Operations Management 11th Edition by Jay Heizer – Test Bank

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Operations Management 11th Edition by Jay Heizer – Test Bank

Operations Management, 11e (Heizer/Render)

Chapter 2  Operations Strategy in a Global Environment

 

True/False

 

1) NAFTA seeks to phase out all trade and tariff barriers among Canada, Mexico, and the United States.

Answer:  TRUE

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

2) The World Trade Organization has helped to significantly reduce tariffs around the world.

Answer:  TRUE

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

3) Production processes are being dispersed to take advantage of national differences in labor costs.

Answer:  TRUE

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

4) NAFTA seeks to phase out all trade and tariff barriers between the United States and Asia.

Answer:  FALSE

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

5) One reason for global operations is to gain improvements in the supply chain.

Answer:  TRUE

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

6) One reason to globalize is to learn to improve operations.

Answer:  TRUE

Diff: 1

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

7) To attract and retain global talent, and to expand a product’s life cycle, are both reasons to globalize.

Answer:  TRUE

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

8) A product will always be in the same stage of its product life cycle regardless of the country.

Answer:  FALSE

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

9) The World Trade Organization helps provide governments and industries around the world with protection from firms that engage in unethical conduct.

Answer:  TRUE

Diff: 2

Topic:  A global view of operations

AACSB:  Ethical Reasoning

Objective:  no LO

 

10) Boeing’s development of the 787 Dreamliner is an example of a company obtaining a competitive advantage through product differentiation/innovation.

Answer:  TRUE

Diff: 1

Topic:  Global company profile

Objective:  no LO

 

11) An organization’s strategy is its purpose or rationale for an organization’s existence.

Answer:  FALSE

Diff: 1

Topic:  Developing missions and strategies

Objective:  LO2-1

 

12) Operations strategies are implemented in the same way in all types of organizations.

Answer:  FALSE

Diff: 2

Topic:  Developing missions and strategies

Objective:  LO2-1

 

13) Experience differentiation is an extension of product differentiation, accomplished by using people’s five senses to create an experience rather than simply providing a service.

Answer:  TRUE

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

14) An organization’s ability to generate unique advantages over competitors is central to a successful strategy implementation.

Answer:  TRUE

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

15) Low-cost leadership is the ability to distinguish the offerings of the organization in any way that the customer perceives as adding value.

Answer:  FALSE

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-3

 

16) Most services are tangible; this factor determines how the ten decisions of operations management are handled differently for goods than for services.

Answer:  FALSE

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

17) The relative importance of each of the ten operations decisions depends on the ratio of goods and services in an organization.

Answer:  TRUE

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

18) Decisions that involve what is to be made and what is to be purchased fall under the heading of supply-chain management.

Answer:  TRUE

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

19) Manufacturing organizations have ten strategic OM decisions, while service organizations have only eight.

Answer:  FALSE

Diff: 1

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

20) Errors made within the location decision area may overwhelm efficiencies in other areas.

Answer:  TRUE

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

21) Southwest Airlines’ core competence is operations.

Answer:  TRUE

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

22) Key success factors and core competencies are synonyms.

Answer:  FALSE

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

23) SWOT analysis is a method of determining external strengths and weaknesses and internal opportunities and threats.

Answer:  FALSE

Diff: 2

Topic:  Strategy development and implementation

Objective:  no LO

 

24) For the greatest chance of success, an organization’s operations management strategy must support the company’s strategy.

Answer:  TRUE

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

25) Key Success Factors are those activities that are key to achieving competitive advantage.

Answer:  TRUE

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

26) A multinational corporation has extensive international business involvements.

Answer:  TRUE

Diff: 1

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

27) The multidomestic OM strategy maximizes local responsiveness while achieving a significant cost advantage.

Answer:  FALSE

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

28) Firms using the global strategy can be thought of as “world companies.”

Answer:  FALSE

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

Multiple Choice

 

1) Which of the following statements regarding the Dreamliner 787 is true?

  1. A) Boeing has found partners in over a dozen countries.
  2. B) The new aircraft incorporates a wide range of aerospace technologies.
  3. C) The new aircraft uses engines from not one, but two manufacturers.
  4. D) Boeing will add only 20 to 30 percent of the aircraft’s value.
  5. E) All of the above are true.

Answer:  E

Diff: 2

Topic:  Global company profile

Objective:  no LO

 

2) Boeing’s new 787 Dreamliner

  1. A) is assembled in Washington, D.C.
  2. B) uses engines from Japan
  3. C) has its fuselage sections built in Australia
  4. D) has increased efficiency from new engine technology
  5. E) results from a partnership of about a dozen companies

Answer:  D

Diff: 2

Topic:  Global company profile

Objective:  no LO

 

3) Examples of response to the global environment include

  1. A) Boeing’s worldwide sales and production
  2. B) Benneton’s flexibility in design, production, and distribution
  3. C) a Chinese manufacturer, Haier, opening plants in the United States
  4. D) Ford’s partnerships with Volvo and Mazda
  5. E) all of the above

Answer:  E

Diff: 1

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

4) Which of the following is an example of globalization of operations strategy?

  1. A) Boeing’s Dreamliner has engines with higher fuel/payload efficiency.
  2. B) Ford’s new auto models have dent-resistant panels.
  3. C) A Chinese manufacturer, Haier, now operates plants in the United States.
  4. D) Hard Rock Café provides an “experience differentiation” at its restaurants.
  5. E) All of the above are examples.

Answer:  C

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  LO2-5

5) Cost cutting in international operations can take place because of

  1. A) lower taxes and tariffs
  2. B) lower wage scales
  3. C) lower indirect costs
  4. D) less stringent regulations
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

6) Which of the following did the authors not suggest as a reason for globalizing operations?

  1. A) reduce costs
  2. B) improve the supply chain
  3. C) stockholder approval ratings
  4. D) understand markets
  5. E) None of the above were suggested.

Answer:  C

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  LO2-5

7) Multinational organizations can shop from country to country and cut costs through

  1. A) lower wage scales
  2. B) lower indirect costs
  3. C) less stringent regulations
  4. D) lower taxes and tariffs
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

8) The term maquiladora is most synonymous with

  1. A) free trade zones in Mexico
  2. B) Chinese forced labor camps
  3. C) home-based or cottage industry
  4. D) areas that do not meet U.S. standards for workplace safety and pollution
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

9) Which of the following is true of maquiladoras?

  1. A) They discourage foreign businesses from outsourcing.
  2. B) They assess tariffs only on the value-added work done.
  3. C) They originated in China.
  4. D) none of the above
  5. E) all of the above

Answer:  B

Diff: 2

Topic:  A global view of operations

Objective:  no LO

 

10) Which of the following represent reasons for globalizing operations?

  1. A) to gain improvements in the supply chain
  2. B) to improve operations
  3. C) to expand a product’s life cycle
  4. D) to attract and retain global talent
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

11) Which of the following does not represent a reason for globalizing operations?

  1. A) reduce costs
  2. B) improve the supply chain
  3. C) reduce responsiveness
  4. D) attract and retain global talent
  5. E) None of the above are valid reasons for globalizing operations.

Answer:  C

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

12) NAFTA seeks to

  1. A) substitute cheap labor in Mexico for expensive labor in the United States
  2. B) curb illegal immigration from Mexico to the United States
  3. C) phase out all trade and tariff barriers between North America and South America
  4. D) phase out all trade and tariff barriers between the United States, Canada, and Mexico
  5. E) All of the above are NAFTA goals.

Answer:  D

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

13) With reference to cultural and ethical issues, the World Trade Organization has

  1. A) succeeded in providing equal protection of intellectual property among nations
  2. B) made progress in providing equal protection of intellectual property among nations
  3. C) phased out all trade and tariff barriers between the United States and Mexico
  4. D) eliminated slave labor and child labor
  5. E) played little role in addressing cultural and ethical issues among nations

Answer:  B

Diff: 3

Topic:  A global view of operations

AACSB:  Ethical Reasoning

Objective:  no LO

 

14) Which of the following is true about business strategies?

  1. A) An organization should stick with its strategy for the life of the business.
  2. B) All firms within an industry will adopt the same strategy.
  3. C) Well defined missions make strategy development much easier.
  4. D) Strategies are formulated independently of SWOT analysis.
  5. E) Organizational strategies depend on operations strategies.

Answer:  C

Diff: 2

Topic:  Developing missions and strategies

Objective:  LO2-1

 

15) Which of the following activities takes place most immediately once the mission has been developed?

  1. A) The firm develops alternative or back-up missions in case the original mission fails.
  2. B) The functional areas develop their functional area strategies.
  3. C) The functional areas develop their supporting missions.
  4. D) The ten OM decision areas are prioritized.
  5. E) Operational tactics are developed.

Answer:  C

Diff: 2

Topic:  Developing missions and strategies

Objective:  LO2-1

 

16) Which of the following statements about organizational missions is false?

  1. A) They reflect a company’s purpose.
  2. B) They indicate what a company intends to contribute to society.
  3. C) They are formulated after strategies are known.
  4. D) They define a company’s reason for existence.
  5. E) They provide guidance for functional area missions.

Answer:  C

Diff: 2

Topic:  Developing missions and strategies

Objective:  LO2-1

17) What term describes how an organization expects to achieve its missions and goals?

  1. A) conditional expectation
  2. B) tactic
  3. C) SWOT
  4. D) strategy
  5. E) competitive advantage

Answer:  D

Diff: 1

Topic:  Developing missions and strategies

Objective:  LO2-1

 

18) The fundamental purpose of an organization’s mission statement is to

  1. A) create a good human relations climate in the organization
  2. B) define the organization’s purpose in society
  3. C) define the operational structure of the organization
  4. D) generate good public relations for the organization
  5. E) define the functional areas required by the organization

Answer:  B

Diff: 2

Topic:  Developing missions and strategies

Objective:  LO2-1

 

19) Which of the following is true?

  1. A) Corporate mission is shaped by functional strategies.
  2. B) Corporate strategy is shaped by functional strategies.
  3. C) Functional strategies are shaped by corporate strategy.
  4. D) External conditions are shaped by corporate mission.
  5. E) Functional area missions are merged to become the organizational mission.

Answer:  C

Diff: 3

Topic:  Developing missions and strategies

Objective:  LO2-1

 

20) Which of the international operations strategies involves a focus on high cost reductions and low local responsiveness?

  1. A) international strategy
  2. B) global strategy
  3. C) transnational strategy
  4. D) multidomestic strategy
  5. E) none of the above

Answer:  B

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

21) Which of the following is least likely to be a Cost Leadership competitive advantage?

  1. A) low overhead
  2. B) effective capacity use
  3. C) inventory management
  4. D) broad product line
  5. E) mass production

Answer:  D

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

22) According to the authors, which of the following strategic concepts allow firms to achieve their missions?

  1. A) productivity, efficiency, and quality leadership
  2. B) differentiation, cost leadership, and quick response
  3. C) differentiation, quality leadership, and quick response
  4. D) distinctive competency, cost leadership, and experience
  5. E) differentiation, distinctive competency, quality leadership, and capacity

Answer:  B

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

23) A firm can effectively use its operations function to yield competitive advantage through all of the following except

  1. A) customization of the product
  2. B) setting equipment utilization goals below the industry average
  3. C) speed of delivery
  4. D) constant innovation of new products
  5. E) maintaining a variety of product options

Answer:  B

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

24) Which of the following has progressed the furthest along its product life cycle?

  1. A) drive-thru restaurants
  2. B) Boeing 787
  3. C) iPods
  4. D) Twitter
  5. E) Xbox 360

Answer:  A

Diff: 2

Topic:  Issues in operations strategy

Objective:  no LO

25) The ability of an organization to produce goods or services that have some uniqueness in their characteristics is

  1. A) mass production
  2. B) time-based competition
  3. C) competing on productivity
  4. D) competing on flexibility
  5. E) competing on differentiation

Answer:  E

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

26) Which of the international operations strategies involves a focus on low cost reductions and high local responsiveness?

  1. A) international strategy
  2. B) global strategy
  3. C) transnational strategy
  4. D) multidomestic strategy
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

27) A strategy is a(n)

  1. A) set of opportunities in the marketplace
  2. B) broad statement of purpose
  3. C) simulation used to test various product line options
  4. D) plan for cost reduction
  5. E) action plan to achieve the mission

Answer:  E

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

28) Which of the following statements best characterizes delivery reliability?

  1. A) a company that always delivers on the same day of the week
  2. B) a company that always delivers at the promised time
  3. C) a company that delivers more frequently than its competitors
  4. D) a company that delivers faster than its competitors
  5. E) a company that has a computerized delivery scheduling system

Answer:  B

Diff: 3

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

29) Which of the following is an example of competing on the basis of differentiation?

  1. A) A firm manufactures its product with less raw material waste than its competitors do.
  2. B) A firm’s products are introduced into the market faster than its competitors’ products are.
  3. C) A firm’s distribution network routinely delivers its product on time.
  4. D) A firm offers more reliable products than its competitors do.
  5. E) A firm advertises more than its competitors do.

Answer:  D

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

30) The ability of an organization to produce services that, by utilizing the consumer’s five senses, have some uniqueness in their characteristics is

  1. A) mass production
  2. B) time-based competition
  3. C) differentiation
  4. D) flexible response
  5. E) experience differentiation

Answer:  E

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

31) Which of the following best describes “experience differentiation”?

  1. A) immerses consumers in the delivery of a service
  2. B) uses people’s five senses to enhance the service
  3. C) complements physical elements with visual and sound elements
  4. D) consumers may become active participants in the product or service
  5. E) All of the above are elements of experience differentiation.

Answer:  E

Diff: 1

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

32) Experience Differentiation

  1. A) isolates the consumer from the delivery of a service
  2. B) is an extension of product differentiation in the service sector
  3. C) uses only the consumer’s senses of vision and sound
  4. D) keeps consumers from becoming active participants in the service
  5. E) is the same as product differentiation, but applied in the service sector

Answer:  B

Diff: 1

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

33) Which of the following is the best example of competing on low-cost leadership?

  1. A) A firm produces its product with less raw material waste than its competitors.
  2. B) A firm offers more reliable products than its competitors.
  3. C) A firm’s products are introduced into the market faster than its competitors’ products.
  4. D) A firm’s research and development department generates many ideas for new products.
  5. E) A firm advertises more than its competitors.

