Deck 2: Value Chains

Question 1

Pre-production services might include on-line training services, billing, and warranty service.

Answer 1

False

Question 2

A supply chain is more inclusive than a value chain.

Answer 2

False

Question 3

The organization that outsources still retains ownership of the outsourced process or function.

Answer 3

False

Question 4

Historically, service work was outsourced before many goods-producing jobs were.

Question 5

Proportional increases or decreases in perceived benefits as well as price or cost result in no net change in value.

Question 6

Nearly all value chains are managed from a centralized operational structure because of the inherent inefficiencies that are found in decentralized operational structures.

Question 7

A competitively dominant customer experience is often called a value proposition.

Question 8

Post-production services might include customer financing, customer benefit package design, and promotion/advertising.

Question 9

The focus on value has forced many traditional goods-producing companies to reduce services for their customer benefits package.

Question 10

The focus of pre-production services is on gaining a customer while that of post-production services is on keeping the customer.

Question 11

A value chain views an organization from an integrative perspective of goods and services, while a supply chain focuses mainly on the creation of physical goods.

Question 12

One approach to increasing value is to maintain perceived benefits while increasing price or cost.

Question 13

Outsourcing is the opposite of vertical integration.

Question 14

A value chain describes the flow of customer information through a production system.

Question 15

Value can be increased by adding services to customer benefit packages even when the quality or features of goods cannot be improved.

Question 16

Vertical integration is a modern method of outsourcing.

Question 17

A vertical integration strategy provides a firm more control while generally reducing the complexity of managing the value chain.

Question 18

A value chain begins with the goods and services that are provided to customers.

Question 19

A vertical integration strategy provides a firm more control and generally reduces the complexity of managing the value chain.

Question 20

A value chain can be considered a "cradle-to-grave" model of the operations function.

Question 21

The first, second, and third waves of outsourcing experienced by the U.S. are

A)goods-producing jobs, simple service work, skilled knowledge work
B)simple service work, goods-producing jobs, skilled knowledge work
C)simple service work, skilled knowledge work, goods-producing jobs
D)skilled knowledge work, simple service work, goods-producing jobs

Question 22

Which of the following is false? To increase value, an organization must

A)decrease price or cost while holding perceived benefits constant.
B)change both perceived benefits and price in the same proportion.
C)increase perceived benefits while holding price or cost constant.
D)increase perceived benefits while reducing price or cost.

Question 23

While cultural differences are important in managing operations in different countries, they have little impact in designing the overall value chain.

Question 24

Forward integration might include acquiring a customer.

Question 25

In the value chain model for a hospital, patients, drugs and staff would be considered

A)suppliers
B)inputs
C)processes
D)outputs

Question 26

Offshoring generally lowers unit costs.

Question 27

Value chain integration requires consolidating information systems among suppliers, factories, distributors, and customers; managing the supply chain and scheduling factories; and studying new ways to use technology.

Question 28

A reason for globalization includes shifting work closer to customers for fast delivery and customization.

Question 29

Which of the following is not a component of a value chain?

A)goods and services
B)information
C)sources of labor
D)financial transactions

Question 30

Backward integration refers to acquiring capabilities toward distribution.

Question 31

For a restaurant, order-taking, bill payment and home delivery would be considered

A)services
B)inputs
C)processes
D)outputs

Question 32

A company has two alternatives for meeting a customer requirement for 9,000 units of a specialty molding. If done in-house, fixed cost would be $350,000, with variable cost at $30 per unit. If outsourced, the cost is $80 per unit. Determine the breakeven point and determine if they should make the item in-house or outsource it.

A)breakeven point = 7,000 units; outsource
B)breakeven point = 7,000 units; make in-house
C)breakeven point = 11,667 units; outsource
D)breakeven point = 11,667 units; make in-house

Question 33

____ integration refers to acquiring capabilities at the front of the supply chain, whereas ____ integration refers to acquiring capabilities toward the back end of the supply chain.

