Deck 15: Global Production and Supply Chain Management

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

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

Answer 3

True

Question 4

Location externalities, such as the presence of a skilled labor pool, affect a company's foreign direct investment decision.

Question 5

A business that supplies parts to a manufacturer would be part of the downstream supply chain.

Question 6

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 7

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 8

Supply chain management involves the coordination of the logistics, purchasing, operations, and market channel activities of a company.

Question 9

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

Question 10

According to the concept of economies of scale, as plant output expands, unit costs decrease.

Question 11

The ISO 9000 system used in the European marketplace provides small companies with information regarding export opportunities.

Question 12

An advantage of a low minimum efficient scale is it allows a company to accommodate demands for local responsiveness.

Question 13

W. Edwards Deming believed that achieving better quality requires the commitment of everyone in a company.

Question 14

Flexible machine cells enhance a company's ability to provide mass customization.

Question 15

When applying the Six Sigma approach, the lower the number of "sigmas," the greater the number of errors.

Question 16

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 17

Flexible manufacturing technologies force a company to establish manufacturing facilities in each major national market in order to meet demand.

Question 18

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 19

One downfall of flexible manufacturing technology is that it does not help a company customize products for different national markets.

Question 20

Minimum efficient scale refers to the supply levels a company produces based on consumer demand.

Question 21

Source factories should be located where production costs are low.

Question 22

Centex Systems sources cables and wires from The Wrapper Corp. In this situation, The Wrapper Corp. is part of the ________ portion of the global supply chain.

A) downstream
B) marketing
C) upstream
D) differential
E) process

Question 23

A lead factory would typically be located near a competitor's headquarters to function as the intelligence-gathering unit of the company.

Question 24

Katrine works for a major audio components manufacturer. It is her job to plan and control how the raw materials used to make the components come into the company and how the finished parts are shipped to end-users. Which part of the supply chain does Katrine work in?

A) promotion
B) recruitment
C) logistics
D) benchmarking
E) offshoring

Question 25

The inform function of packaging refers to the package's ability to contain the products properly.

Question 26

A "make" decision is favored when there is a chance that supply cannot be guaranteed if the firm moves production overseas.

Question 27

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 28

One of W. Edwards Deming's beliefs about the total quality management philosophy is that

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 orders rather than recommend changes.

Question 29

Which company is using the total quality management steps identified by W. Edwards Deming?

A) Mercury Inc. believes in reducing interactions between employees and their supervisors.
B) Neptune Inc. empowers its employees to report problems or recommend improvements without any fear.
C) Hudson Inc. bases its work standards solely on numbers or quotas.
D) Ontario Inc. believes that management is not responsible for training employees in new skills.
E) Huron Inc. asserts that achievement of better quality is solely dependent on lower management.

Question 30

The relationship between the number of "sigmas" and the number of errors in the Six Sigma approach is best described as

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 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

Kyle accepted a job at Brenton Manufacturing. During his training, he was told that defective and poor-quality products were unacceptable, and the goal is to manufacture goods that met 100 percent of standards. What methodology does this company use?

A) TQM
B) lean manufacturing
C) JIT
D) ISO 9000
E) mass customization

Question 33

________ 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 34

What philosophy 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 35

Rattle Auto Corp. ships its products to 465 retail stores all across the United States. These retail stores are part of the ________ portion of the global supply chain.

A) upstream
B) horizontal
C) downstream
D) differential
E) process

Question 36

What action did Deming suggest management take in order to achieve total quality management?

A) create an environment where employees did not fear reporting problems
B) import more component parts from countries having factor endowments
C) increase the pay rate of all employees to establish credibility
D) purchase machinery that replaced human interaction with production
E) eliminate middle management positions from the chain of command

Question 37

A JIT system provides a company with enough buffer stock to meet any product demands.

Question 38

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 39

The Cell Inc., a microbiology research laboratory headquartered in the United States, has been losing money. The CEO decides to outsource some production to companies in developing countries. 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 40

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 41

Finder Technologies Inc. has manufacturing units in Canada. The country's stable economic and political environment helps the firm gain competitive advantage by lowering 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) a production possibility frontier.
D) factor endowments.
E) logistics economies.

Question 42

One objective of lean production is to

A) reduce the quality of a product to keep unit costs low.
B) reduce setup times for complex equipment.
C) replace product variety with standardized output.
D) decrease utilization of individual machines through scheduling.
E) increase the level of minimum efficient scale of output.

Question 43

Sound-Rite Audio wants to enter the European market but realizes that consumer tastes are not uniform across countries. To be able to accommodate demands for local responsiveness, Sound-Rite Audio 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 44

A business would incorporate the Six Sigma philosophy as a way to

A) locate customers.
B) distribute product internationally.
C) organize financial data.
D) eliminate waste.
E) count inventory.

Question 45

What 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 46

Mass customization provides companies with the ability to meet which two goals?

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 47

Posh Pools Inc. was ready to sign an agreement to build a new facility in a foreign nation when it learned that the local currency in that nation had appreciated significantly in the past week. How might this affect the company's decision to build the new facility?

