Make to order is a manufacturing operation that does not start processing assembling products until a
customer order is received.
115. Refer to RIP. What kind of inventory are Americans who manufacture NEC, Fujitsu, and Sony
products maintaining?
a.
finished goods inventory
b.
component parts inventory
c.
raw materials inventory
d.
work-in-process inventory
e.
all of these
116. Refer to RIP. __________ would be one of the primary methods used to measure inventory in the
Japanese-based firms operating in the U.S.
a.
Inventory turnover
b.
Inventory equity
c.
Stock liability
d.
Aggregated equity
e.
Stakeholders’ equity
117. Refer to RIP. The JIT system preferred by Japanese manufacturers:
a.
cannot be used with batch processing
b.
makes component parts available at the manufacturing plant just as they are needed
c.
determines the EOQ and maintains it
d.
creates independent demand systems
e.
eliminates problems with stockouts
118. Refer to RIP. Which of the following statements about the American companies who are taking over
Japanese operations is true?
a.
The American companies are able to make effective use of kanban.
b.
Because American companies are more concerned about stockouts, they are less efficient.
c.
Both the Japanese and the American companies rely on independent demand systems to
determine inventory requirements.
d.
The American companies have higher holding costs.
e.
All of these statements about the American companies who are taking over Japanese
operations are true.
Hyundai
Because of the poor quality of its cars, Hyundai watched its U.S. sales drop from 264,000 cars to
90,000 cars in just two years. Hyundai cars ranked 26th out of 35 car brands in terms of initial car
quality as measured by the influential J.D. Power Initial Car Quality survey. With $6.6 million in
debt, a $1 billion investment for a new manufacturing plant in Alabama, and the company’s first-ever
loss, Hyundai’s new chairman, Chung Mong Koo, declared that improving quality was the only way to
fix the company.
The challenge for Chung was to get his managers to put quality, and not costs, first. So he sent
a visible, meaningful message that poor quality would no longer be tolerated. During one plant visit,
Chung demanded to see under the hood of a car on the production line. He was furious when he saw
loose wires, tangled hoses, bolts painted four different colors – tremendous deviation from what the
engine compartment was supposed to look like. On the spot, he instructed the plant chief to paint all
bolts and screws black and ordered workers not to release any car unless all was orderly under the
hood. He then publicly declared that Hyundai would produce higher quality cars than Toyota by 2008,
and that Hyundai would produce the best quality cars in the auto industry.
Today, each workweek starts with a demanding three-hour meeting attended by managers,
engineers, designers, and suppliers. In his large boardroom, Chung displays Hyundai cars on rotating
turntables or mechanical lifts, whatever is required for those in attendance to see up close what
problems need to be fixed. Hyundai managers now measure everything. Hundreds of charts on the
walls of every Hyundai factory measure the number of times and the degree to which a process has
produced parts that differ meaningfully from the quality standards for those parts. The quality
department at Hyundai has grown from 100 to 1,000 people, who now report directly to CEO Chung.
All employees share their ideas about how to improve quality because Chung communicated to
workers that their ideas were critical and welcomed. To prove it, he rewarded them with bonuses
averaging $150 per employee. At one Hyundai factory, workers have suggested 25,000 ideas for
improving quality, 30% of which have been implemented in the factory. For instance, a worker
noticed that the Hyundai Sonata and SG 350 sedans had identically sized spare tires, but different sized
spare tire covers. Though it sounds trivial, using the same spare tire cover for both cars saves
Hyundai $100,000 a year.
Hyundai addresses customer complaints as quickly as possible, and these quick responses to
customer complaints have had dramatic results, like reducing the Santa Fe’s score in J.D. Power’s
Initial Car Quality survey from 149 problems per 100 cars (PP100) to 93 PP100 in just one year.
Finally, if the greatly improved quality isn’t enough to convince you to buy a Hyundai, the
company believes that its 10-year/100,000 mile warranty may be enough. The longest, most
comprehensive warranty in the auto industry shows the confidence the company has in its cars. And
those extensive warranties probably won’t cost Hyundai much either, as the improved quality of its
cars has cut the cost of warranty repairs, which are paid for by headquarters, by 35% over the last three
years.
119. Refer to Hyundai. When Chung Mong Koo, Hyundai’s new chairman and CEO visited a Hyundai
plant he strode onto the factory floor and demanded a peek under the hood of a Sonata sedan. He didn’t
like it when he saw loose wires, tangled hoses, bolts painted four different colors. The fact that this
car was not being built the way it was designed and the fact that its manufacturing flaws resulted in it
not working as it was supposed to, indicated that Hyundai had a problem with:
a.
responsiveness
b.
assurance
c.
tangibles
d.
reliability
e.
serviceability
120. Refer to Hyundai. Because Hyundai needs to improve its results, it would benefit most from:
a.
ISO 9000 certification
b.
ISO 14000 certification
c.
competing for the Baldrige National Quality Award
d.
competing for the Baldrige International Quality Award
e.
