Deck 14: Global Production,Outsourcing,and Logistics

Question 1

Outsourcing the "production" of certain service activities to developing nations,where labor costs are lower,has become a trend in recent years.

Answer 1

True
Explanation: The trend among U.S.firms is to outsource the "production" of certain service activities to developing nations where labor costs are lower.

Question 2

A flexible machine cell is a grouping of various types of machinery,a common materials handler,and a centralized cell controller.

Answer 2

True
Explanation: A flexible machine cell is a grouping of various types of machinery,a common materials handler,and a centralized cell controller.

Question 3

For global organizations,formal and informal trade barriers have no influence on location decisions.

Answer 3

False
Explanation: Formal and informal trade barriers obviously influence location decisions.

Question 4

Improved capacity utilization and reductions in waste and in work in progress are major efficiency benefits of flexible machine cells.

Question 5

Flexible manufacturing technology has been credited with making Ford the most efficient auto company in the world.

Question 6

The total quality management philosophy is a direct descendant of the Six Sigma methodology.

Question 7

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 8

The use of Six Sigma programs to boost product quality and productivity has sharply declined in the past decade.

Question 9

Flexible manufacturing technologies allow a firm to manufacture products customized to various national markets,though at a significant cost penalty.

Question 10

Logistics is the activity that controls the transmission of physical materials through the value chain,from procurement through production and into distribution.

Question 11

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

Question 12

The term production is used to denote manufacturing activities,but not service activities.

Question 13

Production and logistics are closely linked since a firm's ability to perform its production activities efficiently depends on a timely supply of high-quality material inputs,for which logistics is responsible.

Question 14

The "unit cost curve" declines with output until a certain output level is reached,at which point further increases in output realize huge reduction in unit costs.

Question 15

Political economy,culture,and relative factor costs are similar across countries.

Question 16

One of the ways in which improved quality control reduces costs is that it lowers the warranty costs and time associated with fixing defective products.

Question 17

Two important objectives shared by the production and logistics functions are to lower costs and to simultaneously increase product quality.

Question 18

At Six Sigma,a production process would be 90.66 percent accurate.

Question 19

The type of technology a firm uses to perform specific manufacturing activities can be pivotal in location decisions.

Question 20

A product with a high value-to-weight ratio is expensive and weighs a lot.

Question 21

The great advantage of buying component parts from independent suppliers is that the firm can maintain its flexibility.

Question 22

Many international businesses are now moving toward a system where foreign factories are viewed as globally dispersed centers of excellence.

Question 23

Corporate pressure to improve a factory's cost structure or customize a product to the demands of consumers in a particular nation can start a chain of events that ultimately leads to the development of additional capabilities at that factory.

Question 24

A technology that is unique to a firm is called the company's proprietary product technology.

Question 25

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

Question 26

An argument for making a product in-house is that it makes the planning,coordination,and scheduling of adjacent processes easier.

Question 27

When differences in the factor costs,culture,and political economy of countries have a substantial impact on the costs of manufacturing in various countries,a firm should opt for decentralized production.

Question 28

Global learning is the idea that valuable knowledge resides primarily in a firm's domestic operations and such knowledge must be transferred to foreign subsidiaries.

Question 29

The availability of proprietary software solutions to implement EDI systems is making Web-based applications obsolete.

Question 30

The benefits of manufacturing components in-house seem to be greatest when highly specialized assets are involved.

Question 31

Historically,most outsourcing decisions have involved the production of service activities.

Question 32

Offset is an advantage of outsourcing because firms might be able to capture more orders from countries in which they outsource.

Question 33

Two important objectives shared by both production and logistics functions of an international firm are to simultaneously:

A)increase quality and increase competition.
B)increase product awareness and lower costs.
C)lower costs and increase quality.
D)diversify operations and increase product development.

Question 34

One strategic objective shared by production and logistics is to increase product quality by eliminating defective products from both the supply chain and the manufacturing process.In this context,quality means _____,implying that the product has no defects and performs well.

A)scalability
B)flexibility
C)reliability
D)responsibility

Question 35

_____ is the activity that controls the transportation of physical materials through the value chain,from procurement through production and into distribution.

A)Promotion
B)Production
C)Logistics
D)Bureaucracy

Question 36

A firm that enters long-term alliances maximizes its strategic flexibility by the commitments it makes to its alliance partners.

Question 37

There is an increasing trend among many U.S.companies to outsource customer care services to places such as India because _____ in those countries.

A)there is more capital
B)the labor costs are lower
C)there is better technology
D)the quality of work is superior

Question 38

When a product serves universal needs it can be produced at a single,optimal location.

Question 39

The activities involved in creating a product are defined as:

A)distribution.
B)promotion.
C)production.
D)procurement.

Question 40

Decentralizing production facilities in various regional or national locations that are close to major markets makes sense when trade barriers are low.

