Deck 15: Global Production and Supply Chain Management

Question 1

The production and supply chain management of an international firm are independent of each other.

Answer 1

False

Question 2

A wide product variety makes it easier for a firm to increase its production efficiency and thus reduce its unit costs.

Answer 2

False

Question 3

In international business,a relatively high level of fixed costs can make it economical to perform a particular activity in several locations at once.

Answer 3

False

Question 4

Flexible manufacturing technologies allow a 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.

Question 5

A firm that improves its quality control cannot reduce its costs of value creation simultaneously.

Question 6

In recent years,the trend among U.S.firms is to outsource the "production" of certain service activities to developing nations where labor costs are lower.

Question 7

In terms of minimum efficient scale of output,the "unit cost curve" rises with output until a certain output level is reached,at which point further increases in output realize little reduction in unit costs.

Question 8

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

Question 9

The concept of economies of scale tells us that as plant output expands,unit costs decrease.

Question 10

Currency appreciation can transform a low-cost location into a high-cost location.

Question 11

In international business,when consumer demand is prone to large and unpredictable shifts,the firm that can adapt most quickly to these shifts will gain an advantage.

Question 12

With flexible manufacturing technologies,a firm can manufacture products customized to various national markets at a single factory sited at the optimal location but will nevertheless incur a significant cost penalty.

Question 13

Flexible machine cells cannot be used for mass customization.

Question 14

Industrial products have few national differences in consumer taste and preference,hence the need for local responsiveness is reduced for such products.

Question 15

With the advent of flexible manufacturing technologies and mass customization,establishing manufacturing facilities in each major market in which the firm is active is becoming less attractive.

Question 16

The objectives of reducing costs and increasing quality in a firm are independent of each other.

Question 17

In terms of Six Sigma,the higher the number of "sigmas," the greater the number of errors.

Question 18

In international business,production and supply chain functions accommodating demands for local responsiveness work independent of host-government demands.

Question 19

In recent years,time-based competition has become less important in international business.

Question 20

W.Edward Deming believed that achieving better quality requires the commitment of everyone in a company.A.V.Feigenbaum.Deming argued that management has the responsibility to train employees in new skills to keep pace with changes in the workplace.In addition,he believed that achieving better quality requires the commitment of everyone in the company.

Question 21

Rinker Audio Products sources raw materials from six different suppliers around the world.These inputs are stored in Rinker-owned warehouses close to its manufacturing facility in Canton,Ohio.What part of the global supply chain do the suppliers and inputs warehouse together constitute?

A)downstream
B)manufacturing
C)upstream
D)value chain
E)process

Question 22

The drawback of a just-in-time inventory system is that it leaves a firm with excess unsold inventory that it has to write off against earnings or price low to sell.

Question 23

Other things being equal,when fixed costs are substantial and minimum efficient scale of production is high,the arguments for concentrating production at a few choice locations are strong.

Question 24

Champion Works Inc.is an animation company,headquartered in the United States.The CEO of the company has decided to outsource some of the production to companies in developing countries,as the firm seems to be losing out on its competitive advantage.This decision to shift functions or processes to less developed countries is most likely due to their

A)strong intellectual property rights laws.
B)lower labor costs.
C)accessibility to better technology.
D)sophisticated infrastructure.
E)currency appreciation.

Question 25

Which of the following statements is true of Six Sigma?

A)The higher the number of "sigmas," the higher the number of errors.
B)At Six Sigma,a production process would be 90 percent accurate.
C)Six Sigma work standards are based solely on numbers or quotas.
D)It is almost impossible for a company to achieve Six Sigma perfection.
E)Six Sigma is the modern successor to ISO 9000.

Question 26

Which of the following best describes the relationship between the number of "sigmas" and the number of errors?

A)The higher the number of "sigmas," the greater the number of errors.
B)If the number of "sigmas" is a positive value,then the number of errors is always a negative value.
C)The higher the number of "sigmas," the smaller the number of errors.
D)The number of "sigmas" is independent of the number of errors.
E)If the number of "sigmas" is a negative value,then the number of errors is always positive.

Question 27

Under a just-in-time inventory system,a company can reduce the amount of working capital it needs to finance inventory,freeing capital for other uses and/or lowering the total capital requirements of the enterprise.

Question 28

Manufacturing firms should typically aim at lowering the costs of value creation by

A)decreasing inventory turnover.
B)stocking huge amounts of inventory.
C)lowering the quality of products.
D)increasing after-sales services cost.
E)reducing production costs.

