounding in which the service is delivered.

TRUE

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

TRUE

3) The overarching solution to the bullwhip effect is simply for supply chain members to share information and work together.

TRUE

3) The theory of constraints is a body of knowledge that deals with anything that limits an organization's ability to achieve its goals.

TRUE

3) While the prices that consumers pay are often inflexible, a significant number of final prices paid in business-to-business transactions are negotiated.

TRUE

4) A blanket order is a long-term purchase commitment to a supplier for items that are to be delivered against short-term releases to ship.

TRUE

4) Expected output is sometimes referred to as rated capacity.

TRUE

4) One guideline for determining the arrangement and space allocation of a retail store is to place high-impulse and high-margin items in prominent locations.

TRUE

4) Savings in the supply chain exert more leverage as the firm's net profit margin decreases.

TRUE

4) Unfavorable exchange rates can offset other savings in a location decision.

TRUE

5) An example of an intangible cost, as it relates to location decisions, is the quality of education.

TRUE

5) If the schedule calls for the production of 120 units per day and 480 minutes of production time are available per day, the cycle time would be 4 minutes.

TRUE

5) Price changes are useful for matching the level of demand to the capacity of a facility.

TRUE

5) Time-function mapping is a flowchart with time added to the horizontal axis.

TRUE

6) A useful tactic for increasing capacity is to redesign a product in order to facilitate more throughput.

TRUE

7) One drawback of a product-oriented layout is that work stoppage at any one point ties up the whole operation.

TRUE

8) Cycle time is the maximum time that the product is allowed at each workstation.

TRUE

In process-focused facilities, utilization of facilities is low.

TRUE

Intermittent processes are organized around processes.

TRUE

The assembly line is a classic example of a repetitive process.

TRUE

The ratio of labor cost per day to productivity, in units per day, is the labor cost per unit.

TRUE

The term focused processes refers to the quest for increased efficiency, whether in goods or services, that results from specialization.

TRUE

The tool that calculates which process has the lowest cost at any specified production volume is a crossover chart.

TRUE

17) Industrial firms choose locations that minimize cost, but service firms look for locations with good demographics and traffic count because these variables are indicators of good ________.

revenue or volume of business

16) In "drum, buffer, rope," the ________ acts like signals between workstations.

rope

6) The capacity planning strategy that delays adding capacity until capacity is below demand, then adds a capacity increment so that capacity is above demand, is said to ________ demand.

straddle

Of the four stages of supplier selection, the stage at which the factor weighting approach would be used is ________.

supplier evaluation

38) Why is Harley-Davidson identified as a repetitive manufacturer, not a mass customizer?

: While Harley-Davidson's motorcycles variety, they are not as individualized as Dell's personal computers. The variety comes from choices in predefined modules, and there is apparently no place for a customer to get customization that would go beyond what is available in these modules.

21) Align Technology uses a ________ approach to produce clear plastic removable aligners. A) mass customization B) product focus C) process focus D) repetitive focus E) crossover

A) mass customization

6) The use of information technology to monitor and control a physical process is known as: A) process control. B) computer-aided design. C) information numeric control. D) numeric control. E) IT oversight.

A) process control.

45) Big John's Manufacturing currently produces its lead product on a machine that has a variable cost of $0.32 per unit, and fixed costs of $75,000. Big John is considering purchasing a new machine that would drop the variable cost to $.28 per unit, but has fixed costs of $150,000. What is the cross-over point between the two machines?

Answer: 1,875,000 units

22) Which of the following companies use a mass customization approach? A) Dell B) Align Technology C) Frito-Lay D) Arnold Palmer hospital E) A and B

E) A and B

19) High fixed costs and low variable costs are typical of which approach? A) product B) process C) mass customization D) repetitive E) A and C

E) A and C

9) ________ postpones final assembly of a product so the distribution channel can assemble it.

: Channel assembly

11) ________ is the term describing purchasing facilitated through the Internet.

: E-Procurement

23) Identify the four major quantitative methods for solving location problems.

: Factor-rating method, locational cost-volume analysis, center-of-gravity method, and transportation model.

10) ________ is an approach that seeks efficiency of operations through the integration of all material acquisition, movement, and storage activities.

: Logistics management

11) Why do work cells increase the utilization of equipment and machinery?

: Work cells increase the utilization of equipment and machinery because of better scheduling and faster material flow

21) The ________ is a mathematical technique used for finding the best location for a single distribution point that services several stores or areas

: center-of-gravity method

10) "Having a focused work center is like having a plant within a plant." Discuss. Include in your discussion what conditions make focused work centers appropriate.

A focused work center is a permanent or semi-permanent product-oriented arrangement of machines and personnel. It moves production to a large work cell that remains part of the present facility. A focused work center may be appropriate when a firm has identified a family of similar products that have a large and stable demand

6) A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, what is the approximate net present value of this investment? A) $20,920 B) $26,160 C) $49,840 D) $70,920 E) $106,990

A) $20,920

17) A county wants to build one centrally-located processing facility to serve the county's four recycling drop-off locations. The four drop-offs have characteristics as given in the table below. What is the approximate center of gravity of these four locations? Location X-coordinate Y-coordinate Tonnage Drop-off point A 1 8 10 Drop-off point B 6 7 35 Drop-off point C 6 2 25 Drop-off point D 4 7 50 A) (4.75, 6.04) B) (17, 24) C) (33.5, 135.4) D) (6, 4.25) E) (570, 725)

A) (4.75, 6.04)

6) A tortilla chip workstation produces 1,000 chips in 20 seconds. What is its bottleneck time? A) .02 seconds per chip B) 50 chips per second C) 20 seconds D) 6000 chips per minute E) 20,000 seconds

A) .02 seconds per chip

11) A product sells for $5, and has unit variable costs of $3. This product accounts for $20,000 in annual sales, out of the firm's total of $60,000. When performing multiproduct break-even analysis, what is the weighted contribution of this product? A) 0.133 B) 0.200 C) 0.40 D) 0.667 E) $1.66

A) 0.133

6) With cross-sourcing, how many suppliers provide each component on a regular basis (i.e., excluding backup suppliers)? A) 1 B) 2 C) 3 D) equal to the total number of components E) equal to the number of countries to which the final product is sold

A) 1

2) Consider a firm with an annual 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

9) An assembly line has 10 stations with times of 1, 2, 3, 4, ..., 10, respectively. What is the bottleneck time? A) 18.18% of the throughput time B) 100% of the throughput time C) 550% of the throughput time D) 50% of the throughput time E) 1.82% of the throughput time

A) 18.18% of the throughput time

23) Four hundred and eighty minutes of production time are available per day. Scheduled production is 120 units per day. What is the required cycle time? A) 4 minutes B) 5 minutes C) 6 minutes D) 7 minutes E) 8 minutes

A) 4 minutes

29) Process A has fixed costs of $1000 and variable costs of $5 per unit. Process B has fixed costs of $500 and variable costs of $15 per unit. What is the crossover point between process A and process B? A) 50 units B) 200 units C) $2,500 D) $5,000 E) $9,500

A) 50 units

3) In the office relationship chart, which rating reflects the highest importance for two departments' closeness to each other? A) A B) E C) I D) O E) X

A) A

8) Cross-docking means which of the following? A) Avoid placing materials or supplies in storage by processing them as they are received. B) The same docks can be used either incoming or outbound shipments. C) The same dock is used to unload and then reload the same truck. D) Warehouse docks are designed in the shape of a cross. E) Docks are placed in the warehouse according to the direction (north, south, east, or west) from which the truck is arriving.

A) Avoid placing materials or supplies in storage by processing them as they are received.

11) TOC was popularized by: A) Goldratt and Cox. B) Ford. C) Taguchi. D) Deming. E) Motorola and GE.

A) Goldratt and Cox.

5) Which of the following statements regarding the center-of-gravity method is FALSE? A) It is designed to minimize the maximum possible travel distance to any of the locations. B) The optimal x- and y-coordinates are calculated separately. C) The optimal solution is unconstrained, so it could suggest a location in the middle of a body of water. D) The weights used are the quantity of goods moved to or from each location. E) The origin of the coordinate system and the scale used are arbitrary, just as long as the relative distances are correctly represented.

A) It is designed to minimize the maximum possible travel distance to any of the locations.

13) A firm is considering two location alternatives. At location A, fixed costs would be $4,000,000 per year, and variable costs $0.30 per unit. At alternative B, fixed costs would be $3,600,000 per year, with variable costs of $0.35 per unit. If annual demand is expected to be 10 million units, which plant offers the lowest total cost? A) Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units. B) Plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units. C) Plant A, because it is cheaper than Plant B for all volumes. D) Plant B, because it has the lower variable cost per unit. E) Neither Plant A nor Plant B, because the crossover point is at 10 million units.

A) Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units.

16) East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided. What is the center of gravity? X-coordinate Y-coordinate Volume Athens, Texas 30 30 150 Beaumont, Texas 20 10 350 Carthage, Texas 10 70 100 Denton, Texas 50 50 200 A) X = 28.125; Y = 31.25 B) X = 22000; Y = 24000 C) X = 27.5; Y = 40 D) center of gravity = 28 E) X = 25; Y = 40

A) X = 28.125; Y = 31.25

6) ASRS stands for which of the following? A) automated storage and retrieval system B) automated storage and recovery system C) automated scan and recognize system D) automated scan and retail system E) automated scan and retrieval system

A) automated storage and retrieval system

14) Which of the following products is likely to be assembled on a repetitive process line? A) automobiles B) custom personal computers C) custom cakes D) steel E) beer

A) automobiles

4) What term describes a supply chain that is designed to optimize both forward and reverse flows? A) closed-loop supply chain B) full-journey supply chain C) circular supply chain D) network supply chain E) recycled supply chain

A) closed-loop supply chain

9) Computer-integrated manufacturing (CIM) includes manufacturing systems that have: A) computer-aided design, a flexible manufacturing system, inventory control, warehousing and shipping integrated. B) transaction processing, management information systems, and decision support systems integrated. C) automated guided vehicles, robots, and process control integrated. D) robots, automated guided vehicles, and transfer equipment integrated. E) all of their computers integrated with the marketing department.

A) computer-aided design, a flexible manufacturing system, inventory control, warehousing and shipping integrated.

5) A location decision for an appliance manufacturer would tend to have what type of focus? A) cost focus B) focus on finding very highly skilled technicians C) revenue focus D) environmental focus E) education focus

A) cost focus

4) 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) transparent negotiations

A) cost-based price model

15) In "drum, buffer, rope," what provides the schedule, i.e. the pace of production? A) drum B) buffer C) rope D) all three of the above in combination E) none of the above

A) drum

10) Utilization will always be lower than efficiency because: A) effective capacity is less than design capacity. B) effective capacity is greater than design capacity. C) effective capacity equals design capacity. D) expected output is less than actual output. E) expected output is less than rated capacity.

A) effective capacity is less than design capacity.

8) Evaluating location alternatives by comparing their composite (weighted-average) scores involves which of the following? A) factor-rating analysis B) cost-volume analysis C) transportation model analysis D) linear regression analysis E) crossover analysis

A) factor-rating analysis

10) What is a drawing of the movement of material, product, or people? A) flowchart B) process chart C) service blueprint D) process map E) vision system

A) flowchart

9) What value of the bullwhip measure would indicate that the bullwhip effect exists? A) greater than 1 B) greater than 0 C) less than 0 D) less than 1 E) 1

A) greater than 1

16) An organization whose capacity is on that portion of the average unit cost curve that falls as output rises: A) has a facility that is below optimum operating level and should build a larger facility. B) has a facility that is above optimum operating level and should reduce facility size. C) is suffering from diseconomies of scale. D) has utilization higher than efficiency. E) has expected output higher than rated capacity.

A) has a facility that is below optimum operating level and should build a larger facility.

11) A big advantage of a process-oriented layout is: A) its flexibility in equipment and labor assignments. B) its low cost. C) the simplified scheduling problem presented by this layout strategy. D) the ability to employ low-skilled labor. E) its high equipment utilization.

A) its flexibility in equipment and labor assignments.

26) Which of the following phrases best describes process focus? A) low volume, high variety B) Finished goods are usually made to a forecast and stored. C) Operators are less broadly skilled. D) high fixed costs, low variable costs E) low inventory

A) low volume, high variety

9) Which of the following represents an aggressive approach to demand management in the service sector when demand and capacity are not particularly well matched? A) lower resort hotel room prices on Wednesdays B) appointments C) reservations D) first-come, first-served rule E) none of the above

A) lower resort hotel room prices on Wednesdays

4) Industrial location analysis typically attempts to: A) minimize costs. B) maximize sales. C) focus more on human resources. D) avoid countries with strict environmental regulations. E) ignore exchange rates and currency risks.

A) minimize costs.

6) Local optimization is a supply-chain complication best described as: A) optimizing one's local area without full knowledge of supply chain 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 supply chain needs.

