Deck 17: Global Production, Outsourcing, and Logistics

Question 1

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

Answer 1

False

Question 2

Decentralization of production is appropriate when location externalities are important.

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

Modern consumer products such as personal computers serve universal needs.

Question 16

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 17

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

Question 18

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

Question 19

Mass customization facilitates product customization at low costs.

Question 20

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 21

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

Question 22

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

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

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

Question 25

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

Question 26

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

Question 27

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

Question 28

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 29

Strategic alliances build trust between the firm and its suppliers.

Question 30

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 31

One disadvantage of a foreign production site is that the production factors typically lag behind the production factors of other countries.

Question 32

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

Question 33

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

Question 34

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

Question 35

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

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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

Question 41

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 42

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

Question 43

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 44

Flexible manufacturing technology is also known as _____.

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

Question 45

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 46

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 47

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 48

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 49

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 50

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 51

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 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

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 54

Web-based information systems play a minor role in modern materials management.

Question 55

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 56

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 57

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

Question 58

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 59

_____ 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 60

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 61

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 62

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 63

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 64

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 65

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 66

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 67

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 68

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

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

Question 69

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 70

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 71

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 72

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 73

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 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

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 76

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 77

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 78

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 79

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 80

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