Answer:  A

Diff: 3

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

34) Franz Colruyt has achieved low-cost leadership through

  1. A) Spartan headquarters
  2. B) absence of voice mail
  3. C) low-cost facilities
  4. D) no background music
  5. E) all of the above

Answer:  E

Diff: 1

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

35) Franz Colruyt has achieved low-cost leadership through

  1. A) effective use of voice mail
  2. B) plastic, not paper, shopping bags
  3. C) background music that subtly encourages shoppers to buy more
  4. D) converting factories, garages, and theaters into retail outlets
  5. E) exclusive use of the Euro

Answer:  D

Diff: 1

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

36) Which of the following is an example of competing on quick response?

  1. A) A firm produces its product with less raw material waste than its competitors.
  2. B) A firm offers more reliable products than its competitors.
  3. C) A firm’s products are introduced into the market faster than its competitors’ products.
  4. D) A firm utilizes is capacity more effectively than its competitors.
  5. E) A firm advertises more than its competitors.

Answer:  C

Diff: 3

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

37) A firm producing a good is more likely to have which set of the following characteristics compared to a firm providing a service?

  1. A) many subjective quality standards, tangible product, and locate away from customers
  2. B) many subjective quality standards, intangible product, and locate away from customers
  3. C) many objective quality standards, tangible product, and locate near customers
  4. D) many objective quality standards, tangible product, and locate away from customers
  5. E) many objective quality standards, intangible product, and locate away from customers

Answer:  D

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

38) Which of the following influences layout design?

  1. A) inventory requirements
  2. B) capacity needs
  3. C) personnel levels
  4. D) technology decisions
  5. E) All of the above influence layout decisions.

Answer:  E

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

39) Response-based competitive advantage can be

  1. A) flexible response
  2. B) reliable response
  3. C) quick response
  4. D) all of the above
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

40) Which of the following is not an operations strategic decision?

  1. A) maintenance
  2. B) price
  3. C) layout design
  4. D) quality
  5. E) inventory

Answer:  B

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

41) Which of the following OM strategic decisions pertains to sensible location of processes and materials in relation to each other?

  1. A) layout design
  2. B) goods and service design
  3. C) supply-chain management
  4. D) inventory
  5. E) scheduling

Answer:  A

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

42) Which of these companies is most apt to have quality standards that are relatively subjective?

  1. A) Chrysler
  2. B) Dell Computer
  3. C) Sanyo Electronics
  4. D) Harvard University
  5. E) Whirlpool

Answer:  D

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

43) Which of the following will more likely locate near their customers?

  1. A) an automobile manufacturer
  2. B) an aluminum manufacturer
  3. C) an insurance company headquarters
  4. D) a medical clinic
  5. E) All of the above will tend to locate near their customers.

Answer:  D

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

44) Which of the following statements concerning the operations management decision is relevant to services?

  1. A) There are many objective quality standards.
  2. B) The customer is not involved in most of the process.
  3. C) The work force’s technical skills are very important.
  4. D) Labor standards vary depending on customer requirements.
  5. E) Ability to inventory may allow the leveling of the output rates.

Answer:  D

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

45) Which of these organizations is likely to have the most important inventory decisions?

  1. A) a marketing research firm
  2. B) a lobbying agency
  3. C) a management consulting firm
  4. D) an aluminum manufacturer
  5. E) a law firm

Answer:  D

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

46) Before establishing and implementing strategy, a resources view would ensure that which of the following resources are available:

  1. A) financial
  2. B) physical
  3. C) human
  4. D) technological
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

47) Porter’s Five Forces Model is used to evaluate competition based on which 5 aspects?

  1. A) research and development, cost, legal regulations, suppliers, customers
  2. B) immediate rivals, potential entrants, customers, suppliers, and substitute products
  3. C) potential entrants, customers, suppliers, legal regulations, and cost
  4. D) immediate rivals, potential entrants, cost, substitute products, and legal regulations
  5. E) none of the above

Answer:  B

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

48) Porter’s Five Forces Model contains which of the following?

  1. A) immediate rivals
  2. B) potential entrants
  3. C) customers
  4. D) suppliers
  5. E) all of the Above

Answer:  E

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

49) Value-chain analysis is used to identify activities that represent, or can develop into, the core competencies of a business.  Who introduced this concept?

  1. A) Ford
  2. B) Toyota
  3. C) Porter
  4. D) Smith
  5. E) None of the above

Answer:  C

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

50) Value-chain analysis can be used to determine if a business is adding unique value in which of the following areas?

  1. A) product research
  2. B) human resources
  3. C) process innovation
  4. D) quality management
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

51) Which of the following is not part of value-chain analysis?

  1. A) product research
  2. B) quality management
  3. C) supply-chain management
  4. D) marketing
  5. E) human resources

Answer:  D

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

52) Which of the following environmental factors has not been a factor in Microsoft’s changing strategy?

  1. A) Google
  2. B) security issues
  3. C) faster processors
  4. D) the Internet
  5. E) none of the above

Answer:  E

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

53) Standardization is an appropriate strategy in which stage of the product life cycle?

  1. A) introduction
  2. B) growth
  3. C) maturity
  4. D) decline
  5. E) retirement

Answer:  C

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

54) Cost minimization is an appropriate strategy in which stage of the product life cycle?

  1. A) introduction
  2. B) growth
  3. C) adolescence
  4. D) decline
  5. E) retirement

Answer:  D

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

55) Which of the following OM Strategy/Issues should a firm with a product in the maturity stage of its life cycle be least concerned with at the present time?

  1. A) increase capacity
  2. B) long production runs
  3. C) standardization
  4. D) cost cutting
  5. E) fewer rapid product changes

Answer:  A

Diff: 2

Topic:  Issues in operations strategy

Objective:  no LO

 

56) Which of the following is least likely to result in a strategy change?

  1. A) change in the company’s financial situation
  2. B) a company’s adoption of new technology
  3. C) change in the product life cycle
  4. D) change in the competitive environment
  5. E) change in job scheduling techniques

Answer:  E

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

57) Which of the following statements is most correct?

  1. A) KSFs are often necessary, but not sufficient for competitive advantage.
  2. B) KSFs are often sufficient, but not necessary for competitive advantage.
  3. C) KSFs are neither necessary nor sufficient for competitive advantage.
  4. D) KSFs are both necessary and sufficient for competitive advantage.
  5. E) None of the above statements is correct.

Answer:  A

Diff: 3

Topic:  Strategy development and implementation

Objective:  LO2-4

 

58) Given the position of the iPod in the growth stage of its life cycle, which of the following OM Strategy/Issues should the makers of iPods be least concerned with at the current time?

  1. A) forecasting
  2. B) cost cutting
  3. C) increasing capacity
  4. D) product and process reliability
  5. E) enhancing distribution

Answer:  B

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

59) Which of these organizations is likely to have the most complex inventory decisions?

  1. A) a marketing research firm
  2. B) a stock brokerage firm
  3. C) a management consulting firm
  4. D) a computer manufacturing company
  5. E) a high school

Answer:  D

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

60) The three steps of the operations manager’s job, in order, are:

  1. A) develop the strategy, establish the organizational structure, find the right staff
  2. B) develop the strategy, find the right staff, establish the organizational structure
  3. C) find the right staff, establish the organizational structure, develop the strategy
  4. D) find the right staff, develop the strategy, establish the organizational structure
  5. E) establish the organizational structure, find the right staff, develop the strategy

Answer:  A

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

61) When developing the operations strategy for a new manufacturing organization, one of the most important considerations is that it

  1. A) requires minimal capital investment
  2. B) utilizes as much automation as possible
  3. C) utilizes an equal balance of labor and automation
  4. D) supports the overall competitive strategy of the company
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

62) Which of the international operations strategies involves high cost reductions and high local responsiveness?

  1. A) international strategy
  2. B) global strategy
  3. C) transnational strategy
  4. D) multidomestic strategy
  5. E) none of the above

Answer:  C

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

63) Which of the international operations strategies involves low cost reductions and low local responsiveness?

  1. A) international strategy
  2. B) global strategy
  3. C) transnational strategy
  4. D) multidomestic strategy
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

64) Which of the international operations strategies uses import/export or licensing of existing products?

  1. A) international strategy
  2. B) global strategy
  3. C) transnational strategy
  4. D) multidomestic strategy
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

65) Which of the international operations strategies uses the existing domestic model globally?

  1. A) international strategy
  2. B) global strategy
  3. C) transnational strategy
  4. D) multidomestic strategy
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

66) The acronym MNC stands for

  1. A) Mexican National Committee (for international trade)
  2. B) Maquiladora Negates Competition
  3. C) Maytag-Nestlé Corporation
  4. D) Multinational Corporation
  5. E) none of the above

Answer:  D

Diff: 1

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

67) Caterpillar and Texas Instruments are two firms that have benefited from the use of

  1. A) the multidomestic strategy option.
  2. B) the multinational corporation strategy.
  3. C) the transnational strategy option.
  4. D) the maquiladora system in Europe.
  5. E) the global strategy option.

Answer:  E

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

68) Which of the following are examples of transnational firms?

  1. A) Nestlé
  2. B) Asea Brown Boveri
  3. C) Reuters
  4. D) Citicorp
  5. E) All of the above are transnationals.

Answer:  E

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

Short Answer

 

1) Boeing found its Dreamliner 787 partners in __________ countries.

Answer:  over a dozen

Diff: 1

Topic:  Global company profile

AACSB:  Multicultural and Diversity

Objective:  no LO

 

2) __________ are areas located along the U.S.-Mexico border in which factories receive preferential

tariff treatment.

Answer:  Maquiladoras

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

3) __________ is a free trade agreement among Canada, Mexico, and the United States.

Answer:  NAFTA–North American Free Trade Agreement

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

4) __________ and __________ are two issues where significant cultural differences are large and progress toward global uniformity has been slow.

Answer:  Bribery, protection of intellectual property

Diff: 1

Topic:  Global company profile

AACSB:  Ethical Reasoning

Objective:  no LO

 

5) An organization that has worked to achieve global uniformity in cultural and ethical issues such as bribery, child labor, and environmental regulations is __________.

Answer:  the World Trade Organization

Diff: 1

Topic:  Global company profile

AACSB:  Ethical Reasoning

Objective:  no LO

 

6) In goods-producing organizations, __________,__________, and __________ may be inventoried.

Answer:  raw materials, work-in-process, finished goods

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

7) Strategy is not static, but dynamic because of changes in the __________ and __________.

Answer:  organization, environment

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-1

8) __________ is the stage in product life cycle at which it is a poor time to change quality.

Answer:  Maturity

Diff: 2

Topic:  Issues in operations strategy

Objective:  LO2-4

 

9) The __________ is how an organization expects to achieve its missions and goals.

Answer:  strategy

Diff: 2

Topic:  Developing missions and strategies

Objective:  LO2-1

 

10) The creation of a unique advantage over competitors is called a __________.

Answer:  competitive advantage

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

11) Service organizations can immerse the consumer in the service, or have the consumer become a participant in the service, as they practice __________.

Answer:  experience differentiation

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

12) Competitive advantage in operations can be achieved by __________, __________, and/or __________.

Answer:  differentiation, low cost, response

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

13) A(n) __________ is a firm that has extensive involvement in international business, owning or controlling facilities in more than one country.

Answer:  MNC–multinational corporation

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

14) The __________ strategy utilizes a standardized product across countries.

Answer:  global

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

15) The __________ strategy uses exports and licenses to penetrate globally.

Answer:  international

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

16) The __________ strategy uses subsidiaries, franchises, or joint ventures with substantial independence.

Answer:  multidomestic

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

17) The __________ strategy describes a condition in which material, people, and ideas cross or transgress national boundaries.

Answer:  transnational

Diff: 2

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

18) Identify five countries from which Boeing’s 787 Dreamliner has suppliers.

Answer:  France, Germany, UK, Italy, Japan, China, South Korea, Sweden, U.S.

Diff: 1

Topic:  Global company profile

AACSB:  Multicultural and Diversity

Objective:  no LO

 

19) Identify five parts which Boeing’s 787 Dreamliner gets from global suppliers; match each part with the country that supplies it.

Answer:  France–landing gear, Germany–interior lighting, UK–fuel pumps or electronics, Italy–part of fuselage or horizontal stabilizer, Japan–wing box or hydraulic actuators, China–rudder or general parts, South Korea–wingtips, Sweden–cargo and access doors, U.S.–GE engines

Diff: 2

Topic:  Global company profile

AACSB:  Multicultural and Diversity

Objective:  no LO

 

20) How can global operations improve the supply chain?

Answer:  The supply chain can often be improved by locating facilities in countries where unique resources exist.

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

21) How do global operations attract new markets?

Answer:  Since international operations require local interaction with customers, suppliers, and other competitive businesses, international firms inevitably learn about unique opportunities for new products and services.

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

22) State two examples of cultural and ethical issues that face operations managers in a global environment.

Answer:  Student responses will vary, but there are several issues on which there are wide differences from country to country, culture to culture. Among those listed in the text are bribery, child labor, slave labor, and intellectual property rights. Students may bring forward from an earlier chapter issues such as environmental regulation or safe work environment, and may raise issues such as product safety.

Diff: 2

Topic:  A global view of operations

AACSB:  Ethical Reasoning

Objective:  no LO

 

23) What is the difference between a firm’s mission and its strategy?

Answer:  A firm’s mission is its purpose or rationale for an organization’s existence, whereas a firm’s strategy is how it expects to achieve its mission and goals.

Diff: 2

Topic:  Developing missions and strategies

Objective:  LO2-1

 

24) Since the early 1990s, residents in a number of developing countries have overcome culture, religious, ethnic, and political productivity barriers.  These disappearing barriers coupled with simultaneous advances in technology, reliable shipping, and cheap communication have all led to the growth of what three things?

Answer:

  1. World trade.
  2. Global capital markets.
  3. International movement of people.

Diff: 2

Topic:  A global view of operations

AACSB:  Multicultural and Diversity

Objective:  no LO

 

25) Provide an example of an organization that achieves competitive advantage through experience differentiation.  Explain.

Answer:  Answers will vary, but Disney and Hard Rock Café are illustrated in the text. Competing on experience differentiation implies providing uniqueness to your service offering through immersion of the consumer into the service, with visual or sound elements to turn the service into an experience.

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

26) With regard to the scheduling decision, how are goods-producing organizations different from service companies? Discuss.

Answer:  Goods-producing companies: the ability to inventory may allow leveling the output rates; service companies: primarily concerned with meeting the customer’s immediate schedule.

Diff: 3

Topic:  Ten strategic OM decisions

Objective:  LO2-3

27) How do goods and services differ with regard to handling the quality decision?

Answer:  There are many objective quality standards for goods, whereas there are many subjective quality standards for services.