7) Which of the statements below best describes office layout? A) positions workers, their equipment, and spaces/offices to provide for movement of information B) addresses the layout requirements of large, bulky projects such as ships and buildings C) seeks the best personnel and machine utilization in repetitive or continuous production D) allocates shelf space and responds to customer behavior E) deals with low-volume, high-variety production

A) positions workers, their equipment, and spaces/offices to provide for movement of information

5) What is the practice of keeping a product generic as long as possible before customizing? A) postponement B) keiretsu C) vendor-managed inventory D) forward integration E) backward integration

A) postponement

Arnold Palmer Hospital uses which focus? A) process B) repetitive C) product D) mass customization E) A and D

A) process

5) Which type of layout features departments or other functional groupings in which similar activities are performed? A) process-oriented B) product-oriented C) fixed-position D) mass production E) unit production

A) process-oriented

12) Which of the following is a primary supplier selection criterion for a firm pursuing a differentiation strategy? A) product development skills B) cost C) capacity D) speed E) flexibility

A) product development skills

8) Warehouses sometimes perform certain other functions besides storing goods. Which of the following is NOT typically one of those functions? A) purchasing B) postponement C) break-bulk activities D) consolidation point E) cross-docking

A) purchasing

12) Which of the following is a location analysis technique typically employed by a service organization? A) purchasing power analysis B) linear programming C) queuing theory D) transportation method E) locational cost-volume analysis

A) purchasing power analysis

3) Which of the following are all strategies for improving productivity in services? A) separation, self-service, automation, and scheduling B) lean production, strategy-driven investments, automation, and process focus C) reduce inventory, reduce waste, reduce inspection, and reduce rework D) high interaction, mass customization, service factory, and just-in-time E) process focus, repetitive focus, product focus, and mass customization focus

A) separation, self-service, automation, and scheduling

25) Tangible costs include which of the following? A) climatic conditions B) availability of public transportation C) taxes D) quality and attitude of prospective employees E) zoning regulations

C) taxes

7) What are the four stages of supplier selection? A) supplier evaluation, supplier development, negotiations, and contracting B) supplier evaluation, negotiations, supplier acquisition, and supplier development C) introduction, growth, maturity, and decline D) supplier evaluation, supplier development, negotiations, and centralized purchasing E) negotiations, contracting, centralized purchasing, and E-procurement

A) supplier evaluation, supplier development, negotiations, and contracting

2) Which of the following is NOT one of McDonald's "seven major innovations"? A) the Happy Meal B) drive-through windows C) breakfast menus D) play areas E) self-service kiosks

A) the Happy Meal

4) Which of the following is NOT an element of the disaster risk decision tree model? A) the buyer's financial loss incurred in a supply cycle if supplier i were disrupted B) the marginal cost of managing a supplier C) the buyer's financial loss incurred in a supply cycle if all suppliers were disrupted D) the probability of a "super-event" that would disrupt all suppliers simultaneously E) the probability of a "unique-event" that would disrupt only one supplier

A) the buyer's financial loss incurred in a supply cycle if supplier i were disrupted

15) Solving a load-distance problem for a process-oriented layout requires that: A) the difficulty of movement be the same for all possible paths. B) pickup and setdown costs vary from department to department. C) the cost to move a load be the same for all possible paths. D) takt time be less than 1. E) Proplanner software examines all possible department configurations.

A) the difficulty of movement be the same for all possible paths.

7) Which of the following elements of the factor weighting technique in supplier selection analysis does NOT contain a certain degree of subjectivity? A) the formula used to calculate the total weighted score for each supplier B) the weights applied to each supplier criterion C) the scores for each potential supplier on each criterion D) the set of supplier criteria E) the numerical scale used to rate suppliers

A) the formula used to calculate the total weighted score for each supplier

4) Distribution management focuses on which of the following? A) the outbound flow of products B) incoming materials C) allocation of demand among suppliers D) setting dividend rates E) balancing an assembly line

A) the outbound flow of products

6) Mathematically, takt time is: A) total work time available divided by units required. B) units required divided by workers required. C) a fictional time increment similar to a therblig. D) workers required divided by total operation time required. E) units required divided by total work time available.

A) total work time available divided by units required.

14) Which of the following is a location analysis technique typically employed by a manufacturing organization? A) transportation method B) queuing theory C) correlation analysis and traffic counts D) simulation E) demographic analysis

A) transportation method

7) La Quinta Inns has a competitive edge over its rivals because it: A) uses regression analysis to determine which variables most influence profitability. B) has better television advertisements. C) picks larger locations than its rivals. D) builds only along interstate highways. E) consistently receives four-star ratings for its inns.

A) uses regression analysis to determine which variables most influence profitability.

8) What is the formula for the bullwhip measure? A) variance of orders / variance of demand B) variance of orders - variance of demand C) variance of demand / variance of orders D) variance of orders2 / variance of demand2 E) variance of demand - variance of orders

A) variance of orders / variance of demand

19) A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable costs = $10 per unit. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

Answer: Old: TR = $40,000, TC = $16,000, therefore Profit = $24,000. New: TR = $80 × 400 = $32,000, TC = $24,000 + $10 × 400 = $28,000, for a profit of $4,000. Most will say NO; the larger repetitive process is less profitable than the smaller process-focused shop.

24) A good capacity decision requires that it be tightly integrated with the organization's strategy and investments. But there are four other special "considerations" to making a good capacity decision. Identify them.

Answer: (1) Forecast demand accurately. (2) Match technology increments and sales volume. (3) Find the optimum operating size (volume). (4) Build for change.

8) What are the four limitations of the net present value technique?

Answer: (1) Investments with the same net present value may have significantly different projected lives and different salvage values. (2) Investments with the same net present value may have different cash flows. Different cash flows may make substantial differences in the company's ability to pay its bills. (3) The assumption is that we know future interest rates, which we do not. (4) Payments are always made at the end of the period (week, month, or year), which is not always the case.

17) Identify nine areas of technology that enhance production and productivity.

Answer: (1) machine technology, (2) automatic identification systems (AIS), (3) process control, (4) vision systems, (5) robots, (6) automated storage and retrieval systems (ASRSs), (7) automated guided vehicles (AGVs), (8) flexible manufacturing systems (FMSs), and (9) computer-integrated manufacturing (CIM)

17) Identify three common features of contracts between buyers and suppliers.

Answer: (1) quantity discounts; (2) buybacks; (3) revenue sharing

Identify the four stages of supplier selection.

Answer: (1) supplier evaluation; (2) supplier development; (3) negotiations; (4) contracting

25) Identify the six tactics for matching capacity to demand.

Answer: 1. Making staffing changes (increasing or decreasing the number of employees or shifts), 2. Adjusting equipment (purchasing additional machinery or selling or leasing out existing equipment), 3. Improving processes to increase throughput, 4. Redesigning products to facilitate more throughput, 5. Adding process flexibility to better meet changing product preferences, and 6. Closing facilities.

10) A new machine tool is expected to generate receipts as follows: $5,000 in year one; $3,000 in year two, nothing in the next year, and $2,000 in the fourth year. At an interest rate of 6%, what is the net present value of these receipts? Is this a better net present value than $2,500 each year over four years? Explain.

Answer: 5,000 × .943 + 3,000 × .890 + 2,000 × .792 = $8,969 using Table S7.1 ($8,971.16 using Excel). The steady stream generates an NPV of 2,500 × 3.465 = $8,662.5 ($8,662.76 using Excel). The irregular stream has a higher net present value because the larger receipts come early.

19) Explain the importance of a bottleneck operation in a production sequence.

Answer: A bottleneck operation is the one that limits output in the production sequence. Consequently, to increase throughput of the facility, the bottleneck output must be increased.

A factory produces 1000 units a month. If design capacity is 3000 and efficiency is 50% find utilization and effective capacity.

Answer: Output = Utilization ∗ Design Capacity gives 1000 = utilization ∗ 3000, utilization = 33.33%. Next use output = efficiency ∗ effective capacity to get 1000 = .5(effective capacity), effective capacity= 2000 units.

33) Using the factor ratings shown below, determine which location alternative should be chosen on the basis of maximum composite score. Location Factor Weight A B C Easy access 0.15 86 72 90 Parking facilities 0.20 72 77 91 Display area 0.18 86 90 90 Shopper (walking) traffic 0.21 94 86 80 Neighborhood wealth 0.16 99 89 81 Neighborhood safety 0.10 96 85 75

Answer: A is best (87.96), followed by C (85.16). B is somewhat further behind (83.20).

32) Location A would result in annual fixed costs of $300,000 and variable costs of $55 per unit. Annual fixed costs at Location B are $600,000 with variable costs of $32 per unit. Sales volume is estimated to be 30,000 units per year. Which location has the lower cost at this volume? How large is its cost advantage? At what volume are the two facilities equal in cost?

Answer: At 30,000 units, Location A has total costs of $1,950,000, while Location B has total costs of $1,560,000. Location B is cheaper by $390,000. The crossover occurs where 600,000 + 32X = 300,000 + 55X, or at X = 300,000 / 23 = 13,043 units

23) A local business owner is considering adding another employee to his staff in an effort to increase the number of hours that the store is open per day. If the employee will cost the owner $4,000 per month and the store takes in $50/hour in revenue with variable costs of $15/hour, how many hours must the new employee work for the owner to break even?

Answer: BEP = 4000/(50 - 15) = 114.3 hours

18) A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable cost is $50 per unit. The firm sells the product for $200 per unit. What is the break-even point for this operation? What is the profit (or loss) on a demand of 200 units per year?

Answer: BEP = 60 units; TR = $40,000, TC = $19,000, therefore Profit = $21,000.

22) Distinguish between utilization and efficiency.

Answer: Both are ratios, not item counts. Both use actual output in the ratio numerator. Utilization is the ratio of actual output to design capacity, so it measures output as a fraction of ideal facility usage. Efficiency is the ratio of actual output to effective capacity, so it measures output as a fraction of the practical or current limits of the facility. Utilization will be lower than efficiency.

17) How is break-even analysis useful in the study of the capacity decision? What limitations does this analytical tool have in this application?

Answer: Breakeven is defined as the volume for which costs equal revenue. It is useful to know the break-even point for each capacity alternative under consideration. In reality, costs may not be as linear as they are assumed to be in this model.

10) What is cross-docking? What are some of its benefits for manufacturing facilities, distribution centers, and retailers such as Walmart?

Answer: Cross-docking avoids placing materials or supplies in storage by processing them as they are received. In a manufacturing facility, product is received directly by the assembly line. In a distribution center, labeled and presorted loads arrive at the shipping dock for immediate rerouting, thereby avoiding formal receiving, stocking/storing, and order-selection activities. Because these activities add no value to the product, their elimination is 100% cost savings. For retailers such as Walmart, cross-docking reduces distribution costs and speeds restocking of stores, thereby improving customer service.

25) What kinds of location decisions are appropriate for the use of locational cost-volume analysis? Write a brief paragraph explaining how the method can assist an operations manager in choosing among alternative sites in making a location decision

Answer: Crossover analysis is appropriate when the primary focus of a location decision is cost. For each alternative site, crossover analysis constructs a total cost curve composed of a fixed cost and a variable cost that depends upon volume. Where these cost curves intersect (or cross over) is the point at which two alternatives have the same cost. The graph of the cost curves of all alternative sites will display the range of volumes over which each site has the lowest cost of all alternatives.

30) A manufacturing company is considering two alternative locations for a new facility. The fixed and variable costs for the two locations are found in the table below. For which volume of business would the two locations be equally attractive? If the company plans on producing 50,000 units, which location would be more attractive? Glen Rose Mesquite Fixed Costs $1,000,000 $1,500,000 Variable Costs ($ per unit) 25 23

Answer: Crossover is at 250,000 units. Below the crossover, Glen Rose must be cheaper as it has the lower fixed cost. Thus, for an estimated unit volume of 50,000, Glen Rose should be chosen. Break-even points Units Dollars Option 1 vs. Option 2 250,000 7,250,000 Volume analysis at 50,000 units Option 1 Option 2 total cost $2,250,000.00 $2,650,000.00

27) An executive conference center has the physical ability to handle 1,100 participants. However, conference management personnel believe that only 1,000 participants can be handled effectively for most events. The last event, although forecasted to have 1,000 participants, resulted in the attendance of only 950 participants. What are the utilization and efficiency of the conference facility?

Answer: Design Capacity = 1,100 participants Effective Capacity = 1,000 participants Actual Output = 950 participants Utilization = = = 86.4% Efficiency = = = 95.0%

28) A fleet repair facility has the capacity to repair 800 trucks per month. However, due to scheduled maintenance of their equipment, management feels that they can repair no more than 600 trucks per month. Last month, two of the employees were absent several days each, and only 400 trucks were repaired. What are the utilization and efficiency of the repair shop?

Answer: Design Capacity = 800 trucks Effective Capacity = 600 trucks Actual Output = 400 trucks Utilization = = = 50.0% Efficiency = = = 66.7%

21) What is the fundamental distinction between design capacity and effective capacity? Provide a brief example.

Answer: Design capacity is the theoretical maximum output of a system in a given period under ideal conditions. Effective capacity, on the other hand, is the capacity that a firm expects to achieve given the current operating constraints. Effective capacity is often lower than design capacity because the facility may have been designed for an earlier version of the product or a different product mix than is currently being produced. Most firms operate at less than design capacity because they don't want to be stretching their resources to the limit. As an example, a restaurant might have 100 seats, but it only opens up 60 every night because it cannot find enough qualified servers.

6) Suppose that the market has a 70% chance of being favorable and a 30% chance of being unfavorable. A favorable market will yield a profit of $300,000, while an unfavorable market will yield a profit of $20,000. What is the expected monetary value (EMV) in this situation?

Answer: EMV = (0.7)($300,000) + (0.3)($20,000) = $210,000 + $6,000 = $216,000

26) The staff training center at a large regional hospital provides training sessions in CPR to all employees. Assume that the capacity of this training system was designed to be 1800 employees per year. Since the training center was first put in use, the program has become more complex, so that 1400 now represents the most employees that can be trained per year. In the past year, 1350 employees were trained. Calculate the efficiency and the utilization of this system.

Answer: Efficiency = 1350 / 1400 = .964 or 96.4 percent; utilization = 1350 / 1800 = .75 or 75 percent

24) What are the advantages and disadvantages of the use of the factor-rating method?

Answer: Factor rating can handle a mix of quantitative and qualitative variables; its calculations are simple and straightforward. Factor rating is subject to sensitivity to small swings in weights and scores, and is subject to subjectivity (different judges see different scores for same site).

34) Identify five factors that affect location decisions at the site level.

Answer: Factors that affect location decisions at the site level include site size and cost; air, rail, highway, waterway systems; zoning restrictions; nearness of services/supplies needed; and environmental impact issues.

5) Why do modern operations managers look for flexibility in their equipment?

Answer: Flexibility in equipment provides managers with the ability to respond to changes in demand with little penalty in time, cost, or customer value. And in this age of rapid technological change and short product life cycles, adding flexibility to the production process can be a major competitive advantage.

39) What is it called when competing companies locate next to each other? Why do they do this?

Answer: It is called clustering. In many cases, this occurs because of a critical mass of information, talent, venture capital, or natural resources. Alternately, clustering occurs because several firms close together create a larger total market than the same firms separated.

35) What is the role of labor productivity in location decisions?

Answer: Labor productivity is the number of units output per hour of labor input. For location decisions, this is more often displayed in the form of "labor content," which is the dollar labor cost per unit. Labor content provides a useful comparison in cases where wage rates and productivities vary greatly from country to country. In short, low productivity can negate low wages.

5) In what specific areas does the layout decision establish a firm's competitive priorities?

Answer: Layout decisions establish a firm's competitive priorities in regard to: capacity, processes, flexibility, and cost, as well as quality of work life, customer contact, and image.

40) How are modules useful in manufacturing processes?