A)Vertical, horizontal
B)Upward, downward
C)Forward, backward
D)Backward, forward

Question 34

The organization that outsources still retains ownership of the outsourced process or function.

Question 35

General Electrics would be considered a multinational enterprise because it sources, markets, and produces its goods in several countries.

Question 36

In breakeven analysis, whenever the anticipated volume is greater than the breakeven quantity, the firm should not outsource.

Question 37

Which of the following is not true? To increase value, an organization must

A)decrease price or cost while holding perceived benefits constant.
B)hold perceived benefits constant while increasing price or cost.
C)increase perceived benefits while holding price or cost constant.
D)increase perceived benefits while reducing price or cost.

Question 38

Offshoring is the same as outsourcing in terms of transferring ownership and control.

Question 39

Third party "system integrators" are often used for vertical integration strategies.

Question 40

Global value chains face higher levels of risk and uncertainty, requiring more inventory and day-to-day monitoring to prevent product shortages.

Question 41

From the pre- and post-service view of a value chain, goods and services design, contract negotiation and consulting services would be considered

A)pre-production services
B)production processes
C)post-production services
D)value creation

Question 42

Which of the following is not normally considered a variable cost?

A) labor
B) transportation
C) equipment lease
D) material

Question 43

Differentiate a supply chain from a value chain.

Question 44

A competitively dominant customer experience is often called a

A)perceived benefit
B)preemptive strike
C)moment of truth
D)value proposition

Question 45

Contrast outsourcing with vertical integration. Also, contrast backward integration with forward integration.

Question 46

"The perception of the benefits associated with a good, service, or bundle of goods and services in relation to what buyers are willing to pay for them" is the definition of

A)proportionality
B)competitiveness
C)value
D)equity

Question 47

What are the major decisions a firm must address in designing and configuring a value chain?

Question 48

Operational structure of the value chain deals with

A)management hierarchy
B)vertical integration
C)configuration of resources
D)culture

Question 49

The United States has experienced three waves of outsourcing. Which of the following is not one of the waves?

A)skilled knowledge work
B)mass customization
C)simple service work
D)goods-producing jobs

Question 50

Explain the notion of value chain integration.

Question 51

Define value and discuss three 3) ways for organizations to increase value.

Question 52

Explain a value proposition. Relate this to a customer benefits package of goods and services

Question 53

____ is the process of managing information, services and physical goods to insure their availability at the right place, at the right time, at the right cost and at the right quantity, with the highest attention given to quality.

A)Preproduction service
B)Value proposition
C)Operational structure
D)Value chain integration

Question 54

When break-even analysis is applied to an outsourcing decision, the breakeven quantity is

A)the ratio of fixed costs to the difference between variable outsourcing cost and variable in-house production cost
B)the ratio of the difference between variable outsourcing cost and variable in-house production cost to fixed costs
C)the product of the variable costs times the fixed costs
D)the product of the variable costs times the production quantity

Question 55

Define multinational enterprises. What challenges do they pose to operations managers?

Question 56

Contrast the two views of a value chain. What is the significance of each?

Question 57

Which of the following generally does not result from vertical integration?

A)less control over cost
B)more control over quality
C)more complexity in managing
D)higher levels of risk

Question 58

The control of Wal-Mart's value chain is ______, while the control of General Electric's is ________.

