Chapter 18: Managing Service and Manufacturing Operations
1. Supervisors engaged in operations management manage the daily production of goods and services.
2. 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.
3. Higher productivity is good not only for individual companies that achieve it, but also for the countries
in which they do business.
4. Two common measures of productivity are extrinsic productivity and intrinsic productivity.
5. Labor productivity is a frequently used example of extrinsic productivity.
6. Extrinsic productivity indicates how much labor, capital, materials, and energy it takes to produce an
output.
7. While partial productivity assesses how efficiently companies use only one input, such as labor, when
creating outputs, complete productivity is an overall measure of productivity that assesses how
efficiently companies use all the inputs it takes to make outputs.
8. The easier it is to maintain a working product or fix a broken product, the more reliable that product is.
9. Durability is a quality characteristic that applies to products that are not serviceable.
10. Studies clearly show that customers care more about responsiveness than anything else when buying
services
11. The five characteristics that typically distinguish a quality service are reliability, tangibles,
responsiveness, assurance, and empathy.
12. The single characteristic of service quality that is most important to customers is empathy.
13. 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.
14. The purpose of the Baldrige National Quality Award 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.
15. The companies that have won the Baldrige Award have achieved superior financial returns.
16. 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.
17. Total quality management (TQM) is an integrated, organization-wide strategy for improving product
and service quality.
18. In TQM, customer focus and satisfaction, continuous improvement, and teamwork mutually reinforce
each other to improve quality throughout a company.
19. The key concept in the service-profit chain is external service quality or the quality of treatment that
employees receive from a company’s internal service providers.
20. The purpose of service recovery is to restore customer satisfaction to strongly dissatisfied customers
21. The third principle of TQM is teamwork.
22. According to the “Doing the Right Thing” box, the customer is always right.
23. All manufacturing operations produce physical goods.
24. Manufacturing operations are classified according to the depth of their inventory stock.
25. Make-to-stock operations are highly dependent on the accuracy of sales forecasts.
26. Line-flow production processes are inflexible, pre-established, occur in a serial or linear manner, and
are dedicated to making one type of product.
27. Batch production is more flexible than line-flow production, but less flexible than job shop production.
28. 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.
29. Stockout is the situation when a company runs out of finished products.
30. The three basic measures of inventory are average aggregate inventory, weeks of supply, and inventory
turnover.
31. In general, the lower the number of inventory turns, the more efficiently the marketing department is
operating.
32. The four kinds of costs incurred with inventory maintenance are ordering costs, setup costs,
transaction costs, and stockout costs.
33. 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.
34. Assuming the optimal order quantity of integrated circuits for a manufacturer of security timers is
1,000, and the company uses 55 circuits daily, the manufacturer should place an order approximately
every 10 days.
35. Economic order quantity is intended for use with independent demand systems.
36. An on-demand air-taxi service transports travelers from the Richard B. Russell Regional Airport in
Georgia to destinations in the Southeast. Like other services, it will be judged by its customers on the
basis of reliability, durability, and responsiveness.
37. ISO 9000 certification is similar to having a certified public accountant verify that a firm’s financial
accounts are up-to-date and accurate.
38. When passengers on a Southwest Airlines flight were forced to wait on the plain through a delay of
several hours, they were pleased when the pilot ordered pizza for everyone. Southwest Airlines was
performing service recovery.
39. A fashion designer would use batch production to create gowns for a spring exhibit in Milan, Italy.
40. An on-demand air-taxi service transports travelers form the Richard B. Russell Regional Airport to
destinations in the Southeast. Because the air-taxi is a service, it will not need any kind of inventory
other than the airplane.
41. The two basic kinds of stockout costs are the transactions costs incurred when the company attempts to
replace the inventory and the loss of customer goodwill.
42. One method for making sure that JIT works is to have a shared information system that allows a
manufacturer and its suppliers to know the quantity and kinds of parts inventory the other has in stock.
MULTIPLE CHOICE
1. Paul Krisson works as a manager for Bergens Tidene, a Norwegian morning newspaper. He has full
responsibility for the daily printing of the paper that the people of Norway read with their breakfasts.
Krisson works in which of the following management areas?
a.
sales management
b.
operations management
c.
human resource management
d.
promotion management
e.
financial management
2. __________ is the management of the daily production of goods and services.
a.
Operations management
b.
Inventory management
c.
Productivity management
d.
Total quality management
e.
Management by objectives
3. __________ 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
4. 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.
sociocultural
5. 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.
6. 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.