Answer: Modules are parts or components of a product previously prepared. By using modules, the final product can be quickly assembled. Using a different combination of modules allows for quasi-customization.

The efficiency of a factory is 75% and its utilization 50%. If effective capacity is 1000 find design capacity.

Answer: Output = Efficiency ∗ Effective Capacity = Utilization ∗ Design Capacity. Solving gives .75(1000) = .50 (Design Capacity), Design Capacity = 1500

37) Why is "quality of life" an element of intangible costs associated with location decisions? Provide an example as part of your discussion.

Answer: Quality of life affects location decisions in at least one indirect way. Consider a firm that has narrowed its location to two cities. One city has an abundance of educational and recreational facilities, good hospitals and parks. The other has very little of these elements. If you were a prospective employee, in which city would you rather live? Low quality of life can drive up labor costs, and it might also have an impact on training costs and health care costs.

'11) Advantage Milling Devices is preparing to buy a new machine for precision milling of special metal alloys. This device can earn $300 per hour, and can run 3,000 hours per year. The machine is expected to be this productive for four years. If the interest rate is 6%, what is the net present value of the annual cash flows? What is the net present value if the interest rate is not 6%, but 9%? Why does present value fall when interest rates rise?

Answer: S = R × X = 300 × 3,000 × 3.465 = $3,118,500; S = R × X = 300 × 3,000 × 3.240 = $2,916,000 NPV falls because higher interest rates create a greater discount on future receipts. Diff: 2

9) Health Care Systems of the South is about to buy an expensive piece of diagnostic equipment. The company estimates that it will generate uniform revenues of $500,000 for each of the next eight years. What is the present value of this stream of earnings, at an interest rate of 6%? What is the net present value if the machine lasts only six years, not eight? If the equipment cost $2,750,000, should the company purchase it?

Answer: S = R × X = 500,000 × 6.210 = $3,105,000; S = R × X = 500,000 × 4.917 = $2,458,500 The company should purchase the equipment if it believes it will last eight years, but not if it fears that it will last only six.

14) A work cell is required to make 200 computerized diagnostic assemblies (for installation into hybrid automobiles) each day. The cell currently works an eight hour shift, of which seven hours is available for productive work. What is takt time for this cell?

Answer: Takt time = 420 minutes / 200 units required = 2.1 minutes

3) Describe how EMV might be used to analyze a capacity decision.

Answer: The EMV for each capacity decision (perhaps large, medium, and small plants) can be evaluated for unknown costs/revenue/other conditions. Each possible scenario (perhaps low, medium, and high demand) is given a payoff value and a probability. The weighted results of these various states of nature sum to the EMV for each capacity decision. An operations manager can then choose the highest EMV to maximize profit or the lowest EMV to minimize costs.

Service location strategies and goods-producing location strategies rely on very different sets of assumptions. What are the assumptions associated with goods-producing locations? How do these assumptions lead to a location strategy?

Answer: The assumptions for goods-producing locations are: (1) location is a major determinant of cost; (2) most major costs can be identified explicitly for each site; (3) low customer contact allows focus on the identifiable costs; and (4) intangible cost can be objectively evaluated. On the basis of these assumptions, the location strategy for goods-producing firms is usually aimed at minimizing cost.

23) Why is the capacity decision important?

Answer: The capacity decision is important for several reasons. First, capacity costs represent a large portion of fixed costs. Second, a facility of the wrong size means that costs are not as low as they could be. If a facility is too large, and portions of it remain idle, the firm's costs are too high because of the higher fixed costs. If a plant is too small, costs are again higher than they might be due to inefficiencies of working in cramped and crowded spaces. Further, a facility too small may lead to lost sales, perhaps even lost markets.

15) A work cell is scheduled to build 120 digital light processor (DLP) assemblies each week. These assemblies are later installed into home theater projection systems. The work cell has 7.5 hours of productive work each day, six days per week. What is takt time for this cell?

Answer: The cell has 7.5 × 6 = 45 hours (or 2700 minutes) of work time each week. Takt time = 2700 / 120 = 22.5 minutes.

9) Provide an example of the postponement strategy for improving service productivity.

Answer: The postponement strategy refers to customizing the product at delivery, not at production. Examples will vary, but a home builder might leave some tasks unfinished until the house is sold, so that the buyer can make those final decisions. Carpeting, paint colors, cabinet doors, and some appliance choices might be good examples. Another example would be cars or vans.

9) Suppose that the manager of a company has estimated the probability of a super-event sometime during the next three years that will disrupt all suppliers as 2%. In addition, the firm currently uses four suppliers for its main component, and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next three years to be 20%. Supplier management costs during this period are $50,000 per supplier. The financial cost incurred if all four suppliers are disrupted at the same time is estimated to be $10,000,000. What is the expected monetary value (cost) of the current supplier diversification arrangement? A) $412,800 B) $415,680 C) $10,200,000 D) $215,680 E) $8,240,000

B) $415,680

28) A farmers' cooperative association plans to build a new sugar mill in Southwestern Louisiana. The primary objective of the mill is to provide the farmers with a place to take their crop for processing that will reduce their transportation costs. The members of the co-op believe that the center-of-gravity method is appropriate for this objective. While there are over 200 sugar cane farms in the region, they are tightly clustered around six villages. Using the data below, use the center-of-gravity method to calculate the coordinates of the best location for this mill. All mileage references use the city of Lake Charles as (0,0). Village Miles East of Lake Charles Miles North of Lake Charles Sugar Cane tonnage Arceneaux 90 10 240,000 Boudreaux 140 60 320,000 Cancienne 20 70 450,000 Darbonne 50 20 120,000 Evangeline 100 80 60,000 Fontenot 10 120 140,000

Answer: The center of gravity, weighted by the tonnage at each village cluster, is about 66.8 miles east of Lake Charles and 58.0 miles north of Lake Charles. Sugar Mill Solution Weighted # trips x-coord y-coord X multiplied Y multiplied A 240. 90. 10. 21,600. 2,400. B 320. 140. 60. 44,800. 19,200. C 450. 20. 70. 9,000. 31,500. D 120. 50. 20. 6,000. 2,400. E 60. 100. 80. 6,000. 4,800. F 140. 10. 120. 1,400. 16,800. Total 1330. 410. 360. 88,800. 77,100. Average 68.333 60. Weighted Average 66.7669 57,9699 Median 665. 50. 60.

26) What kinds of location decisions are appropriate for the use of center-of-gravity analysis? What variable is being optimized in this analysis?

Answer: The center-of-gravity technique is appropriate when the location decision must find a single centrally-located site to serve any number of outlying points; locating a distribution center to serve a dozen retail stores is an example. The analysis leads to a location that (approximately) minimizes the distribution cost (or total distance traveled) between all outlying points and the center or hub.

20) A firm sells two products. Product R sells for $20; its variable cost is $6. Product S sells for $50; its variable cost is $30. Product R accounts for 60 percent of the firm's sales, while S accounts for 40 percent. The firm's fixed costs are $4 million annually. Calculate the firm's break-even point in dollars.

Answer: The contribution for product R is 70 percent of selling price, or 0.70; the contribution for product S is 0.40. The weighted contribution for R is .70 × .60 = .42; the weighted contribution for S is .40 × .40 = .16. The sum of the weighted contributions is 0.58. The break-even point is $4,000,000 / 0.58 = $6,896,552.

4) A firm is weighing three capacity alternatives: small, medium, and large job shop. Whatever capacity choice is made, the market for the firm's product can be "moderate" or "strong." The probability of moderate acceptance is estimated to be 40 percent; strong acceptance has a probability of 60 percent. The payoffs are as follows. Small job shop, moderate market = $24,000; Small job shop, strong market = $54,000. Medium job shop, moderate market = $20,000; medium job shop, strong market = $64,000. Large job shop, moderate market = -$2,000; large job shop, strong market = $96,000. Which capacity choice should the firm make?

Answer: The expected values for the three decision alternatives (capacities) are: small job shop = $42,000; medium job shop = $46,400; and large job shop = $56,800. The firm should choose the large job shop.

29) A clothing chain is considering two different locations for a new retail outlet. The organization has identified the four factors listed in the following table as the basis for evaluation, and it has assigned weights as shown. The manager has rated each location on each factor, on a 100-point basis (higher scores are better), as shown under the respective columns for Barclay and Chester. a. Calculate the composite score for each alternative location. b. Which site should be chosen? c. Are you concerned about the sensitivity and subjectivity of this solution? Comment. Factor Factor Description Weight Barclay Chester 1 Average community income .40 75 70 2 Community growth potential .25 60 80 3 Availability of public transportation .15 45 90 4 Labor cost .20 80 60

Answer: The higher rated site is Chester, 74.5 to 67.75. There is a margin of nearly seven points, which should overcome most levels of subjectivity. The site factor scores are quite different, so that a small swing in weights could produce swings in scores of a few points, but probably not the seven necessary to reverse the findings. Weight Barclay Chester Factor 1 0.40 75 70 Factor 2 0.25 60 80 Factor 3 0.15 45 90 Factor 4 0.20 80 65 Total 1.00 Weighted sum 67.75 74.5 Weighted average 67.75 74.5

5) A firm is about to undertake the manufacture of a product, and it is weighing three capacity alternatives: small job shop, large job shop, and repetitive manufacturing. The small job shop has fixed costs of $3,000 per month, and variable costs of $10 per unit. The larger job shop has fixed costs of $12,000 per month and variable costs of $3 per unit. The repetitive manufacturing plant has fixed costs of $30,000 and variable costs of $1 per unit. Demand for the product is expected to be 1,000 units per month with "moderate" market acceptance, but 2,000 under "strong" market acceptance. The probability of moderate acceptance is estimated to be 60 percent; strong acceptance has a probability of 40 percent. The product will sell for $25 per unit regardless of the capacity decision. Which capacity choice should the firm make?

Answer: The payoffs are as follows: small job shop, moderate acceptance = $12,000; small job shop, strong acceptance = $27,000; large job shop, moderate acceptance = $10,000; large job shop, strong acceptance = $32,000; repetitive manufacturing, moderate acceptance = -$6,000; and repetitive manufacturing, strong acceptance = $18,000. The expected value for the small job shop decision alternative is $18,000. The expected value of the large job shop alternative is $18,800. The expected value for the repetitive manufacturing alternative is $3600. The firm should choose the large job shop capacity alternative.

10) Identify the techniques for improving service productivity. For any two techniques, describe in a short paragraph, and include an example.

Answer: The seven techniques are separation, self-service, postponement, focus, modules, automation, scheduling, and training. • Separation: structuring the service such that the customer must go where the service is offered (a medical facility) • Self-service: let customers perform their own comparisons (supermarket shopping) • Postponement: customizing at time of delivery or in the final stages of the process (dealer-installed versus factory-installed options on automobiles, boats, etc.; Wendy's Hamburgers) • Focus: restricting the product offerings, options, or degree of customization allowed (limited number of factory installed options on a new automobile) • Modules: services selected from modular choices (health insurance programs) • Automation: separating services that may lend themselves to automation (automatic teller machines) • Scheduling: precise personnel scheduling (keep close watch on how many checkout lanes are needed) • Training: clarifying options, teaching problem avoidance (after-sale maintenance personnel, counselors)

38) "Proximity" or closeness implies that a firm should locate "close" to something. What are the three kinds of proximity described in the text? What are the basic conditions under which each is appropriate? What kinds of firms are likely to use each of these?

Answer: The three are proximity to markets, proximity to suppliers, and proximity to competitors. Proximity to markets is appropriate when customers will not travel far to get the good or service, or when delivering the product to the customer is costly or difficult. Many services must be close to their markets, as must home construction. Proximity to suppliers is appropriate when raw materials are perishable, or when supplies are costly or bulky to transport. Seafood processors need to be near the docks, and smelters need to be near the mines. Proximity to competitors reflects a kind of synergy-retailers find that volume is higher when there are more competitors nearby, because this clustering brings higher traffic counts.

31) East Texas Seasonings is preparing to build one processing center to serve its four sources of seasonings. The four source locations are at coordinates shown below. Also, the volume from each source is provided. a. Calculate the volume-weighted center of gravity. b. Calculate the simple center of gravity (all cities weighted equally). c. Explain why the two calculations differ. X-coordinate Y-coordinate Volume Athens, Texas 30 40 100 Beaumont, Texas 20 15 400 Carthage, Texas 55 60 150 Denton, Texas 20 70 250

Answer: The weighted center of gravity is located at X = 24,250 / 900 = 26.9, Y = 36,500 / 900 = 40.6. The simple center of gravity is located at X = 125 / 4 = 31.25. Y = 185 / 4 = 46.25. The simple center is more to the east and north than the weighted center of gravity. A partial explanation is that the heaviest tonnage is from Beaumont, which is far to the west and south. Its influence pulls the weighted center toward the west and south. East Texas Seasonings Solutions Weighted # trips x-coord y-coord X multiplied Y multiplied A 100. 30. 40. 3,000. 4,000. B 400. 20. 15. 8,000. 6,000. C 150. 55. 60. 8,250. 9,000. D 250. 20. 70. 5,000. 17,500. Total 900. 125. 185. 24,250. 36,500. Average 31.25 46.25 Weighted Average 26.9444 40,5556 Median 450. 20. 40.

14) Describe Value-stream mapping. Explain how it is different from process mapping.

Answer: Value-stream mapping is a variation on time-function mapping or process mapping. The most fundamental difference between them is that Value-stream mapping is not confined to the organization itself. In particular, in its analysis of where value is added, it extends the analysis to the organization's supply chain. Value-stream mapping takes into account not only the process but also the management decisions and information systems that support the process.

16) Define variable costs. What special assumption is made about variable costs in the textbook?

Answer: Variable costs are those that vary with the number of units produced. Linearity (or proportionality) is assumed.

8) To develop a good facility layout, what must be determined?

Answer: You need to consider the following to determine a good layout: material handling equipment, capacity and space requirements, environment and aesthetics, flows of information, and cost of moving between various work areas.

20) In the service sector, scheduling customers is a type of ________ management, while scheduling the workforce is a type of ________.

Answer: demand; capacity

14) ________ is a computer-controlled warehouse that provides for the automatic placement of parts into and from designated places within the warehouse.