Question 29

The effect of improved quality control is to lower the costs of value creation by reducing production costs and

A)decreasing inventory turnover.
B)decreasing after-sales service costs.
C)increasing scrap costs.
D)increasing warranty costs.
E)increasing time spent on fixing defects.

Question 30

Which of the following is a philosophy that was widely adopted,first by Japanese companies and then American companies during the 1980s and early 1990s and from which the Six Sigma methodology directly descended?

A)total quality management
B)enterprise resource planning
C)business process reengineering
D)just-in-time
E)business process outsourcing

Question 31

An important objective shared by both production and logistics functions of an international firm is to

A)increase profits by lowering quality.
B)increase foreign competition.
C)lower costs by dispersing production activities.
D)decrease inventory turnover.
E)stock excess inventory on hand.

Question 32

Rinker Audio Products has had recurring problems in its product quality.The company's manufacturing vice president suggests that Rinker use a statistically based methodology that aims to reduce defects,boost productivity,eliminate waste,and cut costs throughout the company and whose ultimate goal would be to have just 3.4 defects per million units that Rinker produces.What is the methodology that the manufacturing vice president is considering?

A)Six Sigma
B)lean manufacturing
C)just-in-time inventory
D)ISO 9000
E)mass customization

Question 33

Six Sigma refers to a statistically based philosophy that aims to

A)increase defects.
B)lower productivity.
C)increase the costs of value creation.
D)eliminate waste.
E)increase cost per unit.

Question 34

Firms now typically use electronic data interchange (EDI)via the Internet to coordinate the flow of materials into manufacturing,through manufacturing,and out to customers.

Question 35

_____ is a statistically based philosophy that aims to reduce defects,boost productivity,eliminate waste,and cut costs throughout a company.

A)ISO 9000
B)Just-in-time
C)Six Sigma
D)Lean production
E)Upstreaming

Question 36

A second strategic objective shared by production and supply chain management is to increase product quality.In this context,quality means

A)affordability.
B)flexibility.
C)reliability.
D)adaptability.
E)patentability.

Question 37

Rinker Audio Products has a fully-staffed purchasing department that procures various inputs.It also has various domestic manufacturing facilities that coordinate with the purchasing department.Rinker's distribution function coordinates the shipment of finished products.Taken together,Rinker Audio Products' purchasing,manufacturing,and distribution functions constitute the company's

A)promotion.
B)recruitment.
C)logistics.
D)benchmarking.
E)inshoring.

Question 38

Rinker Audio Products wants to adopt the total quality management (TQM)philosophy as developed by,among others,W.Edwards Deming.The company employees are,however,confused as to what TQM entails.As a consultant,you are helping Rinker's employees understand TQM as it would impact them.Which of the following is true of W.Edward Deming's beliefs about the total quality management philosophy?

A)Quality of supervision should be improved by allowing more time for supervisors to work with employees.
B)Management should embrace the philosophy that mistakes are often acceptable.
C)Work standards should be defined only as numbers or quotas.
D)Achieving better quality requires commitment more at the top management than at any other level.
E)Management should create an environment in which employees will follow recommendations rather than recommend changes.

Question 39

Rinker Audio Products stores its finished goods in various warehouses around the United States and in international locations.The company's sales function coordinates with 47 wholesalers who,in turn,ensure that Rinker's products are available in 750 retail outlets worldwide.When taken together,what portion of Rinker's global supply chain do its distributors and retailers constitute?

A)upstream
B)horizontal
C)downstream
D)inward-facing
E)process

Question 40

Since refined sugar has a low value-to-weight ratio,even if it is shipped halfway around the world,the transportation costs would account for a very small percentage of total costs.

Question 41

Which of the following is an objective of lean production?

A)reducing the quality of a product to keep unit costs low
B)reducing setup times for complex equipment
C)replacing product variety with standardized output
D)decreasing utilization of individual machines through scheduling
E)increasing the level of minimum efficient scale of output

Question 42

As the global market for hearing products has become extremely competitive in recent months,Rinker Audio Products' newly appointed CFO,Neha Patel believes that the company should address its minimum efficient scale and attempt to lower it.Which of the following is a consequence of a low minimum efficient scale?

A)preventing a firm from utilizing capital equipment fully
B)necessitating centralized production in a single location or a limited number of locations
C)preventing a firm from accommodating demands for local responsiveness
D)increasing the unit cost of products
E)allowing a firm to hedge against currency risk by manufacturing the same product in several locations

Question 43

Uvicon Inc.and Bionor Inc.are firms that compete against each other in the global market.Uvicon has a high level of fixed costs and high minimum efficient scale,whereas Bionor has a low level of fixed costs and low minimum efficient scale.In this scenario,which of the following is true?