J.D. Power consulting
121. Refer to Hyundai. In every Hyundai factory, hundreds of wall charts track the number of times and the
degree to which a process has produced parts that differ meaningfully from the quality standards for
those parts. The company is maintaining quality by measuring:
a.
variation
b.
synergy
c.
entropy
d.
process autonomy
e.
manufacturing empowerment
122. Refer to Hyundai. Hyundai has refocused on the customer and on improving customer satisfaction, as
well as on continuous improvement and teamwork. This demonstrates that Hyundai has adopted:
a.
multifactor productivity
b.
JIT
c.
TQM
d.
EOQ
e.
MRP
123. Refer to Hyundai. Hyundai’s generous warranty means that the company will assume responsibility
for the costs of all repairs for 10 years or until the car has been driven an astounding 100,000 miles –
generally longer than a single driver will own the car. The warranty demonstrates Hyundai’s
commitment to ______, a quality-related service characteristic.
a.
assurance
b.
durability
c.
service recovery
d.
serviceability
e.
tangibles
124. Refer to Hyundai. By addressing customer complaints as quickly as possible—even in the middle of a
model year—Hyundai is demonstrating:
a.
assurance
b.
empathy
c.
responsiveness
d.
serviceability
e.
tangibles
125. Refer to Hyundai. A worker noticed that the Hyundai Sonata and SG 350 sedans had identically sized
spare tires, but different sized spare tire covers. Using the same spare tire cover for both cars saves
Hyundai $100,000 a year, and increased the company’s productivity by:
a.
decreasing confusion
b.
getting the same output for fewer inputs
c.
increasing inventory of only one item
d.
getting more inputs for more outputs
e.
decreasing variation
Sapphire Farm LLC
Sapphire Farm is a business that trains and boards horses and educates young riders about horse care,
nutrition, and riding. The farm provides both a learning and a fun environment for young equestrians
and their families. It also hosts horse shows for beginning riders to help them build confidence in the
show ring and to prepare them for local horse shows by running shows in accordance with the rules
and regulations of the National Hunter Jumper Association. Feedback from the horseshow judges are
provided to all riders so they can do better at their next meet. In addition, all warm–up and training
areas are fenced and monitored by adults for the children’s safety.
126. Refer to Sapphire Farm LLC. The ability of the farm and its employees to consistently provide a safe
environment for children is an example of service:
a.
durability
b.
assurance
c.
empathy
d.
reliability
e.
responsiveness
127. Refer to Sapphire Farm LLC. The promptness and willingness with which horse show judges provide
feedback to young riders is an example of service:
a.
durability
b.
assurance
c.
empathy
d.
reliability
e.
responsiveness
128. Refer to Sapphire Farm LLC. If the farm unintentionally hired someone to teach riding who was
unable to deal effectively with small children, then a _____ would occur.
a.
performance breakdown
b.
quality underperformance
c.
customer aberration
d.
service divergence
e.
product variation
129. Refer to Sapphire Farm LLC. According to the service-profit chain, the high-value service offered by
Sapphire Farm LLC should lead to:
a.
congruent market response
b.
customer satisfaction
c.
a product focus
d.
positive framing
e.
customer autonomy
130. Refer to Sapphire Farm LLC. Imagine the farm unintentionally hired someone to teach riding who was
unable to deal effectively with small children. This action would more than likely necessitate the need
for:
a.
service recovery
b.
transactional service
c.
a transformational focus
d.
customer reengineering
e.
relationship marketing
131. Refer to Sapphire Farm LLC. The farm must stock riding gear including saddles and halters as well as
food and veterinarian supplies for the horses. _____ for this inventory would include the cost of
completing the order paperwork and any problems that derive from being out of equipment and/or
supplies when needed.
a.
Downtime
b.
Ordering costs
c.
Holding costs
d.
Slack resources costs
e.
Setup costs
132. Refer to Sapphire Farm LLC. The farm uses 600 round bales of hay annually. The optimal order
quantity for bales is 10. The farmer feeds the horses one bale of hay each day. How often should the
farm manager order more hay?
a.
every day
b.
once a month
c.
every ten days
d.
once a week
e.
every six days
Louis Vuitton
Louis Vuitton was founded in 1854 and opened its first workshop in 1860 in the Paris suburb of
Asnières. Work at Asnières is still done by hand, and many current models are closely based on the
original designs that made Vuitton a fashion icon. Workers specialize in making certain types of bags,
and 20 to 30 craftsmen can take up to 8 days to complete one tote! That level of precision and care has
been encouraged to maintain the traditional appeal of the brand.
Maintaining that caché involves creating high demand, frequent use of limited-edition
products, and suppressing supply levels on their standard product lines. Vuitton sells its luggage at
prices from roughly $2,000 to $4,000 per piece and has never put its products on sale. In the 1970s, the
single factory in Asnières could not meet the increased demands of globalization, so Vuitton began
adding new factories every other year. As a result of major pushes in marketing, store-opening, and
expansion into the U.S. and Japan, Vuitton experienced annual sales increases from $760 million in
1990 to $3.7 billion in 2000.
