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Student name:__________
1) Define the term logistics. Compare and contrast production and logistics.
2) Discuss the strategic objectives of the production and logistics functions of an
international firm.
3) Describe the major arguments put forth by Edward Deming.
4) Briefly describe the Six Sigma methodology.
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5) What are the three main factors that affect the decision of where to locate production?
6) Discuss the effect of country factors on the decision of where to locate production.
7) How does the type of technology a firm uses affect its decision of where to locate
production?
8) Explain how fixed costs impact the decision to where to locate a plant.
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9) Describe the concept of minimum efficient scale of output. What are the implications of
minimum efficient scale?
10) Explain how the concept of production efficiency has changed with the rise of flexible
manufacturing technologies.
11) How do product factors affect the decision of where to locate production? Where will you
locate your firm’s production plant if your firm produces refined sugar?
12) When does concentration of production make sense?
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13) Explain how the strategic role of foreign factories evolves over time.
14) Explain make-or-buy decisions by giving an example of an international business that
must decide whether to outsource an activity.
15) Define just-in-time inventory. Explain why a firm might adopt the just-in-time system.
Why might a firm choose a different inventory system?
16) Logistics is the activity that controls the
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A) effective flows of physical materials through the value chain.
B) customer contact points of a business.
C) activities involved in creating a product.
D) information flows between a business and its customers.
17) The Six Sigma methodology
A) is used to compare and benchmark the performances of competing firms.
B) gives more importance to productivity than product quality.
C) is a direct descendant of the total quality management philosophy.
D) says that at six sigmas, there would be only 0.6 defects per million units.
18) Deming argued that to keep pace with changes in the workplace
A) work standards should be defined only as quotas and numbers.
B) supervision is not essential for quality improvements.
C) management should train employees in new skills.
D) products should be certified with standards such as ISO 9000.
19) 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) Six Sigma.
B) ISO 9000.
C) Kaizen.
D) total quality management.
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20) At six sigmas, a production process would be highly accurate and create just
A) 3.4 defects per hundred thousand units.
B) 6.8 defects per million units.
C) 3.4 defects per million units.
D) 6.8 defects per hundred thousand units.
21) Which of the following statements is true of Six Sigma?
A) It is a statistically based philosophy to reduce defects and boost productivity.
B) At six sigmas, a production process will have 6.6 defects per million units.
C) At six sigmas, a production process would be 100 percent accurate.
D) A company can achieve Six Sigma perfection by reducing the number of defects to
one in 6,000.
22) Which of the following statements is true of the country factors that govern international
business?
A) Relative factor costs should be considered when selecting a country for production.
B) Centralized production is the most suitable method of doing international business.
C) Exchange rates are not a significant factor that determines the selection of a country.
D) Decentralized manufacturing is the most suitable method of doing international
business.
23) Which of the following is a factor that transforms a low-cost location to a high-cost
location?
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A) appreciation of local currency
B) use of fixed exchange rates
C) use of pegged exchange rates
D) implementation of free trade regime
24) Which of the following is a characteristic of manufacturing technology that can be
pivotal in deciding where to locate an international business?
A) exchange rates that govern the business
B) relative factors cost in the locality
C) availability of a skilled labor pool
D) fixed costs of setting up a production plant
25) Which of the following makes being dependent on one location particularly risky?
A) governmental intervention in exchange rates
B) floating exchange rates
C) fixed exchange rates
D) preferential treatment of domestic industries
26) According to the concept of economies of scale, as plant output expands
A) productivity declines.
B) total costs decrease.
C) unit costs decrease.
D) utilization of capital declines.
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27) Identify an advantage of adopting a low minimum efficient scale.
A) It helps companies reduce the level of initial capital required for business.
B) It allows the firm to accommodate demands for local responsiveness.
C) It allows firms to discount political risks and other global capital risks.
D) A minimum efficient scale of a plant allows decentralization of production.
28) Central to the concept of economies of scale is the idea that the best way to achieve high
efficiency, and hence low unit costs, is through the
A) customization of products for each individual market.
B) mass production of a standardized output.
C) production of goods that vary from one another.
D) production of small volumes of high-quality products.
29) Flexible manufacturing technology is also known as
A) Six Sigma production.
B) line production.
C) standardization.
D) lean production.
30) Which of the following is a desired outcome of flexible manufacturing technology?
A) minimizing the utilization of individual machines
B) reducing setup times for complex equipment
C) standardizing the output of a system
D) implementing specialized equipment in production
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31) _____ 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) Standardization
B) Kaizen
C) Six Sigma
D) Lean production
32) 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 personalization.
A) assembly-line production
B) product standardization
C) mass customization
D) Six Sigma production
33) _____ is a grouping of various types of machinery, a common materials handler, and a
centralized cell controller.
A) A flexible machine cell
B) A Six Sigma
C) An assembly line
D) A minimum efficient scale
34) Which of the following statements is true of products with high value-to-weight ratios?
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A) Transportation costs usually account for a large percentage of their total costs.
B) They are relatively inexpensive and weigh a lot.
C) They are usually produced in multiple locations close to major markets.