A)Uvicon will be better prepared to hedge against potential adverse moves in currencies than Bionor.
B)Uvicon will benefit from centralizing its production activities and Bionor from decentralizing.
C)Uvicon will have more bargaining power over contract manufacturers than Bionor.
D)Uvicon will be better enabled to adapt to changes in consumer demand in regional markets than Bionor.
E)Uvicon will be better prepared to accommodate demands for local responsiveness than Bionor.

Question 44

Adopting flexible manufacturing technology to produce a wide variety of end products results in

A)increased setup times for complex equipment.
B)increased utilization of individual machines.
C)reduced quality control.
D)increased unit cost of products.
E)lesser need for scheduling.

Question 45

Which of the following includes a grouping of various types of machinery,a common materials handler,and a computer to control the production of a family of parts or products?

A)specialized asset
B)dynamic capability
C)turnkey project
D)flexible machine cell
E)just-in-time inventory

Question 46

Uniway Technologies Inc.has based its manufacturing units in the country of Lanthania.The country's stable economic and political environment has helped the firm gain competitive advantage by lowering its production costs and improving product quality.Other things being equal,the benefits realized from such a strategy can be typically referred to as

A)economies of scope.
B)location economies.
C)diseconomies of scale.
D)economies of power.
E)learning economies.

Question 47

Which of the following is an implication of a mass production system?

A)It results in short production runs.
B)It fails to realize economies of scale.
C)It reduces the number of defects and eliminates waste.
D)It helps to accommodate consumer preferences for product diversity.
E)It creates massive inventories that have to be stored in large warehouses.

Question 48

Producing a standardized product in large volumes will

A)result in diseconomies of scale.
B)increase production efficiency.
C)increase production costs.
D)result in shorter production runs.
E)result in a high minimum efficient scale of output.

Question 49

Ronen Argo,the head of manufacturing of Rinker Audio Products wants the company to centralize its manufacturing in one location in a single country.In contrast,Neha Patel,the company's CFO wants the company to operate several manufacturing facilities in various countries.Which of the following statements is true about performing a manufacturing activity in several locations at once?

A)A manufacturing activity must be performed at multiple locations when the fixed costs of setting up a production plant are high.
B)Performing a manufacturing activity in several locations makes it difficult for a firm to accommodate demands for local responsiveness.
C)Producing in multiple locations reduces the bargaining power of a firm against manufacturers.
D)The larger the minimum efficient scale of a plant relative to total global demand,the greater the need for decentralizing production to multiple locations.
E)Many firms disperse their manufacturing plants to different locations as a "real hedge" against potentially adverse moves in currencies.

Question 50

The level of output at which most plant-level scale economies are exhausted is known as

A)mass customization.
B)break-even point.
C)minimum efficient scale.
D)just-in-time.
E)lean production.

Question 51

Mass customization reconciles the two goals of

A)centralized production and long production runs.
B)product standardization and economies of scale.
C)high fixed costs and multiple production facilities.
D)low cost and product customization.
E)local responsiveness and decentralized production.

Question 52

In entering the European market,Rinker Audio Products is aware that each country in Europe is different and that the company has to be responsive to local needs.The company's CFO,Neha Patel,believes that the company has to address its minimum efficient scale of output to be successful in Europe.Which of the following statements is true about minimum efficient scale of output?

A)With lesser utilization of capital equipment,the chances of a firm realizing economies of scale increases.
B)A plant must avoid operating at the minimum efficient scale of output to realize all major plant-level scale economies.
C)When the minimum efficient scale of production is very low relative to global demand,it will be economical to manufacture a product at a single location.
D)An advantage of a low minimum efficient scale is that it allows the firm to accommodate demands for local responsiveness.
E)A low minimum efficient scale increases the risk of potentially adverse fluctuations in exchange rates.

Question 53

Pink Polka Fashion Inc.,a multinational clothing brand,has plans to expand in the European Union (EU)marketplace.To do so,the EU requires the company to

A)adopt techniques of total quality management.
B)achieve Six Sigma.
C)use just-in-time inventory system.
D)patent its designs and technology.
E)certify its products under ISO 9000.

