Chapter 16—Managing Service and Manufacturing Operations
TRUE/FALSE
1. At their core, companies are production systems that combine inputs such as labor, raw materials,
capital, and knowledge to produce outputs such as finished goods or services.
2. Higher productivity is good not only for individual companies that achieve it but also for the countries
in which they do business.
3. Two common measures of productivity are extrinsic productivity and intrinsic productivity.
4. Extrinsic productivity indicates how much labor, capital, materials, and energy it takes to produce an
output.
5. Labor productivity is a frequently used example of extrinsic productivity.
6. The easier it is to maintain a working product or fix a broken product, the more reliable that product is.
7. Durability is a quality characteristic that applies to products that are can’t be repaired, only replaced.
8. The five characteristics that typically distinguish a quality service are reliability, tangibles,
responsiveness, assurance, and empathy.
9. ISO 9000 is a series of five international standards for achieving consistency in quality management
and quality assurance because they ensure that companies carefully document the steps they take to
create and improve product quality.
10. The purpose of the Baldrige National Quality Award is to recognize U.S. companies for their
achievements in quality and business performance and to raise awareness about the importance of
quality and performance excellence as a competitive edge.
11. Since the Baldrige Award is directly based on ISO 9000 standards, it is essentially a U.S. version of
recognition for excellence in meeting the ISO 9000 standards.
12. Total quality management (TQM) is an integrated organization-wide strategy for improving product
and service quality.
13. The companies that have won the Baldrige Award have achieved superior financial returns.
14. In TQM, customer focus and satisfaction, continuous improvement, and teamwork mutually reinforce
each other to improve quality throughout a company.
15. The first step in the service-profit chain is external service quality or the quality of treatment that
employees receive from a company’s internal service providers.
16. The purpose of service recovery is to restore customer satisfaction to strongly dissatisfied customers
17. Generally speaking, it costs ten times as much to find a new customer as it does to keep an existing
customer.
18. All manufacturing operations produce physical goods.
19. Manufacturing operations are classified according to the depth of their inventory stock.
20. Make-to-stock operations are highly dependent on the accuracy of sales forecasts.
21. Inventory is defined as the number of finished products that a company has in its possession either in
the factory, in warehouses, or on delivery vehicles.
22. Stockout costs are incurred when a company runs out of finished products.
23. The three basic measures of inventory are average aggregate inventory, weeks of supply, and inventory
turnover.
24. In general, the lower the number of inventory turns, the more efficiently the marketing department is
operating.
25. The four kinds of costs incurred with inventory maintenance are ordering costs, setup costs,
transaction costs, and stockout costs.
26. To effectively manage inventory, a manager should use EOQ formulas when inventory levels are
independent, and JIT and MRP when inventory levels are dependent on the number of products to be
produced.
27. Economic order quantity is intended for use with independent demand systems.
MULTIPLE CHOICE
1. ____ is a measure of performance that indicates how many inputs it takes to produce or create an
output.
a.
Reliability
b.
Performance accountability
c.
Productivity
d.
TQM
e.
Effectiveness
2. At their core, companies are ____ systems that combine inputs such as labor, raw materials, capital,
and knowledge to produce finished products and other types of output.
a.
organizational
b.
production
c.
social
d.
predictable
e.
socio-cultural
3. Which of the following shows the correct relationship for productivity, outputs, and inputs?
a.
productivity = (inputs/outputs)
b.
productivity = [(inputs outputs)/100]
c.
outputs = (productivity/inputs)
d.
productivity = (outputs/inputs)
e.
inputs = (productivity/outputs)
4. Which of the following statements about productivity is true?
a.
Productivity is a ratio of benefits to costs (i.e., benefits divided by costs).
b.
For companies, higher productivity can lead to lower costs.
c.
For countries, higher productivity produces a lower standard of living.
d.
Productivity decreases make products more affordable.
e.
All of the statements about productivity are true.
5. Why is productivity important to countries?
a.
Productivity matters because it produces a higher standard of living.
b.
Greater productivity results in lower wages.
c.
Productivity increases supply and reduces demand for products.
d.
Productivity reduces taxation.
e.
None of these statements explains why productivity is important to countries.
6. ____ productivity is a measure of performance that indicates how much of a particular kind of input it
takes to produce an output.
a.
Breakdown
b.
Segregated
c.
Unifactor
d.
Partial
e.
Fractional
7. The CEO of a company that manufactures maple wooden cutting boards has determined that it takes
wood, labor, and electricity to make one maple cutting board. The CEO has determined the ____
productivity of his company so he can compare its operation with that of its competition.
a.
integrated
b.
multifactor
c.
segregated
d.
functional
e.
breakdown
8. ____ productivity shows how much labor, capital, materials, and energy it takes to create an output.
a.
