Deck 16: Global Production, Outsourcing, and Logistics

Question 1

A relatively high level of fixed costs can make it uneconomical to perform a particular activity in several locations at once.

Answer 1

True

Question 2

Country factors,technological factors,and product factors,all influence the decision of where to produce.

Answer 2

True

Question 3

A statistically based philosophy that aims to reduce defects,boost productivity,eliminate waste,and cut costs throughout a company is known as ISO 9000.

Answer 3

False

Question 4

The principle tool that most managers now use to increase the reliability of their product offering is TQM.

Question 5

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

Question 6

Flexible manufacturing technologies can help a firm improve efficiency,lower costs,and customize products to small markets.

Question 7

Efficient supply chain management reduces the amount of inventory in the system and decreases the inventory turnover.

Question 8

A firm can lower costs by dispersing production to locations around the globe where each activity can be performed most efficiently.

Question 9

When a currency depreciates,a low-cost location can be turned into a high-cost location.

Question 10

As a plant output expands,unit costs decrease.

Question 11

The TQM philosophy was first adopted by the American companies

Question 12

Production denotes both service and manufacturing activities.

Question 13

Lean production is another term for flexible manufacturing technology.

Question 14

Producing greater product variety from a factory implies longer production runs.

Question 15

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

Question 16

The smaller the minimum efficient scale of a plant relative to total global demand,the greater the argument for centralizing production in a single location or a limited number of locations.

Question 17

A product's value-to-weight ratio affects the firm's transportation costs.

Question 18

Mass customization describes the ability of companies to use flexible manufacturing technology to reconcile low cost and product customization.

Question 19

European Union firms must comply with ISO 9000 standards in their manufacturing processes and products before they will be given access to the European Union market.

Question 20

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

Question 21

Issues of strategic flexibility and organizational control are greater for purely domestic businesses than for international ones.

Question 22

Because of the low value-to weight ratio of many pharmaceutical and electronics products,there is great pressure to produce these products in the optimal location and serve the world from there.

Question 23

Historically,most outsourcing decisions have involved the manufacture of service products.

Question 24

When one firm invests in specialized assets to supply another,mutual dependency is created.

Question 25

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

Question 26

Decentralization of production is appropriate when the product's value-to-weight is low.

Question 27

Firms use EDI to coordinate the flow of materials into manufacturing,through manufacturing,and out to customers.

Question 28

When substantial investments in specialized assets are required to manufacture a component,the firm will prefer to contract it out to a supplier.

Question 29

A firm that has integrated horizontally is making all or part of a product in-house.

Question 30

Under a JIT system,products are briefly warehoused before entering the manufacturing process.

Question 31

The make-or-buy decision involves deciding whether a firm should make or buy the component parts that go into the final product.

Question 32

A major aspect of a transnational strategy is a belief in the idea that valuable knowledge does not reside just in a firm's domestic operations.

Question 33

Incentive problems that occur with independent suppliers do not arise with internal suppliers.

Question 34

Concentrating production at an optimal location is more attractive when a product serves universal needs.

Question 35

When political risk is high,sourcing products from independent suppliers can be advantageous.

Question 36

Decentralization of production is appropriate when the product serves universal needs.

Question 37

Concentration of production makes most sense when trade barriers are high.

Question 38

A CAD/CAM system allows the firm 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 39

Strategic alliances can effectively limit a firm's strategic flexibility.

Question 40

Outsourcing decisions pose plenty of problems for international businesses but even more problems for purely domestic businesses.

Question 41

Flexible manufacturing technology is also known as:

A)mass customization.
B)lean production.
C)flexible machine cells.
D)minimum efficient scale.

Question 42

Being too dependent on one location is particularly risky because of:

A)floating exchange rates.
B)fixed exchange rates.
C)lack of movement in currencies.
D)static exchange rates.

Question 43

_____ challenged the notion that the way to increase efficiency and drive down unit costs is to limit product variety and produce a standardized product in large volumes.

A)Bartlett and Ghoshal's theory of a transnational company
B)Minimum efficient scale
C)Economies of scale
D)Flexible manufacturing technology

Question 44

The Six Sigma methodology:

A)is a direct descendant of the total quality management philosophy.
B)is a direct descendant of benchmarking.
C)was adopted first by British companies and then Japanese companies during the 1980s.
D)was developed by Deming,Juran,and Feigenbaum.