Question 41

Other things being equal,if the fixed costs of setting up a production plant are very high,_____ can make sense.

A)???serving the world market from a single plant sited at a single,optimal location
B)adopting a low minimum efficient scale
C)basing production in all the individual national markets
D)manufacturing in multiple locations

Question 42

The Six Sigma methodology is a direct descendant of the _____ philosophy that was widely adopted,first by Japanese companies and then American companies during the 1980s and early 1990s.

A)total quality management
B)benchmarking
C)reengineering
D)kaizen

Question 43

The opening case in the text that profiles the rise of the automobile industry in India mentions that Nissan has invested in a new factory close to Hyundai's in the southern city of Chennai.If it were to be assumed that Nissan chose the manufacturing location based on the ready availability of an appropriately skilled labor pool and supporting industries,it could be said that Nissan was leveraging:

A)cultural factors.
B)externalities.
C)exchange rates.
D)FDI regulations.

Question 44

The higher the number of "sigmas":

A)the higher the number of errors.
B)the greater the variation.
C)the smaller the number of errors.
D)the greater the chances of mistakes.

Question 45

The key decision factors that pertain to where an international firm locates its manufacturing facilities can be grouped under three broad headings: country factors,technological factors,and _____.

A)political factors
B)product factors
C)language factors
D)cultural factors

Question 46

According to the text,the level of fixed costs,the minimum efficient scale,and _____ are three characteristics of a manufacturing technology that are particularly interesting to international firms when making manufacturing location decisions.

A)the flexibility of the technology
B)multiple locations
C)the decrease in machine utilization via scheduling
D)the increase in setup times for complex equipment

Question 47

One drawback of ISO 9000 certification is that it has proved to be:

A)somewhat bureaucratic and costly for many firms.
B)an impossible standard to achieve.
C)of no value in international business.
D)ineffective in focusing attention on the need to improve quality.

Question 48

Which of the following is a result of improved quality control?

A)Greater warranty costs
B)Higher scrap costs
C)Increased productivity
D)Direct increase in unit costs

Question 49

The TQM philosophy was developed by a number of American consultants.Which of the following individuals is one of them?

A)Joseph Juran
B)Philip Kotler
C)Paul Harmon
D)Émile Durkheim

Question 50

_____,one of the American consultants credited with developing TQM,argued that management should embrace the philosophy that mistakes,defects,and poor-quality materials are not acceptable and should be eliminated.

A)Deming
B)Harmon
C)Kotler
D)Juran

Question 51

Under _____,Deming believed that achieving better quality requires the commitment of everyone in the company.

A)ISO 9000
B)Six Sigma
C)zero defects management
D)total quality management

Question 52

_____ include(s)the presence of an appropriately skilled labor pool and supporting industries that can play an important role in deciding where to locate manufacturing activities.

A)Internalities
B)Externalities
C)Management
D)Administration

Question 53

The _____ declines with output until a certain output level is reached,at which point further increases in output realize little reduction in unit costs.

A)component expense curve
B)unit expense line
C)unit cost curve
D)component cost slope

Question 54

Efficient _____ management reduces the amount of inventory in the system and increases inventory turnover.

A)marketing
B)finance
C)human resource
D)supply chain

Question 55

Which of the following is an advantage related to both relatively low level of fixed costs and low minimum efficient scale?

A)A firm can hedge against potential adverse moves in currencies.
B)Products can be standardized across different national markets.
C)Firms can operate entirely out of their home countries.
D)Product manufacturing can be limited to a single location.

Question 56

Which of the following is a step in TQM suggested by Deming?

A)Work standards should not be defined as numbers or quotas.
B)Management has the responsibility to train employees in new skills to keep pace with changes in the workplace.
C)Management should embrace the philosophy that mistakes,defects,and poor-quality materials are acceptable.
D)Employees are responsible to train themselves in new skills to keep up with the changes at work.

Question 57

The European Union requires that the quality of a firm's manufacturing processes and products be certified under a quality standard known as _____ before the firm is allowed access to the EU marketplace.

A)ISO 9000
B)Six Sigma
C)CMM
D)JIT

Question 58

Which of the following is true about Six Sigma?

A)The higher the number of "sigmas" the higher the number of errors.
B)At Six Sigma,a production process would be 90.66 percent accurate.
C)Several firms have achieved perfection-having no errors-with Six Sigma.
D)It is almost impossible for a company to achieve Six Sigma perfection.

Question 59

The principal tool that most managers now use to increase the reliability of their product offering is _____,a statistically based methodology for improving product quality.

A)Six Sigma
B)kaizen
C)reengineering
D)benchmarking

Question 60

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

A)ISO 1900.
B)kanban.
C)Six Sigma.
D)kaizen.