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

28) What is the difference between goods and services in terms of their location selection?

Answer:  Manufacturers of goods may need to be located close to raw materials, or labor force.  Services, on the other hand, typically are located close to the customer.

Diff: 2

Topic:  Ten strategic OM decisions

Objective:  LO2-3

 

29) How has Franz Colruyt achieved low-cost leadership? List three specific examples and describe each briefly.

Answer:  Several methods are listed in the text. Among these are no shopping bags, dim lighting, no voice mail, conversion of older buildings, Spartan offices.

Diff: 2

Topic:  Achieving competitive advantage through operations

Objective:  LO2-2

 

30) Define core competencies.

Answer:  A set of skills, talents, and activities that a firm does particularly well.

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

31) For what type of organization might the location decision area be the least important of its ten decision areas?  For what type of organization might the location decision be the most important of the ten decision areas?  Discuss; augment your response with examples.

Answer:  The relationship between the organization and its suppliers or its customers is key.  If that relationship is very weak (as in no transportation costs, or customers can reach the firm from any location), location diminishes in importance.  If that relationship is strong (uniqueness of site, high transportation costs, customers will not travel far) location increases in importance.  “Least” examples: Telemarketing firm, tax help-line, Internet sales.  “Most” examples: gold mine, oil well, ski resort.

Diff: 3

Topic:  Ten strategic OM decisions

AACSB:  Reflective Thinking

Objective:  LO2-3

 

32) What is SWOT analysis? List its four elements and describe its purpose.

Answer:  The four elements of SWOT are strengths, weaknesses, opportunities, and threats. Its purpose is to maximize opportunities and minimize threats in the environment, while maximizing the advantages of the organization’s strengths and minimizing the weaknesses.

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-1

33) Are strategies static or dynamic? What are the forces that lead to this result?

Answer:  Strategies should be dynamic because of changes within the organization and changes in the environment.

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-1

 

34) Identify and explain the four basic global operations strategies.  Give an example of each strategy.

Answer:  The multidomestic strategy decentralizes operating decisions to each country to enhance local responsiveness. The primary example from the textbook is McDonald’s.  The global strategy centralizes operating decisions, with headquarters coordinating the standardization and learning between facilities.  The textbook names Texas Instruments and Caterpillar.  The international strategy uses exports and licenses to penetrate the global markets.  Students may cite Pier One, World Market, or any wine store. The transnational strategy exploits the economies of scale and learning, as well as pressure for responsiveness, by recognizing that core competence does not reside in just the “home” country, but can exist anywhere in the organization.  Examples from the textbook include Bertelsmann, Reuters and Nestlé.

Diff: 3

Topic:  Global operations strategy options

AACSB:  Multicultural and Diversity

Objective:  LO2-5

 

Essay

 

1) Nike is the world’s largest athletic brand.  Its innovative and broad product line helps drive sales, however a large majority of those sales are in the footwear business.  Most of Nike’s goods are produced overseas in low-cost factories and then imported to the final market.  Nike currently has many of the top U.S. athletes under contract (Michael Jordon, Tiger Woods, Dwayne Wade) but international sales are still small in emerging markets.  However, many competitors have attempted to copy Nike’s business model (high-value branded products manufactured at low-cost), including Adidas and Reebok, while many retailers have attempted to pass on the low-cost pressure of retail consumers.  Perform a SWOT analysis for Nike.

Answer:

Strengths- Innovative products, athletes under contract

Weakness- Much of revenue is from footwear, eroding market share could cost Nike its profitability

Opportunities- Sales can be increased in emerging markets using well-known athletes, broad product line can be expanded into high profit sectors (jewelry, sunglasses, golf, etc)

Threats- International business makes Nike vulnerable to currency changes, low-cost pressure from retailers can decrease profit per item, competition could erode existing market share. Athletes’ personal lives could weaken Nike’s reputation.

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

2) Starbucks is one of the best known coffeehouse chains in the world.  Each store sells a variety of innovative products to complement the array of coffee choices available.  However, 75% of current stores are located in the United States and the expensive nature of the coffee leaves Starbucks vulnerable to changes in consumer spending behavior (such as recessions).  Recently Starbucks has begun initiatives to sell its specialty coffee beans for home use, presenting a chance for a large increase in revenue and diversification.  However, Starbucks faces fierce competition seeking a piece of its lucrative market share and the threat of consumer behavior changes, given its reputation rides on a singular product.  Perform a SWOT analysis for Starbucks.

Answer:

Strengths- High profit specialty coffee, well known brand image

Weakness- Most stores located in U.S., most profits come from coffee (both are lack of

diversification)

Opportunities- Emerging market in coffee beans for home use, chance for global expansion

Threats- Intense competition, consumer behavior changes (less spending during a recession on its luxury coffee, change in beverage preferences)

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

3) Perform a SWOT analysis of Boeing’s 787 Dreamliner using the information presented within the text.

Answer:

Strengths- Technological advances (8% increase in fuel efficiency, electronic maintenance monitoring)

Weaknesses- Diverse suppliers and assembly locations leave Boeing vulnerable to currency exchange rates and make quality control difficult

Opportunities- one of fastest-selling commercial jets ever gives Boeing a chance to increase market share, Boeing can parlay its use of diverse supplier locations into diversifying customer base

Threats- competition from Airbus, divestment of the manufacture process risks losing company trade secrets (competitive advantage)

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

4) Perform a SWOT analysis of Hard Rock Café, using the information presented within Chapters 1 and 2 of the text.

Answer:

Strengths- Hard Rock’s unique coupling of an experience with its menu gives it a competitive advantage, diverse portfolio of stores in 40 countries lowers risk

Weaknesses-Hard Rock is known exclusively for its “experience”, this one-dimensional competitive advantage presents high risk

Opportunities- New “experience” types at restaurants (Blues, Hip-Hop, etc themes), addition of new stores to the existing 120+ stores

Threats- Hard Rock’s exclusive Rock ‘n’ Roll theme leaves it vulnerable to changes in consumer music preferences, competition in the restaurant business is very tough

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

5) Perform a SWOT analysis for Franz Colruyt, using the information presented within the text.

Answer:

Strengths- High profit margin of 6.5% from its extreme low-cost competitive advantage

Weaknesses- Lack of bagging, in-store music, dim lighting, and lack of aesthetic in-store appeal all limit potential customer base.

Opportunities- Franz Colruyt only operates 160 stores so there is opportunity for global expansion

Threats- High profit margin might encourage competition to copy Franz Colruyt’s low-cost competitive advantage, eroding it.  Changes in consumer behavior (increased prosperity) might decrease customers interested in only a low-cost alternative.

Diff: 2

Topic:  Strategy development and implementation

Objective:  LO2-4

 

Operations Management, 11e (Heizer/Render)

Chapter 8  Location Strategies

 

True/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.

Answer:  FALSE

Diff: 1

Topic:  Global company profile

Objective:  no LO

 

2) Generally, the objective of the location decision is to maximize the firm’s profit.

Answer:  FALSE

Diff: 1

Topic:  The strategic importance of location

Objective:  LO8-1

 

3) Lists have been developed that rank countries on issues such as “competitiveness” and “corruption.”

Answer:  TRUE

Diff: 1

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

4) When innovation replaces cost as a firm’s focus for location decisions, the presence of other state-of-the-art firms is a plus, not a negative, for the firm’s competitiveness.

Answer:  TRUE

Diff: 2

Topic:  The strategic importance of location

Objective:  LO8-1

 

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

Answer:  TRUE

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

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

Answer:  FALSE

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

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

Answer:  TRUE

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

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

Answer:  TRUE

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

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

Answer:  FALSE

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

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

Answer:  FALSE

Diff: 1

Topic:  Factors that affect location decisions

AACSB:  Ethical Reasoning

Objective:  LO8-1

 

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

Answer:  TRUE

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

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

Answer:  TRUE

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

13) The graphic approach to location break-even analysis displays the range of volume over which each location is preferable.

Answer:  TRUE

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-4

 

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

Answer:  TRUE

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

 

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

Answer:  FALSE

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

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

Answer:  FALSE

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

 

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

Answer:  TRUE

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

 

18) Starbucks Coffee’s approach to choosing new café locations is largely based on executive intuition, not sophisticated models and site selection technology.

Answer:  FALSE

Diff: 1

Topic:  Service location strategy

Objective:  LO8-6

 

19) Labor cost and labor availability often drive the location decision in the call center industry.

Answer:  TRUE

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

 

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

Answer:  FALSE

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

 

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

Answer:  FALSE

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

 

22) Starbucks Coffee’s use of geocoded demographic and consumer data in site selection decisions is an example of the use of a Geographic Information System, or GIS.

Answer:  TRUE

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

Multiple Choice

 

1) FedEx chose Memphis, Tennessee, as its U.S. hub because

  1. A) the city is in the center of the U.S., geographically
  2. B) the airport has relatively few hours of bad weather closures
  3. C) it needed a means to reach cities to which it did not have direct flights
  4. D) the firm believed that a hub system was superior to traditional city-to-city flight scheduling
  5. E) All of the above are true.

Answer:  E

Diff: 1

Topic:  Global company profile

Objective:  no LO

 

2) Which of the following statements regarding FedEx is true?

  1. A) Its hub in Memphis, Tennessee, was selected because of its low cost.
  2. B) Memphis, Tennessee, is the only hub in the company’s global flight network.
  3. C) FedEx believes the hub system helps reduce mishandling and delays due to better controls.
  4. D) FedEx uses a hub system in the U.S., but a city-to-city network in other countries.
  5. E) Memphis is FedEx’s only hub airport in the United States.

Answer:  C

Diff: 1

Topic:  Global company profile

Objective:  no LO

 

3) Industrial location analysis typically attempts to

  1. A) minimize costs
  2. B) maximize sales
  3. C) focus more on human resources
  4. D) avoid countries with strict environmental regulations
  5. E) ignore exchange rates and currency risks

Answer:  A

Diff: 1

Topic:  Strategic importance of location

Objective:  LO8-1

4) Which of the following statements regarding the center-of-gravity method is false?

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

Answer:  A

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

5) Why is Northern Mexico used as a cluster for electronics firms?

  1. A) high traffic flows
  2. B) venture capitalists located nearby
  3. C) natural resources of land and climate
  4. D) NAFTA
  5. E) high per capita GDP

Answer:  D

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

6) Which of the following was not a factor in determining the location of Intel’s Arizona plant?

  1. A) skilled labor availability
  2. B) U.S. laws to protect intellectual property
  3. C) tax breaks from local and regional government
  4. D) proximity to Intel’s California headquarters
  5. E) All of the above were key factors.

Answer:  E

Diff: 2

Topic:  Strategic importance of location

Objective:  LO8-1

 

7) Among the following choices, an operations manager might best evaluate political risk of a country by looking at which type of country ranking?

  1. A) based on competitiveness
  2. B) based on cost of doing business
  3. C) based on corruption
  4. D) based on magnitude of government social programs
  5. E) based on average duration between presidential/prime minister elections

Answer:  C

Diff: 1

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

8) __________ and  __________ are to key country success factors as __________ and __________ are to key region success factors.

  1. A) Cultural issues, location of markets; site size and cost, zoning restrictions
  2. B) Exchange rates, labor availability; site size and cost, environmental impact
  3. C) Labor cost, currency risk; land costs, proximity to customers
  4. D) Land costs, proximity to customers; labor cost, air and rail systems
  5. E) All of the above are accurate relationships.

Answer:  C

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

9) Which of the following workers is the most productive?

  1. A) $50 wages, 10 parts produced
  2. B) $10 wages, 1 part produced
  3. C) $30 wages, 5 parts produced
  4. D) $100 wages, 21 parts produced
  5. E) $500 wages, 100 parts produced

Answer:  D

Diff: 2

Topic:  Factors that affect location decisions- labor productivity

AACSB:  Analytic Skills

Objective:  LO8-2

 

10) A employee produces 15 parts during a shift in which he made $90.  The labor content of the product is

  1. A) $90
  2. B) $5
  3. C) $6
  4. D) $.167
  5. E) none of the above

Answer:  C

Diff: 2

Topic:  Factors that affect location decisions- labor productivity

AACSB:  Analytic Skills

Objective:  LO8-2

 

11) Instead of comparing the salaries of Detroit autoworkers to foreign autoworkers to determine if Union labor prices are the cause of Detroit’s financial woes, which of the following should be used?

  1. A) labor content per vehicle
  2. B) labor productivity
  3. C) total production
  4. D) A or B
  5. E) None of the above, salary is the best comparison.

Answer:  D

Diff: 2

Topic:  Factors that affect location decisions- labor productivity

Objective:  LO8-2

 

12) The reason  fast food restaurants often are found in close proximity to each other is

  1. A) they enjoy competition
  2. B) location clustering near high traffic flows
  3. C) low cost
  4. D) availability of skilled labor
  5. E) all of the above

Answer:  B

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

13) Currency risk is based on what assumption?

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

Answer:  B

Diff: 1

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

14) Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution, and employment stability may change over time.  The term associated with this phenomenon is

  1. A) bureaucratic risk
  2. B) political risk
  3. C) legislative risk
  4. D) judicial risk
  5. E) democratic risk

Answer:  B

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

15) A location decision for an appliance manufacturer would tend to have a(n)

  1. A) cost focus
  2. B) focus on finding very highly skilled technicians
  3. C) revenue focus
  4. D) environmental focus
  5. E) education focus

Answer:  A

Diff: 2

Topic:  Strategic importance of location

Objective:  LO8-1

 

16) A location decision for a traditional department store (Macy’s) would tend to have a(n)

  1. A) cost focus
  2. B) labor focus
  3. C) revenue focus
  4. D) environmental focus
  5. E) education focus

Answer:  C

Diff: 2

Topic:  Strategic importance of location

Objective:  LO8-1

17) Globalization of the location decision is the result of all of the following except

  1. A) market economics
  2. B) higher quality of labor overseas
  3. C) ease of capital flow between countries
  4. D) high differences in labor costs
  5. E) more rapid, reliable travel and shipping

Answer:  B

Diff: 2

Topic:  Factors that affect location decisions

AACSB:  Multicultural and Diversity

Objective:  LO8-1

 

18) In location planning, environmental regulations, cost and availability of utilities, and taxes are

  1. A) global factors
  2. B) country factors
  3. C) regional/community factors
  4. D) site-related factors
  5. E) none of the above

Answer:  C

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

19) A manufacturing firm finds a location that has a significant cost advantage over alternatives, but rejects that location because the educational infrastructure was insufficient to train the firm’s workers in its special production technologies. The firm’s action illustrates the link between __________ and location.