Temporal
b.
Multifactor
c.
Functional
d.
Continuous
e.
Quantitative
9. If the manager of a company that manufactures signs was interested in how much glass tubing was
needed to produce a Las Vegas casino neon sign, the manager would be interested in ____
productivity.
a.
composite
b.
multifactor
c.
partial
d.
breakdown
e.
fractional
10. In general, managers should use ____ to directly compare their overall level of productivity to that of
their competitors, and ____ to analyze the contributions of individual components to that overall
productivity.
a.
efficiency measures; a productivity analysis
b.
partial productivity; multifactor productivity
c.
integrated productivity; segregated productivity
d.
fragmented productivity; complete productivity
e.
multifactor productivity; partial productivity
11. The American Society for Quality defines quality as ____.
a.
a product free of deficiencies, or the characteristics of a product or service that satisfy
customers’ needs
b.
a product that customers perceive as free of deficiencies
c.
any product made from error-free components
d.
a product produced according to a sacrificing design plan
e.
none of these
12. Which of the following is an important characteristic of a quality product?
a.
reliability
b.
validity
c.
responsiveness
d.
homogeneity
e.
tangibility
13. The product quality characteristic of ____ is defined as the mean time before product failure.
a.
reliability
b.
assurance
c.
durability
d.
responsiveness
e.
effectiveness
14. The easier it is to maintain a working product or fix a broken product, the more ____ that product
appears.
a.
reliable
b.
serviceable
c.
durable
d.
tangible
e.
effective
15. Most companies define product ____ in terms of how easy or difficult it is to fix a product.
a.
reliability
b.
serviceability
c.
responsiveness
d.
consistency
e.
effectiveness
16. The average time between breakdowns (for machinery) is referred to as ___?
a.
reliability
b.
serviceability
c.
responsiveness
d.
consistency
e.
effectiveness
17. A product’s quality is determined by its ____.
a.
reliability, homogeneity, and durability
b.
reliability, validity, and effectiveness
c.
serviceability, tangibility, and homogeneity
d.
durability, reliability, and serviceability
e.
consistency, tangibility, and durability
18. Which of the following quality characteristics can be applied to both goods and services?
a.
reliability
b.
serviceability
c.
durability
d.
homogeneity
e.
tangibility
19. The ability to consistently perform a service well is referred to as service ____.
a.
reliability
b.
assurance
c.
responsiveness
d.
tangibility
e.
durability
20. An article addressed to nurses who work in intensive care emphasize practices affirming the patient’s
intrinsic value and individual personality One method to affirm the patient’s intrinsic value is to
demonstrate ____.
a.
empathy
b.
serviceability
c.
durability
d.
homogeneity
e.
tangibility
21. In terms of the characteristics of service quality, a major newspaper is said to be ____ if it provides
news of interest to its readers consistently at the same time and place daily.
a.
proactive
b.
responsive
c.
durable
d.
accessible
e.
reliable
22. ISO 14000 ____.
a.
provides ISO certification for service providers
b.
is a series of five international standards for achieving consistency in quality management
and quality assurance in companies throughout the world
c.
is a series of international standards for managing, monitoring, and minimizing an
organization’s harmful effect on the environment
d.
is the interim ISO certification that is granted in the event that ISO 9000 certification is
temporarily withdrawn
e.
is only given to manufacturers who have achieved the highest possible level of product
quality and assurance
23. Which of the following statements about ISO 9000 is true?
a.
ISO 9000 is a series of three standards for achieving consistency in quality management
and quality assurance in U.S.-based organizations only.
b.
The ISO 9000 standards are specific and require companies who seek this certification to
completely reorganize.
c.
To become ISO 9000 certified, companies must show that they are following their own
procedures.
d.
The ISO standards were created by the Industrial Service Organizations.
e.
All of these statements about ISO 9000 are true.
24. Which of the following statements about ISO 9000 is true?
a.
ISO 9000 is a single international standard for achieving consistency in quality
management and quality assurance in companies throughout the world.
b.
The ISO 9000 standard is applicable only to the manufacturing of goods and not to the
delivery of services.
c.
ISO 9000 certification may be suspended or canceled if companies fail a periodic audit
following their initial certification.
d.
Ninety-eight percent of companies that already have achieved ISO 9000 certification said
they did so because it increases profitability.
e.
Service providers can achieve ISO 14000 certification.
25. Which of the following statements about ISO 9000 is true?
a.
ISO 9000 is a series of five international standards for achieving consistency in quality
management and quality assurance in companies throughout the world.
b.
