40.
Just-in-time systems help a firm respond quickly to increases in demand.
FALSE
The drawback of a JIT system is that it leaves a firm without a buffer stock
of inventory. Although buffer stocks are expensive to store, they can help a
firm respond quickly to increases in demand and tide a firm over shortages
brought about by disruption among suppliers.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-05 Describe what is required to efficiently coordinate a globally dispersed production system.
Topic: Managing a Global Supply Chain
Multiple Choice Questions
41.
Logistics is the activity that controls the _____.
A.
transmission of physical materials through the value chain
B.
customer contact points of a business
C.
activities involved in creating a product
D.
Logistics is the activity that controls the transmission of physical materials
through the value chain, from procurement through production and into
distribution.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Explain why production and logistics decisions are of central importance to many multinational
businesses.
Topic: Strategy, Production, and Logistics
42.
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.
recommends that only one product should be defective in thousand
products
The Six Sigma methodology is a direct descendant of the total quality
management (TQM) philosophy that was widely adopted, first by Japanese
companies and then American companies during the 1980s and early 1990s.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Explain why production and logistics decisions are of central importance to many multinational
businesses.
Topic: Strategy, Production, and Logistics
43.
Deming, the proponent of total quality management, argued that _____.
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
Deming argued that management has the responsibility to train employees
in new skills to keep pace with changes in the workplace. In addition, he
believed that achieving better quality requires the commitment of everyone
in the company.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Explain why production and logistics decisions are of central importance to many multinational
businesses.
Topic: Strategy, Production, and Logistics
44.
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
The European Union requires that the quality of a firm’s manufacturing
processes and products be certified under a quality standard known as ISO
9000 before the firm is allowed access to the EU marketplace.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Explain why production and logistics decisions are of central importance to many multinational
businesses.
Topic: Strategy, Production, and Logistics
45.
At Six Sigma, 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
At Six Sigma, a production process would be 99.99966 percent accurate,
creating just 3.4 defects per million units. While it is almost impossible for a
company to achieve such perfection, Six Sigma quality is a goal that several
strive toward.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Explain why production and logistics decisions are of central importance to many multinational
businesses.
Topic: Strategy, Production, and Logistics
46.
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 Sigma, a production process will have 6.6 defects per million units.
C.
At Six Sigma, 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 six thousand.
Explanation: Six Sigma is a statistically based philosophy that aims to
reduce defects, boost productivity, eliminate waste, and cut costs
throughout a company. At Six Sigma, a production process would be
99.99966 percent accurate, creating just 3.4 defects per million units.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-01 Explain why production and logistics decisions are of central importance to many multinational
businesses.
Topic: Strategy, Production, and Logistics
47.
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.
Other things being equal, a firm should locate its various manufacturing
activities where the economic, political, and cultural conditions, including
relative factor costs, are conducive to the performance of those activities.
AACSB: Analytic
Blooms: Understand
48.
Which of the following is a factor that transforms a low-cost location to a
high-cost location?
A.
Appreciation of local currency
B.
Use of fixed exchange rates
C.
Use of pegged exchange rates
D.
Implementation of free trade regime
Adverse changes in exchange rates can quickly alter a country’s
attractiveness as a manufacturing base. Currency appreciation can
transform a low-cost location into a high-cost location.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
49.
Which of the following is a technological factor that affects international
business?
A.
Exchange rates that govern the business
B.
Relative factors costs in the locality
C.
Availability of a skilled labor pool
D.
Fixed costs of setting up a production plant
Three technological factors majorly affect international business: the level
of fixed costs, the minimum efficient scale, and the flexibility of the
technology.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
50.
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
Being too dependent on one location is particularly risky in a world of
floating exchange rates. Many firms disperse their manufacturing plants to
different locations as a “real hedge” against potentially adverse moves in
currencies.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
51.
According to the concept of economies of scale, as plant output expands,
_____.
A.
productivity decline
B.
total costs decrease
C.
unit costs decrease
D.
utilization of capital decline
The concept of economies of scale tells us that as plant output expands,
unit costs decrease. The reasons include the greater utilization of capital
equipment and the productivity gains that come with specialization of
employees within the plant.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
52.
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 discount political risks and other global capital risks.
D.
A minimum efficient scale of a plant allows decentralization of
production.
The advantages of a low minimum efficient scale include allowing the firm
to accommodate demands for local responsiveness or to hedge against
currency risk by manufacturing the same product in several locations.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
53.
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 are different from each other
D.
production of small volumes of high-quality products
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 mass
production of a standardized output. The trade-off implicit in this idea is
between unit costs and product variety.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
54.
Flexible manufacturing technology is also known as _____.
A.
Six sigma production
B.
line production
C.
standardization
D.
lean production
The term flexible manufacturing technology is also known as lean
production.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
55.
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 equipments
C.
Standardizing the output of a system
D.
Implementing specialized equipments in production
The term flexible manufacturing technology —or lean production, as it is
often called—covers a range of manufacturing technologies designed to (1)
reduce setup times for complex equipment, (2) increase the utilization of
individual machines through better scheduling, and (3) improve quality
control at all stages of the manufacturing process.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
56.
_____ 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
Lean production 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.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
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 personalization.
A.
assembly-line production
B.
product standardization
C.
mass customization
D.
Six Sigma production
The term mass customization has been coined to describe the ability of
companies to use flexible manufacturing technology to reconcile two goals
that were once thought to be incompatible—low cost and product
personalization. Flexible manufacturing technologies vary in their
sophistication and complexity.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
58.
A(n) _____ is a grouping of various types of machinery, a common materials
handler, and a centralized cell controller.
A.
flexible machine cell
B.
Six Sigma
C.
assembly line
D.
minimum efficient scale
Flexible machine cells are another common flexible manufacturing
technology. A flexible machine cell is a grouping of various types of
machinery, a common materials handler, and a centralized cell controller
(computer).
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.
Topic: Where to Produce
59.
Which of the following statements is true of products with high value-to–
weight ratios?
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 account for a very small percentage of the total
costs.
Many electronic components and pharmaceuticals have high value-to–
weight ratios. They are expensive and they do not weigh very much. Thus,
even if they are shipped halfway around the world, their transportation
costs account for a very small percentage of total costs.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 17-02 Explain how country differences; production technology; and product features all affect the
choice of where to locate production activities.