Question 45

Identify an advantage of a low minimum efficient scale.

A)Allows the firm to accommodate demands for local responsiveness
B)Discounts currency risk by manufacturing all products in one location
C)Helps keep overheads low at the expense of fixed costs
D)Helps a firm to standardize its products for all markets

Question 46

Saving time by not producing poor-quality products that cannot be sold,lowering rework costs,lowering scrap costs,and lowering warranty costs are the intended results of:

A)total feature management.
B)reengineering.
C)logistics.
D)total quality management.

Question 47

This 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)Kaizen
B)Six Sigma
C)Lean production
D)TQM

Question 48

A company that wants to reduce set-up time for complex equipment,increase the utilization of individual machines through better scheduling,and improve quality control at all stages of the manufacturing process should adopt:

A)standardization.
B)diseconomies of scale.
C)flexible machine technology.
D)minimum efficient scale.

Question 49

Factors that help a firm decide where to locate its manufacturing facilities can be best grouped under three broad headings.These are:

A)political factors,social factors,and legal factors.
B)country factors,technological factors,and product factors.
C)product factors,service factors,and labor factors.
D)language factors,cultural factors,and transportation factors.

Question 50

Identify the incorrect statement pertaining to exchange rate movements.

A)Adverse changes in exchange rates can quickly alter a country's attractiveness as a manufacturing base.
B)Currency appreciation can transform a low-cost location into a high-cost location.
C)Currency appreciation can cause firms to move their manufacturing offshore to lower-cost locations.
D)A low-cost location can be transformed into a high-cost location because of currency depreciation.

Question 51

The creation of a global web of value creation activities is the result of:

A)location economies.
B)diseconomies of scale.
C)shortage of skilled labor.
D)informal trade barriers.

Question 52

At six sigma,a production process would be 99.99966 percent accurate,creating just _____.

A)3.4 defects per hundred thousand units
B)3.4 defects per million units
C)34 defects per million units
D)6.8 defects per million units

Question 53

According to the concept of economies of scale what is the best way to achieve high efficiency and low unit costs?

A)Customizing products for each individual market
B)Mass producing standardized outputs
C)Concentrating on production of small volumes of products
D)Increasing the product variety dramatically

Question 54

Which of the following statements about Six Sigma is true?

A)It is a statistically based philosophy.
B)It is easily possible for a company to achieve Six Sigma perfection.
C)At six sigma,a production process will have 66 defects per million units.
D)At six sigma,a production process would be 100 percent accurate.

Question 55

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

A)Outsourcing
B)Production
C)Logistics
D)Distribution

Question 56

According to the concept of economies of scale:

A)as plant output reduces,unit costs decrease.
B)as plant output expands,unit costs increase.
C)as plant output reduces,unit costs remain static.
D)as plant output expands,unit costs decrease.

Question 57

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 customization.

A)assembly-line-like customization
B)economies of customization
C)mass customization
D)standardized customization

Question 58

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)total quality management.
B)reengineering.
C)quality management system.
D)ISO 9000.

Question 59

_____ is a management philosophy according to which mistakes,defects,and poor-quality materials are not acceptable and should be eliminated.

A)Scientific management
B)Total quality management
C)ISO 9000
D)Lean manufacturing

Question 60

The modern successor to TQM is:

A)Corporate Quality Commitment.
B)ISO 9000.
C)Quality Process Realized.
D)Six Sigma.

Question 61

Vertical integration may raise a firm's cost structure for all of the following reasons except:

A)the greater the number of subunits in an organization,the more problems coordinating and controlling those units.
B)the firm that vertically integrates into component part manufacturing may find that because its internal suppliers have an active customer,they lack the motivation to be more efficient.
C)vertically integrated firms have to determine appropriate prices for goods transferred to subunits within the firm.
D)it makes planning,coordination,and scheduling of adjacent processes more difficult,as compared to buying from independent suppliers,particularly with just-in-time inventory systems.

Question 62

Which of the following is a drawback associated with a JIT system?

A)There are high transportation costs involved
B)It leaves a firm without a buffer stock of inventory
C)It leaves a firm with scrap costs associated with defective products
D)It increases the warranty costs

Question 63

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

A)flexible machine cell
B)mass customization policy
C)lean production system
D)minimum efficient scale cluster

Question 64

Initially,many foreign factories are established where _____ are low.

A)trade barriers
B)inventory turnover
C)marketing costs
D)labor costs

Question 65

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

A)They are relatively inexpensive and weigh a lot.
B)They are expensive and do not weigh very much.
C)Transportation costs usually account for a large percentage of their total costs.
D)They must be produced in multiple locations close to major markets.

Question 66

The major costs saving associated with JIT comes from:

A)speeding up inventory turnover.
B)having materials arrive at a manufacturing plant before they are needed.
C)avoiding production slowdowns by ensuring inventory is stockpiled.
D)using warehouse space to maintain on-hand inventory.

Question 67

Which of the following is a characteristic of manufacturing technology that should be considered by a firm contemplating international production?

A)Trade barriers
B)Value-to-weight ratio
C)Level of fixed costs
D)Exchange rates

Question 68

When a company's product has a low value-to-weight ratio,the company should:

A)have a centralized manufacturing location.
B)produce the product in multiple locations close to major markets.
C)ignore transportation costs.
D)produce the product in one optimal location and serve the world from there.

Question 69

A company might consider decentralizing when:

A)a product's value-to-weight ratio is high.
B)the product serves universal needs.
C)trade barriers are low.
D)volatility in important exchange rates is expected.

Question 70

Which of the following is not an argument that supports making a product in-house?

A)Vertical integration may be associated with higher costs.
B)Vertical integration may protect proprietary product technology.
C)Vertical integration may facilitate investment in highly specialized assets.
D)Vertical integration may ease the scheduling of adjacent processes.

Question 71

An advantage of buying component parts,or even an entire product,from independent suppliers is that:

A)the firm can maintain its flexibility of switching orders between suppliers as circumstances dictate.
B)it can make planning,coordination,and scheduling of adjacent processes easier for the firm.
C)it reduces the risk for the firm that suppliers will expropriate the technology for their own use.
D)the firm is able to maintain firm control over its proprietary technology.

Question 72

The concentration of production makes most sense when:

A)volatility in important exchange rates is expected.
B)the product's value-to-weight ratio is high.
C)location externalities are not important.
D)trade barriers are high.

Question 73

Which of the following is not a reason to outsource production?

A)It can give the firm greater flexibility
B)It can make planning,coordination,and scheduling of adjacent processes easier
C)It can help drive down the firm's cost structure
D)It may help the firm capture orders from international customers

Question 74

All of the following are the major efficiency benefits of flexible manufacturing technologies except:

A)it enables companies to customize products to the demands of small consumer groups.
B)it helps a company achieve mass customization,which increases its customer responsiveness.
C)it requires firms to establish manufacturing facilities in each major market to provide products that satisfy specific consumer tastes and preferences.
D)it improves capacity utilization and reductions in work in progress and waste.

Question 75

A _____ is an asset whose value is contingent upon a particular relationship persisting.

A)specialized asset
B)common asset
C)complementary asset
D)supplementary asset

Question 76

How can firms attain tight coordination between different stages in the production process?

A)By using information technology
B)By lowering the costs of value creation
C)By implementing ISO 9000
D)By minimum efficient scale of output

Question 77

The concentration of production is favored when all of the following factors are high except

A)fixed costs.
B)minimum efficient scale.
C)value-to-weight ratio.
D)trade barriers.

Question 78

A firm will prefer to make the component internally rather than contract it out to a supplier,because of all of the following reasons except:

A)it needs to maintain control over its proprietary technology.
B)substantial investments in specialized assets are required to manufacture a component.
C)the firm completely trusts the independent supplier to play fair.
D)it runs the risk that suppliers will expropriate the technology for their own use.

Question 79

Just-in-time inventory systems:

A)can help firms improve product quality.
B)are fast becoming obsolete.
C)require that parts be warehoused.
D)give firms a buffer stock of inventory.

Question 80

Decisions a firm must make about whether to perform a certain value creation activity themselves,or outsource it to another entity are best known as:

A)outsource potential decisions.
B)in-house potential decisions.
C)make-or-buy decisions.
D)integration decisions.