Deck 17: Global Production and Supply Chain Management

Question 1

Flexible manufacturing technologies enable companies to customize products to the demands of small consumer groups.

Answer 1

True
Explanation: Besides improving efficiency and lowering costs, flexible manufacturing technologies also enable companies to customize products to the demands of small consumer groups-at a cost that at one time could be achieved only by mass-producing a standardized output.

Question 2

Firms can increase flexibility by producing all parts of a product in-house.

Answer 2

False
Explanation: The great advantage of buying component parts, or even an entire product, from independent suppliers is that the firm can maintain its flexibility, switching orders between suppliers as circumstances dictate.

Question 3

Products such as electronic components and pharmaceuticals have low value-to-weight ratios.

Answer 3

False
Explanation: Many electronic components and pharmaceuticals have high value-to-weight ratios. They are expensive and they do not weigh very much.

Question 4

Poor product quality and low productivity are hidden costs associated with basing production in a foreign location.

Question 5

A production process would create just 1 defect per six thousand products at Six Sigma.

Question 6

Concentration of production is not favored when important exchange rates are expected to remain relatively stable.

Question 7

Modern consumer products such as personal computers serve universal needs.

Question 8

The argument for centralizing production will be greater if the minimum efficient scale of a plant relative to total global demand is low.

Question 9

Organizations are under pressure to produce products in the optimal location and to serve the world market from there if their products have low value-to-weight ratios.

Question 10

Outsourcing some manufacturing to independent suppliers based in other countries would help firms capture more orders from that country.

Question 11

Firms would prefer buying component parts, or an entire product, from independent suppliers to protect proprietary product technologies.

Question 12

Make-or-buy decisions are decisions that concern the components to be used in a production process.

Question 13

Buying a product from external vendors is highly appropriate when a firm intends to protect proprietary technology.

Question 14

Mass customization facilitates product customization at low costs.

Question 15

Lowering the costs is one of the objectives of the production and logistics function of an international firm.

Question 16

Decentralization of production is appropriate when the product does not serve universal needs.

Question 17

Other things being equal, a firm should locate its various manufacturing activities where the relative factor costs are conducive to the performance of those activities.

Question 18

Global learning refers to the idea that valuable knowledge does not reside just in a firm's domestic operations.

Question 19

Deming, the proponent of total quality management, suggested that management shouldn't attempt to train employees in new skills.

Question 20

The firm that sources from independent suppliers has fewer subunits to control.

Question 21

According to the concept of economies of scale, as plant output expands, _____.

A) productivity declines
B) total costs decrease
C) unit costs decrease
D) utilization of capital decline

Question 22

Deming, the proponent of total quality management, argued that:

A) work standards should be defined only as quotas and numbers.
B) supervision is not essential for quality improvements.
C) management should train employees in new skills.
D) products should be certified with standards such as ISO 9000.

Question 23

At Six Sigma, a production process would be highly accurate and create just:

A) 3.4 defects per hundred thousand units.
B) 6.8 defects per million units.
C) 3.4 defects per million units.
D) 6.8 defects per hundred thousand units.

Question 24

Which of the following statements is true of the country factors that govern international business?

A) Relative factor costs should be considered when selecting a country for production.
B) Centralized production is the most suitable method of doing international business.
C) Exchange rates are not a significant factor that determines the selection of a country.
D) Decentralized manufacturing is the most suitable method of doing international business.

Question 25

Which of the following makes being dependent on one location particularly risky?

A) Governmental intervention in exchange rates
B) Floating exchange rates
C) Fixed exchange rates
D) Preferential treatment of domestic industries

Question 26

_____ allows the company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.

A) Standardization
B) Kaizen
C) Six Sigma
D) Lean production

Question 27

Which of the following is a factor that transforms a low-cost location to a high-cost location?

A) Appreciation of local currency
B) Use of fixed exchange rates
C) Use of pegged exchange rates
D) Implementation of free trade regime

Question 28

Just-in-time systems are used to economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process and not before.