The ISO 9000 standards are applicable to the manufacturing of goods and to the delivery
of services.
c.
Studies show that customers prefer to buy from companies with ISO 9000 certification.
d.
ISO 9000 certification may be suspended or canceled if companies fail an audit following
their initial certification.
e.
All of these statements about ISO 9000 are true.
26. The purpose of ____ is to recognize U.S. companies for their achievements in quality and business
performance and to raise awareness of how quality and performance excellence can be used to create a
competitive edge.
a.
ISO 9000 certification
b.
the Baldrige Award
c.
the Herzberg Award for Excellence
d.
Kanban certification
e.
the Gantt Award
27. The three principles that characterize TQM are continuous improvement, teamwork, and ____.
a.
third party certification
b.
delegation
c.
participative management
d.
customer focus and satisfaction
e.
distinctive competence
28. The three principles that characterize TQM are continuous improvement, customer focus and
satisfaction, and ____.
a.
teamwork
b.
organizational dialogue
c.
the equity theory
d.
autonomy
e.
competitive advantage
29. In TQM terms, ____ is an organizational goal to provide products or deliver services that meet or
exceed customers’ expectations.
a.
market response
b.
customer satisfaction
c.
market focus
d.
positive framing
e.
added value
30. A company expressing its ongoing commitment to continuous product improvement and premium
quality products is committed to ____.
a.
a bureaucratic structure
b.
total quality management
c.
winning ISO 8000 certification
d.
implementing an MRP program
e.
autonomous work stations
31. Which of the following is NOT a criterion on which companies are judged when applying for the
Baldrige National Quality Award?
a.
leadership
b.
business results
c.
customer and market focus
d.
competitive advantage
e.
process management
32. Which of the following statements about the Baldrige National Quality Award is true?
a.
The purpose of the Baldrige Award is to recognize all companies that operate in the
business-to-business market for their achievements in quality and business performance
and to raise awareness about the importance of quality and performance excellence as a
competitive edge.
b.
The Baldrige Award is primarily concerned with improving customer satisfaction.
c.
Companies that apply for the Baldrige Award are judged on a 1,000-point scale based on
three criteria: leadership, customer and market focus, and business results.
d.
An emphasis on results is what differentiates the Baldrige Award from the ISO 9000
standards.
e.
All of these statements about the Baldrige National Quality Award are true.
33. Which of the following statements about total quality management (TQM) is true?
a.
TQM is an integrated organization-wide strategy for improving product and service
quality.
b.
TQM is a specific technique used to reposition a company’s product so as to justify higher
prices.
c.
TQM is based on four mutually reinforcing principles: customer focus, customer
satisfaction, participative management, and delegation.
d.
TQM was developed and is monitored by the International Organization of Standards.
e.
All of these statements about TQM are true.
34. According to the TQM strategy, what should be a company’s primary goal?
a.
customer focus and satisfaction
b.
continuous improvement
c.
teamwork
d.
participative management
e.
reciprocity
35. Continuous improvement is typically associated with ____.
a.
low morale and reduced customer satisfaction
b.
a reduction in variation and higher customer satisfaction
c.
batch processing and a broad chain of command
d.
a flat organizational structure and a broad chain of command
e.
higher customer satisfaction and a narrower chain of command
36. When a CEO of a company says that TQM ‘s payoff comes when everyone shares solutions with
others, the CEO is promoting which characteristic of TQM?
a.
continuous improvement
b.
variation elimination
c.
teamwork
d.
market focus
e.
a customer orientation
37. Many organizations rely on teaming as a key to their productivity and credit their use of teams with
performance improvements in such areas as efficiency and quality. This statement is another way to
illustrate ____.
a.
the importance of benchmarking
b.
the prevalence of ISO certification
c.
how restructuring leads to stakeholder satisfaction
d.
the importance of morale in the creation of a positive bureaucracy
e.
how teamwork can result in total quality management
38. ____ is a deviation in the form, condition, or appearance of a product from the quality standard for that
product.
a.
Performance breakdown
b.
Quality underperformance
c.
Aberration
d.
Divergence
e.
Variation
39. The first step in the service-profit chain is the establishment of ____.
a.
employee satisfaction
b.
service capability
c.
internal service quality
d.
high value service
e.
nonmonetary rewards
40. One of the key assumptions in the service business is that success depends on how well employees
deliver their services to customers. However, according to the service-profit chain, success depends on
____.
a.
the availability of factors of production
b.
autocratic management
c.
a high degree of centralization
d.
how well employees are treated
e.
market size
41. A company has purchased new software which will allow its employees to extend the electronic
support capabilities and parts-ordering efficiencies the company offers its customers. The company’s
improved ____ should lead to improved employee satisfaction.
a.
service capability
b.
lean manufacturing
c.
service benchmarking
d.
service empowerment
e.
customer empathy
42. Which of the following is a specific component of internal service quality?
a.
