Exam 17: Managing Service and Manufacturing Operations

Narrative 17-2 Because of the poor quality of its cars,Hyundai watched its U.S. sales drop from 264,000 cars to 90,000 cars in just two years. Hyundai cars ranked 26th out of 35 car brands in terms of initial car quality as measured by the influential J.D. Power initial car quality survey. With $6.6 billion in debt,a $1 billion investment for a new manufacturing plant in Alabama,and the company's first-ever loss,Hyundai's new chairman,Chung Mong Koo,declared that improving quality was the only way to fix the company. The challenge for Chung was to get his managers to put quality,not costs,first. So he sent a visible,meaningful message that poor quality would no longer be tolerated. During one plant visit,Chung demanded to see under the hood of a car on the production line. He was furious when he saw loose wires,tangled hoses,bolts painted four different colours-a tremendous deviation from what the engine compartment was supposed to look like. On the spot,he instructed the plant chief to paint all bolts and screws black and ordered workers not to release any car unless all was orderly under the hood. He then publicly declared that Hyundai would produce higher-quality cars than Toyota by 2008,and that Hyundai would produce the best quality cars in the auto industry. Today,each workweek starts with a demanding three-hour meeting attended by managers,engineers,designers,and suppliers. In his large boardroom,Chung displays Hyundai cars on rotating turntables or mechanical lifts-whatever is required for those in attendance to see up close what problems need to be fixed. Hyundai managers now measure everything. Hundreds of charts on the walls of every Hyundai factory measure the number of times and the degree to which a process has produced parts that differ meaningfully from the quality standards for those parts. The quality department at Hyundai has grown from 100 to 1,000 people,who now report directly to CEO Chung. All employees share their ideas about how to improve quality because Chung communicated to workers that their ideas were critical and welcomed. To prove it,he rewarded them with bonuses averaging $150 per employee. At one Hyundai factory,workers have suggested 25,000 ideas for improving quality,30 percent of which have been implemented in the factory. For instance,a worker noticed that the Hyundai Sonata and SG 350 sedans had identically sized spare tires,but different-sized spare tire covers. Though it may sound trivial,using the same spare tire cover for both cars saves Hyundai $100,000 a year. Hyundai addresses customer complaints as quickly as possible,and these quick responses to customer complaints have had dramatic results,such as reducing Hyundai Santa Fe's score in J.D. Power's initial car quality survey from 149 problems per 100 cars to 93 problems per 100 cars in just one year. Finally,if the greatly improved quality isn't enough to convince prospective buyers to buy a Hyundai,the company believes that its 5-year/100,000 km warranty may be enough. The longest,most comprehensive warranty in the auto industry shows the confidence the company has in its cars. And those extensive warranties probably won't cost Hyundai much either,as the improved quality of its cars has cut the cost of warranty repairs,which are paid for by headquarters,by 35 percent over the last three years. -Refer to Narrative 17-2. In which area are many of the repetitive Japanese manufacturing firms weak,in terms of the characteristics of quality service?

Xerox is a firm believer in total quality management (TQM). Anne Mulcahy,the president of Xerox,was quoted as saying,"TQM may help employees figure out how to solve a specific problem. But the really big payoff comes when they share that solution with others." Which characteristic of TQM was Mulcahy promoting in her statement?

Rhett Butler Trucking is a viable bulk carrier providing just-in-time (JIT)transportation for both chemical and dry bulk products throughout the United States and into Canada. Which of the following makes an accurate statement about the companies that use this transport carrier?

ISO 14000 is a series of international standards for managing,monitoring,and minimizing an organization's harmful effects on the environment.

What is the definition of quality according to the American Society for Quality?

What does TQM state a company's primary goals should be?

Judy is arranging the end of year party at a restaurant for the company's employees. Judy considered a new restaurant but decided to make a reservation at the one she has used in the past since she has never been disappointed. What characteristic of the restaurant keeps Judy returning?

In TQM,customer focus and satisfaction,continuous improvement,and teamwork mutually reinforce each other to improve quality throughout a company.

The Liquor Control Board of Ontario (LCBO)has installed new checkout stands,which will allow its employees to serve customers from a variety of sitting and/or standing positions. Which aspect has been improved,likely leading to greater employee satisfaction?