Question 29

Which of the following statements is true of Six Sigma?

A) It is a statistically based philosophy to reduce defects and boost productivity.
B) At Six Sigma, a production process will have 6.6 defects per million units.
C) At Six Sigma, a production process would be 100 percent accurate.
D) A company can achieve Six Sigma perfection by reducing the number of defects to one in six thousand.

Question 30

Before a firm is allowed access to the European marketplace, the European Union requires that the quality of the firm's manufacturing processes and products be certified under a quality standard known as _____.

A) Six Sigma
B) ISO 9000
C) Kaizen
D) total quality management

Question 31

The Six Sigma methodology:

A) is used to compare and benchmark the performances of competing firms.
B) gives more importance to productivity than product quality.
C) is a direct descendant of the total quality management philosophy.
D) recommends that only one product should be defective in a thousand products.

Question 32

Logistics is the activity that controls the:

A) transmission of physical materials through the value chain.
B) customer contact points of a business.
C) activities involved in creating a product.
D) information exchange between a business and its customers.

Question 33

The term _____ has been coined to describe the ability of companies to use flexible manufacturing technology to reconcile the goals of low cost and product personalization.

A) assembly-line production
B) product standardization
C) mass customization
D) Six Sigma production

Question 34

One way to reduce risks associated with a JIT global supply chain is to source inputs from several suppliers located in different countries.

Question 35

Which of the following is a desired outcome of flexible manufacturing technology?

A) Minimizing the utilization of individual machines
B) Reducing setup times for complex equipment
C) Standardizing the output of a system
D) Implementing specialized equipment in production

Question 36

Flexible manufacturing technology is also known as _____.

A) Six Sigma production
B) line production
C) standardization
D) lean production

Question 37

Identify an advantage of adopting a low minimum efficient scale.

A) It helps companies reduce the level of initial capital required for business.
B) It allows the firm to accommodate demands for local responsiveness.
C) It allows firms discount political risks and other global capital risks.
D) A minimum efficient scale of a plant allows decentralization of production.

Question 38

Which of the following is a technological factor that affects international business?

A) Exchange rates that govern the business
B) Relative factors costs in the locality
C) Availability of a skilled labor pool
D) Fixed costs of setting up a production plant

Question 39

Just-in-time systems reduce product quality although it brings about huge cost savings.

Question 40

Central to the concept of economies of scale is the idea that the best way to achieve high efficiency, and hence low unit costs, is through the:

A) customization of products for each individual market.
B) mass production of a standardized output.
C) production of goods that are different from each other.
D) production of small volumes of high-quality products.

Question 41

An advantage of engaging in in-house production of products and components is that:

A) the firm will have fewer subunits to control by making products in-house.
B) it will help the firm capture more orders from other countries.
C) it enables a firm to protect the proprietary technologies that it has.
D) firms can make better use of the location advantages of certain countries.

Question 42

An advantage of buying component parts, or even an entire product, from independent suppliers is that:

A) it can make planning, coordination, and scheduling of adjacent processes easier for the firm.
B) the firm can maintain its flexibility by switching orders according to circumstances.
C) the firm will be able to maintain strict control over its proprietary technology.
D) the firm will have access to superior quality raw materials and will deliver high quality products.

Question 43

Which of the following statements is true of products with high value-to-weight ratios?

A) Transportation costs usually account for a large percentage of their total costs.
B) They are relatively inexpensive and weigh a lot.
C) They are usually produced in multiple locations close to major markets.
D) Their transportation account for a very small percentage of the total costs.

Question 44

How has the adoption of just-in-time inventory systems impacted firms' associations with suppliers?

A) The bargaining power of the firms over their suppliers has increased enormously.
B) It has reduced the level of data sharing between firms and their suppliers.
C) Firms are capable of switching suppliers often due to such technologies.
D) It has increased pressures to establish long-term relationships with suppliers.