MBO
b.
high value service
c.
delegation
d.
autonomy
e.
span of management
43. This is a description of what happened to a patron at Royal Mail (the United Kingdom’s equivalent of
the USPS). “In the 15 minutes I waited in line, during which I shuffled forward one yard and two
places, I had ample opportunity to watch what the other three staff were doing. They were busy all
right, but the main task was counting each stamp in their folders. In this vital work, two of the three
were overseen by another member of staff. There was no eye contact with the waiting customers.”
Assuming this experience is typical, the Royal Mail needs to engage in ____.
a.
service recovery
b.
process integration
c.
manufacturing flexibility
d.
just-in-time manufacturing
e.
process changeover
44. The term ____ refers to restoring customer satisfaction to strongly dissatisfied customers.
a.
service recovery
b.
service enhancement
c.
customer focus
d.
customer reengineering
e.
relationship marketing
45. Which of the following statements about service recovery is true?
a.
Service recovery refers to restoring customer satisfaction to strongly dissatisfied
customers.
b.
Service recovery sometimes requires not only that mistakes be fixed but also that heroic
service be performed that far surpasses the expectations dissatisfied customers have
regarding fair treatment.
c.
The purpose of empowering service employees is zero customer defections.
d.
Service recovery increases the cost of selecting and hiring service workers who are
capable of solving problems and dealing with irate customers.
e.
All of these statements about service recovery are true.
46. The highest degree of processing occurs in ____ operations.
a.
assemble-to-order
b.
make-to-order
c.
make-to-stock
d.
batch
e.
real-time
47. ____ refers to a manufacturing operation that divides manufacturing processes into separate parts or
modules that are combined to create semi-customized products.
a.
Assemble-to-stock
b.
Assemble-to-order
c.
Make-to-order
d.
Make-to-stock
e.
Batch processing
48. The lowest degree of processing occurs in ____ operations, where a company orders parts and
assembles standardized products before receiving customer orders.
a.
assemble-to-stock
b.
buy–to-sell
c.
make-to-order
d.
make-to-stock
e.
assemble-to-order
49. Classifying manufacturing operations in terms of the amount of assembly that occurs after an order is
received from customers is the same as classifying those operations in terms of ____.
a.
processing
b.
flexibility
c.
production
d.
operations
e.
technical skills
50. Which of the following types of operations are most dependent on the accuracy of sales forecasts?
a.
project manufacturing
b.
assemble-to-order operations
c.
make-to-order operations
d.
buy–to-sell operations
e.
make-to-stock operations
51. The ____ of a maker of cloth dolls would include over 200 yards of fabric, 100 yards of ribbon, a box
of 500 wiggle eyes, stuffing, 20 dolls in various stages of completion, and 15 completed dolls.
a.
raw materials
b.
component materials
c.
finished products
d.
inventory
e.
SKUs
52. ____ inventories include the basic inputs in a manufacturing process.
a.
Finished goods
b.
Work-in-process
c.
Component parts
d.
Raw materials
e.
Recyclable
53. Pamela Katian makes cloth dolls, which she sells to friends and relatives. Her total inventory includes
over 200 yards of fabric, 100 yards of ribbon, a box of 500 eyes, stuffing, 20 dolls in various stages of
completion, and 15 completed dolls. How many items are in Katian’s work–in-process inventory?
a.
100
b.
200
c.
15
d.
20
e.
cannot tell from information given
54. Which of the following is NOT a kind of inventory a manufacturer would keep in stock?
a.
raw materials
b.
nonrenewable materials
c.
component parts
d.
finished goods
e.
work-in-process
55. Pamela makes cloth dolls, which she sells to friends and relatives. Her total inventory includes over
200 yards of fabric, 100 yards of ribbon, a box of 500 eyes, stuffing, 20 dolls in various stages of
completion, and 15 completed dolls. How many items are in Katian’s finished goods inventory?
a.
100
b.
500
c.
15
d.
20
e.
cannot be determined from the information given
56. The three basic measures of inventory are inventory turnover, average aggregate inventory, and ____.
a.
inventory depreciation
b.
inventory amortization
c.
weeks of supply
d.
multifactor inventory
e.
speed of obsolescence
57. A company decided to reduce its inventory by lowering their prices. The plan to get rid of excessive
inventory was so successful that the company found itself completely sold out in just a couple of days.
In other words, The company experienced ____.
a.
a loss of amortization
b.
negative sales
c.
a stockout
d.
aggregated turnover
e.
negative turnover