Automated storage and retrieval system or ASRS

20) A production line is to be designed to make 500 El-More dolls per day. Each doll requires 11 activities totaling 16 minutes of work. The factory operates 750 minutes per day. What is the required cycle time for this assembly line? A) 0.5 minutes B) 1.5 minutes C) 2 minutes D) 5,500 minutes E) 4.26 minutes

B) 1.5 minutes

9) A clothing chain is considering two different locations for a new retail outlet. They have identified the four factors listed in the following table as the basis for evaluation, and have assigned weights as shown. The manager has rated each location on each factor, on a 100-point basis, as shown under the respective columns for Barclay and Chester. Factor Factor Description Weight Barclay Chester 1 Average community income .40 30 20 2 Community growth potential .25 40 30 3 Availability of public transportation .15 20 20 4 Labor cost .20 10 30 What is the score for Chester? A) 10.00 B) 24.50 C) 25.75 D) 27.00 E) 100.00

B) 24.50

8) A work system has five stations that have process times of 5, 9, 4, 9, and 8. What is the bottleneck time? A) 4 B) 9 C) 18 D) 35 E) 7

B) 9

13) The staff training center at a large regional hospital provides training sessions in CPR to all employees. Assume that the capacity of this training system was designed to be 1200 employees per year. Since the training center was first put into use, the program has become more complex, so that 1050 now represents the most employees that can be trained per year. In the past year, 950 employees were trained. The efficiency of this system is approximately ________ and its utilization is approximately ________. A) 79.2 percent; 90.5 percent B) 90.5 percent; 79.2 percent C) 87.5 percent; 950 employees D) 950 employees; 1050 employees E) 110.5 percent; 114.3 percent

B) 90.5 percent; 79.2 percent

28) Which of the following is the best example of the proximity rule that, for service firms, proximity to market is the most important location factor? A) Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances. B) Few people will travel out-of state for a haircut. C) Patients will travel very long distances to have their hernia surgeries performed at Shouldice Hospital. D) Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers. E) Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal's source.

B) Few people will travel out-of state for a haircut.

4) Which of the following is NOT one of the five parts of the Supply Chain Operations Reference (SCOR) model? A) Make B) Sell C) Plan D) Source E) Return

B) Sell

5) Consider a production line with five stations. Station 1 can produce a unit in 9 minutes. Station 2 can produce a unit in 10 minutes. Station 3 has two identical machines, each of which can process a unit in 12 minutes (each unit only needs to be processed on one of the two machines. Station 4 can produce a unit in 5 minutes. Station 5 can produce a unit in 8 minutes. Which station is the bottleneck station? A) Station 1 B) Station 2 C) Station 3 D) Station 4 E) Station 5

B) Station 2

13) Suppose that in month 1, both the retailer and the wholesaler in a supply chain ordered 20,000 units. Then in month 2, the retailer decreases its order size by 1000 units. If the wholesaler then decreases its order size in month 2 by 700 units, which of the following is TRUE? A) The wholesaler is contributing to the bullwhip effect. B) The wholesaler is providing a dampening (anti-bullwhip) effect. C) The bullwhip measure for the wholesaler equals 0.70. D) Neither amplification nor smoothing is present. E) The wholesaler is providing both amplification and smoothing.

B) The wholesaler is providing a dampening (anti-bullwhip) effect.

16) Currency risk is based on what assumption? A) Firms that do not continuously innovate will lose market share. B) Values of foreign currencies continually rise and fall in most countries. C) Changing product lines by reacting to every current trend may alienate the customer base. D) The value of one dollar today is greater than the value of one dollar to be received one year from now. E) The U.S. stock market fluctuates daily.

B) Values of foreign currencies continually rise and fall in most countries.

5) Which of the following statements regarding fixed costs is TRUE? A) Fixed costs rise by a constant amount for every added unit of volume. B) While fixed costs are ordinarily constant with respect to volume, they can "step" upward if volume increases result in additional fixed costs. C) Fixed costs are those costs associated with direct labor and materials. D) Fixed costs equal variable costs at the break-even point. E) Fixed cost is the difference between selling price and variable cost.

B) While fixed costs are ordinarily constant with respect to volume, they can "step" upward if volume increases result in additional fixed costs.

12) 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.

7) Which of the following is NOT one of the requirements of cellular production? A) testing (poka-yoke) at each station in the cell B) adequate volume for high equipment utilization C) a high level of training, flexibility, and empowerment of employees D) being self-contained, with its own equipment and resources E) identification of families of products, often through the use of group technology codes or equivalents

B) adequate volume for high equipment utilization

5) Balancing a work cell is done: A) before the work cell equipment is sequenced. B) as part of the process of building an efficient work cell. C) before takt time is calculated. D) so that each assembly line workstation has exactly the same amount of work. E) to minimize the total movement in a process layout.

B) as part of the process of building an efficient work cell.

8) Effective capacity is the: A) maximum output of a system in a given period. B) capacity a firm expects to achieve given the current operating constraints. C) average output that can be achieved under ideal conditions. D) minimum usable capacity of a particular facility. E) sum of all of the organization's inputs.

B) capacity a firm expects to achieve given the current operating constraints.

5) Which of the following is NOT a potential cause of the bullwhip effect? A) shortage gaming B) channel coordination C) order batching D) demand forecast errors E) price fluctuations

B) channel coordination

4) Which of the following is NOT an advantage of work cells? A) reduced direct labor cost B) decreased equipment and machinery utilization C) heightened sense of employee participation D) reduced raw material and finished goods inventory E) reduced investment in machinery and equipment

B) decreased equipment and machinery utilization

7) The main issue in designing process-oriented layouts concerns the relative positioning of: A) safety devices. B) departments or work centers. C) raw materials. D) entrances, loading docks, etc. E) supervisors to their employees.

B) departments or work centers.

3) The objective of layout strategy is to: A) minimize cost. B) develop an effective and efficient layout that will meet the firm's competitive requirements. C) maximize flexibility. D) minimize space used. E) maximize worker satisfaction.

B) develop an effective and efficient layout that will meet the firm's competitive requirements.

15) A furniture maker has delivered a dining set directly to the end consumer rather than to the furniture store. The furniture maker is practicing which of the following? A) postponement B) drop shipping C) channel assembly D) passing the buck E) float reduction

B) drop shipping

10) What is an approach to location analysis that includes both qualitative and quantitative considerations? A) locational cost-volume analysis B) factor-rating method C) transportation model D) center-of-gravity method E) make-or-buy analysis

B) factor-rating method

13) A rice mill in south Louisiana purchases the trucking firm that transports packaged rice to distributors. This is an example of which of the following? A) horizontal integration B) forward integration C) backward integration D) current transformation E) keiretsu

B) forward integration

18) Globalization of the location decision is the result of all EXCEPT which of the following? A) market economics B) higher quality of labor overseas C) ease of capital flow between countries D) high differences in labor costs E) more rapid, reliable travel and shipping

B) higher quality of labor overseas

2) Deloitte & Touche solved the empty desk problem by: A) assigning permanent desks. B) implementing a "hoteling" program. C) creating open offices. D) no longer allowing employees to work from home. E) reducing the number of allowable sick days per employee.

B) implementing a "hoteling" program.

5) E-procurement: A) works best in long-term contract situations but is not suited for auctions. B) is the same thing as Internet purchasing. C) has many benefits but requires a lot of paperwork. 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.

14) Japanese manufacturers often pursue a strategy that is part collaboration, part purchasing from a few suppliers, and part vertical integration. What is this approach called? A) kanban B) keiretsu C) samurai D) poka-yoke E) kaizen

B) keiretsu

15) The reason fast food restaurants often are found in close proximity to each other is: A) they enjoy competition. B) location clustering near high traffic flows. C) low cost. D) availability of skilled labor. E) all of the above.

B) location clustering near high traffic flows.

7) Under the disaster risk decision tree model, which of the following conditions would create the HIGHEST incentive to use FEWER suppliers? A) lower L, lower C B) lower L, higher C C) higher L, lower C D) higher L, higher C E) lower L, higher C, lower S

B) lower L, higher C

6) Under the disaster risk decision tree model, which of the following conditions would create the HIGHEST incentive to use MORE suppliers? A) lower S, lower U B) lower S, higher U C) higher S, lower U D) higher S, higher U E) higher S, higher U, higher C

B) lower S, higher U

7) Which sourcing strategy is particularly common when the products being sourced are commodities? A) few suppliers B) many suppliers C) keiretsu D) vertical integration E) virtual companies

B) many suppliers

19) In assembly-line balancing, cycle time (the ratio of available production time to scheduled production) is the: A) minimum time that a product is allowed at each workstation. B) maximum time that a product is allowed at each workstation. C) inverse of the minimum number of workstations needed. D) sum of all the task times divided by the maximum number of workstations. E) equivalent of the maximum task time among all tasks.

B) maximum time that a product is allowed at each workstation.

13) The typical goal used when developing a process-oriented layout strategy is to: A) minimize the distance between adjacent departments. B) minimize the material handling costs. C) maximize the number of different tasks that can be performed by an individual machine. D) minimize the level of operator skill necessary. E) maximize job specialization.

B) minimize the material handling costs.

19) The transportation model, when applied to location analysis: A) minimizes total fixed costs. B) minimizes total production and transportation costs. C) minimizes total transportation costs. D) maximizes revenues. E) minimizes the movement of goods.

B) minimizes total production and transportation costs.

17) Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution, and employment stability may change over time. What is the term associated with this phenomenon? A) bureaucratic risk B) political risk C) legislative risk D) judicial risk E) democratic risk

B) political risk

10) The basic break-even model can be modified to handle more than one product. This extension of the basic model requires: A) price and sales volume for each product. B) price and variable cost for each product, and the percent of sales that each product represents. C) that the firm have very low fixed costs. D) that the ratio of variable cost to price be the same for all products. E) sales volume for each product.

B) price and variable cost for each product, and the percent of sales that each product represents.

18) Frito-Lay is to ________ focus as Harley Davidson is to ________ focus. A) process, repetitive B) product, repetitive C) repetitive, product D) process, product E) product, mass customization

B) product, repetitive

10) In most manufacturing industries, which of the following would likely represent the largest cost to the firm? A) transportation B) purchasing C) insurance D) financing E) advertising

B) purchasing

5) Designing distribution networks to meet customer expectations suggests what three criteria? A) rapid response, service, and cost B) rapid response, product choice, and service C) product choice, cost, and service D) cost, process choice, and service E) rapid response, cost, and process choice

B) rapid response, product choice, and service

4) Which of the following is NOT among the eight determinants of revenue and volume for a service firm? A) quality of management B) shipment cost of finished goods C) purchasing power of the customer-drawing area D) uniqueness of the firm's and the competitors' locations E) competition in the area

B) shipment cost of finished goods

11) A product-oriented layout would be MOST appropriate for which one of the following businesses? A) fast food B) steel making C) insurance sales D) clothing alterations E) a grocery store

B) steel making

8) A restaurant runs a special promotion on lobster and plans to sell twice as many lobsters as usual. When this large order is sent to the distributor, the distributor assumes the large size is a trend, not a one-time event. The distributor therefore places an even larger order with the lobsterman. This behavior is the result of which of the following? A) double marginalization B) the bullwhip effect C) CPFR D) postponement E) vendor-managed inventory

B) the bullwhip effect

16) 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

18) Production and transportation costs are always considered in which of the following location decision methods? A) traffic counts B) transportation model C) purchasing power D) proximity of markets E) clustering

B) transportation model

16) Which of the following is most likely to affect the location strategy of a manufacturing firm? A) appearance/image of the area B) utility costs C) purchasing power of drawing area D) competition in the area E) parking availability

B) utility costs

7) Basic break-even analysis typically assumes that: A) revenues increase in direct proportion to the volume of production, while costs increase at a decreasing rate as production volume increases. B) variable costs and revenues increase in direct proportion to the volume of production. C) both costs and revenues are made up of fixed and variable portions. D) costs increase in direct proportion to the volume of production, while revenues increase at a decreasing rate as production volume increases because of the need to give quantity discounts. E) All of the above are assumptions in the basic break-even model.

B) variable costs and revenues increase in direct proportion to the volume of production.

12) ________ analysis finds the point at which costs equal revenues.

Break-even

14) A employee produces 15 parts during a shift in which he made $90. What is the labor content of the product? A) $90 B) $5 C) $6 D) $0.167 E) $1,350

C) $6

11) What is the value of the bullwhip measure for a company with a standard deviation of demand equal to 20, and a variance of orders equal to 450? A) 0.889 B) 22.5 C) 1.125 D) 0.044 E) 50

C) 1.125

10) What value of the bullwhip measure would indicate that a dampening scenario exists? A) greater than 1 B) greater than 0 C) less than 0 D) less than 1 E) 0

D) less than 1

12) Christopher's Cranks uses a machine that can produce 100 cranks per hour. The firm operates 12 hours per day, five days per week. Due to regularly scheduled preventive maintenance, the firm expects the machine to be running during approximately 95% of the available time. Based on experience with other products, the firm expects to achieve an efficiency level for the cranks of 85%. What is the expected weekly output of cranks for this company? A) 5100 B) 5700 C) 4845 D) 969 E) 6783

C) 4845

21) A production line is to be designed for a job with four tasks. The task times are 2.4 minutes, 1.4 minutes, 0.9 minutes, and 1.7 minutes. After line balancing, the largest possible assigned cycle time is ________ minutes, and the smallest possible assigned cycle time is ________ minutes. A) 1.8; 1.4 B) 1.6; 0.9 C) 6.4; 2.4 D) 2.4; 0.9 E) 6.4; 0.9

C) 6.4; 2.4

4) A grocery store is trying to find a new supplier for carrots. Its three most important supplier criteria are freshness, lot size, and cost, with factor weights of 0.6, 0.1, and 0.3, respectively. What would a supplier with ratings of 6, 8, and 10 in the three respective categories score as a weighted total? A) 24 B) 1 C) 7.4 D) 9.8 E) 8

C) 7.4

30) An assembly line consists of 158 tasks grouped into 32 workstations. The sum of all task times is 105 minutes. The largest assigned cycle time is 4 minutes. What is the efficiency of this line? A) 8 percent B) 21 percent C) 82 percent D) 100 percent E) 81 percent

C) 82 percent

29) An assembly line consists of 21 tasks grouped into 5 workstations. The sum of the 21 task times is 85 minutes. The largest assigned cycle time is 20 minutes. What is the efficiency of this line? A) 4.2 percent B) 17 percent C) 85 percent D) 100 percent E) 21 percent

C) 85 percent

10) In what type of auction does a buyer initiate the process by submitting a description of the desired product or service? A) traditional B) buyer C) Dutch D) French E) Mexican

C) Dutch

3) Which of the following statements regarding FedEx is TRUE? A) Its hub in Memphis, Tennessee, was selected because of its low cost. B) Memphis, Tennessee, is the only hub in the company's global flight network. C) FedEx believes the hub system helps reduce mishandling and delays due to better controls. D) FedEx uses a hub system in the United States, but a city-to-city network in other countries. E) Memphis is FedEx's only hub airport in the United States.