Which of the following is continuous improvement typically associated with?

The first step in the service-profit chain is external service quality or the quality of treatment that employees receive from a company's internal service providers.

The four kinds of costs incurred with inventory maintenance are ordering costs,setup costs,transaction costs,and stockout costs.

What is materials requirement planning (MRP)used with?

The United Kingdom's Royal Mail (the equivalent of Canada Post)needed to transform the image its customers had of it. A key part of the transformation was to permanently pass decision-making authority and responsibility to its workforce and allow them to develop and implement their ideas on how to improve performance and service to customers. According to one manager,"We understand now that people who work here care as much as managers do about the business." Which of the following did the Royal Mail use to improve its image?

Mass distributors lower prices substantially to sell increased volumes of hardware products. What costs would hardware stores have to manage when maintaining larger-than-needed inventories by including them as overhead?

Narrative 17-2 Because of the poor quality of its cars,Hyundai watched its U.S. sales drop from 264,000 cars to 90,000 cars in just two years. Hyundai cars ranked 26th out of 35 car brands in terms of initial car quality as measured by the influential J.D. Power initial car quality survey. With $6.6 billion in debt,a $1 billion investment for a new manufacturing plant in Alabama,and the company's first-ever loss,Hyundai's new chairman,Chung Mong Koo,declared that improving quality was the only way to fix the company. The challenge for Chung was to get his managers to put quality,not costs,first. So he sent a visible,meaningful message that poor quality would no longer be tolerated. During one plant visit,Chung demanded to see under the hood of a car on the production line. He was furious when he saw loose wires,tangled hoses,bolts painted four different colours-a tremendous deviation from what the engine compartment was supposed to look like. On the spot,he instructed the plant chief to paint all bolts and screws black and ordered workers not to release any car unless all was orderly under the hood. He then publicly declared that Hyundai would produce higher-quality cars than Toyota by 2008,and that Hyundai would produce the best quality cars in the auto industry. Today,each workweek starts with a demanding three-hour meeting attended by managers,engineers,designers,and suppliers. In his large boardroom,Chung displays Hyundai cars on rotating turntables or mechanical lifts-whatever is required for those in attendance to see up close what problems need to be fixed. Hyundai managers now measure everything. Hundreds of charts on the walls of every Hyundai factory measure the number of times and the degree to which a process has produced parts that differ meaningfully from the quality standards for those parts. The quality department at Hyundai has grown from 100 to 1,000 people,who now report directly to CEO Chung. All employees share their ideas about how to improve quality because Chung communicated to workers that their ideas were critical and welcomed. To prove it,he rewarded them with bonuses averaging $150 per employee. At one Hyundai factory,workers have suggested 25,000 ideas for improving quality,30 percent of which have been implemented in the factory. For instance,a worker noticed that the Hyundai Sonata and SG 350 sedans had identically sized spare tires,but different-sized spare tire covers. Though it may sound trivial,using the same spare tire cover for both cars saves Hyundai $100,000 a year. Hyundai addresses customer complaints as quickly as possible,and these quick responses to customer complaints have had dramatic results,such as reducing Hyundai Santa Fe's score in J.D. Power's initial car quality survey from 149 problems per 100 cars to 93 problems per 100 cars in just one year. Finally,if the greatly improved quality isn't enough to convince prospective buyers to buy a Hyundai,the company believes that its 5-year/100,000 km warranty may be enough. The longest,most comprehensive warranty in the auto industry shows the confidence the company has in its cars. And those extensive warranties probably won't cost Hyundai much either,as the improved quality of its cars has cut the cost of warranty repairs,which are paid for by headquarters,by 35 percent over the last three years. -Refer to Narrative 17-2. Which of the following is Hyundai demonstrating by addressing customer complaints as quickly as possible-even in the middle of a model year?

A restaurant chain's commissary kitchen is most likely to follow a job shop production process.

What may cause ISO 9000 suspension or cancellation?

In which type of operations classification are manufacturing operations classified in terms of the amount of assembly that occurs after a customer order is received?

A commissary kitchen best represents which form of production?