  1. A) innovation
  2. B) clustering
  3. C) tax incentives
  4. D) globalization
  5. E) proximity

Answer:  A

Diff: 1

Topic:  The strategic importance of location

Objective:  LO8-1

 

20) Which of the following is usually not one of the top considerations in choosing a country for a facility location?

  1. A) availability of labor and labor productivity
  2. B) exchange rates
  3. C) attitude of governmental units
  4. D) zoning regulations
  5. E) location of markets

Answer:  D

Diff: 2

Topic:  Factors that affect location decisions

AACSB:  Multicultural and Diversity

Objective:  LO8-1

21) When making a location decision at the country level, which of these would be considered?

  1. A) corporate desires
  2. B) land/construction costs
  3. C) air, rail, highway, waterway systems
  4. D) zoning restrictions
  5. E) location of markets

Answer:  E

Diff: 2

Topic:  Factors that affect location decisions

AACSB:  Multicultural and Diversity

Objective:  LO8-1

 

22) Which of these factors would be considered when making a location decision at the region/community level?

  1. A) government rules, attitudes, stability, incentives
  2. B) cultural and economic issues
  3. C) zoning restrictions
  4. D) environmental impact issues
  5. E) proximity to raw materials and customers

Answer:  E

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

23) When making a location decision at the region/community level, which of these would be considered?

  1. A) government rules, attitudes, stability, incentives
  2. B) cultural and economic issues
  3. C) cost and availability of utilities
  4. D) zoning restrictions
  5. E) air, rail, highway, waterway systems

Answer:  C

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

24) Which of these factors would be considered when making a location decision at the site level?

  1. A) government rules, attitudes, stability, incentives
  2. B) cultural and economic issues
  3. C) zoning regulations
  4. D) cost and availability of utilities
  5. E) proximity to raw materials and customers

Answer:  C

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

25) Tangible costs include which of the following?

  1. A) climatic conditions
  2. B) availability of public transportation
  3. C) taxes
  4. D) quality and attitude of prospective employees
  5. E) zoning regulations

Answer:  C

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

26) Intangible costs include which of the following?

  1. A) quality of prospective employees
  2. B) quality of education
  3. C) availability of public transportation
  4. D) all of the above
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

27) Operations managers will need to consider ethical and social responsibility issues when location decisions involve

  1. A) child labor issues
  2. B) sweatshop conditions
  3. C) allegiance to the firm’s current location
  4. D) corruption
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Factors that affect location decisions

AACSB:  Ethical Reasoning

Objective:  LO8-1

 

28) A firm is seeking a new factory location, and is considering several countries worldwide. In some of these countries, child labor is prevalent; in others, working conditions and worker safety are inferior to conditions in the U.S. An operations manager paying attention to __________ will factor these issues into the location decision.

  1. A) ethical and social responsibility issues
  2. B) key success factors
  3. C) factor-rating systems
  4. D) geographic information systems
  5. E) regression models

Answer:  A

Diff: 1

Topic:  Factors that affect location decisions

AACSB:  Ethical Reasoning

Objective:  LO8-1

29) Which of the following statements regarding “proximity” in the location decision is false?

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

Answer:  E

Diff: 1

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

30) 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?

  1. A) Soft drinks are bottled in many local plants, where carbonated water is added to proprietary syrups that may have been shipped long distances.
  2. B) Few people will travel out-of state for a haircut.
  3. C) Patients will travel very long distances to have their hernia surgeries performed at Shouldice

Hospital.

  1. D) Furniture makers choose to locate near the source of good hardwoods, even though it means locating near other furniture manufacturers.
  2. E) Metal refiners (smelters) locate near mines to accomplish significant weight reduction near the metal’s source.

Answer:  B

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

31) Which of the following worker characteristics would likely be least important for U.S. firms looking to open up call centers in different countries?

  1. A) willing to accept low wages
  2. B) have a high level of education
  3. C) speak English
  4. D) possess an in-depth knowledge of American popular culture
  5. E) are young

Answer:  E

Diff: 2

Topic:  Service location strategy

AACSB:  Multicultural and Diversity

Objective:  LO8-6

32) Community attitudes, zoning restrictions, and quality of labor force are likely to be considered in which of the following location decision methods?

  1. A) transportation method
  2. B) locational break-even analysis
  3. C) center-of-gravity method
  4. D) simulation
  5. E) factor-rating method

Answer:  E

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

 

33) Which of the following methods best considers intangible costs related to a location decision?

  1. A) crossover methods
  2. B) locational break-even analysis
  3. C) factor-rating analysis
  4. D) the transportation method
  5. E) the assignment method

Answer:  C

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

 

34) Evaluating location alternatives by comparing their composite (weighted-average) scores involves

  1. A) factor-rating analysis
  2. B) cost-volume analysis
  3. C) transportation model analysis
  4. D) linear regression analysis
  5. E) crossover analysis

Answer:  A

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

35) 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 on the left. The manager has rated each location on each factor, on a 100-point basis, as shown on the right.

 

Factor Factor Description Weight
1 Average community income .40
2 Community growth potential .25
3 Availability of public  transportation .15
4 Labor cost .20

 

Barclay Chester
30 20
40 30
20 20
10 30

 

What is the score for Chester?

  1. A) 10.00
  2. B) 24.50
  3. C) 25.75
  4. D) 27.00
  5. E) 100.00

Answer:  B

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

 

36) An approach to location analysis that includes both qualitative and quantitative considerations is

  1. A) locational cost-volume
  2. B) factor-rating
  3. C) transportation model
  4. D) assignment method
  5. E) make or buy analysis

Answer:  B

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

37) 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

  1. A) fixed costs are equal for two alternative locations
  2. B) variable costs are equal for two alternative locations
  3. C) total costs are equal for all alternative locations
  4. D) fixed costs equal variable costs for one location
  5. E) total costs are equal for two alternative locations

Answer:  E

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-4

 

38) 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 __________.

  1. A) 120; 120
  2. B) 22; 24
  3. C) 18; 120
  4. D) 34; 28
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

 

39) 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?

  1. A) Plant A, because it is cheaper than Plant B for all volumes over 8,000,000 units.
  2. B) Plant B, because it is cheaper than Plant A for all volumes over 8,000,000 units.
  3. C) Plant A, because it is cheaper than Plant B for all volumes.
  4. D) Plant B, because it has the lower variable cost per unit.
  5. E) Neither Plant A nor Plant B, because the crossover point is at 10 million units.

Answer:  A

Diff: 1

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-4

40) The center-of-gravity method does not take into consideration the

  1. A) location of markets
  2. B) volume of goods shipped to the markets
  3. C) value of the goods shipped
  4. D) combination of volume and distance
  5. E) center-of-gravity method considers none of the above

Answer:  C

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

 

41) The center-of-gravity method is used primarily to determine what type of locations?

  1. A) service locations
  2. B) manufacturing locations
  3. C) distribution center locations
  4. D) supplier locations
  5. E) call center locations

Answer:  C

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

 

42) A regional bookstore chain is about 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?

  1. A) assembly line balancing
  2. B) load-distance analysis
  3. C) center-of-gravity model
  4. D) linear programming
  5. E) all of the above

Answer:  C

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

43) 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

 

  1. A) X = 28.125; Y = 31.25
  2. B) X = 22000; Y = 24000
  3. C) X = 27.5; Y = 40
  4. D) center of gravity = 28
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

44) 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

 

  1. A) 4.75, 6.04
  2. B) 17, 24
  3. C) 33.5, 135.4
  4. D) 6, 4.25
  5. E) 570, 725

Answer:  A

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

45) Production and transportation costs are always considered in which of the following location decision methods?

  1. A) traffic counts
  2. B) transportation method
  3. C) purchasing power
  4. D) proximity of markets
  5. E) clustering

Answer:  B

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

 

46) The transportation method, when applied to location analysis

  1. A) minimizes total fixed costs
  2. B) minimizes total production and transportation costs
  3. C) minimizes total transportation costs
  4. D) maximizes revenues
  5. E) minimizes the movement of goods

Answer:  B

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

 

47) Which of the following is not among the eight determinants of revenue and volume for a service firm?

  1. A) quality of the management
  2. B) shipment cost of finished goods
  3. C) purchasing power of the customer-drawing area
  4. D) uniqueness of the firm’s and the competitor’s locations
  5. E) competition in the area

Answer:  B

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

 

48) Which of the following is among the eight determinants of revenue and volume for a service firm?

  1. A) uniqueness of the firm’s and the competitor’s locations
  2. B) quality of the competition
  3. C) quality of management
  4. D) purchasing power of the customer-drawing area
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

49) Traffic counts and purchasing power analysis of drawing area are techniques associated with

  1. A) locational break-even analysis
  2. B) a manufacturing location decision
  3. C) a retail or professional service location decision
  4. D) the factor rating method
  5. E) the transportation method

Answer:  C

Diff: 2

Topic:  Service location strategy

Objective:  LO8-6

 

50) Which of the following statements regarding Starbucks Coffee is false?

  1. A) The firm plans to open three new cafes per day around the world.
  2. B) The firm uses GIS to evaluate every site decision.
  3. C) The firm’s cafes are exclusively in traditional settings: malls, tourist areas, and airports.
  4. D) The firm places cafes into ever more innovative locations.
  5. E) The firm put cafes in Japan, even though that country had no GIS data available.

Answer:  C

Diff: 1

Topic:  Service location strategy

Objective:  LO8-1

 

51) LaQuinta Motor Inns has a competitive edge over its rivals because it

  1. A) uses regression analysis to determine which variables most influence profitability
  2. B) picks better locations than its rivals
  3. C) picks larger locations than its rivals
  4. D) builds only along interstate highways
  5. E) all of the above

Answer:  A

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

 

52) Traffic counts and demographic analysis of drawing areas are associated with

  1. A) the center-of-gravity method
  2. B) manufacturing location decisions
  3. C) service location decisions
  4. D) the transportation method
  5. E) none of the above

Answer:  C

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

53) What describes a system that stores and displays information that can be linked to a geographic location?

  1. A) AIS
  2. B) LOC
  3. C) GLOC
  4. D) LIS
  5. E) GIS

Answer:  E

Diff: 2

Topic:  Service location strategy

AACSB:  Use of IT

Objective:  LO8-1

 

54) Location analysis techniques typically employed by service organizations include

  1. A) factor rating method
  2. B) center-of-gravity method
  3. C) purchasing power analysis of area
  4. D) traffic counts
  5. E) all of the above

Answer:  E

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

 

55) Which of the following is most likely to affect the location decision of a service firm rather than a manufacturing firm?

  1. A) energy and utility costs
  2. B) attitude toward unions
  3. C) parking and access
  4. D) cost of shipping finished goods
  5. E) labor costs

Answer:  C

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

 

56) Which of the following is a location analysis technique typically employed by a service organization?

  1. A) purchasing power analysis
  2. B) linear programming
  3. C) queuing theory
  4. D) crossover charts
  5. E) cost-volume analysis

Answer:  A

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

57) A jewelry store is more likely than a jewelry manufacturer to consider __________ in making a location decision.

  1. A) transportation costs
  2. B) cost of raw materials
  3. C) parking and access
  4. D) climate
  5. E) taxes

Answer:  C

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

 

58) Which of the following is a location analysis technique typically employed by a manufacturing organization?

  1. A) transportation method
  2. B) queuing theory
  3. C) correlation analysis and traffic counts
  4. D) simulation
  5. E) demographic analysis

Answer:  A

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

 

59) Which of these assumptions is not associated with strategies for goods-producing location decisions?

  1. A) Most major costs can be identified explicitly for each site.
  2. B) Focus on identifiable cost.
  3. C) High customer contact issues are critical.
  4. D) Intangible costs can be evaluated.
  5. E) Location is a major determinant of cost.

Answer:  C

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

 

60) Which of the following is most likely to affect the location strategy of a manufacturing firm?

  1. A) appearance/image of the area
  2. B) utility costs
  3. C) purchasing power of drawing area
  4. D) competition in the area
  5. E) parking availability

Answer:  B

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

61) Geographic Information Systems can assist the location decision by

  1. A) automating center-of-gravity problems
  2. B) computerizing factor rating analysis
  3. C) combining geography with demographic analysis
  4. D) updating transportation method solutions
  5. E) giving good Internet placement for virtual storefronts

Answer:  C

Diff: 2

Topic:  Service location strategy

AACSB:  Use of IT

Objective:  LO8-1

 

Short Answer

 

1) FedEx schedules its aircraft using a __________ system, which it credits with reducing package mishandling and delay in transit.

Answer:  central hub

Diff: 1

Topic:  Global company profile

Objective:  no LO

 

2) __________ costs are readily identifiable and can be measured with precision.

Answer:  Tangible

Diff: 1

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

3) When __________, in addition to creativity and R&D investments, is critical to operations strategy, cost may cease to be the primary focus of location criteria.

Answer:  innovation

Diff: 1

Topic:  The strategic importance of location

Objective:  LO8-1

 

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

Answer:  Key  Success Factors

Diff: 1

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

5) Labor cost per unit is also referred to as __________.

Answer:  labor content

Diff: 1

Topic:  Factors that affect location decisions

Objective:  LO8-1

6) When firms build supply chains that include foreign firms, __________ and __________ are issues that raise ethical and legal concerns with operations managers.

Answer:  bribery, corruption

Diff: 1

Topic:  Factors that affect location decisions

AACSB:  Ethical Reasoning

Objective:  LO8-1

 

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

Answer:  Clustering

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

 

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

Answer:  factor-rating

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

 

9) __________ is a cost-volume analysis to make an economic comparison of location alternatives.

Answer:  Locational break-even analysis

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-4

 

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

Answer:  center-of-gravity method

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

 

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

Answer:  transportation method

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-5

 

12) 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 __________.

Answer:  revenue or volume of business

Diff: 1

Topic:  Service location strategy

Objective:  LO8-1

13) 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 __________.

Answer:  Geographic Information Systems or GIS

Diff: 1

Topic:  Service location strategy

AACSB:  Use of IT

Objective:  LO8-1

 

14) Why does FedEx use a “hub-and-spoke” airline network, rather than a “point-to-point” network? Describe FedEx’s approach to choosing the airports that serve as its hubs.

Answer:  The hub system is more centralized, and allows for greater control; greater control reduces package mishandling and transit delays. Their U.S. hub in Memphis reflects a need to be geographically centralized, and in a location where schedules can more reliably be kept.

