Operations Management: Processes and Supply Chains, 12e (Krajewski)
Chapter 2 Process Strategy and Analysis
1) Process decisions are strategic in nature.
2) No process can exist without at least one product or service.
3) All parts of an organization, as well as external suppliers and customers across the supply chain, need
to be involved to ensure that processes are providing the most value to their internal and external
customers.
4) Processes, by their nature, are found only in the operations function of an organization.
5) Customer involvement reflects the ways in which customers become part of the process and the extent
of their participation.
6) Service providers with a line process tend to move customers, materials, or information in a fixed
sequence from one operation to the next.
7) A moment of truth or service encounter is face–to-face interaction between the customer and a service
provider.
8) Divergence is the extent to which the process is customized with considerable latitude on how the
tasks are performed.
9) A front office structure features high levels of customer contact where the service provider interacts
directly with the internal or external customer.
10) Back office work is typically routine, with many steps having considerable divergence.
11) People processing services require:
A) a high degree of process structure.
B) high capital intensity.
C) physical presence.
D) hybrid low volume–capital intensive operations.
12) A politician conducting a town hall meeting, face–to-face with her constituents, is an example of:
A) back office.
B) passive contact.
C) active contact.
D) hybrid office.
13) An interior designer decorates homes for a clientele that wants a one–of-a-kind living space. This
service process can be described as:
A) divergent.
B) complex.
C) specialized.
D) hybrid.
14) The process structure that best describes a waiter’s position at a restaurant would be classified as:
A) front office.
B) back office.
C) hybrid office.
D) inner office.
15) Field service representatives are classified as:
A) back office.
B) hybrid office.
C) front office.
D) mid office.
16) A process that is primarily back office is:
A) a taxi driver.
B) a loan officer at a bank.
C) the payroll clerk that calculates your paycheck.
D) the hostess at a restaurant.
17) Front offices typically emphasize:
A) low cost operations and on-time delivery.
B) top quality and customization.
C) on-time delivery and standardization.
D) top quality and low cost operations.
18) Back offices typically emphasize:
A) low cost operations and on-time delivery.
B) high divergence and customization.
C) on-time delivery and customization.
D) high customer contact and low cost operations.
19) What are three principles of process strategy that should govern choices that process designers make?
Provide examples of well-conceived process strategy choices to illustrate each of your three principles.
Answer: The three principles discussed in the text are: 1) The key to successful process decisions is to
make choices that fit the situation and that make sense together. They should not work at cross-purposes,
with one process optimized at the expense of other processes. A more effective process is one that
20) What are the different dimensions of customer contact in service processes? Provide an example of a
service that has high levels of customer contact and one that has very low levels of customer contact.
21) Describe and highlight differences among the three process structures in services.
Answer: The three process structures form a continuum and are front office, hybrid office, and back
office. The front office structure is a process with high customer contact in which the service provider
2.2 Process Structure in Manufacturing
1) A continuous flow process is characterized by a high degree of job customization.
2) A job process has the highest level of customization of the process choices.
3) Job processes generally have higher volumes than batch processes.
4) In a line process, there is little variability in the products manufactured, and production and material
handling equipment are often specialized.
5) Petroleum refineries typically use continuous flow processes.
6) The product-process matrix brings together the elements of volume, process, and quality.
7) An off-diagonal position in the product-process matrix is typically more profitable than a position on
the diagonal.
8) A make-to-stock strategy involves holding items in stock for immediate delivery and is feasible for
standardized products with high volumes and reasonably accurate forecasts.
9) The degree of process divergence is what keeps a large batch process from being economically
produced using a line process.
10) Assemble-to–order strategy produces a wide variety of products from relatively few assemblies and
components after orders are received.
11) The principle of postponement is modeled by the worker that has known his assignment for several
weeks, but waits until the day before the product is to be delivered to begin production.
12) Which of the following is sometimes called mass production?
A) batch process and make-to-order strategy
B) line process and make-to–stock strategy
C) continuous flow process and assemble-to–order strategy
D) job process and make-to–order strategy
13) A job process should be preferred when:
A) workforce and equipment are specialized.
B) products are made to stock type.
C) customization is high and volume is low.
D) customization is low and volume is high.
14) Which of the following statements about process choice is best?
A) A batch process typically has a standard sequence of operations through the facility.
B) Automobiles and appliances are examples of products created using a continuous flow process.
C) Continuous flow processes are very capital intensive.
D) A custom cake operation is an example of a batch process.
15) The product-process matrix used to analyze manufacturing operations brings together the elements
of:
A) volume, process, and intensity.