Vuitton’s current production system, however, is slow and makes it difficult to adjust to
increased demand when certain items become hot. In spite of new factories and production schedules,
the production process itself still needed to change to keep up with demand. In 2005, Vuitton
introduced its new Pegase plan, which was based on teamwork and production line models used by
Japanese automakers. Previously under Vuitton’s production process, each task involved in making an
item was done by a single craftsman, who would pass the item along to the next station after he had
completed his task.
Under Pegase, workers are divided into teams of 6 to 12 craftsmen, with each worker trained
in several specific tasks. Tasks are divided so that each set takes about the same amount of time. Each
team is given a single batch of items to work on, and their work stations are arranged in U-shaped
clusters, eliminating the time it took to move items between workstations. Previously, it took 8 days to
complete a single bag, like the Reade tote, but now it takes only one.
Furthermore, Vuitton can now get new batches into its boutiques in six weeks, half the time it
used to take. Worker versatility makes it much easier to switch teams to new projects if an item
becomes hot, and additional training has improved product troubleshooting as well. Customer returns
at Vuitton’s Issoudun and Conde? plants have dropped by two thirds since the new production system
has been in place.
133. Refer to Louis Vuitton. An example of an output would be:
a.
the number of tote bags produced
b.
the time it would take to produce one tote
c.
the amount of material it would take to produce one tote
d.
the number of workers involved in making a batch of totes
e.
the number of factories Louis Vuitton owns
134. Refer to Louis Vuitton. According to Total Quality Management, by training employees to
troubleshoot for quality problems that occur during the production process, Vuitton is improving its
a.
customer focus
b.
teamwork
c.
customer satisfaction
d.
variation
e.
efficiency
135. Refer to Louis Vuitton. What would ready–to-wear clothing lines be an example of?
a.
batch production
b.
make-to-stock operations
c.
make-to-order operations
d.
job shops
e.
just-in-time inventory
136. Refer to Louis Vuitton. If Louis Vuitton received a specialized request for a particular piece of
luggage, this would be an example of:
a.
batch production
b.
line-flow production
c.
assemble-to-order operations
d.
make-to-stock operations
e.
make-to-order operations
137. Refer to Louis Vuitton. Which of the following would be an example of stockout?
a.
Stores running out of popular items and putting customers on waiting lists.
b.
A single tote taking 8 days to complete.
c.
Opening new factories to keep up with production demands.
d.
Training employees to catch mistakes in production.
e.
Never putting products on sale.
SHORT ANSWER
1. Define productivity. Provide an everyday example of a measure of productivity that consumers
sometimes use in deciding which car to purchase.
ANS:
2. Define the two common measures of productivity used by managers. Specify the circumstances under
which each should be used.
3. There are two ways to define quality. Describe both of them.
4. Make a list of the characteristics that define quality for goods. Then make a second list of
characteristics that define quality for services. Why do these lists differ? Why does one characteristic
appear on both lists?
5. Briefly explain the difference between ISO 9000 certification and the Baldrige National Quality
Award.
6. What types of public recognition are given to companies that demonstrate the highest probability that
they are consistent producers of high quality goods or services?
7. Briefly describe total quality management (TQM).
8. Manufacturing processes are classified according to the amount of processing or assembly that occurs
after receiving an order from customers. Briefly describe the three types of manufacturing processes.
9. What is manufacturing flexibility? How is manufacturing flexibility used to classify the five types of
manufacturing operations?
10. List and describe the four kinds of inventory that a manufacturer stores.
11. List and briefly identify the three basic measures of inventory that managers use to keep inventory
costs from becoming too large.
12. Briefly identify the three different methods of inventory management. Specify the circumstances under
which each should be used.
ANS:
ESSAY
1. Briefly explain how production and productivity relate to the financial success of companies as well as
the countries in which the companies are located. Given the nature of today’s global economy,
comment on how these relationships might be particularly important in developing (as opposed to
industrialized) countries, where the industrial base and standard of living are low.
2. What is quality? List and define three characteristics of quality for goods and for services. Explain
why these characteristics are different for goods and services. Then identify the one dimension that is
common in both lists. Finally, specify a good or service that you were very dissatisfied with during the
past year, and explain which of these quality dimensions the good or service was deficient on.
3. Describe the changes that many service organizations are making to enhance the process of service
recovery. Give an example of such a change that could enhance service recovery for dissatisfied
students at your college or university.
4. What are the two general approaches to classifying manufacturing operations? Identify the specific
types of manufacturing operations within each classification. Comment on the extent to which the
different types of manufacturing operations within each classification might be appropriate in
circumstances where customer needs and preferences are unpredictable and rapidly changing.
5. What is inventory? Explain the potential costs associated with it. Briefly describe the systems of
inventory management that are available to managers to control these costs, and specify which method
of inventory management is best.
6. Explain why operations management is potentially relevant to every employee in every organization in
the 21st century.