Question 61

Wide product variety makes it difficult for a company to increase its production efficiency and reduce its unit costs.According to this logic,the way to increase efficiency and drive down unit costs is to:

A)reduce setup times for complex equipment.
B)decrease the utilization of individual machines through better scheduling.
C)offer several customized products and adopt short production runs.
D)limit product variety and produce a standardized product in large volumes.

Question 62

In response to the problems with mass production,Toyota's engineer Ohno Taiichi looked for ways to make shorter production runs economical.Which of the following is a result of the techniques he used?

A)Improved labor relations.
B)Larger inventories.
C)A 100 percent error-free production process.
D)Reduced waste.

Question 63

What is a grouping of various types of machinery,a common materials handler,and a centralized cell controller called?

A)Malleable manufacturing unit
B)Elastic manufacturing station
C)Rigid machine unit
D)Flexible machine cell

Question 64

Why does a product's value-to-weight ratio affect location decisions?

A)Because of its influence on transportation costs
B)To determine whether the product serves universal needs
C)Because the need for local responsiveness is increased
D)Because of trade barriers in some countries

Question 65

Which of the following is a major efficiency benefit of flexible machine cells?

A)Improved capacity utilization
B)Increase in work in progress
C)Larger inventories
D)Product standardization across markets

Question 66

The larger the minimum efficient scale of a plant relative to total global demand,the greater is the argument for:

A)decentralizing production in multiple locations.
B)centralizing production in a single location or a limited number of locations.
C)achieving location economies by operating in multiple locations.
D)centralizing production in multiple locations.

Question 67

For products that have a high value-to-weight ratio,there is great pressure to produce these products in:

A)multiple locations in all national markets.
B)locations close to major markets.
C)the optimal location and to serve the world market from there.
D)locations that are close to transportation systems.

Question 68

Improved capacity utilization arises from the reduction in setup times and from the computer-controlled coordination of production flow between machines,which:

A)decreases efficiency.
B)increases costs.
C)eliminates bottlenecks.
D)increases defects.

Question 69

Flexible manufacturing technologies allow firms to manufacture products customized to various national markets at _____,without absorbing significant cost penalties.

A)globally dispersed locations
B)a single factory sited at the optimal location
C)each major national market
D)various locations in the home country

Question 70

Two product factors impact location decisions.They are the product's value-to-weight ratio and:

A)whether the product serves universal needs.
B)the product's shape.
C)the product's point-of-origin.
D)the product's technological sophistication.

Question 71

Central to the concept of _____ is the idea that the best way to achieve high efficiency,and hence low unit costs,is through the mass production of a standardized output.

A)lean production
B)economies of scale
C)mass customization
D)outsourcing

Question 72

Toyota's engineer,Ohno Taiichi,saw numerous problems with Toyota's mass production philosophy for making cars.Which of the following is one of the problems?

A)Short production runs created a scarcity of inventories
B)It hampered the achievement of economies of scale
C)Inability to accommodate consumer preferences for product diversity
D)It resulted in antagonizing workers in the United States

Question 73

Flexible manufacturing technologies enable companies to:

A)customize products to the demands of small consumer groups.
B)build large inventories.
C)achieve product standardization across markets.
D)increase their work in progress.

Question 74

Technological factors are making it feasible,and necessary,for firms to concentrate manufacturing facilities at optimal locations.However,_____ and _____ are major brakes on this trend.

A)demand trends;raw material scarcity
B)short production cycles;demographic factors
C)endowment factors;promotional considerations
D)trade barriers;transportation costs

Question 75

Wide product variety makes it difficult for a company to increase its production efficiency and to:

A)achieve shorter product runs.
B)increase its product sales.
C)reduce its unit costs.
D)improve marketing efficiency.

Question 76

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

A)efficiency curve
B)unit cost curve
C)minimum efficient scale
D)fixed cost scale

Question 77

The term flexible manufacturing technology or _____,as it is often called-covers a range of manufacturing technologies designed to reduce setup times,increase use of individual machines through better scheduling,and improve quality control at all stages of manufacturing.

A)kaizen
B)lean production
C)business process management
D)value network

Question 78

_____,or reductions in unit costs as plant output expands,are achieved because of greater utilization of capital equipment and the productivity gains that come with specialization of employees within the plant.

A)Minimum efficient scale
B)Production cost curve
C)Maximum efficient scale
D)Economies of scale

Question 79

The term _____ refers to the ability of companies to use flexible manufacturing technology to reconcile two goals that were once thought to be incompatible-low cost and product customization.

A)rapid manufacturing
B)product management
C)overengineering
D)mass customization

Question 80

Which of the following is an objective of flexible manufacturing technology?

A)Bringing a factory into compliance with ISO 9000.
B)Reducing setup times for complex equipment.
C)Improving quality control only during the final stages of the manufacturing process.
D)Decreasing utilization of individual machines through scheduling.