C) FedEx believes the hub system helps reduce mishandling and delays due to better controls.

15) Which of the following assumptions is NOT associated with strategies for goods-producing location decisions? A) Most major costs can be identified explicitly for each site. B) Focus on identifiable costs. C) High customer-contact issues are critical. D) Intangible costs can be evaluated. E) Location is a major determinant of cost.

C) High customer-contact issues are critical.

12) ________ and ________ are to key country success factors as ________ and ________ are to key region success factors. A) Cultural issues, location of markets; site size and cost, zoning restrictions B) Exchange rates, labor availability; site size and cost, environmental impact C) Labor cost, currency risk; land costs, proximity to customers D) Land costs, proximity to customers; labor cost, air and rail systems E) All of the above are accurate relationships.

C) Labor cost, currency risk; land costs, proximity to customers

10) Which of the following does NOT support the retail layout objective of maximizing customer exposure to products? A) Locate high-draw items around the periphery of the store. B) Use prominent locations for high-impulse and high-margin items. C) Maximize exposure to expensive items. D) Use end-aisle locations. E) Convey the store's mission with the careful positioning of the lead-off department.

C) Maximize exposure to expensive items.

30) Process X has fixed costs of $10,000 and variable costs of $2.40 per unit. Process Y has fixed costs of $9,000 and variable costs of $2.25 per unit. Which of the following statements is TRUE? A) The crossover point is approximately 6667 units. B) It is impossible for one process to have both of its costs lower than those of another process. C) Process Y is cheaper than process X at all volumes. D) Process X should be selected for very large production volumes. E) Process X is more profitable than process Y and should be selected.

C) Process Y is cheaper than process X at all volumes.

14) 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's net profit margin decreases. 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's net profit margin decreases.

5) Which of the following is NOT one of the factors complicating the techniques for addressing the fixed-position layout? A) The volume of materials needed is dynamic. B) At different stages of a project, different materials are needed; therefore, different items become critical as the project develops. C) Takt times at workstations are dynamic. D) There is limited space at virtually all sites. E) All of the above are complicating factors.

C) Takt times at workstations are dynamic.

4) Lag and straddle strategies for increasing capacity have what main advantage over a leading strategy? A) They are cheaper. B) They are more accurate. C) They delay capital expenditure. D) They increase demand. E) All of the above are advantages.

C) They delay capital expenditure.

9) What is the primary reason why retailers tend to locate high-draw items around the periphery of the store? A) More shelf space for those popular items is available around the periphery. B) There will be less congestion of customers than there would be in the middle. C) This arrangement will help to maximize customer exposure to other items in the store. D) It is easier to put large advertisement signs on the outside walls right next to the items. E) This arrangement allows customers to travel through the store as quickly as possible.

C) This arrangement will help to maximize customer exposure to other items in the store.

2) The Great East Japan Earthquake of 2011 was centered off of the Pacific coast of which region of Japan? A) Kanto B) Chubu C) Tohoku D) Kansai E) Chugoku

C) Tohoku

11) A system using an automated work cell controlled by electronic signals from a common centralized computer facility is called: A) an adaptive control system. B) robotics. C) a flexible manufacturing system. D) an automatic guided vehicle (AGV) system. E) a manufacturing cell.

C) a flexible manufacturing system.

6) Traffic counts and purchasing power analysis of drawing area are techniques associated with: A) locational cost-volume analysis. B) a manufacturing location decision. C) a retail or professional service location decision. D) the factor-rating method. E) the transportation model.

C) a retail or professional service location decision.

10) Which one of the following is NOT common to repetitive and product-oriented layouts? A) a high rate of output B) specialized equipment C) ability to adjust to changes in demand D) low unit costs E) standardized products

C) ability to adjust to changes in demand

4) The major problem addressed by the warehouse layout strategy is: A) minimizing difficulties caused by material flow varying with each product. B) requiring frequent close contact between forklift drivers and item pickers. C) addressing trade-offs between space and material handling. D) balancing product flow from one work station to the next. E) locating the docks near a convenient access point to the closest highway.

C) addressing trade-offs between space and material handling.

5) Which one of the following distribution systems offers speed and reliability when emergency supplies are needed overseas? A) trucking B) railroads C) airfreight D) waterways E) pipelines

C) airfreight

13) A jewelry store is more likely than a jewelry manufacturer to consider ________ in making a location decision. A) transportation costs B) cost of raw materials C) appearance/image of the location D) quality of life E) taxes

C) appearance/image of the location

32) Product focused processes: A) allow more customization, but are not very efficient. B) are desirable because resource needs increase slowly with the complexity of a process. C) are processes that are specialized for relatively few products or customer groups. D) apply only to service firms, not to manufacturers. E) are profitable because customers demand flexibility, not specialization.

C) are processes that are specialized for relatively few products or customer groups.

11) A fried chicken fast-food chain that acquired feed mills and poultry farms has performed which of the following? A) horizontal integration B) forward integration C) backward integration D) current transformation E) job expansion

C) backward integration

11) Among the following choices, an operations manager might best evaluate political risk of a country by looking at which type of country ranking? A) based on competitiveness B) based on cost of doing business C) based on corruption D) based on magnitude of government social programs E) based on average duration between presidential/prime minister elections

C) based on corruption

15) A regional bookstore chain wants to build a distribution center that is centrally located for its eight retail outlets. It will most likely employ which of the following tools of analysis? A) assembly line balancing B) load-distance analysis C) center-of-gravity method D) linear programming E) locational cost-volume analysis

C) center-of-gravity method

14) Which of the following represents a common way to manage capacity in the service sector? A) appointments B) reservations C) changes in staffing levels D) first-come, first-served service rule E) "early bird" specials in restaurants

C) changes in staffing levels

6) A location decision for a traditional department store (e.g., Macy's) would tend to have what type of focus? A) cost focus B) labor focus C) revenue focus D) environmental focus E) education focus

C) revenue focus

Geographic information systems can assist the location decision by: A) automating center-of-gravity problems. B) computerizing factor-rating analysis. C) combining geography with demographic analysis. D) updating transportation method solutions. E) providing good Internet placement for virtual storefronts.

C) combining geography with demographic analysis.

3) For which of the following operations would a fixed-position layout be MOST appropriate? A) assembling automobiles B) producing TV sets C) constructing a highway tunnel D) refining of crude oil E) running an insurance agency

C) constructing a highway tunnel

23) When making a location decision at the region/community level, which of these would be considered? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) cost and availability of utilities D) zoning restrictions E) air, rail, highway, waterway systems

C) cost and availability of utilities

5) Which of the following describes using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other? A) outsourcing B) dual-sourcing C) cross-sourcing D) backup-sourcing E) parallel-sourcing

C) cross-sourcing

14) The center-of-gravity method is used primarily to determine what type of locations? A) service locations B) manufacturing locations C) distribution center locations D) supplier locations E) call center locations

C) distribution center locations

7) Which of the following methods best considers intangible costs related to a location decision? A) crossover methods B) locational cost-volume analysis C) factor-rating method D) the transportation method E) center-of-gravity method

C) factor-rating method

2) Typically, a more expensive shipping option is: A) slower with a lower holding cost. B) slower with a higher holding cost. C) faster with a lower holding cost. D) faster with a higher holding cost. E) faster, but holding cost is unaffected by delivery speed.

C) faster with a lower holding cost.

6) One of the major advantages of process-oriented layouts is: A) high equipment utilization. B) large work-in-process inventories. C) flexibility in equipment and labor assignment. D) smooth and continuous flow of work. E) small work-in-process inventories.

C) flexibility in equipment and labor assignment.

12) "Operators simply load new programs, as necessary, to produce different products" describes: A) CAD. B) automated guided vehicles. C) flexible manufacturing systems. D) vision systems. E) process control.

C) flexible manufacturing systems.

A product-focused process is commonly used to produce: A) high-volume, high-variety products. B) low-volume, high-variety products. C) high-volume, low-variety products. D) low-variety products at either high- or low-volume. E) high-volume products of either high- or low-variety.

C) high-volume, low-variety products.

6) What three logistics-related costs are relevant when analyzing the choice of number of facilities in a distribution network? A) inventory costs, production costs, and transportation costs B) inventory costs, production costs, and facility costs C) inventory costs, transportation costs, and facility costs D) facility costs, production costs, and transportation costs E) facility costs, inventory costs, and marketing costs

C) inventory costs, transportation costs, and facility costs

3) A hospital's layout most closely resembles which of the following? A) product oriented B) work cell C) job shop D) project E) retail

C) job shop

17) When Daimler and BMW pooled resources to develop standardized auto components, the sourcing strategy could best be described by which of the following? A) keiretsu B) virtual companies C) joint venture D) vertical integration E) few suppliers

C) joint venture

5) A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is: A) greater than $80,000 but less than $130,000. B) greater than $130,000. C) less than $30,000. D) impossible to calculate, because no interest rate is given. E) impossible to calculate, because variable costs are not known.

C) less than $30,000.

9) Traffic counts and demographic analysis of drawing area are associated with: A) the center-of-gravity method. B) manufacturing location decisions. C) service location decisions. D) the transportation model. E) locational cost-volume analysis.

C) service location decisions.

8) Which of the following is NOT an advantage of the "few suppliers" sourcing strategy? A) suppliers have a learning curve that yields lower transaction and production costs B) suppliers are more likely to understand the broad objectives of the end customer C) less vulnerable trade secrets D) creation of value by allowing suppliers to have economies of scale E) suppliers' willingness to provide technological expertise

C) less vulnerable trade secrets

10) Drop shipping: 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 ship directly to the end consumer, rather than to the seller.

26) Which of the following is NOT a heuristic rule for assigning tasks to workstations in a product layout? A) longest tasks first B) in order of most number of following tasks C) median tasks first D) shortest tasks first E) in accordance with positional weight

C) median tasks first

24) A production line is to be designed for a product whose completion requires 21 minutes of work. The factory works 400 minutes per day. Can an assembly line with five workstations make 100 units per day? A) yes, with exactly 100 minutes to spare B) no, but four workstations would be sufficient C) no, it will fall short even with a perfectly balanced line D) yes, but the line's efficiency is very low E) cannot be determined from the information given

C) no, it will fall short even with a perfectly balanced line

6) Which of the following is NOT a remedy for the bullwhip effect? A) share demand information B) channel coordination C) order batching D) price stabilization E) allocate orders based on past demand

C) order batching

11) Which of the following is most likely to affect the location decision of a service firm rather than a manufacturing firm? A) energy and utility costs B) attitude toward unions C) parking and access D) cost of shipping finished goods E) labor costs

C) parking and access

10) Which of the following best describes vertical integration? A) sell products to a supplier or a distributor B) develop the ability to produce products that complement the original product C) produce goods or services previously purchased D) develop the ability to produce the specified good more efficiently than before E) build long-term partnerships with a few suppliers

C) produce goods or services previously purchased

5) Workspace can inspire informal and productive encounters if it balances what three physical and social aspects? A) proximity, privacy, and persuasion B) privacy, persuasion, and permission C) proximity, privacy, and permission D) proximity, persuasion, and permission E) proximity, persuasion, and passion

C) proximity, privacy, and permission

2) 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) grants Ph.D. degrees in purchasing.

C) publishes the principles and standards for ethical supply management conduct.

19) In location planning, environmental regulations, cost and availability of utilities, and taxes are: A) global factors. B) country factors. C) regional/community factors. D) site-related factors. E) none of the above.

C) regional/community factors.

11) Among which of the following industries are purchasing costs the LOWEST percentage of sales? A) automobiles B) petroleum C) restaurants D) lumber E) chemicals

C) restaurants

15) Adding a complementary product to what is currently being produced is a demand management strategy used when: A) demand exceeds capacity. B) capacity exceeds demand for a product that has stable demand. C) the existing product has seasonal or cyclical demand. D) price increases have failed to bring about demand management. E) efficiency exceeds 100 percent.

C) the existing product has seasonal or cyclical demand.

8) One fundamental difference between a process chart and a flowchart is that: A) the process chart adds a time dimension to the horizontal axis, while a flowchart is not time-oriented. B) the process chart includes the supply chain, while the flowchart stays within an organization. C) the process chart is more like a table, while the flowchart is more like a schematic diagram. D) the process chart focuses on the customer and on the provider's interaction with the customer, while the flowchart does not deal directly with the customer. E) None of these is true, because a process chart and a flowchart are the same thing.

C) the process chart is more like a table, while the flowchart is more like a schematic diagram.

24) Which of these factors would be considered when making a location decision at the site level? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) zoning regulations D) cost and availability of utilities E) proximity to raw materials and customers

C) zoning regulations

32) ________ occurs when competing companies locate near each other because of a critical mass of information, talent, venture capital, or natural resources.

Clustering

27) A manufacturing company preparing to build a new plant is considering three potential locations for it. The fixed and variable costs for the three alternative locations are presented below. a. Complete a numeric locational cost-volume analysis. b. Indicate over what range each of the alternatives A, B, C is the low-cost choice. c. Is any alternative never preferred? Explain.