Question 54

Rinker Audio Products wants to enter the European market but realizes that European consumer tastes are not uniform across countries.To be able to accommodate demands for local responsiveness,Rinker should

A)ignore national differences in consumer tastes and preferences.
B)decentralize production activities to the major national or regional markets.
C)ensure that the manufacturing processes in all units are identical.
D)standardize the product coming out of all manufacturing units.
E)refrain from hiring host country managers.

Question 55

Which of the following is a consequence of using flexible machine cells?

A)It fails to adapt to the production of different products.
B)It generally results in stockpiles of partly finished products.
C)It improves capacity utilization and reduces wastes.
D)It increases setup time for complex equipment.
E)It adds to the cost structure of a firm.

Question 56

In studying various European countries to identify the one where Rinker Audio Products can manufacture and use as the base for a pan-Europe launch,the company found out that the country of Marunia changed its foreign exchange rate that resulted in a significant appreciation of the Marun,its local currency.Which of the following is a consequence of Marunia's change in exchange rate that results in appreciation of the local currency?

A)more foreign direct investment into Marunia
B)decrease in the dollar cost of products exported from Marunia
C)diminishing of Marunia's attractiveness as a manufacturing base
D)transformation of Marunia into a low-cost location
E)decrease in the amount of imports brought into Marunia

Question 57

In an effort to enter the European market,Rinker Audio Products wants to get ISO 9000 certification.However,a segment of the company's top management team is not supportive of this and to make their case,they cite various drawbacks of ISO 9000 certification.Which of the following is a drawback of ISO 9000 certification?

A)It is bureaucratic and costly for many firms.
B)It is an impossible standard to achieve.
C)It is losing its prominence in international business.
D)It is ineffective in improving processes.
E)It is ineffective in bringing about quality improvement.

Question 58

Rinker Audio Products is looking to enter Europe.Toward this,the company is studying various European countries to see which ones to invest in.Which of the following location externalities is favorable for Rinker's foreign direct investment in a country?

A)presence of supporting industries
B)market with many other foreign competitors
C)lack of intellectual property rights laws
D)presence of a communist political system
E)appreciation of local currency

Question 59

The cost to manufacture one unit of Rinker Audio Products' bestselling hearing aid,the Magnifier,is $87.50.The CFO of the company,Neha Patel,has determined that if the company expands the output of its biggest U.S.plant by 20 percent,the unit cost would be only $82.50.The concept that as plant output expands,unit costs decrease,is known as

A)minimum efficient scale.
B)lean production.
C)Six Sigma.
D)economies of scale.
E)total quality management.

Question 60

Rinker Audio Products has wide product variety in its product line.A firm with a wide product variety will find it

A)difficult to achieve shorter product runs.
B)difficult to increase its product sales.
C)difficult to reduce its unit costs.
D)easy to realize economies of scale.
E)easy to reach optimum production efficiency.

Question 61

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

A)They are expensive to transport.
B)They tend to increase in weight after processing.
C)They tend to be restricted under trade barriers.
D)They are expensive and do not weigh very much.
E)They have a low inventory turnover.

Question 62

Which of the following holds true for products with low value-to-weight ratios?

A)They are relatively expensive.
B)They do not weigh very much.
C)Their transportation costs account for a very small percentage of total costs.
D)It is advisable to manufacture them in multiple locations close to major markets.
E)Examples of these products are electronic components and pharmaceuticals.

Question 63

Which of the following products is best manufactured in multiple locations close to major markets to reduce transportation costs?

A)pharmaceuticals
B)petroleum products
C)books
D)magazines
E)electronics

Question 64

Which of the following statements is true of industrial products such as steel?

A)They serve needs that are the same all over the world.
B)They have drastic national differences in consumer taste and preference.
C)The need for local responsiveness for these products is more than consumer products.
D)It makes sense to produce these products in multiple locations close to major markets.
E)A plant must operate at the highest minimum efficient scale of output for these products.

Question 65

A product's value-to-weight ratio affects location decisions primarily because of its influence on

A)transportation costs.
B)shelf life.
C)work-in-progress inventory.
D)inventory turnover.
E)capacity utilization.

Question 66

When a company achieves mass customization via flexible manufacturing technologies,it increases the company's

A)cost structure.
B)waste.
C)customer responsiveness.
D)learning effects.
E)externalities.

Question 67

Which of the following terms refers to the production of a variety of end products at a unit cost that could once be achieved only through bulk production of a standardized output?

A)lean production
B)just-in-time inventory
C)mass customization
D)specialized asset
E)dynamic capability

Question 68

Which of the following is a step taken by automobile companies in situations where neither centralization nor decentralization of production is feasible?