D) Their transportation accounts for a very small percentage of the total costs.
35) Which of the following products will most likely have high value-to-weight ratios?
A) pharmaceuticals
B) refined sugar
C) bulk chemicals
D) petroleum products
36) When a company’s product has a low value-to-weight ratio, the company should
A) acquire a shipping company and manufacture nearby.
B) manufacture products from a centralized location.
C) ignore transportation costs as they would only be a minor part.
D) produce the product in multiple locations close to major markets.
37) Which of the following products will have low value-to-weight ratios?
A) pharmaceuticals
B) refined sugar
C) microprocessor
D) electronic items
38) Concentration of production is appropriate when
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A) the product serves universal needs.
B) the product does not serve universal needs.
C) the product’s value-to-weight ratio is low.
D) volatility in important exchange rates is expected.
39) The level of output at which most plant-level scale economies are exhausted is referred to
as the
A) minimum efficient scale of output.
B) downstream supply chain.
C) flexible machine.
D) upstream supply chain.
40) An advantage of a _____ allows a firm to hedge against currency risks.
A) low TQM
B) low minimum efficient scale
C) high TQM
D) high minimum efficient scale
41) _____ covers a range of manufacturing technologies designed to reduce setup times for
complex equipment.
A) ISO 9000
B) TQM
C) Lean production
D) JIT
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42) A flexible machine cell is
A) a component of a source factory.
B) used to perform a standardized operation.
C) a component of a lead factory.
D) a grouping of various types of machinery, a common materials handler, and a
centralized cell controller.
43) Products such as refined sugar, certain bulk chemicals, paint, and petroleum products
A) cannot travel through a global supply chain.
B) have low value-to-weight ratios.
C) come from offshore factories.
D) have high value-to-weight ratios.
44) Which of the following is the main concept of economies of scale?
A) Productivity declines when firms attempt to reduce costs.
B) Total costs increase as firms increase production.
C) Unit costs decrease as a plant’s output expands.
D) Utilization of capital declines when firms grow in size.
45) _____ implies that a firm may be able to customize its product range to suit the needs of
different customer groups without bearing a significant cost penalty.
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A) Assembly-line production
B) Mass customization
C) Six Sigma production
D) Product standardization
46) The typical _____ is dedicated to the production of a family of parts or products through
the use of four to six machines capable of performing various operations.
A) minimum efficient scale
B) flexible machine cell
C) just-in-time machine
D) assembly line
47) Decentralization of production is appropriate when
A) a product’s value-to-weight ratio is high.
B) the product serves universal needs.
C) barriers to trade are low.
D) volatility in key exchange rates is expected.
48) Which of the following is a hidden cost associated with basing production in a foreign
location?
A) cost of labor within the location
B) high employee turnover
C) transportation costs
D) differences in the value of currency
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49) The idea that valuable knowledge does not reside just in a firm’s domestic operations but
can also be found in its foreign subsidiaries is called
A) global learning.
B) global production processes.
C) global economics.
D) global factors.
50) _____ makes the most sense when differences among countries in factor costs have a
substantial impact on the costs of manufacturing in various countries.
A) Decentralized production
B) Just in time (JIT)
C) Concentration of production
D) Total quality management (TQM)
51) Decentralization of production is appropriate when
A) the product’s value-to–weight ratio is high.
B) location externalities are important.
C) the product serves universal needs.
D) volatility in important exchange rates is expected.
52) This type of factory—often with the same standards as the top factories in the global
firm’s system—is set up to overcome intangible and tangible barriers in the global marketplace.
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A) contributor factory
B) source factory
C) lead factory
D) server factory
53) _____ is often placed near a competitor’s headquarters or main operations, near the most
demanding customers, or near key suppliers of unique and critically important parts.
A) An outpost factory
B) A source factory
C) A contributor factory
D) A lead factory
54) This is where cutting-edge production should take place, or at least be tested for
implementation in other parts of the firm’s production network.
A) source factory
B) lead factory
C) contributor factory
D) outpost factory
55) Which of the following would lead a firm to choose a concentration of production?
A) Trade barriers are high.
B) Location externalities are not important.
C) Important exchange rates are expected to remain relatively stable.
D) The product’s value-to-weight ratio is low.
56) Which of the following situations would lead a firm to choose to decentralize production?
A) The product serves universal needs.
B) The production technology has high fixed costs and high minimum efficient scale
relative to global demand or flexible manufacturing technology exists.
C) Trade barriers are low.
D) The production technology has low fixed costs and low minimum efficient scale, and
flexible manufacturing technology is not available.
57) RSA is a bicycle manufacturing company. Which of the following is a make-or-buy
decision that the company will have to make?
A) Should the company increase its responsiveness toward the retailers?
B) What are the products that the company should manufacture?
C) Should the company outsource production to a low-cost vendor?
D) What should be the pricing strategy for the company’s product?
58) Make-or-buy decisions are decisions about
A) the components to be used in the manufacturing process.
B) procuring raw materials for a production process.
C) procuring the capital equipment for production.
D) whether or not to outsource value creation activities.
59) An advantage of engaging in in-house production of products and components is that