Costs A B C Fixed ($) 2,500,000 2,000,000 3,500,000 Variable ($ per unit) 21 25 15 Answer: B is cheapest up to 125,000 units; C is cheapest after 166,667 units. A is cheapest in between. The B-C crossover is not relevant. Thus each alternative has an attractive range. Break-even points Units Dollars Option A vs. Option B 125,000 5,125,000 Option A vs. Option C 166,667 6,000,000 Option B vs. Option C 150,000 5,750,000

13) Which of the following workers is the most productive? A) $50 wages, 10 parts produced B) $10 wages, 1 part produced C) $30 wages, 5 parts produced D) $100 wages, 21 parts produced E) $500 wages, 100 parts produced

D) $100 wages, 21 parts produced

2) A retailer is considering building a large store. If the local economy experiences expansion, the firm expects the store to earn a $2,000,000 profit next year. If the local economy experiences a contraction, the firm expects the store to lose $400,000 next year. Analysts estimate a 20% chance for the local economy to experience an expansion next year (hence an 80% chance for contraction). What is the expected monetary value (EMV) of building the large store? A) $1,600,000 B) $720,000 C) $2,000,000 D) $80,000 E) $1,520,000

D) $80,000

8) Fabricators, Inc. wants to increase capacity by adding a new machine. The fixed costs for machine A are $90,000, and its variable cost is $15 per unit. The revenue is $21 per unit. What is the break-even point for machine A? A) $90,000 dollars B) 90,000 units C) $15,000 dollars D) 15,000 units E) 4,286 units

D) 15,000 units

14) A process layout problem consists of 4 departments, each of which can be assigned to one of four rooms. The number of different solutions to this problem is ________, although all of them may not have different material handling costs. A) 1 B) 4 C) 16 D) 24 E) unknown

D) 24

12) A full-service restaurant is considering opening a new facility in a specific city. The table below shows its ratings of four factors at each of two potential sites. Factor Weight Gary Mall Belt Line Affluence of local population .20 30 30 Traffic flow .40 50 20 Parking availability .20 30 40 Growth potential .20 10 30 The score for Gary Mall is ________ and the score for Belt Line is ________. A) 120; 120 B) 22; 24 C) 18; 120 D) 34; 28 E) none of the above

D) 34; 28

7) A work system has five stations that have process times of 5, 9, 4, 9, and 8. What is the throughput time of the system? A) 4 B) 9 C) 18 D) 35 E) 7

D) 35

25) Four hundred and eighty minutes of production time are available per day. The schedule calls for the production of 80 units per day. Each unit of the product requires 30 minutes of work. What is the theoretical minimum number of workstations? A) 2 B) 3 C) 4 D) 5 E) 6

D) 5

11) The Academic Computing Center has five trainers available in its computer labs to provide training sessions to students. Assume that the design capacity of the system is 1900 students per semester and that effective capacity equals 90% of design capacity. If the number of students who actually got their orientation session is 1500, what is the efficiency of the system? A) 1350 students B) 1710 students C) 78.9% D) 87.7% E) 90%

D) 87.7%

12) TOC strives to reduce the effect of constraints by: A) offloading work from constrained workstations. B) increasing constrained workstation capability. C) changing workstation order to reduce throughput time. D) A and B E) A, B, and C

D) A and B

10) Which one of the following technologies is used ONLY for material handling, NOT actual production or assembly? A) robots B) CNC C) CAD D) AGVs E) FMS

D) AGVs

4) Outsourcing: A) transfers traditional internal activities to outside vendors. B) utilizes the efficiency that comes with specialization. C) allows the outsourcing firm to focus on its key success factors. D) All of the above are true of outsourcing. E) None of the above is true of outsourcing.

D) All of the above are true of outsourcing.

3) Which of the following is FALSE regarding capacity expansion? A) "Average" capacity sometimes leads demand, sometimes lags it. B) If "lagging" capacity is chosen, excess demand can be met with overtime or subcontracting. C) Total cost comparisons are a rather direct method of comparing capacity alternatives. D) Capacity may only be added in large chunks. E) In manufacturing, excess capacity can be used to do more setups, shorten production runs, and drive down inventory costs.

D) Capacity may only be added in large chunks.

10) Why is Northern Mexico used as a cluster for electronics firms? A) high traffic flows B) venture capitalists located nearby C) natural resources of land and climate D) NAFTA E) high per capita GDP

D) NAFTA

7) Which of the following technologies could enable a cashier to scan the entire contents of a shopping cart in seconds? A) ASRS B) AGV C) CAD/CAM D) RFID E) FMS

D) RFID

5) Which of the following is NOT true about reverse logistics as compared to forward logistics? A) Inventory management is not consistent. B) Distribution costs are less directly visible. C) Pricing is dependent upon many factors. D) Speed is often very important. E) Forecasting is more uncertain.

D) Speed is often very important.

13) Which of the following is TRUE regarding fabrication lines? A) They are the same thing as assembly lines. B) They are the same thing as focused factories. C) They are a special type of process-oriented layout. D) They are usually machine-paced as opposed to worker-paced. E) They require completely different line balancing techniques than do assembly lines.

D) They are usually machine-paced as opposed to worker-paced.

7) As the number of facilities increases, total logistics costs tend to follow a curve that first declines, then rises. Why? A) Transportation and inventory costs first decline steeply, then rise, while facility costs always rise. B) Transportation costs always decline, but eventually the rise in facility and inventory costs outweigh the declining transportation costs. C) Facility costs first decline steeply, then rise, while transportation and inventory costs always rise. D) Transportation costs first decline steeply, then rise, while facility and inventory costs always rise. E) Inventory costs first decline steeply, then rise, while transportation and facility costs always rise.

D) Transportation costs first decline steeply, then rise, while facility and inventory costs always rise.

2) The fixed-position layout would be MOST appropriate in which of the following settings? A) a fast-food restaurant B) a doctor's office C) a casual dining restaurant D) a cruise ship assembly facility E) a washing machine assembly line

D) a cruise ship assembly facility

8) Which of the following is NOT an information requirement for solving a load-distance problem to design a process layout? A) a list of departments or work centers B) a projection of work flows between the work centers C) the distance between locations D) a list of product cycle times E) the cost per unit of distance to move loads

D) a list of product cycle times

6) Which of the following is NOT REQUIRED information to obtain to conduct the factor weighting technique in supplier selection analysis? A) a set of supplier criteria B) a weight for each supplier criterion C) a score for each potential supplier on each criterion D) a qualitative scale on which to rate suppliers E) a numerical scale on which to rate suppliers

D) a qualitative scale on which to rate suppliers

26) Intangible costs include which of the following? A) quality of prospective employees B) quality of education C) availability of public transportation D) all of the above E) none of the above

D) all of the above

18) In assembly-line balancing, the theoretical minimum number of workstations is: A) the ratio of the sum of all task times to cycle time. B) always (when a fraction) rounded upward to the next larger integer value. C) not always possible to reach when tasks are actually assigned to stations. D) all of the above. E) none of the above.

D) all of the above.

17) In a product-oriented layout, what is the process of deciding how to assign tasks to workstations? A) station balancing B) process balancing C) task allocation D) assembly-line balancing E) work allocation

D) assembly-line balancing

6) Which of the following costs would be incurred even if no units were produced? A) raw material costs B) direct labor costs C) transportation costs D) building rental costs E) purchasing costs

D) building rental costs

6) What are the three classic types of negotiation strategies? A) supplier evaluation, supplier development, and supplier 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) traditional auctions, reverse auctions, and online exchanges

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

22) Cycle time is computed as: A) desired output divided by the daily operating time. B) daily operating time divided by the product of desired output and the sum of job times. C) the product of desired output and the sum of job times divided by daily operating time. D) daily operating time divided by the scheduled output. E) 1.00 minus station time.

D) daily operating time divided by the scheduled output.

3) What technique does the text use to determine the best number of suppliers to manage disaster risk? A) linear programming B) factor weighting technique C) transportation model D) decision tree E) simulation

D) decision tree

11) A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing which of the following? A) postponement B) cross-docking C) channel assembly D) drop shipping E) float reduction

D) drop shipping

11) Ambient conditions; spatial layout and functionality; and signs, symbols, and artifacts are all: A) indicators of imbalance on an assembly line. B) indicators that cross-docking has been successful. C) elements of customization in a warehouse layout. D) elements of servicescapes. E) elements of successful office layouts.

D) elements of servicescapes.

7) What is sometimes referred to as rated capacity? A) efficiency B) utilization C) effective capacity D) expected output E) design capacity

D) expected output

4) Net present value will be greater: A) as a fixed set of cash receipts occurs later rather than earlier. B) if the future value of a cash flow is smaller. C) for one end-of-year receipt of $1200 than for twelve monthly receipts of $100 each. D) for a 4% discount rate than for a 6% discount rate. E) All of the above are true.

D) for a 4% discount rate than for a 6% discount rate.

3) Advances in technology: A) have impacted the manufacturing sector only. B) have had only a limited impact on services. C) have failed to change the level of customer interaction with an organization. D) have had a dramatic impact on customer interaction with services and with products. E) have dramatically changed health care, but have not changed retailing.

D) have had a dramatic impact on customer interaction with services and with products.

5) The concept of customizing in a warehouse layout: A) is possible, but it causes serious loss of oversight of the quality function. B) cannot be considered seriously in today's high efficiency factories. C) is theoretically sound, but several years away in practice. D) incorporates value-added activities in warehouses. E) locates stock wherever there is an open location.

D) incorporates value-added activities in warehouses.

10) The most common tactic followed in process-layout planning is to arrange departments or work centers so they: A) minimize the cost of skilled labor. B) maximize the machine utilization. C) are equally allocated within the available space. D) minimize the costs of material handling. E) produce a perfectly balanced assembly line.

D) minimize the costs of material handling.

9) The major problem addressed by the process-oriented layout strategy is: A) the movement of material to the limited storage areas around the site. B) how to design a continuous flow process. C) the provision of low-cost storage with low-cost material handling. D) minimizing difficulties caused by material flow varying with each product. E) balancing product flow from one work station to the next.

D) minimizing difficulties caused by material flow varying with each product.

4) Which of the following constitutes a major trend influencing office layouts? A) downsizing B) globalization C) environmental issues D) off-site employees E) health issues

D) off-site employees

4) Because problems with fixed-position layouts are so difficult to solve well onsite, operations managers: A) virtually never employ this layout strategy. B) utilize this approach only for construction projects such as bridges and office towers. C) increase the size of the site. D) often complete as much of the project as possible offsite. E) utilize this layout only for defense contractors.

D) often complete as much of the project as possible offsite.

5) 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.

12) Hewlett-Packard withholds customization of its laser printers as long as possible. This is an example of which of the following? A) vendor-managed inventory B) standardization C) backward integration D) postponement E) timely customization

D) postponement

28) Which of the following is a common heuristic for assembly line balancing? A) first come, first served B) least preceding tasks C) earliest due date first D) ranked positional weight E) most preceding tasks

D) ranked positional weight

9) Which of the following is NOT a typical benefit of centralized purchasing? A) leverage purchase volume for better pricing B) develop specialized staff expertise C) reduce the duplication of tasks D) reduce lead times E) promote standardization

D) reduce lead times

8) Which of the following characteristics is NOT common to all four of Darden Restaurants' supply channels? A) supplier qualification B) product tracking C) independent audits D) refrigeration E) just-in-time delivery

D) refrigeration

7) Which of the following is NOT one of the risk mitigation tactics for the supply chain risk category of suppliers failing to deliver? A) use multiple suppliers B) effective contracts with penalties C) subcontractors on retainer D) require overnight delivery E) pre-planning

D) require overnight delivery

5) Which one of the following is NOT one of the six sourcing strategies? A) negotiation with many suppliers B) vertical integration C) keiretsu D) short-term relationships with few suppliers E) virtual companies

D) short-term relationships with few suppliers

9) 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) sufficiently high demand D) small market share E) All of the above favor the success of vertical integration.

D) small market share

7) While freight rates are often based on very complicated pricing systems, in general, the primary freight price factor is based on which of the following attributes? A) damage record B) on-time delivery C) door-to-door service D) speed of shipment E) consolidation capabilities

D) speed of shipment

9) Break-even analysis can be used by a firm that produces more than one product, but: A) the results are estimates, not exact values. B) the firm must allocate some fixed cost to each of the products. C) each product has its own break-even point. D) the break-even point depends upon the proportion of sales generated by each of the products. E) None of these statements is true.

D) the break-even point depends upon the proportion of sales generated by each of the products.

6) A disadvantage of the "few suppliers" sourcing 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) the suppliers are less likely to understand the broad objectives of the procuring firm and the end customer.

D) the high cost of changing partners.

31) The crossover point is that production quantity where: A) variable costs of one process equal the variable costs of another process. B) fixed costs of a process are equal to its variable costs. C) total costs equal total revenues for a process. D) total costs for one process equal total costs for another process. E) the process no longer loses money.

D) total costs for one process equal total costs for another process.

23) Harley Davidson: A) utilizes job shops to make each of its modules. B) uses product focused manufacturing. C) uses a large number of modules to build a small number of different bikes. D) uses work cells to feed its assembly line. E) All of the above are true.

D) uses work cells to feed its assembly line.

5) "A special arrangement of machinery and equipment to focus on production of a single product or group of related products" describes what layout type? A) fixed-position layout B) intermittent production C) job shop D) work cell E) warehouse layout

D) work cell

20) Which of the following is usually NOT one of the top considerations in choosing a country for a facility location? A) availability of labor and labor productivity B) exchange rates C) attitude of governmental units D) zoning regulations E) location of markets

D) zoning regulations

8) Suppose that the manager of a company has estimated the probability of a super-event sometime during the next five years that will disrupt all suppliers as 0.23%. In addition, the firm currently uses three suppliers for its main component, and the manager estimates the probability of a unique-event that would disrupt one of them sometime during the next five years to be 1.4%. What is the probability that all three suppliers will be disrupted at the same time at some point during the next five years? A) 4.4203% B) 0.2300% C) 4.4300% D) 0.2297% E) 0.2303%

E) 0.2303%

3) Consider a firm with an annual 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? A) 12.50 B) 5.20 C) 2.60 D) 0.08 E) 4.16

E) 4.16

5) An industrial producer is searching for a supplier for ball bearings. Its three most important supplier criteria are price, quality, and delivery reliability. The firm has decided that quality and delivery reliability should carry the same weight, and that each of them are twice as important as price. If the weights sum to 100%, what would a supplier with ratings of 40, 90, and 75 in the three respective categories score as a weighted total? A) 37 B) 370 C) 49 D) 205 E) 74

E) 74

5) What is a common method used to increase capacity with a lag strategy? A) overtime B) subcontracting C) new facilities D) new machinery E) A and B

E) A and B

14) Which of the following techniques is NOT a technique for dealing with a bottleneck? A) Schedule throughput to match the capacity of the bottleneck. B) Increase the capacity of the constraint. C) Have cross-trained employees available to keep the constraint at full operation. D) Develop alternate routings. E) All are techniques for dealing with bottlenecks.

E) All are techniques for dealing with bottlenecks.