A)outsourcing production to developing countries
B)inshoring production into the home country
C)selling product patents and technology to competitors
D)refraining from international trade
E)establishing top-to-bottom manufacturing operations

Question 69

When should a firm concentrate its production facilities in a centralized location?

A)when the production technology has a low minimum efficient scale
B)when the production technology has low fixed costs
C)when important exchange rates are expected to remain relatively stable
D)when flexible manufacturing technologies are unavailable
E)when the product's value-to-weight ratio is low

Question 70

Two product features impact location decisions.Which of the two reduces the need for local responsiveness?

A)product's ability to serve universal needs
B)product's life cycle
C)product's packaging
D)product's flexible manufacturing technology
E)product's value-to-weight ratio

Question 71

Which of the following is true of a product that serves universal needs?

A)It becomes necessary to customize the product to suit small consumer groups.
B)It becomes necessary to accommodate demands for local responsiveness.
C)It increases the attractiveness of concentrating production at an optimal location.
D)It is difficult to serve national differences in consumer taste and preference.
E)It is always attractive to globally disperse production to all major markets.

Question 72

Technological factors are making it feasible for firms to concentrate manufacturing facilities at optimal locations.The major brakes on this trend are

A)differences in endowment factors.
B)transportation costs and trade barriers.
C)rising national differences in consumer tastes and preferences.
D)growing free trade areas and democracy.
E)declining fluctuations in exchange rates.

Question 73

Which of the following firms should spread its production over decentralized locations?

A)Univion Inc.operates in an industry where national differences in political economy and culture have a substantial impact on its cost of production.
B)Saturn Inc.operates in an industry where volatile fluctuations in important exchange rates are expected.
C)Brew Technology manufactures industrial machines and equipment that serve universal needs.
D)Gold Dreams Inc.customizes jewelry in precious metal and stones with the aid of flexible manufacturing technologies.
E)Uniton Inc.uses a production technology that has high fixed costs and high minimum efficient scale.

Question 74

Amber Engineers Inc.wants to be able to customize products for different national markets and in turn increase its customer responsiveness.However,the fixed costs associated with its production are high.Hence,these functions will be performed most efficiently if Amber Engineers

A)sets up a production facility that is well suited for mass production.
B)establishes multiple manufacturing facilities in each major national market.
C)increases each manufacturing unit's minimum efficient scale of output.
D)adopts flexible manufacturing technologies to help achieve mass customization.
E)locates its production unit in countries that have fluctuations in exchange rates.

Question 75

Which of the following statements is true of flexible manufacturing technologies?

A)They promote the idea of manufacturing in each major market.
B)They fail to produce multiple models from the same line.
C)They are used to reconcile the goals of large volumes and standardized output.
D)They decrease the utilization of individual machines.
E)They allow firms to customize products to national differences at a single facility.

Question 76

Which of the following is true of high value-to-weight ratio products?

A)They tend to have greater weight than other products in the segment.
B)Their transportation costs account for a very small percentage of total costs.
C)They tend to be inexpensive.
D)There is great pressure to produce these products in multiple locations close to major markets.
E)These products gain weight as raw materials get processed during transportation.

Question 77

Concentration of production makes most sense when

A)trade barriers are low.
B)the product's value-to-weight ratio is low.
C)important exchange rates are volatile.
D)flexible manufacturing technology does not exist.
E)the production technology has low fixed costs.

Question 78

Flexible manufacturing technologies are specially targeted at enabling companies to

A)establish multiple manufacturing facilities in each major national market.
B)build large inventories.
C)achieve product standardization across markets.
D)increase their work in progress.
E)produce customized products without a significant cost penalty.

Question 79

When is decentralization of manufacturing facilities most appropriate?

A)when the product serves universal needs
B)when exchange rates are expected to remain relatively stable
C)when the product's value-to-weight ratio is high
D)when there are few trade barriers
E)when the production technology has low minimum efficient scale

Question 80

Which of the following firms should concentrate its production in a centralized location?

A)Jupiter Inc.operates in an industry where the fixed costs are high and services of supporting industries are of prime importance.
B)Star Goal Inc.manufactures consumer products like processed food,apparel,and cosmetics for which national differences in consumer taste and preference are wide.
C)Uranious Inc.operates in an economy where volatile fluctuations in exchange rates are frequently expected.
D)Earth Ventures Inc.is a mining company that exports iron ore-a product with low value-to-weight ratio-to various countries.
E)Silver Times Inc.customizes heavy machines without the use of flexible manufacturing technologies.