A)post-production focused, preproduction focused
B)horizontal, vertical
C)centralized, decentralized
D)backward integrated, forward integrated

Question 59

Outsourcing is

A)the same as offshoring
B)the opposite of vertical integration
C)the opposite of backward integration
D)the same as diversifying

Question 60

From the pre- and post-service view, transportation service, training service and consulting and technical services would be considered

A)pre-production services
B)a production processes
C)post-production services
D)value creation

Question 61

A U.S. motorcycle manufacturer has the option of either making the gas tank in their newly designed cycle, or subcontracting it out to a Singapore manufacturer. Costs for the two options are:
$\begin{array}{lcc} \underline{\text { Source } }& \underline{\text { Fixed Cost}}& \underline{\text { Variable Cost }}\\\text { Make in-house } & \$ 15,000 & \$ 21.50 \\\text { Buy from Singapore } & \$ 0 & \$ 29.00\end{array}$

a. Which option would be preferred at an annual volume of 1, 000 gas tanks?
b. Which option would be preferred at an annual volume of 5,000 gas tanks?
c. For what range of production volume would it be better to make the gas tanks in?house?

Question 62

John Morton, director of materials management for Computer Products Corporation CPC) in San Jose, is now reviewing next year's plans for the supply of a component that is now purchased from Osiega Ltd., a company in Japan. The component is the PS100 power supply assembly that is used in many of CPC's products.
CPC pays the supplier more than $7 million per year for these units, and John wonders if money could be saved by developing another supplier for this component or if CPC should gear up to manufacture the power supply assemblies in-house within one of the CPC's own production plants.
John's purchasing-analysis staff has developed the following estimates:
The purchasing-analysis group has learned that CPC will need about 550,000 of the PS100 units next year.
a. Which supply source provides the least cost for next year?
b. How many PS100 units would have to be bought next year for each of the sources to be the least-cost source?

Question 63

A company has two alternatives for meeting a customer requirement for 9,000 units of a specialty molding. If done in-house, fixed cost would be $350,000 with variable cost at $30 per unit. Alternative two is to outsource for a total cost of $80 per unit. Determine the breakeven quantity and determine if they should make the item in-house or outsource it.

Question 64

Two alternatives are being considered for a customer's order whose anticipated volume is not yet known. If the firm produces in-house, the fixed cost is $340,000 and variable cost is $2.90 per unit. If the firm chooses to outsource, it will incur a fixed of $275,000 and variable cost is $3.50 per unit. Determine the breakeven quantity and a decision rule of when to outsource.

Question 65

A manufacturing company needs to know whether to make in-house or buy a roller gear assembly for its new fax machine production. The company expects to produce 9,000 units per year. The following estimates have been made:
$\begin{array}{lrr} &\underline{\text {Make}}& \underline{\text {Buy }}\\ \text {Fixed cost per year } &\$8,000&\$0\\ \text { Variable cost per part } &\$5.45&\$6.93\\\end{array}$

a. What is the annual cost to make the roller gear assembly in-house?
b. What is the annual cost to buy the roller gear assembly?
c. At what volume are they indifferent regarding the decision to make or buy?

Question 66

A large hotel?casino in Las Vegas is currently under construction. There will be an Italian restaurant in the hotel that will serve pizza. Management is trying to decide whether to make the pizza themselves or buy it frozen and simply heat it to customer order. There are two major sources of commercial?grade frozen pizza; Ma Ma's Products and the Chun?Yee Corporation. If they make the pizza themselves a substantial amount of preparation equipment will be required, along with skilled personnel. Frozen pizza needs either a conventional oven Ma Ma's) or a microwave Chun?Yee). Financial data is as shown below variable costs are estimated based on an average pizza purchase):
$\begin{array}{ccc} \underline{\text { Source} } & \underline{\text { Fixed Cost/year } }& \underline{ \text { Variable Cost }}\\\text { Make in-house } & \$ 7,870 & \$ 3.20 \\\text { Ma Ma's } & \$ 860 & \$ 5.60 \\\text { Chun-Yee } & \$ 2.460 & \$ 4.50\end{array}$

a. At what volume is either Ma Ma's or Chun?Yee acceptable?
b. At what volume is the company indifferent to either Chun?Yee or make in?house?

Question 67

What makes global value chains more difficult to manage than small domestic value chains?

Question 68

List the variety of economic and noneconomic issues to be considered when making offshore decisions.