7. __________ 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
8. 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)
9. The two types of productivity are:
a.
partial productivity and complete productivity
b.
multifactor productivity and partial productivity
c.
individual productivity and departmental productivity
d.
departmental productivity and organizational productivity
e.
organizational productivity and industry productivity
10. In 2005 Caterpillar expressed concern about a tire shortage that could prevent it from meeting
production level goals. Caterpillar was concerned about _____ productivity.
a.
composite
b.
multifactor
c.
partial
d.
incremental
e.
fractional
11. 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
12. The CEO of a company that manufactures maple wooden cutting boards has determined that it takes a
piece of maple lumber 18 inches square and two inches thick, 2 hours of labor, a planer, a sander, an
electric saw, and $5.67 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
13. __________ 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
14. 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
15. The American Society for Quality defines quality as:
a.
a product free of deficiencies, or the characteristics of a product or service that satisfy
customer 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 satisficing design plan
e.
none of these
16. Which of the following is an important characteristic of a quality product?
a.
reliability
b.
validity
c.
responsiveness
d.
homogeneity
e.
tangibility
17. The product quality characteristic of __________ is defined as the mean time before product failure.
a.
reliability
b.
assurance
c.
durability
d.
responsiveness
e.
effectiveness
18. 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
19. 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
20. Shine Bros. Corp., a recycling company based in Spencer, Iowa, bought its first Fuchs machine—an
MHL 320 scrap handler—in 1998. Since then, the company has bought two additional Fuchs scrap
handlers to perform various scrap handling tasks at its Spencer yard. According to the owners of the
company, “We now know the average time between break downs.” The owner was describing which
characteristic of product quality?
a.
durability
b.
serviceability
c.
responsiveness
d.
consistency
e.
effectiveness
21. Robin Subaru centrifugal pumps combine a powerful overhead-cam engine, heavy-duty construction,
and reliable performance for dewatering in light construction, flood control, homeowner, firefighting,
and irrigation applications. Designed to offer durability, the centrifugal pumps:
a.
break down frequently
b.
demonstrate a short time frame between necessary maintenance
c.
must be sent back to the manufacturer for repair
d.
have a high mean time before product failure
e.
are easily repaired
22. Massey Ferguson, a division of AGCO Corp., has introduced two new front cut mowers designed to
provide a high level of serviceability. “The new mowers are targeted toward golf course, municipality
and commercial cutting operations and have been designed with easy operation and safety in mind,”
the company said. This means the mowers:
a.
demonstrate a long time frame between necessary maintenance
b.
must be sent back to the manufacturer for repair
c.
are easy to repair
d.
have a high mean time before product failure
e.
have a low median time between servicing
23. 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
24. Which of the following quality characteristics can be applied to both goods and services?
a.
reliability
b.
serviceability
c.
durability
d.
homogeneity
e.
tangibility
25. The ability to consistently perform a service well is referred to as service:
a.
reliability
b.
assurance
c.
responsiveness
d.
tangibility
e.
durability
26. An article addressed to nurses who work in intensive care said, “Patients may feel isolated or
ostracized from those around them, including medical staff, because of their condition or appearance.
Practices affirming the patient’s intrinsic value and individual personality will be critical to
establishing trust and rapport.” One method to affirm the patient’s intrinsic value is to provide:
a.
empathy
b.
serviceability
c.
durability
d.
homogeneity
e.
tangibility
27. 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
28. Studies clearly show that customers care more about_______ than anything else when buying services.
a.
responsiveness
b.
assurance
c.
reliability
d.
tangibles
e.
empathy
29. Stock-car racing is different from other sports, with team owners—who spend millions outfitting cars
and fronting drivers—and track owners reliant on an independent NASCAR to bring them together.
There are no union troubles, and if a team fails to perform, it doesn’t drag down the league—it’s simply
replaced by the next new faster car and driver. If a track is getting shabby and failing to draw a
capacity crowd, NASCAR can simply shift to another site. In other words, the fans know that they
will get their money’s worth of entertainment every time they attend a NASCAR event. NASCAR
provides its fans with:
a.
service reliability
b.
service assurance
c.
service responsiveness
d.
tangibility
e.
service durability
30. Clean, neatly pressed uniforms and college diplomas hanging on the wall are examples of which
service quality characteristic?
a.
tangibles
b.
assurance
c.
empathy
d.
reliability
e.
responsiveness
31. 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
32. 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.
33. 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.
34. Dell’s giant PC factory in Limerick, Ireland, is ISO 9000 certified. Which of the following statements
about this certification is true?
a.
All Dell factories are ISO 9000 certified.
b.
Dell is allowed to sell computers in the European Union because it has ISO 9000
certification.
c.
Dell will be periodically audited to see if it deserves continued ISO 9000 certification.
d.
Dell was certified by an internal multifunctional committee that it met ISO 9000
standards.
e.
Dell is ethically bound not to use its ISO 9000 certification in its promotion.
35. 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.