15) Which of the following is a disadvantage of product-oriented layout? A) There is a lack of flexibility necessary for handling a variety of products. B) High volume is required because of the large investment needed to establish the process. C) Work stoppage at any one point can tie up the whole operation. D) There is a lack of flexibility necessary for handling a variety of production rates. E) All of the above are disadvantages of product-oriented layouts.

E) All of the above are disadvantages of product-oriented layouts.

8) Which of the following is NOT a retail layout practice? A) Locate the high-draw items around the periphery of the store. B) Distribute power items throughout the store. C) Use end-aisle locations to maximize product exposure. D) Use prominent locations for high-impulse and high-margin items. E) All of the above are retail layout practices.

E) All of the above are retail layout practices.

2) FedEx chose Memphis, Tennessee, as its U.S. hub because: A) the city is in the center of the United States, geographically. B) the airport has relatively few hours of bad weather closures. C) it needed a means to reach cities to which it did not have direct flights. D) the firm believed that a hub system was superior to traditional city-to-city flight scheduling. E) All of the above are true.

E) All of the above are true.

3) 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.

3) Which of the following statements is TRUE regarding the 2011 Tohoku earthquake and tsunami? A) It devastated eastern sections of Japan. B) Some manufacturers around the globe had been relying exclusively on suppliers located in the affected zones. C) Japanese-built vehicle outputs for Toyota and Honda were down more than 60% in the month following the disaster. D) Manufacturers in several industries worldwide took 6 months or longer before they saw their supply chains working normally again. E) All of the above are true.

E) All of the above are true.

7) The bullwhip effect: A) occurs as orders are relayed from retailers to distributors to wholesalers to manufacturers. 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 are true.

E) All of the above are true.

7) Value-stream mapping: A) is a variation of time-function mapping. B) examines the supply chain to determine where value is added. C) extends time function mapping back to the supplier. D) starts with the customer and works backwards. E) All of the above are true.

E) All of the above are true.

8) Which of the following would NOT be subject to negotiation between a buyer and supplier? A) price B) credit and delivery terms C) quality standards D) cooperative advertising agreements E) All of the above could be negotiated.

E) All of the above could be negotiated.

3) Which of the following would NOT be considered (in addition to delivery speed) when choosing a mode of transportation? A) on-time delivery B) coordinating shipments to maintain a schedule C) getting new products to market D) keeping a customer happy E) All of the above may be considered.

E) All of the above may be considered.

10) Which of the following is not one of the four principles of bottleneck management? A) Release work orders to the system at the bottleneck's capacity pace. B) Lost time at the bottleneck is lost system capacity. C) Increasing capacity at non-bottleneck stations is a mirage. D) Increased bottleneck capacity is increased system capacity. E) Bottlenecks should be moved to the end of the system process.

E) Bottlenecks should be moved to the end of the system process.

2) Of the four approaches to capacity expansion, the approach that "straddles" demand: A) uses incremental expansion. B) uses one-step expansion. C) at some times leads demand, and at other times lags. D) works best when demand is not growing but is stable. E) Choices A and C are both correct.

E) Choices A and C are both correct.

27) Which of the following statements regarding "proximity" in the location decision is FALSE? A) Service organizations find that proximity to market is the most critical primary location factor. B) Manufacturers want to be near customers when their product is bulky, heavy, or fragile. C) Perishability of raw materials is a good reason for manufacturers to locate near the supplier, not the customer. D) Reduction in bulk is a good reason for a manufacturer to locate near the supplier. E) Clustering among fast food chains occurs because they need to be near their labor supply.

E) Clustering among fast food chains occurs because they need to be near their labor supply.

13) The theory of constraints has its origins in: A) linear programming theory. B) the theory of economies of scale. C) material requirements planning. D) the theory of finite capacity planning. E) Goldratt and Cox's book, The Goal: A Process of Ongoing Improvement.

E) Goldratt and Cox's book, The Goal: A Process of Ongoing Improvement.

7) Which of the following is TRUE of random stocking? A) Because items are stocked randomly, accurate inventory records are not necessary. B) Its results always minimize handling costs. C) Products have their own permanent storage spot. D) Each pick can be of only one product. E) None of the above is true.

E) None of the above is true.

27) If a layout problem is solved by use of heuristics, this means that: A) there is no other way to solve the problem. B) no computer software is available. C) the problem has only a few alternatives to evaluate. D) no optimum solution exists. E) a satisfactory, but not necessarily optimal, solution is acceptable.

E) a satisfactory, but not necessarily optimal, solution is acceptable.

7) As described in the book Aerotropolis, nowadays location decisions worldwide are often being based on what? A) rivers B) rail hubs C) interstate highways D) ports E) airports

E) airports

2) Process redesign: A) is the fundamental rethinking of business processes. B) is sometimes called process reengineering. C) tries to bring about dramatic improvements in performance. D) often focuses on activities that cross functional lines. E) all of the above

E) all of the above

5) Which of the following is among the eight determinants of revenue and volume for a service firm? A) uniqueness of the firm's and the competitors' locations B) quality of the competition C) quality of management D) purchasing power of the customer-drawing area E) all of the above

E) all of the above

6) A good layout requires determining: A) material handling equipment. B) capacity and space requirements. C) environment and aesthetics. D) cost of moving between various work areas. E) all of the above

E) all of the above

7) Slotting fees: A) are charged by retailers to stock a product. B) can amount to as much as $25,000. C) are not a part of Walmart's business practices. D) can reduce the ability of small businesses to introduce new products. E) all of the above

E) all of the above

8) 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

10) Location analysis techniques typically employed by service organizations include: A) the factor rating method. B) the center-of-gravity method. C) purchasing power analysis of area. D) traffic counts. E) all of the above.

E) all of the above.

7) Which of the following is the prescribed remedy when the bullwhip effect is caused by shortage gaming? A) share demand information B) channel coordination C) increase capacity D) price stabilization E) allocate orders based on past demand

E) allocate orders based on past demand

3) Which of the following reduces product handling, inventory, and facility costs, but requires both (1) tight scheduling and (2) accurate inbound product information? A) phantom-docking B) random stocking C) ASRS D) customizing E) cross-docking

E) cross-docking

6) Community attitudes, zoning restrictions, and quality of labor force are likely to be considered in which of the following location decision methods? A) transportation method B) locational cost-volume analysis C) center-of-gravity method D) simulation E) factor-rating method

E) factor-rating method

3) Net present value: A) is gross domestic product less depreciation. B) is sales volume less sales and excise taxes. C) is profit after taxes. D) ignores the time value of money. E) is the discounted value of a series of future cash receipts.

E) is the discounted value of a series of future cash receipts.

13) All EXCEPT which of the following are "opportunities" in managing the integrated supply chain? A) postponement B) drop shipping C) blanket orders D) standardization E) line balancing

E) line balancing

21) When making a location decision at the country level, which of these would be considered? A) corporate desires B) land/construction costs C) air, rail, highway, waterway systems D) zoning restrictions E) location of markets

E) location of markets

13) For which corporate strategy(ies) should supply chain inventory be minimized? A) low cost B) response C) differentiation D) low cost and response E) low cost and differentiation

E) low cost and differentiation

16) Which of the following is one of the main advantages of a product-oriented layout? A) high customer exposure rates B) employability of highly skilled labor C) high flexibility D) low capital cost E) low variable cost per unit

E) low variable cost per unit

6) Retail layouts are based on the notion that: A) handling costs should be minimized. B) storage costs should be minimized. C) average customer visit duration should be maximized. D) space used should be minimized. E) maximizing customer exposure rate maximizes sales and profit.

E) maximizing customer exposure rate maximizes sales and profit.

5) The main goal of retail layout is: A) minimizing material handling cost. B) minimizing customer confusion regarding location of items. C) minimizing storage costs. D) minimizing space required. E) maximizing profitability per square foot of floor space.

E) maximizing profitability per square foot of floor space.

14) The central problem in product-oriented layout planning is: A) minimizing material handling within workstations. B) minimizing labor movement between workstations. C) equalizing the space allocated to the different workstations. D) maximizing equipment utilization. E) minimizing the imbalance in the workloads among workstations.

E) minimizing the imbalance in the workloads among workstations.

4) What layout strategy deals with low-volume, high-variety production? A) fixed-position layout B) retail layout C) warehouse layout D) office layout E) process-oriented layout

E) process-oriented layout

2) The ________ layout's main objective is to equalize the task time for each station. A) work cell B) fixed position C) office D) job shop E) product oriented

E) product oriented

22) Which of these factors would be considered when making a location decision at the region/community level? A) government rules, attitudes, stability, incentives B) cultural and economic issues C) zoning restrictions D) environmental impact issues E) proximity to raw materials and customers

E) proximity to raw materials and customers

14) Which of the following is an advantage 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

1) The work cell layout, a special arrangement of machinery and personnel to focus on the production of a single product or group of related products, is for manufacturing applications and has no relevance to services.

FALSE

8) Which of the following statements does NOT accurately explain what occurs when the number of facilities in a distribution network increases? A) response time decreases B) profit first increases, then decreases C) total logistics costs first decrease, then increase D) inventory costs increase E) response time first decreases, then increases

E) response time first decreases, then increases

Which of the following industries is most likely to have low equipment utilization? A) auto manufacturing B) commercial baking C) television manufacturing D) steel manufacturing E) restaurants

E) restaurants

16) TAL Apparel's management of its supply chain for Stafford shirts sold in JCPenney in an example of which of the following? A) blanket orders B) standardization C) postponement D) lot size reduction E) single-stage control of replenishment

E) single-stage control of replenishment

12) The disadvantages of process-oriented layout come from: A) the use of special purpose equipment. B) machine maintenance, which tends to seriously degrade the capacity of the entire system. C) the use of specialized material handling equipment. D) the need for stable demand. E) the flexibility of general-purpose equipment.

E) the flexibility of general-purpose equipment.

8) Which of the following is NOT one of the predictive variables chosen by the profitability regression model used by La Quinta Inns? A) the price of the inn B) median income levels C) the state population per inn D) the location of nearby colleges E) the number of inns in a region

E) the number of inns in a region

4) 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 (3PL)

E) third-party logistics (3PL)

11) On the crossover chart where the costs of two or more location alternatives have been plotted, the quantity at which two cost curves cross is the quantity at which: A) fixed costs are equal for two alternative locations. B) variable costs are equal for two alternative locations. C) total costs are equal for all alternative locations. D) fixed costs equal variable costs for one location. E) total costs are equal for two alternative locations

E) total costs are equal for two alternative locations

4) Break-even is the number of units at which: A) total revenue equals price times quantity. B) total revenue equals total variable cost. C) total revenue equals total fixed cost. D) total profit equals total cost. E) total revenue equals total cost.

E) total revenue equals total cost.

18) Which of the following best describes Vizio's sourcing strategy? A) few suppliers B) keiretsu C) joint venture D) vertical integration E) virtual company

E) virtual company

19) ________ is actual output as a percent of effective capacity.

Efficiency

Define EDI.

Electronic data interchange is a standardized data-transmittal format for computerized communications between organizations.

36) What is the impact of exchange rates on location decisions?

Exchange rates fluctuate, and they can negate savings from low wage rates.

1) As the number of facilities increases, total logistics costs tend to follow a curve that first rises, then declines.

FALSE

1) Because the supply chain has become so electronic and automated, opportunities for unethical behavior have been greatly reduced.

FALSE

1) Even though a firm may have a low cost strategy, supply-chain strategy can select suppliers primarily on response or differentiation.

FALSE

1) FedEx chose Memphis, Tennessee, for its central location, or "hub," primarily because of the incentives offered by the city of Memphis and the state of Tennessee.

FALSE

1) Possible decision alternatives found in capacity EMV problems are future demands or market favorability.

FALSE

1) Production technology has had a major impact on services, but as yet there has been little reduction in service labor requirements.

FALSE

1) Successful process redesign focuses on departmental areas where small, continuous improvements can be made.

FALSE

1) The bullwhip effect describes the tendency for larger order size fluctuations in the supply chain as orders move from suppliers toward retailers.

FALSE

1) The dominant problem associated with the fixed-position layout is that workers are fixed in position, and they cannot be reassigned.

FALSE

1) The layout approach that addresses trade-offs between space and material handling is called the fixed-position layout.

FALSE

49) A product is currently made in a process-focused shop, where fixed costs are $8,000 per year and variable cost is $40 per unit. The firm currently sells 200 units of the product at $200 per unit. A manager is considering a repetitive focus to lower costs (and lower prices, thus raising demand). The costs of this proposed shop are fixed costs = $24,000 per year and variable cost = $10 per unit. If a price of $80 will allow 400 units to be sold, what profit (or loss) can this proposed new process expect? Do you anticipate that the manager will want to change the process? Explain.

Old: TR = $40,000, TC = $16,000, therefore Profit = $24,000. New: TR = $80 × 400 = $32,000, TC = $24,000 + $10 × 400 = $28,000, for a profit of $4,000. The manager should not change. The larger repetitive process is less profitable than the smaller process-focused shop.

53) Bridget is considering how to get to work over the summer. She has two options. Option A is to buy a seasonal bus pass for $100. Option B is to pay $.25 for each ride. Identify the fixed and variable costs for each option. If she has to ride both to and from work, how many days of work would it take for the seasonal pass to cost the same amount as Option B?

Option A: VC = 0 FC = 100 Option B: VC = .25 FC= 0 100 = .25V, V = 400 rides, since she has to take 2 rides each time she works, she would need to work 200 days for the two options to cost the same amount.

________ involves delaying any modifications or customization to the product as long as possible in the production process.

Postponement

16) ________ layouts deal with low-volume, high-variety production with like machines and equipment grouped together.

Process-oriented

16) Identify the typical elements in a process control system.

Sensors collect data, which are read on a periodic basis. Measurements are digitized and transmitted to a computer. Computer programs read the file and analyze the data. Output is produced in the form of signals, diagrams, charts, messages, etc.

13) ________ are charges that manufacturers pay to get their products displayed.

Slotting fees

________ involves reducing the number of variations in materials and components as an aid to cost management.

Standardization

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

TRUE

1) Cross-docking processes items as they are received, rather than placing them in storage.

TRUE

1) Firms often use multiple suppliers for important components to mitigate the risks of total supply disruption.

TRUE

1) Fixed costs are those costs that continue even if no units are produced.

TRUE

1) Lists have been developed that rank countries on issues such as "competitiveness" and "corruption."

TRUE

1) One guideline for a retail layout is to locate high-draw items around the periphery of the store.

TRUE

18) Identify, in proper sequence, the steps in the process of recognizing and managing constraints.