Question 45

Make-or-buy decisions are decisions about:

A) the components to be used in manufacturing process.
B) procuring raw materials for a production process.
C) procuring the capital equipment for production.
D) whether or not to outsource value creation activities.

Question 46

Which of the following products will have low value-to-weight ratios?

A) Pharmaceuticals
B) Refined sugar
C) Microprocessor
D) Electronic items

Question 47

Just-in-time inventory systems:

A) are used when procurement is not organized.
B) require large warehouses for storage.
C) economize on inventory holding costs.
D) maintain large buffer for inventory.

Question 48

The major cost saving associated with JIT systems comes from:

A) early delivery of raw materials to production.
B) decentralization of manufacturing.
C) speeding up inventory turnover.
D) reduced spending on CRM activities.

Question 49

With a(n) _____ system, suppliers, shippers, and the purchasing firm can communicate with each other with no time delay.

A) CAD
B) JIT
C) CAM
D) EDI

Question 50

Which of the following is a hidden cost associated with basing production in a foreign location?

A) Cost of labor within the location
B) High employee turnover
C) Transportation costs
D) Differences in the value of currency

Question 51

Which of the following is a way that improved quality control reduces costs?

A) Increasing unit costs
B) Increasing rework and scrap costs
C) Increasing the warranty costs
D) Increasing productivity because time is not wasted producing poor-quality products that cannot be sold

Question 52

A(n) _____ is a grouping of various types of machinery, a common materials handler, and a centralized cell controller.

A) flexible machine cell
B) Six Sigma
C) assembly line
D) minimum efficient scale

Question 53

Which of the following products will most likely have high value-to-weight ratios?

A) Pharmaceuticals
B) Refined sugar
C) Bulk chemicals
D) Petroleum products

Question 54

Which of the following statements is true of Web-based EDI systems?

A) Cloud-based EDI systems are more expensive than proprietary solutions.
B) Small firms will not be able to make use of cloud-based EDI systems.
C) Cloud-based systems are much easier to install compared to proprietary solutions.
D) Most cloud-based systems are implemented to support proprietary solutions.

Question 55

RSA is a bicycle manufacturing company. Which of the following is a make-or-buy decision that the company will have to make?

A) Should the company increase its responsiveness toward the retailers?
B) What are the products that the company should manufacture?
C) Should the company outsource production to a low-cost vendor?
D) What should be the pricing strategy of the company's product?

Question 56

Concentration of production is appropriate when:

A) the product serves universal needs.
B) the product does not serve universal needs.
C) the product's value-to-weight ratio is low.
D) volatility in important exchange rates is expected.

Question 57

Which of the following is a drawback of a just-in-time system?

A) Transport costs are high when using a just-in-time system.
B) It leaves a firm without a buffer stock of inventory.
C) It increases the warranty costs associated with products.
D) It leaves a firm with high scrap costs associated with defective products.

Question 58

The idea that valuable knowledge does not reside just in a firm's domestic operations but can also be found in its foreign subsidiaries is called _____.

A) global learning
B) global production processes
C) global economics
D) global factors

Question 59

Decentralization of production is appropriate when:

A) a product's value-to-weight ratio is high.
B) the product serves universal needs.
C) barriers to trade are low.
D) volatility in key exchange rates is expected.

Question 60

When a company's product has a low value-to-weight ratio, the company should:

A) produce the product from two or three optimal locations and ship products from there.
B) manufacture products from a centralized location.
C) ignore transportation costs as they would only be a minor part.
D) produce the product in multiple locations close to major markets.

Question 61

A flexible machine cell is:

A) a component of a source factory.
B) used to perform a standardized operation.
C) a component of a lead factory.
D) a grouping of various types of machinery, a common materials handler, and a centralized cell controller.

Question 62

_____ is favored if differences between countries in factor costs have a substantial impact on the costs of manufacturing in various countries.

A) Decentralized production
B) Just in time (JIT)
C) Concentration of production
D) Total quality management (TQM)

Question 63

Products such as refined sugar, certain bulk chemicals, paint, and petroleum products:

A) cannot travel through a global supply chain.
B) have low value-to-weight ratios.
C) come from offshore factories.
D) have high value-to-weight ratios.

Question 64

A firm would prefer to buy component parts, or an entire product to:

A) make scheduling of adjacent processes easier.
B) maintain control over its proprietary technology.
C) accumulate dynamic capabilities within the organization.
D) reduce organizational complexity and cost structure.

Question 65

The minimum efficient scale of production is:

A) low when fixed costs are high.
B) low when production is centralized.
C) high when fixed costs are low.
D) high when production is decentralized.

Question 66

_____ can be viewed as the decision-making process regarding the raw materials, work-in-process (component parts), and finished goods inventory for a multinational corporation.

A) Global supply chain management
B) Global inventory management
C) Global corporate management
D) Global sourcing arrangements

Question 67

This is where cutting-edge production should take place, or at least be tested for implementation in other parts of the firm's production network.

A) Source factory
B) Lead factory
C) Contributor factory
D) Outpost factory

Question 68

Which of the following situations would lead a firm to choose to decentralize production?

A) The product serves universal needs.
B) The production technology has high fixed costs and high minimum efficient scale relative to global demand or flexible manufacturing technology exists.
C) Trade barriers are low.
D) The production technology has low fixed costs and low minimum efficient scale, and flexible manufacturing technology is not available.

Question 69

Which of the following is the main concept of economies of scale?

A) Productivity declines when firms attempt to reduce costs.
B) Total costs decrease as firms increase the production.
C) Unit costs decrease as a plant's output increases.
D) Utilization of capital declines when firms grow in size.

Question 70

Cost and _____ are the two main drivers behind make-or-buy choices made by global companies when they engage in global supply chains.

A) production capacity
B) assurance of continual supply
C) quality control
D) control

Question 71

This type of factory-often with the same standards as the top factories in the global firm's system-is set up to overcome intangible and tangible barriers in the global marketplace.

A) Contributor factory
B) Source factory
C) Lead factory
D) Server factory

Question 72

The level of output at which most plant-level scale economies are exhausted is referred to as the:

A) minimum efficient scale of output.
B) downstream supply chain.
C) flexible machine.
D) upstream supply chain.

Question 73

A facility that positions and allows customization of products for delivery to worldwide wholesalers or retailers or directly to consumers anywhere in the world.

A) Logistics center
B) Lead factory
C) Global distribution center
D) Source factory

Question 74

A(n) _____ is often placed near a competitor's headquarters or main operations, near the most demanding customers, or near key suppliers of unique and critically important parts.

A) outpost factory
B) source factory
C) contributor factory
D) lead factory

Question 75

Which of the following would lead a firm to choose a concentration of production?

A) Trade barriers are high.
B) Location externalities are not important.
C) Important exchange rates are expected to remain relatively stable.
D) The product's value-to-weight ratio is low.

Question 76

Just-in-time systems:

A) leave a firm without a buffer stock of inventory.
B) ensure that product is always available.
C) help a firm respond quickly to increases in demand.
D) allow for stockpiling of key components of production.

Question 77

Maintaining _____ allows a firm to hedge against currency risks.

A) low TQM
B) low minimum efficient scale
C) high TQM
D) high minimum efficient scale

Question 78

_____ covers a range of manufacturing technologies designed to reduce setup times for complex equipment.

A) ISO 9000
B) TQM
C) Lean production
D) JIT

Question 79

Making all or part of a product in-house is most beneficial when a firm wants to:

A) build valuable capabilities over time.
B) labor costs are more at the firm's location.
C) increase strategic flexibility.
D) start business in more geographical locations.

Question 80

Decentralization of production is appropriate when:

A) the product's value-to-weight ratio is high.
B) location externalities are important.
C) the product serves universal needs.
D) volatility in important exchange rates is expected.