Deck 17: Global Production and Supply Chain Management

Question 1

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.

Answer 1

False
Explanation: Products that have high value-to-weight ratios are expensive and they do not weigh very much. Their transportation costs account for a very small percentage of total costs. Given this, other things being equal, there is great pressure to produce these products in the optimal location and to serve the world market from there.

Question 2

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

Answer 2

False
Explanation: At Six Sigma, a production process would be 99.99966 percent accurate, creating just 3.4 defects per million units.

Question 3

Modern consumer products such as personal computers serve universal needs.

Answer 3

True
Explanation: Many industrial products such as industrial electronics, steel, bulk chemicals and modern consumer products such as handheld calculators, personal computers, and video game serve universal needs.

Question 4

Decentralization of production is appropriate when location externalities are important.

Question 5

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

Question 6

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

Question 7

A flexible machine cell is used to perform a standardized operation.

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

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 10

Maintaining high minimum efficient scale allows a firm to hedge against currency risks.

Question 11

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

Question 12

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

Question 13

The firm that improves its quality control will also reduce its costs of value creation.

Question 14

The minimum efficient scale of production is high when fixed costs are low.

Question 15

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

Question 16

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

Question 17

Mass customization facilitates product customization at low costs.

Question 18

Products such as refined sugar,certain bulk chemicals,paint,and petroleum products have low value-to-weight ratios.

Question 19

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

Question 20

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

Question 21

Upward migration in the strategic role of foreign production sites arises when they upgrade their own capabilities.

Question 22

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

Question 23

The objectives of logistics are to manage a firm's global supply chain at the lowest possible cost and in a way that best serves customer needs.

Question 24

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

Question 25

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 26

Dynamic capabilities describe skills that become more valuable over time through learning.

Question 27

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

Question 28

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

Question 29

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

Question 30

The benefits of making all or part of a product in-house is minimal when highly specialized assets are involved.

Question 31

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

Question 32

Making all or part of a product in-house is beneficial when the firm intends to build valuable capabilities over time.

Question 33

A specialized asset is an asset that is used to perform day-to-day activities.

Question 34

Just-in-time systems help a firm respond quickly to increases in demand.

Question 35

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

Question 36

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

Question 37

Use of technologies such as just-in-time inventory systems and computer-aided design has reduced pressures for firms to establish long-term relationships with their suppliers.

Question 38

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

Question 39

Strategic alliances build trust between the firm and its suppliers.

Question 40

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

Question 41

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 42

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 43

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 44

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 45

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 46

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 47

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 48

_____ 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 49

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 50

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 51

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 52

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 equipments
C) Standardizing the output of a system
D) Implementing specialized equipments in production

Question 53

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 54

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 55

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 thousand products

Question 56

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

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

Question 57

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 58

Flexible manufacturing technology is also known as _____.

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

Question 59

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 60

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 61

The benefits of making all or part of a product in-house seem to be greatest when the firm _____.

A) wants to accumulate dynamic capabilities
B) has highly specialized assets
C) lacks efficiency in some processes
D) faces the risk of strategic inflexibility

Question 62

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 63

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 64

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 65

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 66

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

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

Question 67

Vertical integration refers to _____.

A) outsourcing production to a low-cost based company
B) making all or part of a product in-house
C) using multiple suppliers to procure raw materials
D) procuring raw materials or products from a single supplier

Question 68

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 69

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 70

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 71

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 72

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 73

A _____ is an asset whose value is contingent upon a particular relationship persisting.

A) specialized asset
B) balanced asset
C) universal asset
D) supplementary asset

Question 74

Which of the following is a major source of the improvement in the capabilities of a foreign site?

A) Increasing abundance of advanced factors of production in the nation where the factory is located
B) Changes in the labor costs associated with the foreign site
C) Fluctuations in the quality of the product coming out of the foreign site
D) Sudden changes in the currency exchanges rates with the nation in which the factory is located

Question 75

Dynamic capabilities describe skills that _____.

A) are used to perform the day-to-day activities in a firm
B) refer to extrinsic capabilities of an employee
C) become more valuable over time through learning
D) are used by managers to make transactional decisions

Question 76

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 equipments for production
D) whether or not to outsource value creation activities

Question 77

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 78

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

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

Question 79

How has the adoption of just-in-time inventory systems,computer-aided design,and computer-aided manufacturing impact 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 80

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