Diff: 2

Topic:  Global company profile

Objective:  no LO

 

15) 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? Answer in a clear, convincing paragraph.

Answer:  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 focus on maximizing revenues. Service location alternatives may vary little in cost, but have dramatic differences in revenue or volume, because of differences in population, income, traffic count, or other variables.

Diff: 2

Topic:  The strategic importance of location

Objective:  LO8-1

 

16) Identify the changes that have fostered globalization.

Answer:  Changes that foster globalization include better international communications; more rapid, reliable travel and shipping; ease of capital flow between countries; and high differences in labor costs.

Diff: 2

Topic:  The strategic importance of location

AACSB:  Multicultural and Diversity

Objective:  LO8-1

 

17) Motorola is in an industry where there are intense pressures to keep costs low. Why did Motorola reject a possible location that offered low manufacturing costs?

Answer:  While there are pressures to keep costs low, cost is not the only driver for location choices. Motorola is also in an industry that values innovation and creativity; the firm needs high-quality labor inputs. Motorola felt that the location lacked infrastructure and education levels that would support its specific production technologies.

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

18) Consider the list of Key  Success Factors in your textbook. Why do some items appear at the country level only, while others are present at both country and regional levels? Select one KSF as an example, and use it in your discussion.

Answer:  A key success factor should appear wherever it is relevant. A factor loses its ability to differentiate one location from another if it is the same for all alternatives. For this reason, the KSF “exchange rates” is listed at the country level. There are significant costs and risks associated with foreign currency trading and foreign currency accounting; these costs and risks vary from country to country. But there is no exchange rate risk between two U.S. states or cities, or between two sites within a city.

Diff: 3

Topic:  Factors that affect location decisions

AACSB:  Reflective Thinking

Objective:  LO8-1

 

19) 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.

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

20) What is the role of labor productivity in location decisions? Why is it more important than low wages 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.

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

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

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

Diff: 2

Topic:  Factors that affect location decisions

AACSB:  Multicultural and Diversity

Objective:  LO8-1

22) 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 might also have an impact on training costs and health care costs.

Diff: 2

Topic:  Factors that affect location decisions

AACSB:  Reflective Thinking

Objective:  LO8-1

23) “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.

Diff: 3

Topic:  Factors that affect location decisions

Objective:  LO8-1

 

24) Consider the list of Key Success Factors in your textbook.  From items on that list, select two which might involve ethical issues or issues of social responsibility, and cite a possible example of each. Write a brief explanation of each of your examples. Cite and describe a third example, from an area not covered by the KSFs.

Answer:  At the country level, good candidates are cultural and economic issues, labor availability and costs. (Bribery, corruption, child labor, slave labor, racial and gender discrimination in the work force all raise ethical issues.) At the regional level, environmental concerns, and land cost are good candidates. (Corruption, bribery, or cronyism might be associated with land deals; or managers might be tempted to locate where environmental laws are less likely to be enforced.) At the site level, zoning and environmental impact are easy targets. (There might be bribery or corruption related to zoning issues or environmental permits.)  Off the list of KSFs, student examples can include corruption and bribery in exchange for incentives.

Diff: 3

Topic:  Factors that affect location decisions

AACSB:  Ethical Reasoning

Objective:  LO8-1

 

25) Identify those factors identified in the textbook as creating legal or ethical issues for operations mangers as they analyze location decisions.

Answer:  The text identifies bribery, corruption, child labor, sweatshop and other poor working conditions. The text also identifies allegiance–does a firm owe anything to a town or state that it is about to depart from?

Diff: 2

Topic:  Factors that affect location decisions

AACSB:  Ethical Reasoning

Objective:  LO8-1

 

26) 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.

Diff: 2

Topic:  Factors that affect location decisions

Objective:  LO8-1

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

Answer:  Factor-rating method, locational break-even analysis, center-of-gravity method, and transportation method.

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3, LO8-4, LO8-5

 

28) What are the advantages and disadvantages of the use of factor-rating schemes?

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).

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3, LO8-4, LO8-5

 

29) What kinds of location decisions are appropriate for use of crossover analysis? Write a brief paragraph explaining how crossover analysis (break-even analysis) can assist an operations manager choose 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.

Diff: 2

Topic:  Methods of evaluating location decisions

Objective:  LO8-4

 

30) What kinds of location decisions are appropriate for 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.

Diff: 2

Topic:  Methods of evaluating location decisions

Objective:  LO8-5

 

31) Is Starbucks Coffee a user of Geographic Information Systems? Support your answer with examples.

Answer:  Starbucks is clearly a user of GIS. Databases reveal population, age, purchasing power, traffic count, and more, for the blocks around each potential site.  Sites are compared on the basis of these variables.

Diff: 1

Topic:  Service location strategy

AACSB:  Use of IT

Objective:  LO8-5

32) How does the Starbucks Coffee case illustrate the general principles of service location strategy?

Answer:  Starbucks Coffee clearly selects sites on the basis of revenue or volume, not cost. They clearly pay attention to such variables as drawing power, competition, and traffic counts, all of which are appropriate for service location decisions. Starbucks Coffee is a user of GIS, which is more a tool of service location than of industrial location. There is no indication that Starbucks Coffee uses shipment costs, labor cost, break-even analysis, or transportation method, which are variables and tools associated with industrial location decisions.

Diff: 1

Topic:  Service location strategy

Objective:  LO8-1

 

33) 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: location is a major determinant of cost; most major costs can be identified explicitly for each site; low customer contact allows focus on the identifiable costs; and 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.

Diff: 2

Topic:  Methods of evaluating location alternatives

Objective:  LO8-3

 

34) How do service facility location decisions differ from industrial location decisions in terms of the techniques used to analyze them?

Answer:  Service location decisions tend to focus on the revenue function, whereas manufacturing/industrial location decisions tend to focus on costs. The service sector uses techniques such as correlation analysis, traffic counts, demographic analysis, and purchasing power analysis. The industrial decision uses transportation method, factor-weighting approach, break-even analysis, and crossover charts.

Diff: 2

Topic:  Service location strategy

Objective:  LO8-1

Essay

 

1) 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.

 

  1. Complete a numeric locational cost-volume analysis.
  2. Indicate over what range each of the alternatives A, B, C is the low-cost choice.
  3. 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

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-4

 

2) 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. On the grid below, plot the location of the six farm clusters and the calculated mill location. 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.

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

3) 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 has assigned weights as shown on the right side of this table. The manager has rated each location on each factor, on a 100-point basis (higher scores are better), as shown in the right-hand table.

  1. Calculate the composite score for each alternative location.
  2. Which site should be chosen?
  3. Are you concerned about the sensitivity and subjectivity of this solution? Comment.

 

Factor Factor Description Weight
1 Average community income .40
2 Community growth potential .25
3 Availability of public transportation .15
4 Labor cost .20

 

Barclay Chester
75 70
60 80
45 90
80 60

 

Answer:  The higher rated site is Chester, 74.5 to 67.75. There is a margin of several 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

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

 

4) 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

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-4

5) 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.

 

  1. Calculate the volume-weighted center of gravity.
  2. Calculate the simple center of gravity (all cities weighted equally).
  3. 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.

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

6) 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

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-4

7) 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).

 

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
Total 1.00
Weighted sum 87.96 83.20 85.16
Weighted average 87.96 83.20 85.16

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

 

8) A manager has received an analysis of several cities being considered for a new order fulfillment center (warehouse) for Shop at Home Network. The scores (scale is 10 points = best) are contained in the table below.

  1. If the manager weights the factors equally, how would the locations be ranked?
  2. If transportation costs and operating costs are given weights that are double the weights of the others, should the locations be ranked differently?

 

Location
Factor W X Y Z
Business services 7 9 5 4
Community services 5 7 6 7
Real estate cost 7 3 8 6
Construction costs 8 6 6 5
Operating costs 5 4 7 6
Business taxes 6 9 6 4
Transportation costs 8 6 7 8

Answer:  The locations are ranked W, Y, X, Z with equal weights; but W and Y tie for highest, and Z and X tie for lowest as revised.

 

Factor Weight W X Y Z
Business services 1 7 9 5 4
Community services 1 5 7 6 7
Real estate cost 1 7 3 8 6
Construction costs 1 8 6 6 5
Operating costs 1 5 4 7 6
Business taxes 1 6 9 6 4
Transportation costs 1 8 6 7 8
Total 7 46 44 45 40
Weighted average 6.579 6.286 6.429 5.714

 

Weight W X Y Z
Business services 1 7 9 5 4
Community services 1 5 7 6 7
Real estate cost 1 7 3 8 6
Construction costs 1 8 6 6 5
Operating costs 2 5 4 7 6
Business taxes 1 6 9 6 4
Transportation costs 2 8 6 7 8
Total 9
Weighted sum 59 54 59 54
Weighted average 6.56 6 6.56 6

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

9) A telecommunications firm is planning to lay fiber optic cable from several community college distance learning sites to a central studio, in such a way that the miles of cable are minimized. Some locations require more than one set of cables (these are the loads). Where should the studio be located to accomplish the objective?

 

College Map Coordinate (x, y) Load
A (2,10) 3
B (6,8) 2
C (4,9) 4
D (9,5) 1
E (8,1) 3
F (3,2) 2
G (2,6) 1

 

Answer:  This is a center-of-gravity problem, even though it is not about shipping tangible items. The center of gravity is at coordinates X = 4.69, Y = 6.25.

 

  Weight X coord Y coord
Location 1 3 2 10
Location 2 2 6  8
Location 3 4 4  9
Location 4 1 9  5
Location 5 3 8  1
Location 6 2 3  2
Location 7 1 2  6
Sum 16 34 41
Average          4.857           5.857
Weighted Average            4.6875          6.25

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

10) The owner of a millwork shop is considering three alternative locations for a new plant for building embossed-and-clad steel exterior doors for residences. Fixed and variable costs follow. Since the plant ships nationwide, revenue is assumed the same regardless of plant location. Plot the total cost lines in the chart provided below, and identify the range over which each location is best.

 

Location
Costs A B C
Fixed $700,000 $1,000,000 $1,1000,000
Variable $28 $18 $20

 

 

 

Answer:  A is cheapest from 0 to about 30,000 units. B is cheapest thereafter. C can never be preferred.

Break-even points Units Dollars
Location A vs. Location B 30,000 $1,540,000
Location A vs. Location C 50,000 $2,100,000
Location B vs. Location C -50,000 $100,000

 

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-4

11) A manufacturing firm is considering three potential locations for a new parts manufacturing facility. A consulting firm has assessed three sites based on the four factors supplied by management as critical to the location’s success. Given the management-supplied factor weights and the consultant team scores, which location should be selected? Scores are based on 50 = best. Do the results surprise you in any way? Comment.

 

Location
Factor Weight A B C
Labor Climate 10 35 45 20
Taxes 30 30 40 40
Utilities 20 25 20 45
Wages 40 10 25 25

 

Answer:  C is clearly better than either A or B. This problem illustrates the importance of having good scores on important factors.  B has scores that are about as high as those of C, but in the wrong places.

 

Factor Weight A B C
Labor Climate 10 35 45 20
Taxes 30 30 40 40
Utilities 20 25 20 45
Wages 40 10 25 25
Total 100
Weighted sum 2150 3050 3300
Weighted average 21.5 30.5 33.0

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

12) Environmental Glass Products, Inc. wants to build a new centralized facility to receive household, commercial, and industrial glass for recycling. This center will be supplied by trucks coming from four “collection points,” where recyclable glass is dropped off by individuals and businesses. The volume and the map coordinates for the four collection centers are shown below. Where should the collection center be located?

 

Collection point Load (X,Y) Coordinates
A 9,000 (4,8)
B 4,000 (7,2)
C 2,000 (4,1)
D 5,000 (7,3)

 

Answer:  The center should be built near coordinates (5.35, 4.85).

 

Collection Point Weight X coord Y coord
A  9,000  4  8
B  4,000  7  2
C  2,000  4  1
D  5,000  7  3
Sum 20,000 22 14
Average   5.5 3.5
Weighted Average     5.35   4.85

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

13) A manufacturer of stamped metal auto parts has four parts factories in one city at the location coordinates shown below. Each coordinate unit represents a city block (roughly 100 meters). The yearly demand at each factory is also given.

 

Factories Demand X-Coord. Y-Coord.
Rayburn Industrial Park 19,000 20 130
Port of Zavalla 3,000 60 40
Henderson Mfg. Center 5,000 70 100
Wax Mills Site 6,000 90 30

 

Management has decided to build a new sheet metal mill, to supply these factories, at a location central to these plants. What should be the map coordinates of the new plant? On the grid below, graph the locations of the four parts factories and the proposed sheet metal mill.

 

Answer:  The mill should be located near (44, 99).  The center-of-gravity model does not favor any single data point; it is the weighted average of them all. In this case, being central does not mean being close to any single factory, but it is closer to the collection of all four than any other mill location could be.

 

Sheet Metal Mill Solution
Weighted # trips x-coord y-coord X multiplied Y multiplied
Rayburn 19. 20. 130. 380. 2,470.
Zavalla 3. 60. 40. 180. 120.
Henderson 5. 70. 100. 350. 500.
Wax MIlls 6. 90. 30. 540. 180.
Total 33. 240. 300. 1,450. 3,270..
Average 60. 75.
Weighted Average 43.9394. 99.0909.
Median 17. 20. 130..

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

14) A small producer of music boxes wants to move to a larger facility.  Two alternative facilities have been found.  Site 1 has a fixed cost of $500,000 per year, with a variable cost of $25 per unit.  Site 2 has a fixed cost of $800,000 per year, but a variable cost of $22 per unit.

  1. Write out the equation for total cost for each site.
  2. At what volume of output would the two locations have the same total cost?
  3. For what range of output would Site 1 be superior?
  4. For what range of output would Site 2 be superior?

Answer:  (a) The equation for the total cost at site 1 is TC = 500,000 + 25X, where X is volume.  The equation for total cost at Site 2 is TC = 800,000 + 22X.  (b) Set these two equations equal and solve for X.  500,000 + 25X = 800,000 + 22X leads to 300,000 = 3X, then to X = 100,000.  (c) Site 1 is preferred for volumes up to 100,000 units, and (d) site 2 is preferred above 100,000 units.

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-4

15) A small manufacturer is considering several locations for a new facility.  They have identified four factors that they consider to be important for their location decision.  They have decided to assign scores to the four factors, with a higher score indicating a more favorable location.  Use the information in the following table to perform a factor rating to select the best location.