B) process, intensity, and product design.
C) intensity, volume, and process.
D) customization, volume, and process.
16) Which one of the following statements about process management is best?
A) When customization must be high, equipment should be general purpose, and employees need to
perform a broader range of duties.
B) The traditional relationship between capital intensity and resource flexibility is that if one is high, so is
the other.
C) Creating a more capital-intensive process tends to reduce the fixed cost and raise the variable unit cost.
D) Economies of scope mean that a process should be devoted to a single product or service to achieve
high volumes.
17) A manufacturer that produces standard products in large volumes is likely to be using a(n):
A) make-to–stock strategy.
B) make-to–order strategy.
C) assemble-to-order strategy.
D) engineer-to–order strategy.
18) The principle of postponement is employed by a producer using a(n):
A) make-to–stock strategy.
B) make-to–order strategy.
C) assemble-to-order strategy.
D) engineer-to–order strategy.
19) A(n) ________ process would probably not be used to produce products before a customer has placed
a firm order.
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20) Describe the differences among make-to-order, assemble-to-order, and make-to-stock strategies from
the producer’s and from the customer’s perspective.
Answer: A make-to-order strategy produces to customer specifications in low volumes; typically using
highly divergent job or batch processes that are highly flexible. This level of customization requires a
great deal of planning and control by the producer; the customer receives exactly what has been
21) List and briefly define four different basic types of manufacturing processes.
Answer: The four basic process types are job process, batch process, line process, and continuous flow
process. A job process creates the flexibility needed to produce a variety of products or services in
significant quantities. Customization is relatively high, and volume for any one product or service is low.
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22) Sketch and discuss the product-process matrix for manufacturing.
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2.3 Process Strategy Decisions
1) High customer involvement increases service provider productivity and makes quality measurement
easier.
2) Capital intensive automation is appropriate for both high and low volume operations.
3) Fixed automation is appropriate for both line and continuous flow operations.
4) The ability to reprogram machines is useful for both low-customization and high-customization
processes.
5) A toaster is an example of flexible automation.
6) In a service process, capital intensity varies with volume in both front office and back office operations.
7) Customer involvement is especially important for service process strategy decisions, particularly if
customer contact is high.
8) Additive manufacturing capabilities, such as 3D printing, prevent firms from achieving substantial
economies of scope.
9) Which of the following statements about customer involvement is best?
A) In service industries, customer contact is of minor importance.
B) High task divergence and flexible process flows require more flexibility of the process‘s employees,
facilities and equipment.
C) A firm that produces standardized products often seeks customer specifications.
D) When customer involvement is highly customized, a process is more likely to use a standardized–
services process rather than a customized-services process.
10) Active customer contact and personalized attention can lower cost to the customer by:
A) increasing the capital intensity.
B) trading fixed costs for an equivalent variable cost.
C) substituting customer efforts for those of the service provider.
D) lowering the level of technology involved.
Scenario 2.4
A company is considering two options for the production of a part needed downstream in the
manufacturing process. Particulars are as follows:
Specialized automation
Fixed Costs = $9,000 / month
Variable Cost / Unit = $2
General automation:
Fixed Costs = $3,000 / month
Variable Cost / Unit = $5
11) Use Scenario 2.4 to answer this question. What is the monthly break-even quantity for choosing
between the two automation approaches?
A) 1,000 units
B) 2,000 units
C) 6,000 units
D) 12,000 units
12) Use Scenario 2.4 to answer this burning question. For a monthly volume of 3,000 units, which
automation approach should be chosen?
A) specialized automation
B) general automation
C) Either approach is acceptable, because costs are the same for either option at 3,000 units.
D) Can’t be determined with information given.
13) Use Scenario 2.4 to solve this problem. What does the company save each month by selecting this low–
cost option compared to the higher-cost option (for monthly requirements of 3,000 units)?
A) $1,000
B) $3,000
C) $6,000
D) Can’t be determined with information given.
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Scenario 2.6
You currently purchase a part used in your production process from an outside supplier, and have
decided to begin making this part in-house. You have two equipment options for moving production in-
house: special-purpose equipment and general-purpose equipment. Cost information for these two
options is as follows:
ALTERNATIVE
FIXED COST
VARIABLE COST
Special-Purpose Equipment
$200,000 per year
$15 per unit
General-Purpose Equipment
$50,000 per year
$20 per unit
14) Use Scenario 2.6 to answer this question. What is the break even quantity between the two options?
A) 30,000 units per year
B) 40,000 units per year
C) 50,000 units per year
D) 60,000 units per year
15) Use Scenario 2.6 to answer this question. What are total costs under the Special-Purpose Equipment
option for an annual quantity of 40,000 units?