A) The company will want to make more foreign direct investment in that country.
B) There will be a decrease in the dollar cost of products exported from that nation which benefits Posh Pools.
C) This will diminish the attractiveness of this country as a manufacturing base for Posh Pools.
D) This will transform the country into a low-cost location and make it more desirable for manufacturing.
E) This will decrease the amount of imports brought into the country and make it more attractive for manufacturing.

Question 48

A-1 Athletic Shoes has wide 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 49

A ________ 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 50

SuspendHers Inc., a maker of fashionable belts and accessories for women, plans to expand in the 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 51

As the global market for eyeglass products has become extremely competitive in recent months, U-See Products' newly appointed CFO believes the company should address its minimum efficient scale and attempt to lower it. What is a consequence of a low minimum efficient scale?

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

Question 52

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 53

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 54

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 55

The cost to manufacture one unit of Killian Audio Products' best-selling hearing aid, the Zone, is $67.50. The CFO of the company determines that if the company expands the output of its biggest U.S. plant by 20 percent, the unit cost would be only $42.50. This analysis is based on the concept of

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

Question 56

When considering foreign direct investment in a country, what is one situation that will benefit a company?

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 57

What is an accurate depiction of Six Sigma?

A) The higher the number of "sigmas," the higher the number of errors.
B) When using 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 necessary to achieve balanced supply and demand.

Question 58

What 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 59

One problem with a mass production system is that it

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

Question 60

Calvin Manufacturing purchased new equipment that reduces setup times when employees change templates between production runs. This equipment has also improved quality control measures throughout the entire manufacturing process. What type of technology is Calvin Manufacturing using?

A) TQM
B) lean production
C) downstream
D) JIT
E) Six Sigma

Question 61

What is an example of a product with a low value-to-weight ratio?

A) jewelry
B) electronic components
C) musical instruments
D) paint
E) pharmaceuticals

Question 62

As a way to save costs, The Foundry Inc. set up a factory in a foreign country to produce the component parts it uses in the farm equipment it manufactures. The technology at this factory is kept to a minimum and management has no say in purchasing or production decisions. What type of factory is Foundry Inc. using?

A) server
B) outpost
C) contributor
D) source
E) offshore

Question 63

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 64

Small electronic parts have a high value-to-weight ratio, which means that they

A) are cheap to produce and don't weigh very much.
B) weigh very little but are expensive.
C) can cost less when mass produced.
D) are poor candidates for international shipments.
E) are taxed at a higher rate.

Question 65

What term 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) decentralization of production
B) just-in-time inventory
C) mass customization
D) economies of scale
E) minimum efficient scale

Question 66

The Jackson Group decides that the best way to get around the exorbitant tariff barriers it encounters when shipping products to Malaysia is to build a factory there, with the same standards as the home factory, and allow that factory to serve the Malaysian market. What type of factory is the Jackson Group going to build?

A) server
B) outpost
C) contributor
D) source
E) offshore

Question 67

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 fixed costs

Question 68

Sweet Stuff Sugar Source ships product all over the world. Since the product it ships has a low value-to-weight ratio, transportation costs are

A) taxed by both the importer and exporter.
B) a large percentage of the total cost.
C) absorbed by the importer.
D) not factored into the total cost.
E) a small percentage of the total cost.

Question 69

Products with high value-to-weight ratios tend to

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

Question 70

ClearWater 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. These functions will be performed most efficiently if ClearWater Engineers

A) sets up a new 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 71

What are some automobile companies doing 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 72

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 73

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 74

Based on the information provided, which of these firms should concentrate its production in a centralized location?

A) Mercury Inc. operates in an industry where the fixed costs are high, and services of supporting industries are of prime importance.
B) In-the-Now Inc. manufactures products like apparel and cosmetics for which national differences in consumer taste and preference are wide.
C) QuickFloors Inc. operates in an economy where volatile fluctuations in exchange rates are frequently expected.
D) Down-to-Earth Corp. is a mining company that exports quartz-a product with low value-to-weight ratio-to various countries.
E) Bronze Inc. customizes heavy machines without the use of flexible manufacturing technologies.

Question 75

Which product 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 76

The decentralization of production would be the best choice for

A) Martin Inc., which is in an industry where national differences in politics, economy, and culture have a substantial impact on cost of production.
B) Dahl Inc., which operates in an industry where volatile fluctuations in important exchange rates are expected.
C) Sudser Technology, which manufactures industrial machines and equipment that serve universal needs.
D) Glitzy Inc., which customizes jewelry in precious metal and stones with the aid of flexible manufacturing technologies.
E) Denti-Kleen Inc., which uses a production technology that has high fixed costs and high minimum efficient scale.

Question 77

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 78

When manufacturing a product that serves universal needs, a company should remember that it

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

Question 79

A business would want to concentrate its production facilities in a centralized location when

A) the production technology has a low minimum efficient scale.
B) the production technology has low fixed costs.
C) the product serves universal needs.
D) flexible manufacturing technologies are unavailable.
E) the product's value-to-weight ratio is low.

Question 80

When determining the location decision for industrial products like steel, what should a company keep in mind?

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.