 

Weight Location A Location B Location C
Wages 40 30 75 90
Labor Climate 30 40 70 40
Taxes 15 80 40 90
Utilities 15 75 60 10

 

Answer:  Location B is the preferred location.

 

Weight Location A Location B Location C
Wages 40 30 75 90
Labor Climate 30 40 70 40
Taxes 15 80 40 90
Utilities 15 75 60 10
Total 100
Weighted sum 4725 6600 6300
Weighted average          47.25     66     63

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

16) A contractor for the military is looking for a new location for a supply depot. The depot will supply four bases whose tonnage (demand) and map coordinates are shown below. If management wants the depot to have a central location, what should be its map coordinates?

 

Bases (X,Y) Coordinates Tonnage
Fort Able (40,110) 30,000
Base Baker (70,50) 60,000
Camp Charlie (90,20) 35,000
Camp Delta (70,80) 75,000

 

Answer:  The depot should be located near X = 69, Y = 65.

 

Bases Weight X coord Y coord X mult. Y mult.
Fort Able  30,000  40 110 1,200,000 3,300,000
Base Baker  60,000  70   50 4,200,000 3,000,000
Camp Charlie  35,000  90   20 3,150,000 700,000
Camp Delta  75,000  70   80 5,250,000 6,000,000
Sum 200,000 270 260 13,800,000 13,000,000
Weighted Average 69   65

 

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

17) A highway contractor needs to locate a single supply point to provide road building materials to four projects. The four projects, which are all approximately the same magnitude, are located at the following coordinates. Coordinate units are in miles.

 

X (East) Y (North)
Project A 50 10
Project B 15 60
Project C 40 60
Project D 30 20

 

 

  1. On the grid below, plot the locations of the four road-building sites. Properly label all points.
  2. What is the center of gravity?
  3. If a single truck were sent from center-of-gravity to each project and back (four round trips), how many miles would be traveled? (Hint: use the Pythagorean Theorem C =).
  4. Add the calculated center of gravity to the grid.

 

 

Answer:

  1. Coordinates are (50, 10), (15, 60), (40,60), and (30, 20)
  2. The supply point should be at (33.75, 37.50).

 

Weight X coord Y coord
Project A 1 50 10
Project B 1 15 60
Project C 1 40 60
Project D 1 30 20
Sum 4 135 150
Average 33.75 37.5
Weighted Average 33.75 37.5

 

 

c.

Distance to COG
Project A 31.94
Project B 29.29
Project C 23.35
Project D 17.90

 

31.94 * 2 + 29.29 * 2 + 23.35 * 2 + 17.9 * 2 = 204.96 total miles traveled

 

  1. Coordinates are (33.75, 37.50)

 

Diff: 3

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

18) Every month, a distribution center will deliver 14,000 units to Retailer A at coordinates (20, 10), 12,000 units,  to Retailer B at coordinates (30, -15), and 20,000 units to Retailer C at coordinates  (4, 4).  Assuming no constraints on location, at what coordinates should the distribution center be located (rounded to two decimal places)?

Answer:  (15.65, 0.87), where 15.65 = [20(14) + 30(12) + 4(20)]/(14 + 12 + 20), and 0.87 = [10(14) – 15(12) + 4(20)]/(14 + 12 + 20).

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

19) A school district is considering where in town to house its central office (The office must also be located at an existing school for cost reasons).  If there are five schools in the district, with locations and size given in the following table, use the COG method to determine at which school the central office should be placed to minimize the average distance between the office and students.

 

Location X,Y Size (Enrollment)
A 5,5 2500
B 0,5 1000
C 0,0 10000
D 5,0 4500
E 2,1 7500

 

Answer:  The total number of students is (2500+1000+10000+4500+7500)=25500

X=(5*2500+0*1000+0*10000+5*4500+2*7500)/25500 = 1.96

Y=(5*2500+5*1000+0*10000+0*4500+1*7500)/25500= .98

Rounding these gives (X,Y) of (2,1) which is closest to school E.

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

20) A school district is considering four locations for a new high school.  There are four factors the district is considering (Cost of land, distance to students, land size, and traffic flow).  The district would like to compare results using two weighting systems. The first system would give each factor equal weight and the second would give the factors weights of .4, .2, .1, and .3 respectively.  Fill in the missing information in the table and then use the factor rating method to determine which location is best for each weighting system.

 

Factor W(1) W(2) A B C D
Cost of Land 1 .4 10 20 25 5
Distance to Students 1 .2 30 25 15 20
Land Size 1 .1 5 10 20 40
Traffic Flow 1 .3 20 5 15 30

 

Answer:  Students should first fill in the W(1) and W(2) columns as shown (note W(1) can have any value so long as each value is equal).  Applying the factor rating method gives the following results:

 

Site W(1) W(2)
A 65 16.5
B 60 15.5
C 75 19.5
D 95 19

 

Thus the district should select site D under W(1) and site C under W(2).  Note that site D scores similarly to site C under W(2) and thus other factors (such as politics) could make site D an acceptable choice.

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-3

 

21) A manufacturing company is considering three expansion options.  The first is to do nothing (Option A).  The next is to leave the current plant open and also open a new larger plant (Option B).  Finally they could close the existing plant and open the new, larger one (Option C).  Given the VC and FC from the table below calculate the range for which each option minimizes cost.

 

Option FC ($) VC ($/unit)
A 50000 2
B 100000 1
C 60000 1.4

 

Answer:  Attached is the graph of the total cost with respect to units produced.

 

 

To solve for the crossover points students should set the total cost functions equal for the various options.  This gives the following equations

50000+2x=100000+x, x=50000 units

50000+2x=60000+1.4x, x=16667 units

100000+x=60000+1.4x, x=100000 units

To check which function is the lowest cost for a given range students should test each function for its total cost.  For example

A(0)=50000+2(0)=50000

B(0)=100000+1(0)=100000

C(0)=60000+1.4(0)=60000

Therefore for the range 0 to 16667 option A is cheapest.

A( 20000)=90000

B(20000)= 120000

C(20000)=88000

Therefore for the range 16667 to 50000 option C is cheapest.

A(60000)=170000

B(60000)=160000

C(60000)=144000

Therefore for the range 50000 to 100000 option C is cheapest

A(110000)=270000

B(110000)=210000

C(110000)=214000

Therefore for the range 100000 or more option B is cheapest

 

Combining these ranges shows that for production of under 16667 units A is cheapest, for between 16667 and 100000 C is cheapest, and for 100000 and above B is cheapest.

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-4

22) A grocery chain is deciding on where to locate its new distribution center.  The new DC will serve four grocery stores, each with a demand of 10,000 units.  If the coordinates of the stores are (112,108), (110,50), (40, 85), and (10, 25) where should the DC be located?  Suppose now that each store instead had demand of 20,000 units.  Where should the DC go in this case?

Answer:  Since each store has the same demand the x and y coordinates can simply be averaged and the DC will be located in the same spot for each case.

X=(112+110+40+10)/4 =68

Y=(108+50+85+25)=67

Thus the DC should be located at (68,67) for both cases.

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

23) Suppose that a bus company is deciding where to locate its central hub.  There are 6 possible destinations for the buses.  Suppose that the center of town will be used as the reference for describing the possible destinations.  A is located 5 miles South and 3 miles West.  B is located 3 miles North and 2 miles East.  C is located 1 mile South and 5 miles East.  D is located 2 miles North and 3 miles West.  E is located exactly in the center of town.  F is located 10 miles North and 5 miles East.  Assume that traffic to each destination will be equal.  Where should the hub go so that travel time is minimized?

Answer:  Since each site has the same demand the coordinates can simply be averaged.  Converting the center of town to (0,0) will mean that coordinates that are labeled South become
-y and those labeled West become -x, while North becomes +y and East +x.  Thus the location is found to be:

X= (-3+2+5-3+0+5)/6 =1

Y= (-5+3-1+2+0+10)/6=1.5

Converting back into direction yields 1 mile East and 1.5 miles North of the center of town should be the location for the hub.

Diff: 2

Topic:  Methods of evaluating location alternatives

AACSB:  Analytic Skills

Objective:  LO8-5

 

Operations Management, 11e (Heizer/Render)

Chapter 16  Just-In-Time and Lean Options

 

True/False

 

1) TPS stands for Toyota Production System.

Answer:  TRUE

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

2) TPS stands for Total Production Streamlining.

Answer:  FALSE

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

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

Answer:  TRUE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

4) In a JIT system, product inspection adds value by identifying defective items.

Answer:  FALSE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

5) Customer demand will always remain an unknown, so it is not considered a source of variation.

Answer:  FALSE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

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

Answer:  TRUE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

7) A push system means providing the next station with exactly what is needed when it is needed.

Answer:  FALSE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

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

Answer:  TRUE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

9) Increasing inventory exposes variability in production processes.

Answer:  FALSE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

10) JIT brings about competitive advantage by faster response to the customer regardless of cost.

Answer:  FALSE

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

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

Answer:  TRUE

Diff: 1

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

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

Answer:  TRUE

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

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

Answer:  TRUE

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

14) Reducing distance is a common JIT goal.

Answer:  TRUE

Diff: 2

Topic:  JIT layout

Objective:  LO16-3

 

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

Answer:  TRUE

Diff: 2

Topic:  JIT layout

Objective:  LO16-3

16) JIT systems carry inventory just in case something goes wrong.

Answer:  FALSE

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

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

Answer:  TRUE

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

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

Answer:  TRUE

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

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

Answer:  TRUE

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

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

Answer:  TRUE

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

 

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

Answer:  TRUE

Diff: 1

Topic:  JIT Inventory

Objective:  no LO

 

22) Level scheduling means producing at a constant rate, regardless of customer demands.

Answer:  FALSE

Diff: 1

Topic:  JIT scheduling

Objective:  LO16-5

 

23) With level schedules, a few large batches, rather than frequent small batches, are processed.

Answer:  FALSE

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

24) The number of kanbans decreases as safety stock is increased.

Answer:  FALSE

Diff: 1

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

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

Answer:  TRUE

Diff: 2

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

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

Answer:  TRUE

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

 

27) The quality management tool called poka-yoke is not relevant to JIT systems.

Answer:  FALSE

Diff: 2

Topic:  JIT quality

Objective:  no LO

 

28) Employee empowerment is unnecessary in the Toyota Production System, because automation and powerful information systems reduce the need for employee creativity and decision making.

Answer:  FALSE

Diff: 1

Topic:  Toyota production system

Objective:  LO16-6

 

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

Answer:  TRUE

Diff: 1

Topic:  Toyota production system

Objective:  LO16-6

 

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

Answer:  TRUE

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

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

Answer:  TRUE

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

32) Because most services cannot be inventoried, there is little place for JIT to help service organizations achieve competitive advantage.

Answer:  FALSE

Diff: 2

Topic:  Lean operations in services

Objective:  no LO

 

Multiple Choice

 

1) What does TPS stand for?

  1. A) Total Production Streamlining
  2. B) Toyota Production System
  3. C) Taguchi’s Production S’s
  4. D) Total Process Simplification
  5. E) None of the above

Answer:  B

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

2) Which of the following is generally found in most JIT environments?

  1. A) a push or pull system, depending upon the rate of demand
  2. B) a push system for high margin items and a pull system for low margin items
  3. C) a push system for purchased parts and a pull system for manufactured parts
  4. D) push systems
  5. E) pull systems

Answer:  E

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

3) Which of the following is not a reason for variability?

  1. A) Employees, machines, and suppliers produce units late.
  2. B) Customer demand is unknown.
  3. C) Employees, machines, and suppliers produce units that conform to standards.
  4. D) Engineering drawings are inaccurate.
  5. E) Drawings or specifications are incomplete.

Answer:  C

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

4) Which of the following is specifically characterized by a focus on continuous improvement, respect for people, and standard work practices?

  1. A) Just-in-time (JIT)
  2. B) Toyota Production System (TPS)
  3. C) Lean operations
  4. D) Material requirements planning (MRP)
  5. E) kanban

Answer:  B

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

5) Which of the following is specifically characterized by continuous and forced problem solving through a focus on throughput and reduced inventory?

  1. A) Just-in-time (JIT)
  2. B) Toyota Production System (TPS)
  3. C) Lean operations
  4. D) Material requirements planning (MRP)
  5. E) kanban

Answer:  A

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

6) Which of the following statements regarding a pull system is true?

  1. A) Large lots are pulled from upstream stations.
  2. B) Work is pulled to the downstream stations before it is actually needed.
  3. C) Manufacturing cycle time is increased.
  4. D) Problems become more obvious.
  5. E) None of the above is true of a pull system.

Answer:  D

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

7) Manufacturing cycle time is best defined as the

  1. A) length of the work shift, expressed in minutes per day
  2. B) time it takes a unit to move from one workstation to the next
  3. C) time between the start of one unit and the start of the next unit
  4. D) sum of all the task times to make one unit of a product
  5. E) time from raw materials receipt to finished product exit

Answer:  E

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

8) Which of the following is specifically characterized by the elimination of waste through a focus on exactly what the customer wants?

  1. A) Just-in-time (JIT)
  2. B) Toyota Production System (TPS)
  3. C) Lean operations
  4. D) Material requirements planning (MRP)
  5. E) kanban

Answer:  C

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

9) What is the time required to move orders through the production process, from receipt to delivery?

  1. A) throughput
  2. B) manufacturing cycle time
  3. C) pull time
  4. D) push time
  5. E) queuing time

Answer:  A

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

10) Throughput measures the time

  1. A) that it takes to process one unit at a station
  2. B) between the arrival of raw materials and the shipping of finished products
  3. C) to produce one whole product through an empty system (i.e., with no waiting)
  4. D) required to move orders through the production process, from receipt to delivery
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

11) Which of the following is not one of the Seven Wastes?

  1. A) overproduction
  2. B) transportation
  3. C) assignment
  4. D) defective product
  5. E) motion

Answer:  C

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

12) The 5Ss

  1. A) have the “flavor” of a housekeeping list
  2. B) are a checklist for lean operations
  3. C) have become a list of seven items in American practice
  4. D) can be used to assist with necessary changes in organizational culture
  5. E) All of these are true.

Answer:  E

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

13) The list of 5S’s, although it looks like a housekeeping directive, supports lean production by

  1. A) identifying non-value items and removing them, in the “sort/segregate” item
  2. B) reducing inventory, in the “standardize” item
  3. C) increasing variability through standardized procedures, in the “standardize” item
  4. D) eliminating wasted motion through ergonomic studies, in the “support” item
  5. E) building good safety practices, in the “shine/sweep” item

Answer:  A

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

14) Concerning relationships with suppliers, which of the following combinations is critical to the success of JIT?

  1. A) close relationships with trust
  2. B) close relationships with skepticism
  3. C) distant relationships with trust
  4. D) distant relationships with skepticism
  5. E) none of the above

Answer:  A

Diff: 1

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

15) Which one of the following is not a benefit of the implementation of JIT?

  1. A) cost reduction
  2. B) variability increase
  3. C) rapid throughput
  4. D) quality improvement
  5. E) rework reduction

Answer:  B

Diff: 1

Topic:  Just-in-time (JIT)

Objective:  LO16-1

16) If the goals of JIT partnerships are met, which of the following is a result?

  1. A) For incoming goods, receiving activity and inspection are outsourced.
  2. B) In-transit inventory falls as suppliers are located closer to facilities.
  3. C) The number of suppliers increases.
  4. D) In-plant inventory replaces in-transit inventory.
  5. E) All of the above are consequences of meeting the JIT partnership goals.

Answer:  B

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

17) Which one of the following is a characteristic of a JIT partnership?

  1. A) large number of suppliers
  2. B) maximal product specifications imposed on supplier
  3. C) active pursuit of vertical integration
  4. D) removal of incoming inspection
  5. E) frequent deliveries in large lot quantities

Answer:  D

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

18) Characteristics of JIT partnerships with respect to suppliers include

  1. A) competitive bidding encouraged
  2. B) buyer plant pursues vertical integration to reduce the number of suppliers
  3. C) support suppliers so they become or remain price competitive
  4. D) most suppliers at considerable distance from purchasing organization
  5. E) All of the above are characteristics of JIT partnerships.

Answer:  C

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

19) Characteristics of just-in-time partnerships do not include

  1. A) removal of in-transit inventory
  2. B) large lot sizes to save on setup costs and to gain quantity discounts
  3. C) long-term contracts
  4. D) few suppliers
  5. E) buyer helps supplier to meet the quality requirements

Answer:  B

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

20) Which of the following is not a goal of JIT partnerships?

  1. A) removal of unnecessary activities
  2. B) removal of in-plant inventory
  3. C) removal of in-transit inventory
  4. D) removal of engineering changes
  5. E) All of the above are goals of JIT partnerships.

Answer:  D

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

21) A characteristic of JIT partnerships with respect to quality is to

  1. A) help suppliers meet quality requirement
  2. B) inspect all incoming parts
  3. C) maintain a steady output rate
  4. D) impose maximum product specifications on the supplier
  5. E) draw up strict contracts ensuring that all defectives will be immediately replaced

Answer:  A

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

22) Which of the following is not a goal of JIT partnerships?

  1. A) removal of unnecessary activities
  2. B) removal of in-plant inventory
  3. C) removal of in-transit inventory
  4. D) obtain improved quality and reliability
  5. E) All of the above are goals of JIT partnerships.

Answer:  E

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

23) Which one of the following is a concern expressed by suppliers?

  1. A) having too many customers
  2. B) delivery to the point of use
  3. C) having limited ability to respond to changes in product and quality
  4. D) large lot sizes
  5. E) customers’ infrequent engineering changes

Answer:  C

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

24) Reduction of in-transit inventory can be encouraged through use of

  1. A) supplier location near plants
  2. B) low setup costs
  3. C) low carrying costs
  4. D) use of trains, not trucks
  5. E) low-cost, global suppliers

Answer:  A

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

25) In JIT partnerships, suppliers have several concerns. Which of the following is not such a concern?

  1. A) desire for diversification
  2. B) poor customer scheduling
  3. C) small lot sizes
  4. D) producing high enough quality levels
  5. E) customers’ infrequent engineering changes

Answer:  E

Diff: 1

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

26) Which of the following is not a concern of suppliers as they prepare to enter into JIT partnerships?

  1. A) Suppliers feel that they would be less at risk if they contracted with more than one customer.
  2. B) Suppliers are concerned that customers will present frequent engineering changes with inadequate lead time to deal with them.
  3. C) Suppliers feel that their processes are suited for larger lot sizes than the customer wants.
  4. D) Suppliers are concerned that frequent delivery of small quantities is economically prohibitive.
  5. E) All of the above represent JIT supplier concerns.

Answer:  E

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

27) Just-in-time systems make demands on layouts, including

  1. A) distance reduction
  2. B) increased flexibility
  3. C) reduced space and inventory
  4. D) cross-trained, flexible employees
  5. E) All of the above are JIT influences on layout.

Answer:  E

Diff: 2

Topic:  JIT layout

Objective:  no LO

28) Which one of the following is not a layout tactic in a JIT environment?

  1. A) work cells for families of products
  2. B) fixed equipment
  3. C) minimizing distance
  4. D) little space for inventory
  5. E) poka-yoke devices

Answer:  B

Diff: 2

Topic:  JIT layout

Objective:  no LO

 

29) Which of the following is the author of the phrase “Inventory is evil”?

  1. A) Poka Yoke
  2. B) Pat “Keiretsu” Morita
  3. C) Kanban Polka
  4. D) Shigeo Shingo
  5. E) none of the above

Answer:  D

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

30) Which one of the following statements is true regarding JIT inventory?

  1. A) It exists just in case something goes wrong.
  2. B) It is the minimum inventory necessary to keep a perfect system running.
  3. C) It hides variability.
  4. D) It is minimized with large lot production.
  5. E) It increases if setup costs decrease.

Answer:  B

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

31) A firm wants to develop a level material use schedule based on the following data. What should be the setup cost?

 

Desired lot size: 60
Annual demand: 40,000
Holding cost: $20 per unit per year
Daily production rate: 320
Work days per year: 250

 

  1. A) $0.45
  2. B) $4.50
  3. C) $45
  4. D) $450
  5. E) $500

Answer:  A

Diff: 2

Topic:  JIT Inventory

AACSB:  Analytic Skills

Objective:  no LO

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

  1. A) $2.00
  2. B) $7.20
  3. C) $18.00
  4. D) $64.00
  5. E) $1,036.80

Answer:  B

Diff: 2

Topic:  JIT Inventory

AACSB:  Analytic Skills

Objective:  no LO

 

33) Which of the following is true regarding the steps to reducing setup times?

  1. A) The first step involves performing as much setup preparation as possible while the process/machine is operating.
  2. B) The cycle of steps is repeated until setup time is reduced to under a minute.
  3. C) The standardization of both tooling and work procedures is advantageous to setup time reduction.
  4. D) Improved material handling and move material closer are done before operator training.
  5. E) All of the above are true.

Answer:  E

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

34) Factory X is trying to use level use scheduling. If their first target were to cut the current lot size in half, by what proportion must setup cost change?

  1. A) Setup cost must be cut to one fourth its current value.
  2. B) Setup cost must also be cut in half from its current value.
  3. C) Setup cost must double from its current value.
  4. D) cannot be determined
  5. E) none of the above

Answer:  A

Diff: 2

Topic:  JIT Inventory

Objective:  no LO

 

35) The technique known as level schedules

  1. A) requires that schedules be met without variation
  2. B) processes many small batches rather than one large one
  3. C) is known as “jelly bean” scheduling
  4. D) is based on meeting one day’s demand with that day’s production
  5. E) All of the above are true regarding level scheduling.

Answer:  E

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

36) Which one of the following statements is true about the kanban system?

  1. A) The quantities in the containers are usually large to reduce setup costs.
  2. B) It is associated with a push system.
  3. C) It is useful to smooth operations when numerous quality problems occur.
  4. D) The supplier workstation signals the customer workstation as soon as a batch is completed.
  5. E) The customer workstation signals to the supplier workstation when production is needed.

Answer:  E

Diff: 2

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

37) Kanban is associated with all of the following except

  1. A) small lot sizes
  2. B) signals, such as cards, lights, or flags
  3. C) moving inventory only as needed
  4. D) increased material handling
  5. E) reductions in inventory

Answer:  D

Diff: 2

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

38) The word “kanban” means

  1. A) low inventory
  2. B) employee empowerment
  3. C) card
  4. D) continuous improvement
  5. E) lot size of one

Answer:  C

Diff: 1

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

39) Which one of the following scenarios represents the use of a kanban to reduce inventories?

  1. A) A supervisor tells the operators to stay busy and start producing parts for next month.
  2. B) A “supplier” work center signals the downstream workstation that a batch has been completed.
  3. C) A supervisor signals to several work centers that the production rate should be changed.
  4. D) A “customer” work center signals to the “supplier” workstation that more parts are needed.
  5. E) An operator asks the next station’s operator to help him fix his machine.

Answer:  D

Diff: 2

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

40) If a casual-dining restaurant is attempting to practice JIT and lean operations, which of the following would not be present?

  1. A) close relationship with the restaurant’s suppliers of food, utensils, and equipment
  2. B) food preparation in large batches
  3. C) a kitchen set up to minimize wasteful movements
  4. D) lean inventories of food
  5. E) All of the above should be present.

Answer:  B

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

41) The number of kanbans should be equal to

  1. A) one
  2. B) the ratio of (demand during lead time + safety stock) to container size
  3. C) ½ of the EOQ
  4. D) one full day’s production divided by the EOQ
  5. E) none of the above

Answer:  B

Diff: 2

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

42) Lead time for cakes is 2 days with daily demand of 10 cakes and a safety stock of ½ a day.  Each container (kanban) holds 1 cake.  What is the correct number of kanbans?

  1. A) not enough information
  2. B) 1
  3. C) 5
  4. D) 10
  5. E) 25

Answer:  E

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-6

 

43) The cook in a fast-food restaurant knows that 2 hamburger patties and an order of fries should be started for each car that is waiting in line.  This is best an example of

  1. A) Lead time
  2. B) Kanban
  3. C) Push production
  4. D) Kaizen
  5. E) EOQ

Answer:  B

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

44) Lead time for computers is 7 days with daily demand of 5 computers and a safety stock of 1 day.  Each kanban holds 8 computers.  What is the correct number of kanbans?

  1. A) not enough information
  2. B) 1
  3. C) 5
  4. D) 7
  5. E) 8

Answer:  C

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-6

 

45) Lead time for computers is 5 days with daily demand of 25 and safety stock of 5 computers.  If management wants to use 10 kanbans how many computers should each one hold?

  1. A) not enough information
  2. B) 1
  3. C) 5
  4. D) 10
  5. E) 13

Answer:  E

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-6

 

46) A grocery store is attempting to implement a kanban system.  Which of the following would not be an application of kanbans?

  1. A) An empty doughnut tray signaling the bakery to produce 2 dozen glazed doughnuts.
  2. B) A line of 5 people in the Chinese department signaling the department to heat 5 Crab Rangoon.
  3. C) A red light on top of the cashier’s lane signals that the cashier needs additional change replenished.
  4. D) The meat department stocking up on turkeys before Thanksgiving.
  5. E) All of the above are kanban applications.

Answer:  D

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

 

47) Which of the following is false regarding the links between JIT and quality?

  1. A) Inventory hides bad quality; JIT immediately exposes it.
  2. B) JIT reduces the number of potential sources of error by shrinking queues and lead times.
  3. C) As quality improves, fewer inventory buffers are needed; in turn, JIT performs better.
  4. D) If consistent quality exists, JIT allows firms to reduce all costs associated with inventory.
  5. E) All of the above are true.

Answer:  E

Diff: 2

Topic:  JIT quality

Objective:  no LO

48) JIT makes quality cheaper because

  1. A) the cost of low quality can be hidden as inventory cost
  2. B) JIT adds more buffers to the system
  3. C) JIT prevents long runs of defects
  4. D) B and C
  5. E) A, B and C

Answer:  C

Diff: 2

Topic:  JIT quality

Objective:  LO16-1

 

49) Which of the following is an illustration of employee empowerment?

  1. A) UPS drivers are trained to perform several motions smoothly and efficiently.
  2. B) Unionization of the work place brings better morale and therefore better quality.
  3. C) “No one knows the job better than those who do it.”
  4. D) all of the above
  5. E) none of the above

Answer:  C

Diff: 2

Topic:  Toyota production system

Objective:  LO16-7

 

50) Which of the following is not characteristic of a TPS employee?

  1. A) knowledgeable
  2. B) strict job classifications
  3. C) know more about their job than anyone else
  4. D) empowered
  5. E) All of the above characterize a TPS employee.

Answer:  B

Diff: 2

Topic:  Toyota production system

Objective:  LO16-7

 

51) Which of the following is not an attribute of lean operations?

  1. A) eliminating almost all inventory through just-in-time techniques
  2. B) minimizing space requirements by reducing the distance a part travels
  3. C) pushing responsibility to the highest level possible through centralized decision making
  4. D) educating suppliers to accept responsibility for helping meet customer needs
  5. E) All of the above are attributes of lean operations.

Answer:  C

Diff: 1

Topic:  Lean operations

Objective:  LO16-1

52) Lean operations are known for their

  1. A) employee development
  2. B) supplier education
  3. C) supplier partnerships
  4. D) challenging jobs
  5. E) All of the above are attributes of lean operations.

Answer:  E

Diff: 1

Topic:  Lean operations

Objective:  LO16-1

 

53) Which of the following is characteristic of lean operations?

  1. A) long lead times
  2. B) easy, mindless jobs
  3. C) specialty workers with no cross-training
  4. D) low space requirements
  5. E) no supplier partnerships

Answer:  D

Diff: 1

Topic:  Lean operations

Objective:  LO16-1

 

54) In the quest for competitive advantage, which of the following is a JIT requirement?

  1. A) small number of job classifications
  2. B) reduced number of vendors
  3. C) reduced space for inventory
  4. D) quality by suppliers
  5. E) All of the above are JIT requirements.

Answer:  E

Diff: 2

Topic:  Multiple sections

 

55) Which one of the following does not exemplify JIT used for competitive advantage?

  1. A) Acme Foods decides to decrease the number of its suppliers to just a few.
  2. B) Ajax, Inc. is proud to announce that incoming goods are delivered directly to the point of use.
  3. C) Ardoyne Builders has a scheduled preventive maintenance program.
  4. D) Cheramie Trucking trains workers to specialize and become very efficient in one job.
  5. E) Cajun Contractors has reduced the amount of space for inventory.

Answer:  D

Diff: 2

Topic:  Multiple sections

 

56) Which one of the following is not a requirement of JIT systems?

  1. A) quality deliveries on time
  2. B) low setup time
  3. C) training support
  4. D) strong job specialization
  5. E) employee empowerment

Answer:  D

Diff: 2

Topic:  Multiple sections

57) Great Lakes Barge and Baggage Company makes, among other things, battery-operated bilge pumps. Which of the following activities is not part of JIT? They

  1. A) communicate their schedules to suppliers
  2. B) produce in long production runs to reduce the impact of setup costs
  3. C) use a pull system to move inventory
  4. D) continuously work on reducing setup time
  5. E) produce in small lots

Answer:  B

Diff: 2

Topic:  Multiple sections

 

58) Which one of the following is an example of JIT being used for competitive advantage?

  1. A) Jones Company has decreased the number of job classifications to just a few.
  2. B) Lafourche Metals increases the number of its suppliers to be less dependent on just a few.
  3. C) Houma Fabricators is proud to announce that incoming goods are inspected.
  4. D) Acme Company tells its maintenance department to intervene only if a machine breaks down.
  5. E) Caro Specialty Metals, Inc. has built a new, huge warehouse to store inventory.

Answer:  A

Diff: 2

Topic:  Multiple sections

 

59) A manufacturer took the following actions to reduce inventory. Which of these is generally not accepted as a JIT action?

  1. A) It used a pull system to move inventory.
  2. B) It produced in ever smaller lots.
  3. C) It required deliveries directly to the point of use.
  4. D) It picked the supplier that offered the lowest price based on quantity discounts.
  5. E) It worked to reduce the company’s in-transit inventory.

Answer:  D

Diff: 2

Topic:  Multiple sections

 

60) Excess bags of basic commodities such as flour and sugar that are stored in a restaurant’s kitchen represent which of the following wastes?

  1. A) overproduction
  2. B) queues
  3. C) transportation
  4. D) inventory
  5. E) defective product

Answer:  D

Diff: 1

Topic:  Lean operations in services

Objective:  LO16-2

61) Which of the following statements regarding JIT in services is true?

  1. A) Restaurants do not use JIT layouts because they interfere with creation of a good servicescape.
  2. B) Excess customer demand in services such as air travel is met by dipping into safety stocks.
  3. C) All of the JIT techniques for dealing with suppliers, layout, inventory, and scheduling are used in services.
  4. D) Scheduling is not relevant to effective use of JIT in services.
  5. E) All of the above are false.

Answer:  C

Diff: 2

Topic:  Lean operations in services

Objective:  no LO

 

Short Answer

 

1) __________ is the minimum inventory necessary to keep a perfect system running.

Answer:  Just-in-time inventory

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

2) __________ is the Japanese word for card that has come to mean “signal.”

Answer:  Kanban

Diff: 2

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

3) When suppliers are encouraged to locate near manufacturing plants, the goal of the JIT partnership is to reduce __________ inventory.

Answer:  in-transit

Diff: 1

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

4) __________ is any deviation from the optimum process that delivers perfect product on time, every time.

Answer:  Variability

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

5) A(n) __________ is a JIT concept that results in material being produced only when requested and moved to where it is needed just as it is needed.

Answer:  pull system

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

6) The __________ is the time between the arrival of raw materials and the shipping of finished products.

Answer:  manufacturing cycle time

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

7) __________ allows manufacturing work cells and offices to be easily rearranged.

Answer:  Layout flexibility

Diff: 1

Topic:  JIT layout

Objective:  no LO

 

8) The main focus of JIT efforts to reduce investment in inventory requires __________.

Answer:  small lot sizes or reduction of lot size

Diff: 1

Topic:  JIT layout

Objective:  no LO

 

9) __________ gets suppliers to accept responsibility for satisfying end customer needs.

Answer:  Educating suppliers

Diff: 1

Topic:  Lean operations

Objective:  no LO

 

10) __________ involves scheduling products so that each day’s production meets the demand for that day.

Answer:  Level scheduling

Diff: 2

Topic:  JIT scheduling

Objective:  LO16-5

 

11) TPS stands for __________.

Answer:  Toyota Production System

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

12) The 5S term __________ includes analysis to improve workflow and reduce wasted motion.

Answer:  simplify/straighten or simplify

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

13) Handling material more than once is an example of the waste called __________.

Answer:  transportation

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

14) What does TPS stand for?

Answer:  Toyota Production System

Diff: 1

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

15) Define variability within the context of JIT.

Answer:  Variability is any deviation from the optimum process that delivers perfect products on time every time.

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

16) Differentiate between a push and a pull system.

Answer:  A push system pushes material into downstream workstations regardless of the resources available. A pull system uses signals to request delivery from upstream stations to the station that has production facilities available. In a pull system, materials or parts are pulled where they are needed when they are needed.

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

17) Define manufacturing cycle time in the context of JIT systems.

Answer:  Manufacturing cycle time is the time between receipt of raw materials and shipment of the finished product.

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

18) Identify sources of variability.

Answer:  1. Incomplete or inaccurate drawings or specifications

  1. Late or non-comforming units
  2. Unknown customer demands

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

19) What three things does the Toyota Production System (TPS) emphasize?

Answer:  Focus on continuous improvement, respect for people, and standard work practices.

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

20) What are the goals of JIT partnerships?

Answer:

  1. Removal of unnecessary activities, such as receiving, incoming inspection, and paperwork related to bidding, invoicing, and payment.
  2. Removal of in-plant inventory by delivery in small lots directly to the using department as needed.
  3. Removal of in-transit inventory by encouraging suppliers to locate nearby and provide frequent small shipments.
  4. Obtain improved quality and reliability through long-term commitments, communication, and cooperation.

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

21) Compare and contrast throughput with manufacturing cycle time.

Answer:  Throughput is a measure (in units or time) that it takes to move an order from receipt to delivery.  Each minute that products remain on the books, costs accumulate and competitive advantage is lost.  On the other hand, the time that an order is actually in the shop is called manufacturing cycle time.  This is the time between the arrival of raw materials and the shipping of finished product.  Driving down manufacturing cycle time can make a major improvement in throughput.

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-1

 

22) What are the five reasons given by suppliers for their reluctance to enter into JIT systems? Elaborate on one of these, of your choosing.

Answer:  The five reasons are desire for diversification, poor customer scheduling, engineering changes, quality assurance, and small lot sizes.

Diff: 2

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

23) Identify the layout tactics appropriate for a JIT environment.

Answer:  Layout tactics for a JIT environment include build work cells for families of products, include a large number of operations in a small area, minimize distance, design little space for inventory, improve employee communication, use poka-yoke devices, build flexible or movable equipment, and cross-train workers to add flexibility.

Diff: 2

Topic:  JIT layout

Objective:  no LO

 

24) Identify the inventory tactics appropriate for a JIT environment.

Answer:  Inventory tactics for a JIT environment include a pull system to move inventory, ever smaller lots, just-in-time deliveries from suppliers, deliveries directly to point of use, performance to schedule, setup reduction, and group technology.

Diff: 2

Topic:  JIT layout

Objective:  no LO

25) What is a kanban?

Answer:  Kanban is the Japanese word for card that has come to mean “signal.”  A kanban system moves parts through production by means of  a “pull” from a signal.

Diff: 1

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

26) Describe level schedules. What purpose do they serve?

Answer:  Level schedules act on frequent small batches rather than a few large batches; the small batches are always changing.  The practice matches one day’s demand to one day’s work.

Diff: 2

Topic:  JIT scheduling

Objective:  no LO

 

27) Identify JIT scheduling tactics.

Answer:  JIT scheduling tactics include communicate schedules to suppliers; make level schedules; freeze part of the schedule; perform to schedule; seek one-piece-make and one-piece-move; eliminate waste; produce in small lots; use kanbans; and make each operation produce a perfect part.

Diff: 2

Topic:  JIT scheduling

Objective:  no LO

 

28) Identify some of the signals that kanban systems use.

Answer:  Kanban systems use a wide variety of signals. These include cards, lights, an empty position, an empty tote tray, a rag over a rack adjacent to a storage area, or a post that indicates how high the inventory should be in the storage area.

Diff: 1

Topic:  JIT scheduling

AACSB:  Communication

Objective:  LO16-5

 

29) Explain how JIT works in services. After all, how does “small lot size” and “reduce setup cost” make sense in services? Supply examples to support your work.

Answer:  In services, JIT works more on scheduling than on inventory, but is otherwise quite applicable. Furthermore, many services, such as restaurants, have significant inventories to deal with.

Diff: 2

Topic:  JIT in services

Objective:  no LO

 

30) How are lean operations and the Toyota Production System (TPS) alike? How are they different?

Answer:  Lean operations and TPS are basically synonymous, and the two terms are often used interchangeably. The approach we call lean operations was begun by two employees at Toyota. Lean operations places more emphasis on understanding the customer; TPS places more emphasis on employee empowerment.

Diff: 1

Topic:  Lean operations

Objective:  no LO

31) What are the 5Ss? Why does the list of the 5Ss sometimes have seven elements?

Answer:  The five terms are sort/segregate, simplify/straighten, shine/sweep, standardize, and sustain/self discipline. American practice often adds safety and support/maintenance.

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

32) Identify Ohno’s Seven Wastes. Which one of these deals most directly with distance reductions?

Answer:  The seven are overproduction, queues, transportation, inventory, motion, overprocessing, and defective product. Transportation is the obvious choice, but motion may also be appropriate.

Diff: 2

Topic:  Just-in-time, the Toyota production system, and lean operations

Objective:  LO16-2

 

33) Identify JIT policies for and expectations of suppliers.

Answer:  Few vendors; supportive supplier relationships; and quality deliveries on time, directly to work areas.

Diff: 1

Topic:  Just-in-time (JIT)

Objective:  LO16-3

 

Essay

 

1) Weekly usage of a product is 8 units. Since the plant operates 50 weeks per year, this leads to annual usage of 400 units. Setup cost is $40 and annualized carrying cost is $80.  Weekly production of this product is 12 units.  Lead time is four weeks, and safety stock is one week’s production. What is optimal kanban size? What is the optimal number of kanbans?

Answer:  35; 44/35→2

Diff: 2

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-6

 

2) You have read that in JIT and lean production the optimum lot size is one, with some exceptions for packaging and physical limitations. If a product currently has a lot size of 25, what must happen to setup time for the lot size to truly fall to one? Data for this problem are D=100 units, S=$75 based on setup time of 50 minutes at $1.50 per minute, and H=$40 per unit per year.

Answer:  Students may try ever smaller values for S, and find S =$0.12 by trial and error. Or they may solve the economic production quantity model for S, which also yields $0.12. Or they may recognize that the reduction in Q by a factor of 25 requires a reduction in S by that factor squared; in this case $75 / (25*25) = 0.12.

Diff: 2

Topic:  JIT layout

AACSB:  Analytic Skills

Objective:  LO16-4

3) Daily usage of a product is 10 in a facility that operates every day of the year. Setup cost is $68 and annualized carrying cost is $100. Daily production of this product is 20.  Lead time is 14 days; safety stock is one day’s production. What is the optimum kanban size, and number of kanbans?

Answer:  100; 160/100→2

Diff: 2

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-6

 

4) Daily usage of an assembly is 100 in a facility that operates 300 days of the year. Setup cost is $5 and annualized carrying cost is $160. Production of this assembly occurs at the rate of 400 per day when production of the assembly is underway. Lead time is 3 days; safety stock is 1/2 day’s production. What is the optimum kanban size, and number of kanbans?

Answer:  50; 500/50=10

Diff: 3

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-1

 

5) Daily usage of a part is 20 in a facility that operates 250 days of the year. Setup cost is $20 and annualized carrying cost is $210. Production of this part occurs at the rate of 50 per day when production of the part is underway. Lead time is 1 day; safety stock is 1/2 day’s production. What is the optimum kanban size, and number of kanbans?

Answer:  40; 45/40→2

Diff: 2

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-6

 

6) A certain product has been effectively managed in the past, according to its managers.  The previous technique used the economic production quantity model, and resulted in an optimum lot size of 100. For this product, setup time is directly proportional to setup cost, and setup time is currently 40 minutes per batch. How much must setup time decline in order for the lot size to fall to 50 units? 25 units? 10 units?

Answer:  Complete data for the problem is not necessary. To cut the lot size in half, S must be cut to 25 percent of its previous value, or from 40 minutes to 10 minutes. The reduction of lot size to 25 units requires another reduction by a factor of four, to 2.5 minutes. Reducing the lot size by a factor of ten requires the reduction in setup time by a factor of 100, the equivalent of 0.4 minutes.

Diff: 2

Topic:  JIT layout

AACSB:  Analytic Skills

Objective:  LO16-4

7) A repetitive manufacturing firm is planning on level material use.  The following information has been collected.  Currently, the firm operates 250 days per year.

 

Annual demand 22,000
Daily demand 88
Daily production 250
Desired lot size (2 hours of production) 63
Holding cost per unit per year $50

 

  1. What is the setup cost, based on the desired lot size?
  2. What is the setup time, based on $40 per hour setup labor?

Answer:

(a) S =  leads to =   and S = $2.92

(b) Setup time = 4.38 min

 

Diff: 2

Topic:  JIT layout

AACSB:  Analytic Skills

Objective:  LO16-4

 

8) Labor cost for set-up is $500/hour.  If the plant plans on level material use and operates 50 days per year, determine the time it takes to setup.

 

Annual demand 5000
Daily production 1000
Lot size 700
Holding cost $25

 

Answer:  S=Q^2*H*(1-d/p)/(2D) = 700^2*25*(1-5000/50/1000)/(2*5000) = $1102.5

$1102.5/$500 = 2.205 hours

Diff: 2

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-4

 

9) Daily demand is half of daily production.  If setup and holding costs are equal, determine how Q and D are related.

Answer:  Q=sqrt (2DS/(H)/(1-d/p))  Since S=H and d/p=.5 this reduces to Q= sqrt( 4 D) or Q^2=4*D.

Diff: 1

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-4

 

10) A bakery uses 5 containers that each hold 5 cakes.  If daily demand is 20 cakes and lead time is 1 day determine the safety stock.

Answer:  5=(20+SS)/5 thus Safety Stock = 5 cakes

Diff: 1

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-6

11) A bakery uses 6 containers that each hold 4 cakes.  If safety stock is 2 cakes and lead time is 11 days, determine daily demand.

Answer:  6=(2+11*D)/4 D=(24-2)/11 = 2 cakes per day

Diff: 1

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-6

 

12) A bakery uses 5 containers that hold 3 cakes.  Daily demand is 10 cakes and safety stock is 5 cakes.  What is the lead time?

Answer:  5=(5+10*LT)/3 LT=1 day

Diff: 1

Topic:  JIT scheduling

AACSB:  Analytic Skills

Objective:  LO16-6

 

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