A) $400,000
B) $500,000
C) $800,000
D) $850,000
16) Use Scenario 2.6 to answer this question. What are total costs under the General-Purpose Equipment
option for an annual quantity of 40,000 units?
A) $400,000
B) $450,000
C) $800,000
D) $850,000
17) Use Scenario 2.6 to solve this riddle. For what range of output is the General-Purpose Equipment the
low-cost option?
A) 0-30,000 units per year
B) 30,000 or more units per year
C) 40,000 or more units per year
D) 0-40,000 units per year
18) Use Scenario 2.6 to answer this question. For what range of output is the Special-Purpose Equipment
the low-cost option?
A) 30,000 or more units per year
B) 0 – 30,000 units per year
C) 0 – 40,000 units per year
D) 40,000 or more units per year
19) Use Scenario 2.6 to solve this mystery. At an annual requirement of 40,000 units, what does the
company save per year by selecting the lower-cost option?
A) $150,000
B) $300,000
C) $50,000
D) $40,000
20) A higher level of fixed automation can be justified by:
A) decreased labor productivity.
B) longer cycle time.
C) higher demand volumes.
D) lower sales.
21) Which one of the following statements about flexible automation is best?
A) Investment cost is lower when a transfer machine handles many operations.
B) Chemical processing plants and oil refineries mainly utilize programmable automation.
C) It is an automatic process that can be reprogrammed to handle various products.
D) It achieves top efficiency; accommodating new products is difficult and costly.
22) With flexible automation, the ability to reprogram instructions can be useful in:
A) line flow, but not flexible flow, operations.
B) flexible flow, but not line flow, operations.
C) either line flow or flexible flow operations.
D) situations in which top efficiency is mandatory, but only if volumes are high.
23) Higher volume in a process is generally associated with:
A) more resource flexibility.
B) more capital intensity.
C) greater customer involvement.
D) fewer opportunities for standardization.
24) Which of the following statements regarding resource flexibility is best?
A) Training is a small part of worker flexibility.
B) Specialization of employees is consistent with worker flexibility.
C) Worker flexibility is not a priority if the process is subject to hourly or seasonal peaks in demand.
D) Resource flexibility requires employees to be able to perform a broad range of duties, and equipment
usually must be more general purpose.
25) Which of the following statements concerning resource flexibility is best?
A) Flexible equipment is useful to companies with low production volumes and high customization.
B) Investment in general-purpose equipment is warranted if the firm expects to sell more than the break–
even amount.
C) Manufacturing efficiency increases with general-purpose equipment.
D) Resource flexibility is crucial for line-flow processing.
26) Suppose that competitive priorities call for offering a wide variety of customized services. Which of
the following process decisions would be more likely?
A) more capital intensity
B) more resource flexibility
C) more process automation
D) less customer involvement
27) Which statement about economies of scope is not true?
A) Economies of scope are often attained through programmable automation.
B) Economies of scope bring together two competitive priorities—customization and low price.
C) Economies of scope reflect the ability to produce multiple products more cheaply in combination than
separately.
D) Economies of scope reflect low capital intensity and high resource flexibility.
28) Which of the following statements about additive manufacturing capabilities is not true?
A) Changes in product design are difficult and costly to incorporate.
B) It allows firms to react to a wider variety of customer demands.
C) Three-dimensional (3D) printing technology is one example of additive manufacturing.
D) It enables firms to achieve substantial economies of scope.
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29) Two manufacturing processes are being considered for making a new product. Process #1 is less
capital intensive, with fixed costs of $50,000 per year and variable costs of $700 per unit. Process #2 has
fixed costs of $400,000 annually, with variable costs of $200 per unit.
a. What is the break-even quantity for the two processes?
b. If annual sales are expected to be 600 units, which process should be selected?
c. If lowest overall costs per year is your overall objective, for what range of annual production quantities
should you select Process #1? Process #2?
d. Operations and Engineering have found a way to reduce the cost of Process #2, such that the fixed
costs for this process decrease from $400,000 to $300,000 annually. All other costs remain the same
(Process #1 fixed = $50,000 / year, Process #1 variable = $700 / unit, Process #2 variable = $200 / unit). What
is the new break even quantity between the two processes?
e. Does this change the process selection for the annual sales volume of 600 units? If so, for what range of
annual production quantities should you select Process #1 and Process #2?
Answer:
a. $50,000 + $700(Q) = $400,000 + $ 200(Q)
$500(Q) = $350,000 → Q = 700 units per year