The five-step process of the theory of constraints includes: Step 1: Identify the constraints. Step 2: Develop a plan for overcoming the identified constraints. Step 3: Focus resources on accomplishing Step 2. Step 4: Reduce the effects of the constraints by offloading work or by expanding capability. Make sure that the constraints are recognized by all those who can have an impact on them. Step 5: When one set of constraints is overcome, go back to Step 1 and identify new constraints.

9) Why does FedEx use a central hub airline network, rather than a "point-to-point" network? Describe FedEx's approach to choosing its superhub.

The hub system is more centralized, and allows for greater control; greater control reduces package mishandling and transit delays. Also, the hub permits service to a far greater number of points with fewer aircraft than a point-to-point network would. Their U.S. hub in Memphis reflects a need to be geographically centralized, and in a location where schedules can more reliably be kept because weather delays are minimized.

17) Describe the theory of constraints in a sentence.

The theory of constraints is the body of knowledge that deals with anything that limits an organization's ability to achieve its goals.

17) ________ is the number of units a facility can hold, store, receive, or produce in a period of time.

Throughput or Capacity

2) Job lots are groups or batches of parts processed together.

True

2) The work cell improves layouts by reducing both floor space and direct labor cost.

True

4) The most common tactic to arrange departments in a process-oriented layout is to minimize material handling costs.

True

8) Manufacturers may want to locate close to their customers if the transportation of finished goods is expensive or difficult.

True

9) One reason for a firm locating near its competitors is the presence of a major resource it needs.

True

18) ________ is actual output as a percent of design capacity.

Utilization

8) A(n) ________ is a special product-oriented arrangement of machines and personnel in what is ordinarily a process-oriented facility.

WORK CELL

14) Multiproduct break-even analysis calculates the ________ of each product, ________ it in proportion to each product's share of total sales.

contribution; weighting

17) Local optimization, incentives, and large lots all contribute to ________ about what is really occurring in the supply chain.

distortions of information

20) The ________ method is popular because a wide variety of factors, from education to recreation to labor skills, can be objectively included.

factor-rating

30) Political risk, cultural issues, and exchange rates are among those ________ that affect which country will be selected for a location decision.

key success factors

31) Labor cost per unit is also referred to as ________.

labor content

7) The strategy for improving service productivity that customizes at delivery, rather than at production, is ________.

postponement

13) Which one of the following products is most likely made in a job shop environment? A) rolls of newsprint B) paper forms C) television sets D) cigarettes E) canned vegetables

B) paper forms

8) Which of the following provides automatic placement and withdrawal of parts and products into and from designated places in a warehouse? A) AGV B) CAD/CAM C) CIM D) ASRS E) FMS

D) ASRS

5) Which of the following is TRUE regarding vision systems? A) They are consistently accurate. B) They are modest in cost. C) They do not become bored. D) All of the above are true. E) None of the above is true.

D) All of the above are true.

1) Process control is the use of information technology to monitor and control a physical process.

TRUE

55) Mary is considering purchasing a machine from one of two suppliers. Supplier A's machine has an annual fixed cost of $10,000 and a unit variable cost of $2.10. Supplier B's machine has an annual fixed cost of $16,000 and a unit variable cost of $3.00. How large should Mary's annual demand be in order to make Supplier B's machine the better choice?

The answer is that there is no demand for which Supplier B's machine will be better. Both Supplier B's fixed and variable costs are higher than Supplier A's.

A firm's process strategy is its approach to transforming resources into goods and services.

True

34) The process strategy that is organized around processes to facilitate low-volume, high-variety processes is called a(n) ________.

process focus

28) A quasi-custom product: A) gets its apparent customization from the combinations available from a small number of modules. B) is often the output of repetitive focus facilities. C) is a valid description of a fast food sandwich. D) only applies in services. E) All but D are true.

E) All but D are true.

6) In the mass service and service factory quadrants of the service process matrix, the operations manager could focus on all of the following except: A) automation. B) standardization. C) tight quality control. D) removing some services. E) customization

E) customization.

2) What have restaurants such as Steakhouses and Stacked Restaurants replaced their traditional paper menus with? A) spoken descriptions B) singing descriptions C) menus painted on the walls D) index cards containing a picture of each item E) iPad menus

E) iPad menus

4) Which of the following is not one of the strategies for improving service productivity? A) self-service B) automation C) scheduling D) separation E) mass customization

E) mass customization

A job shop is an example of a(n): A) repetitive process. B) continuous process. C) line process. D) intermittent process. E) specialized process.

E) specialized process.

1) Professional services typically require low levels of labor intensity.

FALSE

3) Activity times should not be included in a service blueprint.

FALSE

4) A flowchart with the addition of a time axis becomes a process chart.

FALSE

6) Flowcharts use distance, but not time, to show the movement of material, product, or people through a process.

FALSE

Harley-Davidson, because it has so many possible combinations of products, utilizes the process strategy of mass customization.

FALSE

The typical full-service restaurant uses a product-focused process.

FALSE

52) Kirstin is thinking about opening a Chinese restaurant and needs to buy a rice cooker. Machine A has fixed costs of $100 and variable costs of $1/pound. Machine B has fixed costs of $500 and variable costs of $.1/pound. If Kirstin plans to sell 100 pounds of rice, which machine should she choose? What is the cross-over point?

Machine A costs 100 + 1(100) = $200 Machine B costs $500 + .1(100) = $510 Thus she should buy machine A. Crossover occurs when 100+V = 500 + .1V, or V = 444.4 pounds of rice

36) ________ is a rapid, low-cost production process that caters to constantly changing unique customer desires.

Mass customization

41) What is mass customization?

Mass customization is rapid, low-cost production of goods and services that fulfill increasingly unique customer desires. It brings us the variety of products traditionally provided by the process focus, with low costs associated with standardized high volume production (the product focus).

54) Karla's candle factory is considering two different manufacturing options. Option A is highly automated with fixed costs of $25,000 and variable costs of $.1/candle. Option B uses hand labor with fixed costs of $10,000 and variable costs of $.5/candle. If demand for Karla's candles is 25,000, which option should she pick?

Option A: $25,000 + .1(25,000) = $27,500 Option B: $10,000 + .5(25,000) = $22,500 Karla should pick Option B

Identify the four basic process strategies, and describe them in a complete sentence or two each.

Process focus is a job shop—high variety and low volume; repetitive focus is an assembly line—relatively standardized products with options from modules; product focus is for high volume, low-variety, products, such as oil refining and flour milling; and mass customization is for high volume, high variety.

35) ________ is a process strategy based on a product-oriented production process that uses modules.

Repetitive focus

2) One use of camera-and-computer-based vision systems is to replace humans doing tedious and error-prone visual inspection activities.

TRUE

2) Service blueprinting is a process analysis technique that focuses on the customer and the provider's interaction with the customer.

TRUE

3) Automated storage and retrieval systems are commonly used in distribution facilities of retailers.

TRUE

4) Flexible manufacturing systems, because of easily changed control programs, are able to perform such tasks as manufacturing one-of-a-kind parts economically.

TRUE

20) Goods made to order are typical of ________ and ________ approaches while goods made to forecast are typical of ________ and ________ approaches. A) process, mass customization; repetitive, product B) product, mass customization; repetitive, process C) product, process; repetitive, mass customization D) repetitive, product; mass customization, process E) repetitive, process; mass customization, product

A) process, mass customization; repetitive, product

39) What is the link between focused processes and specialization? What kinds of focus are possible?

Answer: Focused processes are a means of obtaining increased productivity through forms of specialization. Focus can take several forms, including concentrating on specific classes of customers, working only with products in selected product families, specializing in a specific service, or working with a narrow range of technology.

10) Three of the four types of processes are: A) goods, services, and hybrids. B) manual, automated, and service. C) process focus, repetitive focus, and product focus. D) modular, continuous, and technological. E) input, transformation, and output.

C) process focus, repetitive focus, and product focus.

An assembly line is an example of a: A) product-focused process. B) process-focused process. C) repetitive process. D) line process. E) specialized process.

C) repetitive process.

3) Which of the following is true regarding the concept of flexibility? A) It is the ability to respond with little penalty in time, cost, or customer value. B) It may be accomplished with digitally controlled equipment. C) It may involve modular or movable equipment. D) All of the above are true. E) None of the above is true.

D) All of the above are true.

9) Service blueprinting: A) provides the basis to negotiate prices with suppliers. B) mimics the way people communicate. C) determines the best time for each step in the process. D) focuses on the provider's interaction with the customer. E) uses the schematic of a house to diagram a service process.

D) focuses on the provider's interaction with the customer.

25) Which of the following phrases best describes product focus? A) low volume, high variety B) Finished goods are usually made to order. C) Processes are designed to perform a wide variety of activities. D) high fixed costs, low variable costs E) high inventory

D) high fixed costs, low variable costs

5) In mass service and professional service, the operations manager should focus extensively on: A) automation. B) equipment maintenance. C) sophisticated scheduling. D) human resources. E) cost-cutting initiatives.

D) human resources.

17) One of the similarities between process focus and mass-customization is: A) the volume of outputs. B) the use of modules. C) many departments and many routings. D) the variety of outputs. E) All of the above are similarities.

D) the variety of outputs.

A(n) ________ uses an automated work cell controlled by electronic signals from a common centralized computer facility.

flexible manufacturing system or FMS

33) An organization's approach to transforming resources into goods and services is called its ________.

process strategy

47) A firm is about to undertake the manufacture of a product, and it is weighing the process configuration options. There are two intermittent processes under consideration, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 per month and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 per month and variable costs of $1 per unit. a. At what output does the large intermittent process become cheaper than the small one? b. At what output does the repetitive process become cheaper than the larger intermittent process?

Answer: (a) at 1125 units, the large job shop becomes cheaper than the small job shop; (b) at 38,000 units, the repetitive shop is cheaper than the larger job shop.

48) An organization is considering three process configuration options. There are two different intermittent processes, as well as a repetitive focus. The smaller intermittent process has fixed costs of $3,000 per month and variable costs of $10 per unit. The larger intermittent process has fixed costs of $12,000 per month and variable costs of $2 per unit. A repetitive focus plant has fixed costs of $50,000 per month and variable costs of $1 per unit. a. If the company produced 20,000 units, what would be its cost under each of the three choices? b. Which process offers the lowest cost to produce 40,000 units? What is that cost?

Answer: (a) at 20,000 units, the costs are: small intermittent = $203,000; large intermittent = $52,000; and repetitive = $70,000 (b) at 40,000 units, repetitive process is cheapest, at $90,000 (small intermittent = $403,000, and large intermittent = $92,000).

46) The local convenience store makes personal pan pizzas. Currently, its process makes complete pizzas, fully cooked, for the customer. This process has a fixed cost of $20,000, and a variable cost of $1.75 per pizza. The owner is considering a different process that can make pizzas in two ways: completely cooked (as before), or partially cooked and then flash frozen for the customer to finish heating at home. This alternate process has a fixed cost of $24,000, but a lower variable cost (because much less energy is used in baking) of $1.25 per pizza. a. What is the crossover point between the existing process and the proposed process? b. If the owner expects to sell 9,000 pizzas, should he get the new oven?

Answer: (a) the crossover is 8,000 units (b) for production quantities of 8,000 or larger, the new, more flexible process has a lower cost.

51) A non-profit organization is planning a raffle to raise money. It has two options for tickets. The first option is to do the tickets by hand, with fixed costs of $50 and variable costs of $.05 per ticket. The second option is to outsource production. This would result in fixed costs of $500 and variable costs of $.01. If the organization plans to sell 10,000 tickets which option should it choose?

Answer: 50 + .05V = 500 + .01V, V = 11,250 tickets (students may solve for the cross-over point and realize higher VC option is cheaper at 10,000 since it is below the cross-over point). Another viable method is to find the cost for each option, yielding Option 1 = 50 + .05(10,000) = $550 and Option 2 = 500 + .01(10,000) = $600. Thus the organization should choose the first option.

50) Brandon's computer shop is considering two different configuration options. The first one is to have each computer built by the sales associates when they have free time. The second option is to hire a dedicated assembly technician. Option A has variable costs of $50 per computer and no fixed costs. Option B has a fixed cost of $1,000 but variable costs of only $5 per computer. What is the cross-over point?

Answer: 50V = 1000 + 5V, V (cross-over point) = 22.2 computers

15) Identify the five major tools of process analysis and design. Describe them in a sentence or two each.

Answer: A flowchart is a schematic or drawing of the movement of material, product, or people. Time-function mapping is a flow chart, with the addition of time on the horizontal axis. Value-stream mapping shows how to add value in the flow of materials and information through the entire production process. Process charts use symbols, time, and distance to provide an objective and structured way to analyze and record the activities that make up a process. Service blueprinting focuses on the customer and the provider's interaction with the customer.

43) In an affluent society, how do we produce a wide number of options for products at low cost? Hint: Focus on how to address some of the major challenges of mass customization.

Answer: For mass customization, products should be built-to-order. Product design must be imaginative. Process design must be flexible and able to accommodate changes in both design and technology. Inventory management requires tight control. Tight schedules are needed that track orders and material from design through delivery. Responsive partners in the supply chain can yield effective collaboration.

44) A product is currently made in a process-focused shop, where fixed costs are $9,000 per year and variable costs are $50 per unit. The firm is considering a fundamental shift in process, to repetitive manufacturing. The new process would have fixed costs of $90,000, and variable costs of $5. What is the crossover point for these processes? For what range of outputs is each process appropriate?

Answer: The crossover is at 1800 units annually. For volumes under 1800, the process focus is cheaper; for volumes over 1800 units, the repetitive focus is cheaper.

8) Provide an example of the focus strategy for improving service productivity.

Answer: The focus strategy refers to restricting the offerings. Examples will vary, but a restaurant with a limited menu would be one example.

27) Which of the following characteristics best describes repetitive focus? A) It uses sophisticated scheduling to accommodate custom orders. B) Its output is a standardized product produced from modules. C) Operators are broadly skilled. D) It is widely used for the manufacture of steel. E) low volume, high variety

B) Its output is a standardized product produced from modules.

24) Which of the following is FALSE regarding repetitive processes? A) They use modules. B) They allow easy switching from one product to the other. C) They are the classic assembly lines. D) They have more structure and less flexibility than a job shop layout. E) They include the assembly of basically all automobiles.

B) They allow easy switching from one product to the other.