36. 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
37. 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
38. Which of the following is a criterion on which companies are judged when applying for the Baldrige
National Quality Award?
a.
workforce diversity
b.
business results
c.
global market development
d.
ISO 9000 certification
e.
span of management
39. 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.
40. Graniterock is a California-based supplier of construction materials such as rock, gravel, and sand. In
1992, this small business won the prestigious Baldrige National Quality Award. Which of the
following statements about winning that award is true?
a.
By winning the Baldrige Award, Graniterock immediately became ISO 9000 certified.
b.
ISO 9000 certification would be superfluous for Graniterock.
c.
Graniterock received no performance feedback from Baldrige auditors.
d.
Like other winners, Graniterock received superior financial returns as a result of its win.
e.
According to the Baldrige Award, Graniterock is following the management system it put
in place to improve quality.
41. 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
42. In TQM, __________ occurs when the company’s products or services meet or exceed customers’
expectations.
a.
the extension of core capabilities
b.
customer satisfaction
c.
continuous improvement
d.
added value
e.
market focus
43. Ritz-Carlton placed first in customer satisfaction among luxury hotels in a recent J.D. Power &
Associates hotel survey. This means that in TQM terms:
a.
Ritz-Carlton satisfies every customer’s demands
b.
Ritz-Carlton is more interested in service durability than in any other service characteristic
c.
guests at Ritz Carlton never experience service failure
d.
Ritz-Carlton consistently provide services that meet or exceed customers’ expectations
e.
guests at Ritz-Carlton know the hotel chain has an ISO 14000 certification
44. 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
45. Brake Parts Inc., manufacturer of Raybestos brand brakes, is at the forefront of the replacement brake
industry as a result of its ongoing commitment to continuous product improvement and its
uncompromising dedication to providing customers with the most advanced, premium quality product
technology through teamwork. In other words, Brake Parts 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
46. In May, 2007, CNNMoney.com reported that the most productive auto plant in North America,
Oshawa No. 2, was doomed—it was on the list of plants that General Motors was closing as the
world’s largest automaker slashed capacity in a bid to stem losses. The Ontario plant, which made the
Pontiac Grand Prix and Buick LaCrosse and Allure, took only 15.68 hours on average to build a
vehicle in 2006. That’s an improvement from the 16.08 hours it took in 2005, and is better than the
16.34 hours it takes to build a vehicle at the neighboring Oshawa GM assembly line. Which of the
following statements best describes the plant that was to be closed?
a.
It was the most efficient automobile manufacturing plant in the world.
b.
The plant was capable of producing more vehicles with less input than GM’s other North
American plant.
c.
The plant used more inputs per vehicles when manufacturing a car or truck than any other
GM plant in North America.
d.
The decision to close the plant was justifiable in terms of productivity measures.
e.
The Ontario plant’s improvements were not consistent with those in other manufacturing
47. 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.
48. 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
49. Total quality management (TQM) saved Xerox from bankruptcy when it was badly beleaguered by its
Japanese rivals. In other words:
a.
every Xerox employee, from the top to the bottom, became focused on meeting or
exceeding its customers’ needs.
b.
the company became committed to continuous improvement in its products.
c.
Xerox managers and nonmanagers entered into collaborations across business functions
and with suppliers and customers.
d.
Xerox adopted a philosophy, which was reflected by changes in its organizational culture.
e.
all of these occurred.
50. 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
51. __________ 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
52. The levels of teamwork presumed in __________ are between managers and nonmanagers, across
business functions, and between the company and its customers and suppliers.
a.
an autonomy
b.
autocratic management
c.
TQM
d.
MBO
e.
environmental control
53. Anne Mulcahy, the former CEO of Xerox, was quoted as saying, “TQM may help employees figure
out how to solve a specific problem. But the really big payoff comes when they share that solution
with others.” In her statement, Mulcahy was promoting which characteristic of TQM?
a.
continuous improvement
b.
variation elimination
c.
teamwork
d.
market focus
e.
a customer orientation
54. Many organizations rely on teaming as a key to their productivity and credit their use of teams with
performance improvements such as increased efficiency, improved participation and innovation, error
reduction, quality improvement, increased responsiveness, cost-effectiveness, better customer service,
and improved employee satisfaction. 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
55. The key concept 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
56. Which of the following statements comparing goods and services is true?
a.
Services are produced, but goods are performed.
b.
Goods are intangible, but services are tangible.
c.
Goods can be collected and stored, but services are perishable and unstorable.
d.
Quality can be easily assessed for services, but not for goods.
e.
Goods account for a larger percentage of gross national product than services do.
57. One of the key assumptions in the service business is that success depends on how well employees
deliver their services to customer. However, according to the service-profit chain, success depends
on: