Test Bank for Introduction to Operations and Supply Chain Management, 6th edition Robert B. Handfiel

Test Bank For Introduction to Operations and Supply Chain Management, 6th Edition Robert B. Handfield Frank Montabon Cecil B. Bozarth Chapter 1-15 Chapter 1 Introduction to Operations and Supply Chain Management

Learning Objective 1-1 1) Every organization has an operations function.

Answer: TRUE Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: organization, operations, function AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 2) Most organizations function as part of a larger supply chain.

Answer: TRUE Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: organization, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 3) The supply chain is a network of manufacturers and service providers that work together to create products or services needed by end users.

Answer: TRUE Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: organization, supply chain, network AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 4) To participate in a supply chain, a firm must actually handle the physical goods at some point.

Answer: FALSE Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: decisions, supply chain, operations AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 5) Information and materials are two examples of inputs to the transformation process.

Answer: TRUE

Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: information, materials, input, transformation AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 6) In general, operations management activities are information and decision intensive.

Answer: TRUE Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: information, decisions, operations, management AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 7) Of the three flows linking organizations in a supply chain, information and monetary flows always move upstream and physical flows always move downstream.

Answer: FALSE Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: information, monetary, information flows, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 8) A second-tier supplier is downstream from a first-tier supplier in a supply chain.

Answer: FALSE Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: downstream, supply chain, tier AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 9) Most of the participants in a supply chain are both suppliers and customers.

Answer: TRUE Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: supply chain, supplier, customer AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival

10) Transportation and warehousing are examples of logistics activities.

Answer: TRUE Diff: 2 Reference: Purpose and Organization of This Book Keywords: logistics, transportation, warehousing AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 11) The collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services is called: A) the supply chain.

B) the operations function.

C) the evoked set.

D) relationship management.

Answer: B Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: operations, function AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 12) Which of these is NOT a component of the operations function in an organization?

A) People B) Technology C) Systems D) Information Answer: D Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: operations, function, information AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 13) Which of the following is NOT a flow typically found in a supply chain?

A) physical B) information C) monetary D) risk Answer: D Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: supply chain, flow AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 14) Which of the following is primarily a supply chain management decision?

A) from whom to purchase materials

B) how many of each item should be produced C) the mix of labor skill and automation D) the location of the plant Answer: A Diff: 3 Reference: Why Study Operations and Supply Chain Management?

Keywords: supply chain, decision, supplier AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 15) ________ is an example of an output of the transformation process.

A) Material B) Information C) Satisfied customers D) Intangible needs Answer: C Diff: 3 Reference: Why Study Operations and Supply Chain Management?

Keywords: output, transformation, process, customer AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 16) Typical inputs to the transformation process include: A) tangible goods.

B) satisfied customers.

C) intangible needs.

D) fulfilled needs.

Answer: C Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: intangible needs, inputs AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 17) Which of the following statements about the operations function is NOT correct?

A) Inputs to operations can take many different forms.

B) Nearly all operations activities require coordination with other business functions.

C) The outputs of an operations function are always tangible.

D) Operations management activities are information and decision intensive.

Answer: C Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: operations, function, tangible output AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 18) Which of these statements about flows in a supply chain is best?

A) Information and monetary flows move upstream and downstream, but physical flows move downstream only.

B) Information flows move upstream and downstream, monetary flows move upstream only, and physical flows move downstream only.

C) Information and monetary flows move upstream only and physical flows move downstream only.

D) Information, physical and monetary flows move both upstream and downstream.

Answer: D Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: information flow, physical flow, monetary flow AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 19) Which of the following statements regarding the supply chain is TRUE? A) A second-tier supplier is downstream from a first-tier supplier.

B) A first-tier supplier is upstream from a second-tier supplier.

C) A first-tier supplier is downstream from a second-tier supplier.

D) A customer is upstream from a first-tier supplier.

Answer: C Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: downstream, upstream, tier, supplier, customer AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 20) In the Sweet Action! supply chain, the flowers produce the nectar which is collected by the bees. The busy bees take this nectar and produce honey, which is collected by the beekeeper, who puts it in quart jars and supplies it to the baker. The baker produces a lovely array of confections, which are purchased by the local restaurant. The restaurant sells these confections to their loyal diners, who gleefully consume them and nag the chef for his recipe. Which of these statements about this supply chain is best?

A) The busy bees are a first-tier supplier of the local restaurant.

B) The beekeeper is a first-tier supplier of the local restaurant.

C) The baker is a first-tier supplier of the local restaurant.

D) The local restaurant is a first-tier supplier of the loyal diners.

Answer: C Diff: 3 Reference: Why Study Operations and Supply Chain Management?

Keywords: downstream, first-tier, supplier, customer AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival

21) In the Sweet Action! supply chain, the flowers produce the nectar which is collected by the bees. The busy bees take this nectar and produce honey, which is collected by the beekeeper, who puts it in quart jars and supplies it to the baker. The baker produces a lovely array of confections, which are purchased by the local restaurant. The restaurant sells these confections to their loyal diners, who gleefully consume them and nag the chef for his recipe. Which of these statements about this supply chain is best?

A) The busy bees are a second-tier supplier of the local restaurant.

B) The beekeeper is a second-tier supplier of the local restaurant.

C) The baker is a second-tier supplier of the local restaurant.

D) The local restaurant is a second-tier supplier of the loyal diners.

Answer: B Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: downstream, second-tier, supplier, customer AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 22) In the Sweet Action! supply chain, the flowers produce the nectar which is collected by the bees. The busy bees take this nectar and produce honey, which is collected by the beekeeper, who puts it in quart jars and supplies it to the baker. The baker produces a lovely array of confections, which are purchased by the local restaurant. The restaurant sells these confections to their loyal diners, who gleefully consume them and nag the chef for his recipe. Which of these statements about this supply chain is best?

A) The busy bees are within the span of the SCOR model of the local restaurant.

B) The beekeeper is within the span of the SCOR model of the local restaurant.

C) The loyal patrons are within the span of the SCOR model of the beekeeper.

D) The loyal patrons are within the span of the SCOR model of the busy bees.

Answer: B Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: SCOR, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 23) In the Sweet Action! supply chain, the flowers produce the nectar which is collected by the bees. The busy bees take this nectar and produce honey, which is collected by the beekeeper, who puts it in quart jars and supplies it to the baker. The baker produces a lovely array of confections, which are purchased by the local restaurant. The restaurant sells these confections to their loyal diners, who gleefully consume them and nag the chef for his recipe. Which of these statements about this supply chain is best?

A) There is only one first-tier supplier in this supply chain.

B) There are only two first-tier suppliers in this supply chain.

C) There are only three first-tier suppliers in this supply chain.

D) There are four first-tier suppliers in this supply chains.

Answer: D Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: downstream, first-tier, supplier, customer AACSB: Application of Knowledge

LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 24) Which of the following lists is in correct supply chain order?

A) first-tier supplier — manufacturer — distributor B) distributor — manufacturer — retailer C) first-tier supplier — second-tier supplier — third-tier supplier D) customer — retailer — distributor Answer: A Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: downstream, tier, supplier, distributor AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 25) Which of these is NOT an element of the SCOR model?

A) Operate B) Plan C) Source D) Return Answer: A Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: SCOR AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 26) The collection of people, technology, and systems within an organization that has primary responsibility for providing the organization's products or services is ________.

Answer: operations Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: operations, product, service AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 27) Most organizations function as part of larger ________ that are linked through physical, monetary, and information flows.

Answer: supply chains Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 28) Operations can be considered a transformation process that takes things like materials, labor, and capital, called ________, and transforms them into goods or services, called ________.

Answer: inputs; outputs Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: operations, transformation, input, output AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 29) An activity or firm that is positioned earlier in the supply chain relative to another activity or firm is said to be ________.

Answer: upstream Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: upstream, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 30) Printing and binding a book take place ________ from the conversion of wood to paper pulp in a publishing supply chain.

Answer: downstream Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: downstream, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 31) The ________ model is used to define processes and relationships in supply chain management.

Answer: SCOR Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: SCOR, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 32) A(n) ________-tier supplier for Acme sells directly to them.

Answer: first Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: first-tier, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 33) A second-tier supplier is located ________ from a first-tier supplier.

Answer: upstream Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: upstream, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 34) What are three reasons that the study of operations and supply chain management is important?

Answer: One reason that the study of operations management is important is that every organization must make a product or provide a service that someone values. Without this, there is no reason for the existence of the organization. The study of supply chain management is important because most organizations function as part of a larger supply chain. Finally, organizations must carefully manage their operations and supply chains in order to prosper. The better the supply chain and operations functions are coordinated, the greater chance for success of all members.

Diff: 1 Reference: Why Study Operations and Supply Chain Management?

Keywords: organization, operations, supply chain AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 35) Describe the operations function's transformation process and provide an example for each element.

Answer: The transformation process view of operations management holds that inputs are transformed into outputs. Examples of inputs are raw materials, labor, capital, equipment, information, and intangible needs. The transformation process is the conversion of these inputs using either manufacturing or service operations (and sometimes both). Manufacturing operations might be painting, welding, machining, or assembling. Outputs of the transformation process are tangible goods, fulfilled needs, and satisfied customers. Specific examples may vary depending on the company chosen.

Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: transformation, operations, input, output AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 36) Distinguish between upstream and downstream firms in a supply chain and provide an example.

Answer: Upstream and downstream are relative terms that describe the position of a supply chain member from one point of reference. A supply chain member that is upstream from a firm is sending their output to the firm for use as an input. A supply chain member that is downstream from a firm is taking the firm's output and using it as an input to their own processes. It is possible for a single member of a supply chain to be both upstream and downstream from one or more members of their supply chain. Examples may vary.

Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: upstream, downstream, supply chain, input, output AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival

37) Distinguish between first-tier and second-tier suppliers in a supply chain and provide an example.

Answer: First-tier, second-tier, and any subsequent steps are measured relative to their position from a common point in the supply chain. All companies at a level (call it A) receive inputs from their first-tier suppliers (level B). These first-tier suppliers (at level B) in turn receive their inputs from their own first-tier suppliers (level C). These companies (level C) are considered secondtier suppliers of the companies at level A. Both tiers are upstream from level A, but level B is downstream from level C. Examples will vary.

Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: first-tier, second-tier, upstream, downstream, supply chain, input, output AACSB: Application of Knowledge LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival 38) Supply chains have been in existence for over a century. What is different about supply chains in the 21st century from those in existence 100 years ago?

Answer: The active management of supply chain activities is the big difference between supply chains in existence today and those of decades ago. Active management includes relationship management and an examination of the supply chain as a whole to optimize it from a global perspective. In the past, the production managers of each company in the supply chain were more concerned with the operation and financial well-being of their own companies, often to the detriment of other members of the supply chain.

Diff: 2 Reference: Why Study Operations and Supply Chain Management?

Keywords: supply chain, management AACSB: Application of Knowledge, Reflective Thinking LO: 1.1: Describe what is meant by operations and supply chain management and explain why activities in these are critical to an organization's survival Learning Objective 1-2 1) Electronic commerce refers to the use of information technology solutions to automate business transactions.

Answer: TRUE Diff: 1 Reference: Important Trends Keywords: electronic commerce, e-commerce, information, technology AACSB: Information Technology LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention

2) The drive for efficiency has decreased the level of globalization in the world economy.

Answer: FALSE Diff: 2 Reference: Important Trends Keywords: globalization AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 3) E-commerce is the component of a supply chain that is the most susceptible to breakdown.

Answer: FALSE Diff: 2 Reference: Important Trends Keywords: e-commerce, electronic commerce, supply chain AACSB: Information Technology LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 4) To avoid supply chain problems, firms must manage relationships with their downstream suppliers as well as their upstream customers.

Answer: FALSE Diff: 2 Reference: Important Trends Keywords: customer, relationship management, downstream, upstream AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 5) Which of these statements about recent trends in operations and supply chain management is best?

A) A lower level of competition exists thanks to an increased level of globalization.

B) The rate of change in markets is actually lower once inflation is factored in.

C) Managers tend to make decisions with less information than they used to.

D) Customers demand for standardization in goods and services has increased.

Answer: C Diff: 2 Reference: Important Trends Keywords: information management, trends AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention

6) An electronic commerce system: A) is used to transmit information upstream only.

B) can improve the speed and quality of business communication.

C) is used to transmit information downstream only.

D) links everyone in the supply chain except customers.

Answer: B Diff: 2 Reference: Important Trends Keywords: e-commerce, business, communications AACSB: Information Technology, Written and Oral Communication LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 7) Which of the following is NOT a trend in operations management?

A) increased use of electronic commerce B) increased globalization C) decreased delivery times D) decreased customization Answer: D Diff: 2 Reference: Important Trends Keywords: trends, operations management, customization AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 8) Efforts to improve cooperation among firms in the supply chain can be characterized as: A) globalization.

B) domestic focus.

C) relationship management.

D) electronic commerce.

Answer: C Diff: 2 Reference: Important Trends Keywords: relationship management, supply chain AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention

9) Among all supply chain functions, ________ is the most susceptible to breakdown.

A) production B) logistics C) supplier selection D) relationship management Answer: D Diff: 2 Reference: Important Trends Keywords: relationship management, supply chain AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 10) ________ is the use of information technology solutions to conduct business via electronic transfer of data and documents.

Answer: Electronic commerce Diff: 1 Reference: Important Trends Keywords: electronic commerce, e-commerce, information AACSB: Information Technology LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 11) ________ is the term that describes efforts to improve operations by increasing supply chain members' willingness to cooperate.

Answer: Relationship management Diff: 2 Reference: Important Trends Keywords: relationship, relationship management, supply chain AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention

12) Briefly discuss the three important trends in business that have focused attention on operations and supply chain management.

Answer: The three trends are electronic commerce, increasing competition and globalization, and relationship management. Electronic commerce is the use of information technology, e.g., computer and telecommunications technologies, to conduct business via electronic transfer of data and documents. E-commerce promises to improve the speed, quality, and cost of business communications and can be used to coordinate a supply chain. The rate of change in markets, products, and technology is escalating, resulting in increased competition. It is no longer good enough to be the best producer within a city, region, or country; firms must be able to compete on a global scale. Finally, we recognize that very few firms are not in a supply chain. As a firm strives to improve to meet this global competition, it may require the cooperation of other members of its supply chain. This cooperation is by no means a certainty, so relationship management is essential to facilitate supply chain coordination.

Diff: 2 Reference: Important Trends Keywords: e-commerce, global, relationship, supply chain AACSB: Application of Knowledge, Information Technology LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 13) What is the most impactful trend in supply chain management over the last quarter century?

Justify your choice.

Answer: The authors name electronic commerce as the greatest influence on business.

Electronic commerce is the use of information technology solutions to automate business transactions. E-commerce promises to improve the speed, quality, and cost of business communications and can be used to coordinate a supply chain. Entire industries and countless business have developed thanks to the Internet and e-commerce. In the entertainment industry alone, Netflix has moved from a distributor of DVDs to a streaming service and the music industry has undergone a sea change in how new music is marketed and distributed. Answers may vary.

Diff: 2 Reference: Important Trends Keywords: e-commerce, supply chain AACSB: Reflective Thinking, Information Technology LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention

14) Of all the activities of supply chain management, which poses the greatest challenge and why? Cite examples in popular media.

Answer: The authors indicate that relationship management is the most difficult and therefore the most susceptible to breakdown. Poor relationships with any link in the supply chain can have disastrous consequences for all other supply chain members. An unreliable supplier can starve a plant, leading to inflated lead times and resulting in problems across the chain, all the way to the final customer. If organizations do not manage relationships with both upstream supply chain members as well as with their customers, they run this risk. If supply chain partners are separated geographically or culturally, or both, it is easy to have misunderstandings. In some cases, many components can be purchased only through foreign suppliers with proprietary knowledge.

Examples will vary as time passes.

Diff: 2 Reference: Important Trends Keywords: relationship management, supply chain AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention 15) Which of the major operations and supply chain activities do not deal directly with customers? Explain why this is so.

Answer: The sole operations and supply chain activity that does not work directly with a customer is the purchasing function. Purchasing reaches upstream, i.e., in the opposite direction from the customer.

Diff: 2 Reference: Operations and Supply Chain Management and You Keywords: purchasing AACSB: Application of Knowledge LO: 1.2: Describe how electronic commerce, increased competition and globalization, and relationship management have brought operations and supply chain management to the forefront of managers' attention Learning Objective 1-3 1) The professional society for persons interested in operations and supply chain management is called APICS. Answer: TRUE Diff: 2 Reference: Operations and Supply Chain Management and You Keywords: resource management, APICS, society AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management

2) Forecasting counts suppliers and customers among its key interorganizational participants.

Answer: TRUE Diff: 2 Reference: Operations and Supply Chain Management and You Keywords: forecasting AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 3) Scheduling and managing the flow of work through an organization and supply chain belongs to the logistics function of a supply chain.

Answer: FALSE Diff: 2 Reference: Operations and Supply Chain Management and You Keywords: logistics, planning and control AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 4) There is no need for an organizational interface between the finance function and the operations and supply chain management function.

Answer: FALSE Diff: 2 Reference: Operations and Supply Chain Management and You Keywords: interface, marketing, operations AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 5) The organization that provides national and institutional leadership in purchasing and materials management is: A) APICS. B) ISM. C) CLM. D) ASQ. Answer: B Diff: 3 Reference: Operations and Supply Chain Management and You Keywords: supply management, purchasing AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management

6) Which job title would be given to someone responsible for supervising production in a manufacturing setting?

A) Supply chain manager B) Production manager C) Supplier development manager D) Purchasing manager Answer: B Diff: 1 Reference: Operations and Supply Chain Management and You Keywords: operations, production, manufacturing, manager AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 7) What are the primary duties of a logistics manager?

A) Creating timely, cost effective import/export supply chains B) Managing private, third party and contract carriage systems to ensure timely delivery and cost-effective transportation C) Using analytical and quantitative methods to understand, predict and improve processes D) Identifying global sources of materials, selecting suppliers and managing ongoing relationships Answer: B Diff: 1 Reference: Operations and Supply Chain Management and You Keywords: logistics, manager AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 8) Which department is least likely to interact with the purchasing function?

A) Engineering B) Finance C) Human resources D) Operations Answer: C Diff: 3 Reference: Operations and Supply Chain Management and You Keywords: operations, purchasing, finance, engineering AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management

9) A(n) ________ acquires knowledge in a specific market in which the organization purchases significant quantities of materials and services.

Answer: commodity manager Diff: 3 Reference: Operations and Supply Chain Management and You Keywords: commodity manager, commodity AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 10) A)n) ________ plans and controls production in a manufacturing setting.

Answer: production manager Diff: 1 Reference: Operations and Supply Chain Management and You Keywords: production manager, production AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 11) The ________ is a leader in education and all aspects of quality improvement.

Answer: ASQ or American Society for Quality Diff: 2 Reference: Operations and Supply Chain Management and You Keywords: quality, ASQ AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 12) ________ is an operations activity with the purpose of designing and implementing the transformation processes that best meet the needs of the customer and firm.

Answer: Process selection Diff: 3 Reference: Operations and Supply Chain Management and You Keywords: process, selection, transformation, design AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 13) The ________ function of an organization manages the movement of physical goods throughout the supply chain.

Answer: logistics Diff: 2 Reference: Operations and Supply Chain Management and You Keywords: logistics, supply chain AACSB: Application of Knowledge LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain management 14) Choose any two non-operations business functions. Provide examples of an operations or supply chain activity that interfaces directly with each business function you have chosen.

Answer: The marketing function interfaces with operations and supply chain management

during process selection, forecasting, capacity planning, planning and control, purchasing, and logistics. The finance function works closely with operations and supply chain management in process selection, forecasting, capacity planning, inventory management, and purchasing. The human resource function works directly with operations and supply chain management when making process selection, capacity planning decisions. The accounting function works with operations and supply chain management when capacity planning is being performed.

The IT function is involved with operations and supply chain management while process selection, inventory management, and planning and control are taking place. Examples will vary.

Diff: 3 Reference: Operations and Supply Chain Management and You Keywords: e-commerce, global, relationship, supply chain AACSB: Application of Knowledge, Reflective Thinking LO: 1.3: Identify the major professional organizations and career opportunities in operations and supply chain managementIntroduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 2 Operations and Supply Chain Strategies Learning Objective 2-1 1) A business is defined by its structural and infrastructural elements.

Answer: TRUE Diff: 1 Reference: Elements of the Business Keywords: structural, infrastructural AACSB: Application of Knowledge LO: 2.1: Distinguish between structural and infrastructural elements of the business.

2) Policies and decision rules are infrastructural elements.

Answer: TRUE Diff: 2 Reference: Elements of the Business Keywords: infrastructural, policy, decision rule AACSB: Application of Knowledge LO: 2.1: Distinguish between structural and infrastructural elements of the business.

3) Structural elements of a business include: A) policies.

B) people.

C) decision rules.

D) computer systems.

Answer: D Diff: 1 Reference: Elements of the Business Keywords: structural AACSB: Application of Knowledge LO: 2.1: Distinguish between structural and infrastructural elements of the business.

4) A(n) ________ is an example of an infrastructural element.

A) building B) organizational structure C) office equipment

D) fleet of delivery trucks Answer: B Diff: 1 Reference: Elements of the Business Keywords: infrastructural AACSB: Application of Knowledge LO: 2.1: Distinguish between structural and infrastructural elements of the business.

5) ________ are tangible resources such as buildings, equipment, and computer systems.

Answer: Structural elements Diff: 1 Reference: Elements of the Business Keywords: structural element AACSB: Application of Knowledge LO: 2.1: Distinguish between structural and infrastructural elements of the business.

6) ________ are the people, policies, and organizational structure choices made by a firm.

Answer: Infrastructural elements Diff: 1 Reference: Elements of the Business Keywords: infrastructural element AACSB: Application of Knowledge LO: 2.1: Distinguish between structural and infrastructural elements of the business.

7) Define and describe the differences between structural and infrastructural elements of a business.

Answer: Structural elements are tangible resources, such as buildings, equipment, and information technology. These resources typically require large capital investments that are difficult to reverse. Because of their cost and inflexibility, such elements are changed infrequently and only after much deliberation. In contrast, infrastructural elements are the people, policies, decision rules, and organizational structure choices made by the firm. These elements are, by definition, not as visible as structural elements, but they are just as important.

Diff: 3 Reference: Elements of the Business Keywords: infrastructural element AACSB: Application of Knowledge LO: 2.1: Distinguish between structural and infrastructural elements of the business.

Learning Objective 2-2 1) A mechanism that identifies a firm's targeted customers and sets time frames and performance objectives for the business is called a mission statement.

Answer: FALSE Diff: 2 Reference: Strategy Keywords: strategy, mission statement AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

2) The vision statement addresses a company's reason for existence, core values, and domain.

Answer: FALSE Diff: 2 Reference: Strategy Keywords: mission statement AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

3) As long as each functional area in a company operates efficiently, their strategies can be very different.

Answer: FALSE Diff: 1 Reference: Strategy Keywords: strategy, function, functional area AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

4) In general, core competencies drive strategies.

Answer: TRUE Diff: 2 Reference: Strategy Keywords: core competency AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

5) A business's core competencies can shift over time.

Answer: TRUE Diff: 2 Reference: Strategy Keywords: core competency AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

6) The firm's targeted customers, time frames, and performance objectives are identified by their: A) mission statement.

B) core competencies.

C) business strategy.

D) functional strategy.

Answer: C Diff: 1 Reference: Strategy Keywords: business strategy AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

7) Core competencies can be described as: A) a declaration of mission that is focused on specific skills.

B) organizational strengths and abilities that have been developed over time.

C) only those processes that create products or provide services.

D) elements of the supply chain that create value.

Answer: B Diff: 2 Reference: Strategy Keywords: core competencies AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

8) The success of a strategy depends on doing many things well and: A) adjusting the company mission to match what you excel at.

B) performing at a high level.

C) doing them better than your competitors.

D) integrating among them.

Answer: D Diff: 2 Reference: Strategy Keywords: business strategy AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

9) Which of the following statements about functional strategies is best?

A) Functional strategies are not impacted by the mission statement; instead they are impacted by the overall business strategy.

B) Functional strategies determine the overall business strategy.

C) Many functional level strategies could readily be described as cross-functional.

D) A firm's operations and supply chain strategy is more important than their marketing, finance and engineering strategies.

Answer: C Diff: 2 Reference: Strategy Keywords: functional strategy, cross-functional AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

10) No one could turn around a failing restaurant as expertly as Gordon, whose experience and cadre of trained professionals was available at a moment's notice should his services be needed.

This ability, some might call it a gift, was developed to such a level that other restaurant consultants were unable to match his results. This ability is best described as his: A) business strategy.

B) core competency.

C) mission statement.

D) operations and supply chain strategy.

Answer: B Diff: 2 Reference: Strategy Keywords: core competency AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

11) The ________ explains why an organization exists.

Answer: mission statement Diff: 1 Reference: Strategy Keywords: mission statement AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

12) Organizational strengths or abilities, developed over a long period of time that customers find valuable and competitors find difficult or impossible to copy are ________.

Answer: core competencies Diff: 1 Reference: Strategy Keywords: core competency, competency AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

13) The translation of an overall business strategy into a level of detail suitable for the marketing area is a(n) ________.

Answer: functional strategy Diff: 1 Reference: Strategy Keywords: functional strategy AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

14) Define mission statement and business strategy and describe the relationship between the two.

Answer: A mission statement explains why an organization exists. It describes what is important to the organization, called its core values, and identifies the organization's domain. A business strategy identifies the firm's targeted customers and sets time frames and performance objectives for the business. The mission statement provides a more global picture, while the business strategy addresses who the targeted customers and markets are, areas of sustainable competitive advantage, the role of supply chain partners, and time frames and performance objectives.

Diff: 2 Reference: Strategy Keywords: mission statement, business strategy, strategy AACSB: Application of Knowledge LO: 2.2: Explain the relationship between mission statements, business strategies, and functional strategies.

Learning Objective 2-3 1) An operations and supply chain strategy is a functional strategy that is, by definition, an infrastructural strategy.

Answer: FALSE Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: strategy, operations, supply chain, infrastructural AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

2) Conformance quality addresses whether the product was made or the service performed to specifications.

Answer: TRUE Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: conformance, quality AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

3) If a logistics firm consistently makes deliveries within the agreed upon delivery window, they are exhibiting delivery reliability.

Answer: TRUE Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: delivery, reliability AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

4) Changeover flexibility refers to the ability of a company to change production quickly from one product to another with a minimal downtime in production.

Answer: FALSE Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: changeover, flexibility, mix AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

5) Volume flexibility is the term used to describe the ability of a producer to produce a dazzling array of products or services.

Answer: FALSE Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: mix flexibility AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

6) Darrell and Dave were fierce competitors, which drove both of them to overpay for many of their inputs, resulting in increased prices at their own stores. Dave realized this, and pondered how he could be recognized as a cost leader by his customers and maintain his reputation for quality merchandise. Sacrificing one element of his strategy at the expense of another is recognized as a trade-off in operations management.

Answer: TRUE Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: trade-off AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

7) "I've never seen flavored marshmallows this size before!" Alice squealed as she emptied the shelves at the local grocery store. The rest of the shoppers would have to make do with the other seventy bags of miniature and standard-size marshmallows during this winter's hot chocolate festival. For Alice, the jumbo size feature is an order winner.

Answer: TRUE Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: order winner, order qualifier AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

8) Your employer prepares a request for proposal that describes in vivid detail all of the capabilities that a new computer system should possess. A software product that can meet this request for proposal has performance characteristics that can be described as order qualifiers.

Answer: TRUE Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: order qualifier AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

9) In the internally supportive stage of business strategy alignment, management merely attempts to minimize negative potential in the operations and supply chain area.

Answer: FALSE Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: strategy, alignment, supportive AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

10) You decide to open a bookstore with a wide selection, comfortable seating, and an internal coffee shop because it has worked very well for other bookstores you have visited. Your strategy could be described as externally neutral.

Answer: TRUE Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: strategy, alignment AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

11) The externally supportive stage of alignment is more desirable than the externally neutral stage of alignment.

Answer: TRUE Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: strategy, alignment AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

12) The phrase "closing the loop" means that strengths and weaknesses, as well as core competencies are fed back into the mission statement.

Answer: FALSE Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: closing the loop, strategy, fourth stage AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

13) Which of these is NOT one of the primary objectives of an operations and supply chain strategy?

A) To help management choose the right mix of structural and infrastructural elements, based on a clear understanding of the performance dimensions valued by customers and the trade-offs involved.

B) To ensure that the firm's structural and infrastructural choices are strategically aligned with the firm's business strategy.

C) To support the development of core competencies in the firm's operations and supply chains.

D) To align structural and infrastructural elements to convert order winners into order qualifiers as determined by the mission statement.

Answer: D Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: functional strategy, operations, supply chain AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

14) Which of these is a major operations and supply chain structural decision category?

A) Organization B) Planning and control C) Capacity D) Product and service development Answer: C Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: structural decision AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

15) Which of these is a major operations and supply chain infrastructural decision category?

A) Organization B) Facilities C) Capacity D) Technology Answer: C Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: structural decision AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

16) Damron Inc. wants to purchase a shear for their sheet metal shop and chooses dimensions of cost, reliability, and flexibility as critical to their long term success. They evaluate three different shears and rate their performance on each criterion on a scale from 1 (poor) to 5 (excellent).

What is the value index for the shear made by Belsky Manufacturing?

Dimension Importance Belsky Mfg. Reber Ind. Floyd Co. 4 1 5 3 Cost 2 5 2 1 Reliability 3 3 3 4 Flexibility A) 9 B) 18 C) 23 D) 81 Answer: C Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: customer, value, value index AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

17) Damron Inc. wants to purchase a shear for their sheet metal shop and chooses dimensions of cost, reliability, and flexibility as critical to their long term success. They evaluate four different shears and rate their performance on each criterion on a scale from 1 (poor) to 5 (excellent).

Which shear should be purchased?

Dimension Importance Belsky Mfg. Reber Ind. Estelle LLC Floyd Co. 4 4 4 3 3 Cost 2 3 2 3 1 Reliability 3 2 3 3 4 Flexibility A) Belsky B) Reber C) Estelle D) Floyd Answer: B Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: value index AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

18) Electra wants to purchase a laptop for use in her MBA program so she can work on assignments and surf the web while the professor drones on endlessly. After consulting with her colleagues, she chooses the dimensions of cost, weight, processor speed, and touchscreen capability as critical to her long term success and amusement. She evaluates four different laptops and rates their performance on each criterion on a scale from 1 (poor) to 5 (excellent).

Which laptop should Electra purchase?

Dimension Importance 3 Weight 5 Speed 2 Cost 1 Touchscreen

Sir Face 4 4 2 5

Toybook Air 4 4 2 2

Knockoff High Priced 3 5 4 3 5 1 3 3

A) Sir Face B) Toybook Air C) Knockoff D) High Priced Answer: C Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: value index AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

19) Electra wants to purchase a laptop for use in her MBA program so she can work on assignments and surf the web while the professor drones on endlessly. After consulting with her colleagues, she chooses the dimensions of cost, weight, processor speed, and touchscreen capability as critical to her long term success and amusement. She evaluates four different laptops and rates their performance on each criterion on a scale from 1 (poor) to 5 (excellent).

She is struggling with her assessment of the importance of the Cost criterion. As an avid lottery player, she is pretty sure that tonight's drawing will mean at least two numbers match on the ticket she bought on the way to class and it could possibly mean a three-number match. Given her uncertainty, she would like to choose the laptop that performs the best overall across the entire spectrum of possibilities of the outcome of tonight's lottery. Which would you recommend?

Dimension Importance 3 Weight 5 Speed ??

Cost 1 Touchscreen

Sir Face 4 4 2 5

Toybook Air 4 4 4 2

Knockoff High Priced 3 5 4 3 5 1 3 3

A) High Priced B) Knockoff C) Toybook Air D) Sir Face Answer: B Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: value index AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

20) Which of the following is NOT a generic performance dimension of operations and supply chain activities?

A) quality B) time C) flexibility D) social responsibility Answer: D Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: performance, quality, time, flexibility AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

21) Whether the product was made or service performed to specifications is a question of: A) conformance quality.

B) performance quality.

C) reliability quality.

D) value indices.

Answer: A Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: quality, conformance AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

22) Which of these statements about time performance is best?

A) A supplier with high delivery speed must have high delivery reliability.

B) A customer with a narrow delivery window should have a supplier with high delivery reliability.

C) A supplier with low delivery reliability must have low delivery speed.

D) A customer with a wide delivery window should have a supplier with low delivery reliability.

Answer: B Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: reliability, window AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

23) Lieutenant Columbo donned his raincoat and hopped into his 1959 Peugeot, hot on the trail of another condescending millionaire murder suspect. The Peugeot always drew stares, not because it was a rare automobile, but because it was an eyesore. It had one redeeming quality; every time he sat behind the wheel and turned the key in the ignition, it would start. Thus, the car scored well on the: A) mix flexibility scale.

B) changeover flexibility scale.

C) reliability quality scale.

D) delivery reliability scale.

Answer: C Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: reliability quality AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

24) We have all experienced the endless wait for repair technicians to show up at our house. If the cable company would provide an estimate of "Your installer will arrive at your house between 2 pm and 3 pm on Wednesday," instead of "Your installer will arrive at your house between 8 am and 5 pm on Wednesday," we would be impressed with their service and their: A) performance quality.

B) delivery speed.

C) delivery reliability.

D) delivery window.

Answer: D Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: delivery window AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

25) The ability to produce a wide range of products or services is: A) mix flexibility.

B) changeover flexibility.

C) volume flexibility.

D) run flexibility.

Answer: A Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: flexibility, mix flexibility AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

26) Which type of flexibility would be the most difficult to achieve for a two-chair barbershop?

A) mix flexibility B) changeover flexibility C) volume flexibility D) run flexibility Answer: C Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: volume flexibility AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

27) Mutt's Amazing Dogs offers a hot dog with mustard and a hot dog with relish and mustard.

The difference between the two (the relish) is achieved by flipping a single lever, which changes the dispenser from mustard, to a perfectly proportioned mix of relish and mustard. This lever responds instantly to the feathery touch of Mutt, who has achieved a high level of: A) mix flexibility.

B) volume flexibility.

C) delivery flexibility.

D) changeover flexibility.

Answer: D Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: changeover flexibility AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

28) Performance dimensions on which customers expect a minimum level of performance are called: A) order winners.

B) minimum performers.

C) recommended daily allowances.

D) order qualifiers.

Answer: D Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: order qualifier AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

29) Four engineering firms completed the request for proposal to develop something called the Arpanet, but the firm of Bolt Beranek and Newman demonstrated a camaraderie and tighter team concept that proved to be the ________ that resulted in their selection to develop a four node network that became the Internet.

A) order winners B) minimum performers C) recommended daily allowances D) order qualifiers Answer: A Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: order winner AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

30) The latex division of Vandelay Industries provided support after the sale that could not be matched by any of the other players in the latex industry. This unique attribute was responsible for perhaps 60% of their sales volume and could be described as: A) a trade-off.

B) a core competency.

C) an order winner.

D) externally neutral.

Answer: A Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: order winner AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

31) When the operations and supply chain areas are not linked with the overall business strategy, but instead follow industry practices, the firm is in this stage of alignment.

A) internally neutral B) externally neutral C) internally supportive D) externally supportive Answer: B Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: externally neutral, strategy, alignment AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

32) Before firms can progress to the fourth stage of alignment, they must: A) exploit core competencies.

B) develop a new mission statement.

C) develop order winners.

D) abandon order qualifiers.

Answer: A Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: core competency, fourth stage, alignment AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

33) Closing the loop in the area of business strategy means that: A) core competencies at the functional level feed back into the business strategy.

B) the mission statement is used to develop the business strategy.

C) the business strategy is translated into operations and supply chain actions.

D) other functional strategies, such as those of the marketing and finance functions are aligned with the operations and supply chain strategy.

Answer: A Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: closing the loop AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

34) One way to quantify the overall value of an item or service to a customer is by using a(n) ________.

Answer: value index Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: value index AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

35) The American-made car I purchased as a starving graduate student was not the sleek, highperformance machine that full professors park in faculty parking, but it performed admirably.

For the next twenty years I could count on one thing; every morning it would start when I turned the key. This vehicle had outstanding ________ quality.

Answer: reliability Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: reliability quality AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

36) The ability to produce a wide range of products or services is referred to as ________.

Answer: mix flexibility Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: flexibility, mix flexibility AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

37) A major retailer wants to sell items as cheaply as possible while maintaining an attractive and enjoyable shopping atmosphere. Spending too much on ambience will raise prices and drive away shoppers but spending too little will drive shoppers away also. Clearly, the retailer is faced with a(n) ________.

Answer: trade-off Diff: 2 Reference: Operations and Supply Chain Strategies Keywords: trade-off AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

38) Superior performance on a(n) ________ will not, by itself, give a company a competitive advantage.

Answer: order qualifier Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: order qualifier AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

39) At the ________ stage of alignment, the business strategy seeks to exploit core competencies found within the operations and supply areas.

Answer: externally supportive Diff: 3

Reference: Operations and Supply Chain Strategies Keywords: alignment, externally supportive AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

40) The operations and supply chain strategy wasn't aligned with the business strategy nor the mission, so management could only hope to minimize the damage the operations function caused. This ________ stage was targeted for improvement next year.

Answer: internally neutral Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: internally neutral AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

41) Before firms can think about progressing to the fourth stage of alignment (________), they must develop ________ within the operations and supply chain areas.

Answer: externally supportive; core competencies Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: externally supportive, core competencies AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

42) What are the three primary objectives of an operations and supply chain strategy?

Answer: The three primary objectives of an operations and supply chain strategy are: 1) To help management choose the right mix of structural and infrastructural elements, based on a clear understanding of the performance dimensions valued by customers and the trade-offs involved; 2) To ensure that the firm's structural and infrastructural choices are strategically aligned with the firm's business strategy; and 3) To support the development of core competencies in the firm's operations and supply chains.

Diff: 2 Reference: Operations and Supply Chain Strategy Keywords: operations, supply chain, strategy AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

43) Modelo, S.A., is considering three providers of automated visual inspection systems for their packaging needs. A team of manufacturing engineers, production managers, and process engineers has developed the following list of criteria and assigned them ratings on a scale of 1 (completely unimportant) to 5 (critical). This team has also rated the candidate products on each of these dimensions using a scale of 1 (poor) to 5 (excellent). Which provider should they choose and what caveats, if any, should go with their recommendation?

Dimension Importance Provider A Provider B Provider C 4 megapixels 5 4 5 5 Minimal fringing 3 4 3 2 15 fps VGA movie mode 4 4 4 1 Minimal shutter lag 2 2 5 5 Works in dim light 1 2 3 4 Water resistant 5 5 2 1 Answer: The highest score using the customer value index is obtained by Provider A. V=

VA = 5 × 4 + 3 × 4 + 4 × 4 + 2 × 2 + 1 × 2 + 5 × 5 = 79 VB = 5 × 5 + 3 × 3 + 4 × 4 + 2 × 5 + 1 × 3 + 5 × 2 = 73 VC = 5 × 5 + 3 × 2 + 4 × 1 + 2 × 5 + 1 × 4 + 5 × 1 = 54 Caveats to this technique are the methods used to assign an importance rating to each of the criteria and scores to each of the providers. A slight switch in ratings or scores could swing the choice from Provider A to Provider B, for example, an increase in importance of the Minimal shutter lag criterion from a 2 to a 4 will put the two products in a tie.

Diff: 2 Reference: Operations and Supply Chain Strategy Keywords: customer value, value AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

44) Electra wants to purchase a laptop for use in her MBA program so she can work on assignments and surf the web while the professor drones on endlessly. After consulting with her colleagues, she chooses the dimensions of cost, weight, processor speed, and touchscreen capability as critical to her long term success and amusement. She evaluates four different laptops and rates their performance on each criterion on a scale from 1 (poor) to 5 (excellent).

She is struggling with her assessment of the importance of the Cost criterion. As an avid lottery player, she is pretty sure that tonight's drawing will result in at least a two number match on the ticket she bought on the way to class and it could mean a three-number match. Given her uncertainty, she would like to choose the laptop that performs the best overall across the entire spectrum of possibilities of the outcome of tonight's lottery. Which would you recommend?

Dimension Importance 3 Weight 5 Speed ??

Cost 1 Touchscreen

Sir Face 4 4 2 5

Toybook Air 4 4 4 2

Knockoff High Priced 3 5 4 3 5 1 3 3

Answer: The most robust choice is the Knockoff, as it is the top-ranked alternative for four of the five possible importance weights for the Cost criterion. Not only does it perform well in four out of the five possible values, but it should be noted that it does so in the most likely outcomes of the lottery drawing this evening. It is highly likely that Electra will not win the lottery, and assuming Electra is a financially-strapped student, the Cost criterion should probably be weighted as a 5 (losing lottery, so money is tight) than as a 1 (winning lottery and therefore cost is not an important consideration).

This table shows the value index for each alternative under the five different importance values for the cost criterion. Highest scores are highlighted.

Alternatively, the data in this table can be graphed to illustrate the preference shift as the importance of cost varies.

Diff: 3 Reference: Operations and Supply Chain Strategies Keywords: value index AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

45) Describe the four generic performance dimensions of operations and supply chain activities.

Answer: The four generic performance dimensions of operations and supply chain activities are quality, time, flexibility, and cost. Quality includes all characteristics of a product or service that bear on its ability to satisfy stated or implied needs. Time has two basic characteristics: speed and reliability. Flexibility is a performance dimension that considers how quickly operations and supply chains can respond to the unique needs of customers. Cost covers a wide range of activities that companies categorize in many ways; typical cost categories include labor cost, material cost, engineering cost, and quality-related costs.

Diff: 2 Reference: Operations and Supply Chain Strategy Keywords: operations, supply chain, performance AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

46) What are the differences between performance, conformance, and reliability dimensions of quality?

Answer: Performance quality addresses the basic operating characteristics of the product or service. Conformance quality addresses whether the product was made or the service performed to specifications. Reliability addresses whether a product will work for a long time without failing or requiring maintenance.

Diff: 1 Reference: Operations and Supply Chain Strategy Keywords: conformance, reliability, quality AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

47) A university is evaluating options for an enterprise information system to replace their antiquated systems. The CIO has developed the following criteria: At a minimum, the system (or system provider) must be capable of: Technical support available 24/7 Have successfully installed and maintained systems in universities of similar size.

Beyond this, systems will be evaluated according to initial cost, annual maintenance and support costs, and ease of use.

The three companies that are vying for the university's business supplied the following information about their performance on these criteria.

Criterion Tech support 24/7 Installed base Initial cost Annual cost Ease of use

A

B

C

24/7 3 installations $2.3 million $100K 20 hours training

24/7 7 installations $1.9 million $125K 20 hours training

8-5 M-F 1 installation $1.25 million $75K 40 hours training

Create and analyze a graph showing each competitor's performance with regards to order winners and order qualifiers. Which firm should get the business and why? If you were consulting with the three potential system providers, what advice would you give each one?

Answer: Graph structure may vary, although all should indicate that provider C fails on the order qualifier regarding technical support. Students may defend company A and Company B as being reasonable choices. While A has a higher initial cost, it takes $25,000 less each year to maintain, a breakeven of 16 years. Company B has a greater installed base of systems, seven to three. Depending on the locations (and possibly identities) of the other installed systems, how funding is secured for the initial investment versus for annual maintenance, one option may be more attractive than another. Company C needs solid advice from a consultant regarding availability of support people; perhaps additional installations can justify increasing the availability of technical support. The amount or effectiveness of user training should also be addressed. Perhaps improved instructional design could reduce the amount of training time needed.

Diff: 3 Reference: Operations and Supply Chain Strategy Keywords: order winner, order qualifier AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

48) Discuss the different types of flexibility that a producer can exhibit. Use any company mentioned in the chapter and provide an example of each.

Answer: Many firms distinguish among several types of flexibility, including mix flexibility (the ability to produce a wide range of products or services), changeover flexibility (the ability to provide a new product with minimal delay), and volume flexibility (the ability to produce whatever volume the customer needs). Examples will vary.

Diff: 1 Reference: Operations and Supply Chain Strategies Keywords: mix flexibility, changeover flexibility, volume flexibility AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

49) Provide a specific example of an order winner that has evolved into an order qualifier. Then provide a specific example of an order qualifier that has remained an order qualifier for many years and remains one to this day. Which situation do you think is more natural, the eventual conversion from winner to qualifier or the static status of "once an order winner, always an order winner"? Justify your conclusions.

Answer: Answers and examples will vary. One theory that speaks to this question is the Kano model, which uses the terms must-be quality and attractive quality in roughly the same way as the terms order qualifiers and order winners are used in this text (the Kano model does not appear in this text). The Kano model argues that there is a gradual conversion of winners to qualifiers. Students might also note that the nature of competition and advances in technology make this progression from winner to qualifier a very natural occurrence.

Diff: 3 Reference: Operations and Supply Chain Strategy Keywords: order winner, order qualifier AACSB: Analytical Thinking LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

50) Describe the four stages of operations and supply chain alignment with business strategy.

Answer: The four stages of alignment are internally neutral, externally neutral, internally supportive, and externally supportive. The internally neutral stage is more of a defensive strategy, where management seeks only to minimize any negative potential in the operations and supply chain areas. There is no effort made to link these areas with the business strategy. In the externally neutral stage, industry practice is followed with no effort made to link the operations and supply chain areas with overall business strategy. There is an assumption made that whatever works for competitors will work for the company. The internally supportive stage features recognition that operations and supply chain structural and infrastructural elements must be aligned with the business strategy. Operations and supply chain areas participate in the strategic debate. In the externally supportive stage the operations and supply areas do more than just support the business strategy — the business strategy actively seeks to exploit the core competencies found within these areas.

Diff: 3 Reference: Operations and Supply Chain Strategy Keywords: internally neutral, externally neutral, internally supportive, externally supportive, alignment AACSB: Application of Knowledge LO: 2.3: Explain some of the key ideas surrounding operations and supply chain strategies, including the concepts of customer value, performance trade-offs, order winners and qualifiers, strategic alignment, and core competencies.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 3 Process Choice and Layout Decisions in Manufacturing and Services Learning Objective 3-1 1) No manufacturing process can be best at everything.

Answer: TRUE Diff: 1 Reference: Introduction Keywords: manufacturing process

AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

2) A product-based layout arranges resources sequentially according to the steps required to make a product.

Answer: TRUE Diff: 1 Reference: Manufacturing Processes Keywords: product-based layout AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

3) A job shop manufacturing process is better suited to make a variety of products than a continuous flow process.

Answer: TRUE Diff: 2 Reference: Manufacturing Processes Keywords: continuous flow, job shop AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

4) A batch process is less flexible than a production line and less efficient that a job shop.

Answer: FALSE Diff: 1 Reference: Manufacturing Processes Keywords: batch, assembly line, job shop AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

5) A cellular layout is another name for a functional layout.

Answer: FALSE Diff: 1 Reference: Manufacturing Processes Keywords: cellular layout, functional layout AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

6) A customer service function at an insurance firm that handles claims based on the first letter of the customer's last name is an example of applying group technology to a service operation.

Answer: FALSE Diff: 2 Reference: Manufacturing Processes Keywords: group technology AACSB: Reflective Thinking LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

7) The product-process matrix illustrates that low volume, one-of-a-kind products are ideally suited to a job shop process.

Answer: TRUE Diff: 2 Reference: Manufacturing Processes Keywords: product-process matrix, job shop AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

8) A manufacturing process decision affects: A) the type of workforce needed.

B) the type of equipment needed.

C) the type of products that can be made.

D) All of the above are correct.

Answer: D Diff: 1 Reference: Introduction Keywords: manufacturing process AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

9) Highly automated batch processes that can reduce the cost of making similar groups of products are: A) functional layouts.

B) flexible manufacturing systems.

C) make-to-stock.

D) adjacent processes.

Answer: B Diff: 1 Reference: Manufacturing Processes Keywords: batch, FMS, flexible manufacturing system AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

10) The time between completions of successive units on a production line is called: A) cycle time.

B) takt time.

C) elapsed time.

D) work time.

Answer: A Diff: 1 Reference: Manufacturing Processes Keywords: production line, cycle time AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

11) An advantage of a production line process is: A) the volume of output needed to justify the investment.

B) the degree of flexibility of the process.

C) the per unit cost of items produced on the line.

D) the range of output typically produced on such a process.

Answer: C Diff: 2 Reference: Manufacturing Processes Keywords: production line, cost, flexibility AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

12) The manufacturing process used to make a wide variety of highly customized products in quantities as small as one is a: A) production line.

B) continuous flow process.

C) job shop.

D) fixed position.

Answer: C Diff: 2 Reference: Manufacturing Processes Keywords: job shop AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

13) A sporting apparel manufacturer that produces t-shirts to commemorate significant athletic achievements for proud students and alumni probably uses: A) a fixed position layout.

B) batch manufacturing.

C) a continuous flow process.

D) a production line.

Answer: B Diff: 2 Reference: Manufacturing Processes Keywords: batch AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

14) The Devon Tower graces the Oklahoma City skyline and is officially the tallest building in the state. The manufacturing process used to produce this jewel is most probably: A) a fixed-position layout.

B) a batch manufacturing process.

C) a hybrid process.

D) a job shop.

Answer: A Diff: 2 Reference: Manufacturing Processes Keywords: fixed-position layout AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

15) Which of these manufacturing processes is most likely dictated by the physical characteristics of the product being produced?

A) job shop B) batch C) production line D) continuous flow Answer: D Diff: 2 Reference: Manufacturing Processes Keywords: continuous flow AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

16) A(n) ________ is a highly automated batch process that can reduce the cost of making groups of similar products.

Answer: flexible manufacturing system (FMS) Diff: 1 Reference: Manufacturing Processes Keywords: flexible manufacturing system, FMS AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

17) ________ gets its name from the fact that items are moved through the different manufacturing steps in groups.

Answer: Batch manufacturing Diff: 1 Reference: Manufacturing Processes Keywords: batch AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

18) "My tour of the Duff Brewery was the greatest experience of my life," Homer recalled.

Lenny's favorite part was the batch process that was evident during the fermenting stage but Carl's favorite part was the high speed continuous flow process evident in the bottling line.

"You're both right," Homer declared, "Duff takes both elements to create a(n) ________ process."

Answer: hybrid (manufacturing) Diff: 1 Reference: Manufacturing Processes Keywords: hybrid manufacturing process AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

19) A cellular layout is essentially the opposite of a(n) ________ layout.

Answer: functional Diff: 2 Reference: Manufacturing Processes

Keywords: cellular layout, functional layout AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

20) The product process matrix uses a scale of ________ and ________.

Answer: volume; standardization Diff: 3 Reference: Manufacturing Processes Keywords: product-process matrix AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

21) Why are process decisions important?

Answer: Process decisions are important because they tend to be expensive and far-reaching. A process choice dictates the type and size of the workforce, the type of equipment that is needed, and the type of products that can be made. Different processes have different strengths and weaknesses.

Diff: 1 Reference: Introduction Keywords: process decision AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

22) What are the two types of product-based layouts? What are their similarities and differences and their advantages and disadvantages compared with other types of layouts and processes?

Answer: A production line is a type of manufacturing process used to produce a narrow range of standard items with identical or highly similar designs. Production lines have several distinct characteristics.

First, they follow a product-based layout, where resources are arranged sequentially according to the steps required to make a product. The various steps are usually linked by some system that moves the items from one step to the next, such as a conveyor belt.

Second, items typically move through the production line at a predetermined pace. At each step in the process, equipment or people have a set amount of time to finish each task. By dividing the manufacturing process into a series of discrete, carefully timed steps, production lines achieve high degrees of equipment and worker specialization, as well as consistent quality and high efficiency.

Production lines are ideally suited to the high-volume production of a single product or of products characterized by similar design attributes, such as size, material, or manufacturing steps.

Production lines have two drawbacks, however. First, high volumes are required to justify the required investment in specialized equipment and labor. Second, lines are inflexible with regard to products that do not fit the design characteristics of the production line. When production volumes are low or product variety is high, other solutions are needed.

Continuous flow processes closely resemble production line processes in that they produce highly standardized products using a tightly linked, paced sequence of steps. The main difference is the form of the product, which usually cannot be broken into discrete units until the very end of the process. The nature of the product tends to make shutdowns and start-ups expensive, which discourages flexibility and encourages product standardization. And the highly technical nature of many continuous flow processes means that specialists are needed to control operations. The only responsibilities of direct laborers might be to load and unload materials and monitor the process. Continuous flow processes also tend to be highly capital-intensive and very inflexible with respect to changes in output levels.

Diff: 2 Reference: Manufacturing Processes Keywords: product-based layout, production line, continuous flow AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

23) Draw the product-process matrix and discuss the placement of each process choice.

Answer: The product process matrix relates output volume and degree of customization and shows which process types have the greatest chance for success in each combination of volume and customization. A job shop is best suited to make low volumes of highly customized (low standardization) products and a production line is best for generating large volumes of highly standardized products. Positions off of the diagonal represent limited chances of company survival and are generally thought to incur high opportunity cost or high out of pocket costs.

Diff: 3 Reference: Manufacturing Processes Keywords: product-process matrix AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

24) What is a cellular layout and what are its advantages?

Answer: A cellular layout is a type of layout typically used in group technology settings; resources are physically arranged according to the dominant flow of activities for the product family. Group technology is achieved when clusters of machines and/or personnel are dedicated to the production of products (or service of customers) that are similar. A cellular layout reduces transportation and congestion on the production floor.

Diff: 2 Reference: Manufacturing Processes Keywords: cellular, group technology AACSB: Application of Knowledge LO: 3.1: Describe the characteristics of the five classic types of manufacturing processes, and explain how different manufacturing process choices support different market requirements.

Learning Objective 3-2 1) Make-to-stock products are typically produced using a production line.

Answer: TRUE Diff: 2 Reference: Product Customization within the Supply Chain Keywords: make-to-stock, MTS, customization AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

2) Products that use standard components, but the final configuration of those components is customer-specific, are called make-to-order products.

Answer: TRUE Diff: 1 Reference: Product Customization within the Supply Chain Keywords: make-to-order, MTO AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

3) Activities that take place prior to the point of customization are called upstream activities.

Answer: TRUE Diff: 1 Reference: Product Customization within the Supply Chain Keywords: customization, upstream AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

4) According to the law of variability, converting from an assemble-to-order to a make-to-order production process should increase productivity of the manufacturing processes.

Answer: FALSE Diff: 3 Reference: Product Customization within the Supply Chain Keywords: assemble-to-order, make-to-order, law of variability, productivity, ATO, MTO AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

5) Products that are customized only at the very end of the manufacturing process are known as: A) make-to-stock.

B) assemble-to-order.

C) make-to-order.

D) engineer-to-order.

Answer: B Diff: 1 Reference: Product Customization within the Supply Chain Keywords: assemble-to-order, ATO AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

6) Products that use standard components but the final configuration of those components is customer-specific are known as: A) make-to-stock.

B) assemble-to-order.

C) make-to-order.

D) engineer-to-order.

Answer: C Diff: 1 Reference: Product Customization within the Supply Chain Keywords: make-to-order, MTO AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

7) An assemble-to-order process occurs upstream from: A) design.

B) material sourcing.

C) fabrication.

D) assembly/finishing.

Answer: D Diff: 2 Reference: Product Customization within the Supply Chain Keywords: assemble-to-order, ATO AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

8) ________ products involve no customization but ________ products are completely customized.

Answer: Make-to-stock; engineer-to-order Diff: 2 Reference: Product Customization within the Supply Chain Keywords: engineer-to-order, make-to-stock, ETO, MTS AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

9) ________ are products that are customized only at the very end of the manufacturing process.

Answer: Assemble-to-order Diff: 1 Reference: Product Customization within the Supply Chain Keywords: assemble-to-order, ATO AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

10) According to the law of variability, the ________ the random variability either demanded of the process or inherent in the process itself or in the items processed, the ________ productive the process is.

Answer: greater, less; lower, more Diff: 2 Reference: Product Customization within the Supply Chain Keywords: law of variability, productivity AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

11) What are the four levels of customization and at what place does each occur in the supply chain?

Answer: The four levels ranked from least to greatest customization are make-to-stock, assemble-to-order, make-to-order, and engineer-to-order. Make-to-stock products have no customization and are typically produced in large enough volumes to warrant keeping a finished goods inventory. Assemble-to-order products are customized at the very end of the manufacturing process. Make-to-order products use standard components, but the final configuration of those components is customer specific. Engineer-to-order products are designed and produced from the start to meet customer requirements. Engineer-to-order products are customized upstream from design. Make-to-order products are customized downstream from material sourcing and upstream from fabrication. Assemble-to-order products are customized downstream from fabrication and upstream from assembly/finishing. The text indicates that make-to-stock products are customized downstream from assembly/finishing and upstream from distribution, although this customization may be only in the order quantity.

Diff: 2 Reference: Product Customization within the Supply Chain Keywords: make-to-stock, assemble-to-order, make-to-order, engineer-to-order, MTO, ATO, ETO, MTS AACSB: Application of Knowledge LO: 3.2: Describe the critical role of customization in manufacturing, including the degree and point of customization.

Learning Objective 3-3 1) In a service process, the greater the emphasis on intangible activities is, the more critical is the training and retention of skilled employees and the development and maintenance of the firm's knowledge assets.

Answer: TRUE Diff: 2 Reference: Service Processes Keywords: service package, intangible activities AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

2) Capability variety is the difference in how customers view an identical service outcome. What some customers might view as economical and thrifty others might view as cheap and poor value.

Answer: FALSE Diff: 2 Reference: Service Processes Keywords: capability, variability, subjective preference AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

3) As the degree of service customization decreases, managers have more opportunity to focus on cost and productivity.

Answer: TRUE

Diff: 2 Reference: Service Processes Keywords: service customization AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

4) The back room refers to the part of the service process where the customer is not visible to the other customers waiting for service.

Answer: FALSE Diff: 2 Reference: Service Processes Keywords: back room AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

5) In a service blueprint, the line of internal interaction falls between the customer and the onstage service provider.

Answer: FALSE Diff: 2 Reference: Service Processes Keywords: service blueprint AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

6) The three dimensions of service positioning are the nature of the service package, the degree of customization and the degree of customer contact.

Answer: TRUE Diff: 2 Reference: Service Processes Keywords: service process, service package, customization, service positioning, customer contact AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

7) The greater the emphasis on intangible activities, the more management's attention will be directed to: A) buildings and property.

B) training employees.

C) truck fleets.

D) material costs.

Answer: B Diff: 2 Reference: Service Processes Keywords: intangible activities, service package AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

8) The point where the customer interfaces directly with the service organization is: A) the front room.

B) the back room.

C) onstage.

D) the floor.

Answer: A Diff: 2 Reference: Service Processes Keywords: front room AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

9) A legal service in a corporate acquisition probably scores: A) low on customization and high on physical activities.

B) high on customer contact and low on intangible activities.

C) high on customization and high on intangible activities.

D) low on customer contact and low on intangible activities.

Answer: C Diff: 2 Reference: Service Processes Keywords: service package, intangible activities, customization AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

10) The ________ includes all the value-added physical and intangible activities that a service organization provides to the customer.

Answer: service package Diff: 1 Reference: Service Processes Keywords: service package AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

11) As the degree of customer contact decreases, more of the service package is provided by the ________.

Answer: back room Diff: 2 Reference: Service Processes Keywords: back room AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

12) In a service blueprint, the two layers the customer is involved with are the ________ and the ________.

Answer: customer action; onstage activities Diff: 2 Reference: Service Processes Keywords: service blueprint AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

13) Service operations compete and position themselves in the marketplace based on the three dimensions — ________, ________, and ________.

Answer: degree of customization; degree of customer contact; nature of the service package Diff: 3 Reference: Service Processes Keywords: service process, service package, customization, customer contact AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

14) Define the term service package and describe management's focus for each activity.

Answer: A service package includes all the value-added physical and intangible activities that a service organization provides to the customer. For some service operations, the primary sources of value are physical (or tangible) activities. In this case, management's attention must be directed towards capital expenditures, material costs and other tangible assets. For some service operations, the service package consists primarily of intangible activities. If this is the case, management should focus on training and retention of skilled employees and development and maintenance of the firm's knowledge assets.

Diff: 2 Reference: Service Processes Keywords: service package AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

15) Define the terms front room and back room and describe the roles these processes play in service operations. What must operations managers take into consideration when setting up these two processes?

Answer: The degree of customer contact determines the relative importance of front-room and back-room operations in a service process. The front room in a service organization is the point (either physical or virtual) where the customer interfaces directly with the service organization.

As a rule, as the degree of customer contact increases, more of the service package is provided by front-room operations.

In designing front-room operations, managers must consider how the customer interfaces with the service. Layout, location, and convenience become key. The physical layout must be comfortable, safe, and attractive, and the location must be convenient. In addition, front-room service must be available when the customer needs it.

As the degree of customer contact decreases, more of the service package is provided by backroom operations. The back room refers to the part of a service operation that is completed without direct customer contact. The back room is often hidden from the customer's view. Such services can be located to reduce transportation costs and laid out to improve productivity.

Because back-room personnel do not deal directly with customers, the hours of operation are not as crucial as they are in front-room operations, and employees do not have to be skilled in dealing with customers. As you might expect, back-room service operations are usually easier to manage than front-room operations.

Diff: 2 Reference: Service Processes Keywords: front room, customer contact, back room AACSB: Application of Knowledge LO: 3.3: Describe the three dimensions that differentiate services from one another — the service package, customization, and customer contact — and explain the different managerial challenges driven by these dimensions.

Learning Objective 3-4 1) Cycle time is the sum of all of the task times.

Answer: FALSE Diff: 1 Reference: Layout Decision Models Keywords: product layout, cycle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

2) Takt time sets the upper limit on the elapsed time between completions of successive items on a production line.

Answer: TRUE Diff: 2 Reference: Layout Decision Models Keywords: takt time, cycle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

3) Regardless of the number of tasks or their durations, a line balance that is 100% efficient is achievable if CT = ΣT. Answer: TRUE Diff: 3 Reference: Layout Decision Models Keywords: efficiency, cycle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

4) The shorter the required takt time, the more workstations will be required to balance a production line.

Answer: TRUE Diff: 2 Reference: Layout Decision Models Keywords: takt time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

5) A manager deciding where six departments could be located in a six-room office building has over 500 possible arrangements.

Answer: TRUE Diff: 2 Reference: Layout Decision Models Keywords: functional layout, department location AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

6) Champion Cooling has just signed a contract to assemble window air conditioners for another company. The list of tasks, including time requirements and immediate predecessors, follows.

Initially, the plan was to make 300 units in an eight hour day but as the summer months approach, Champion Cooling finds themselves far behind in total production. They wish to reconfigure their production line in order to produce maximum output. What should their takt time be?

Task Time (min) Bolt compressor to base 5 Install coils and lines 6 Install fan motor 7 Install switch and thermostat 5 Charge system and test 10 Cosmetic detailing 7

Predecessor None Bolt compressor to base Install coils and lines Install fan motor Install switch and thermostat Charge system and test

A) 5 B) 6 C) 7 D) 10 Answer: D Diff: 2 Reference: Layout Decision Models Keywords: line balance, takt time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

7) The process design team at a manufacturer has broken an assembly process into eight basic steps, each with a required time, and predecessor as shown in the table. They work a 7 hour day and want to produce at a rate of 360 units per day. What should their takt time be?

Task Time (sec) Predecessor A 45 -B 50 A C 40 A D 55 B, C E 40 D F 65 D G 25 E H 35 F, G A) 70 seconds B) 65 seconds C) 52 seconds D) 25 seconds Answer: A Diff: 2 Reference: Layout Decision Models Keywords: line balance, takt time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

Use this scenario for the following questions.

The process design team at a manufacturer has broken an assembly process into eight basic steps, each with a required time, and predecessor as shown in the table. There are 8 productive hours available in a day and the manufacturer wishes to produce 400 units. Use this information to answer the following questions.

Task J K L M N O P R

Time (sec) Predecessor 45 -50 J 40 J 55 K, L 40 M 65 M 25 N 35 O, P

8) Refer to the scenario above. What is the theoretical minimum number of stations?

A) four B) five C) six D) seven Answer: B Diff: 2 Reference: Layout Decision Models Keywords: line balance, takt time, minimum number of stations AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

9) Refer to the scenario above. Operations managers and process engineers design a line that contains seven stations. What is the percentage of idle time?

A) 21.9% B) 14.3% C) 25.6% D) 17.8% Answer: A Diff: 2 Reference: Layout Decision Models Keywords: line balance, efficiency, idle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

10) Refer to the scenario above. The manager assigns tasks to workstations and breaks ties using a longest operation heuristic. That is, if two or three tasks could be assigned to a given station, the manager assigns the longest task first and then fills in the remaining time at the workstation as completely as possible. Using this approach, what task(s) would be assigned at the fourth station?

A) N, P B) M C) N, O D) O, P Answer: B Diff: 2 Reference: Layout Decision Models Keywords: line balance AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

Use this scenario for the following questions.

The process design team at a manufacturer has broken an assembly process into eight basic steps, each with a required time, and predecessor as shown in the table. There are 7.5 productive hours available in a day and the manufacturer wishes to produce 400 units. Balance the line by assigning tasks to workstations to fill up as much takt time as possible. Break ties by assigning the longest task first.

Task A B C D E F G H

Time (sec) Predecessor 45 -50 A 20 A 55 A 15 D 65 D 25 E 35 B, C, F, G

11) Refer to the scenario above. What task(s) should be assigned at the third workstation?

A) B and E B) D C) C, E, and G D) F Answer: D Diff: 3 Reference: Layout Decision Models Keywords: line balance AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

12) Refer to the scenario above. Without using more than one worker per station, what is the maximum output achievable in the 7.5 hour work day?

A) 1000 units B) 1800 units C) 1258 units D) 415 units Answer: D Diff: 2 Reference: Layout Decision Models Keywords: takt time, output rate AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

13) Refer to the scenario above. The process design team realizes that the potential spike in demand for this device requires increased output. They elect to add a seventh worker to their production team at the first station. What is the net effect of adding this worker?

A) Nothing—the output rate does not change.

B) The output rate increases by 20%.

C) The output rate increases by 10%.

D) The output rate increases by 5%.

Answer: A Diff: 3 Reference: Layout Decision Models Keywords: takt time, line balance AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

14) Refer to the scenario above. What is the takt time?

A) 53.3 seconds B) 67.5 seconds C) 75.8 seconds D) 90 seconds Answer: B Diff: 2 Reference: Layout Decision Models Keywords: takt time, line balance AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

15) Refer to the scenario above. The process engineer calculates the takt time and examines the task times indicated in the table. He decides to use the minimum cycle time instead and have the workers leave early each day once they have built 400 units. How much earlier would the workers leave?

A) 12 minutes and 53.3 seconds B) 14 minutes and 20 seconds C) 16 minutes and 40 seconds D) 18 minutes and 15 seconds Answer: C Diff: 2 Reference: Layout Decision Models Keywords: takt time, line balance AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

16) Refer to the scenario above. What is the theoretical minimum number of stations that will be used if the line is balanced using the appropriate takt time?

A) 3 B) 4 C) 5 D) 6 Answer: C Diff: 3 Reference: Layout Decision Models Keywords: line balance, minimum number of stations AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

17) Refer to the scenario above. How many workers must be added to increase the output rate to one unit per minute?

A) 1 B) 2 C) 3 D) 4 Answer: C Diff: 3 Reference: Layout Decision Models Keywords: line balance, takt time, output rate AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

18) The table depicts a production line that has been balanced with a takt time of 2 minutes.

What is the percent idle time of this balance?

Workstation Task Time (min)

1 A, B 1, 1

2 C 1.8

3 D, E, F 1, 0.5, 0.4

4 G, H 0.9, 0.8

5 I 1.8

6 J, K, L 0.5, 0.5, 0.6

A) 5% B) 10% C) 15% D) Cannot be determined from the information provided.

Answer: B Diff: 2 Reference: Layout Decision Models Keywords: line balance, takt time, efficiency, idle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

19) The table depicts a production line that has been balanced with a takt time of 2 minutes.

What is the efficiency of this balance?

Workstation Task Time (min)

1 A, B 1, 1

2 C 1.8

3 D, E, F 1, 0.5, 0.4

4 G, H 0.9, 0.8

5 I 1.8

6 J, K, L 0.5, 0.5, 0.6

A) 82.5% B) 85% C) 87.5% D) 90% Answer: D Diff: 2 Reference: Layout Decision Models Keywords: line balance, takt time, idle time, efficiency AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

20) The table depicts an production line that has been balanced with a takt time of 2 minutes.

Where would you add a worker if you wanted to increase the output rate while keeping six work stations?

Workstation Task Time (min)

1 A, B 1, 1

2 C 1.8

3 D, E, F 1, 0.5, 0.4

4 G, H 0.9, 0.8

5 I 1.8

6 J, K, L 0.5, 0.5, 0.6

A) station 1 B) station 2 C) station 3 D) station 6 Answer: A Diff: 2 Reference: Layout Decision Models Keywords: line balance, takt time, output rate AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

21) The table depicts a production line that has been balanced with a takt time of 2 minutes. If you could hire another six workers, which of these systems would result in the highest output rate?

Workstation Task Time (min)

1 A, B 1, 1

2 C 1.8

3 D, E, F 1, 0.5, 0.4

4 G, H 0.9, 0.8

5 I 1.8

6 J, K, L 0.5, 0.5, 0.6

A) simply duplicating the existing line so you had two lines doing exactly the same thing B) assigning one worker to each activity and creating a single twelve station production line C) keeping the existing balance and assigning three workers to stations 1, two workers to station 2, two workers to station 3, one worker to station 4, two workers to station 5, and two workers to station 6 D) you would be indifferent between alternatives a and b Answer: D Diff: 3 Reference: Layout Decision Models Keywords: line balance, takt time, output rate AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

Use this scenario for the following questions.

With the backyard poultry craze unleashing a tidal wave of municipal code proposals, Chickenverks is poised to capitalize on the sudden demand for chicken tractors. The portable henhouses they have designed can be assembled in 10 basic steps, each with a required time and predecessor as shown in the table. There are 8 productive hours available in a day and the manufacturer wishes to produce 40 units per hour.

Task A B C D E F G H J K

Time (sec) Predecessor 25 -35 A 20 A 55 B 45 C, D 15 B 35 C 40 D, E 25 F, G 30 H, J

22) Refer to the scenario above. Balance the line according to the longest operation rule. What is the assignment for station 2?

A) B, C, F B) E, H, F C) C, D D) D, G Answer: D Diff: 2 Reference: Layout Decision Models Keywords: line balance AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

23) Refer to the scenario above. Balance the line according to the longest operation rule. What is the efficiency of your line balance?

A) 85.66% B) 90.28% C) 88.14% D) 83.88% Answer: B Diff: 3 Reference: Layout Decision Models Keywords: line balance, efficiency, idle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

24) Refer to the scenario above. What is the theoretical minimum number of stations needed?

A) 3

B) 4 C) 5 D) 6 Answer: B Diff: 2 Reference: Layout Decision Models Keywords: number of stations AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

25) These three tables show the floor layout of 5 departments in an office building, the average number of daily trips between each pair of offices, and the distance between each pair of offices.

What is the total cost of this layout if there is a $0.50 per foot transportation cost?

A B C D E

Average number of trips between departments A B C D E -25 15 25 30 -40 50 35 -15 15 -20 -A

A B C D E

B C

D E

Distance between departments (feet) A B C D -20 25 40 -5 20 -25 --

E 45 25 20 5 --

A) $460.00 B) $2300.00 C) $3037.50 D) $4785.50 Answer: C Diff: 3 Reference: Layout Decision Models Keywords: functional layout AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

26) The maximum allowable time between completions of successive units on the production line is the ________.

Answer: takt time Diff: 1

Reference: Layout Decision Models Keywords: cycle time, takt time AACSB: Application of Knowledge LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

27) A collection of different departments must be visited by every new student on campus to take care of registration, housing, books, and other campus services. The placement of these departments within the university center is an example of a(n) ________ layout.

Answer: functional Diff: 1 Reference: Layout Decision Models Keywords: functional layout AACSB: Application of Knowledge LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

28) A manufacturer needs to produce 300 coffee pots per 8 hour day. The discrete tasks required to produce a coffee pot have been identified, timed in seconds, and ordered as indicated in the table. Sketch the precedence diagram and then assign tasks to workstations on the production line to achieve the required level of output. Break ties by assigning the longest task first.

Determine the efficiency delay of your line balance.

Task A B C D E F G H I J

Time Predecessors 80 -25 A 35 A 20 B, C 50 C 70 E 45 D 25 G 15 G 40 F, H, I

Answer: The precedence diagram is shown below.

The takt time for 300 units in 8 hours is takt time =

= 96 sec/unit

Station Task

1 A

Work Idle

80 15

2 CE

3 FB

4 5 DGH IJ 20 + 45 + 35 + 50 70 + 25 25 15 + 40 10 0 5 40

Idle Time = IT = WActual CT IT = 5 × 95 - 405 = 70 Efficiency delay = 100% - 100%

Diff: 3

= 85.3%

Totals 405 70

Reference: Layout Decision Models Keywords: line balance, takt time, cycle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

29) The process design team at a manufacturer has broken an assembly process into eight basic steps, each with a required time, and predecessor as shown in the table. There are 8 productive hours available in a day and the manufacturer wishes to produce 400 units using seven workers—one for each station.

Task J K L M N O P R

Time (sec) Predecessor 45 -50 J 40 J 55 K, L 40 M 65 M 25 N 35 O, P

Balance the line according to the longest operation rule and calculate the percent idle time. Using the same arrangement of tasks at work stations, what is the greatest output that can be achieved in an eight-hour day and what is the percent idle time of this design?

Answer: The takt time is 8 ∗ 60 ∗ 60/400 = 72 seconds per unit. The cycle time is 65 seconds based on . The tasks assigned to stations are: Station 1: J = 45 seconds, 20 seconds remaining Station 2: K = 50 seconds, 15 seconds remaining Station 3: L = 40 seconds, 25 seconds remaining Station 4: M = 55 seconds, 10 seconds remaining Station 5: O = 65 seconds, 0 seconds remaining Station 6: N, P = 65 seconds, 0 seconds remaining Station 7: R = 35 seconds, 30 seconds remaining The total idle time is 100 seconds and the percent idle time is 100/455=21.9% Diff: 3 Reference: Layout Decision Models Keywords: line balance, cycle time, idle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

30) With the backyard poultry craze unleashing a tidal wave of municipal code proposals, Chickenverks is poised to capitalize on the sudden demand for chicken tractors. The portable henhouses they have designed can be assembled in 10 basic steps, each with a required time and predecessor as shown in the table. There are 8 productive hours available in a day and the manufacturer wishes to produce 40 units per hour.

Task A B C D E F G H J K

Time (sec) Predecessor 25 -35 A 20 A 55 B 45 C, D 15 B 35 C 40 D, E 25 F, G 30 H, J

Balance the line according to the longest operation rule and calculate the percent idle time. Using the same arrangement of tasks at work stations, what is the greatest output that can be achieved in an eight-hour day and what is the percent idle time of this design?

Answer: The takt time is 60 ∗ 60/40 = 90 seconds per unit. The tasks assigned to stations are: Station 1: A = 25 seconds, 65 seconds remaining at station 1 Station 1: B = 35 seconds, 30 seconds remaining at station 1 Station 1: C = 20 seconds, 10 seconds remaining at station 1 Station 2: D = 55 seconds, 35 seconds remaining at station 2 Station 2: G = 35 seconds, 0 seconds remaining at station 2 Station 3: E = 45 seconds, 45 seconds remaining at station 3 Station 3: H = 40 seconds, 5 seconds remaining at station 3 Station 4: F = 15 seconds, 75 seconds remaining at station 4 Station 4: J = 25 seconds, 50 seconds remaining at station 4 Station 4: K = 30 seconds, 20 seconds remaining at station 4 The percent idle time is 35/360 = 9.72% The cycle time cannot be reduced since station 2 uses the entire 90 second cycle time. Therefore, the greatest output that can be achieved with this arrangement is 40 units per hour for 320 units per eight-hour day.

Diff: 3 Reference: Layout Decision Models Keywords: line balance, cycle time, idle time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

31) Consider any collection of tasks to be assigned to stations in a line balancing exercise. Use the equation for determining the minimum number of stations to derive an upper bound on the efficiency of the actual line balance for those same tasks.

Answer: The minimum number of stations equation is ΣT/takt time. The heuristic requires that any non-integer result be rounded up to the next highest integer since a fractional station is undefined. The ratio of the result of the equation ΣT/takt time to the next highest integer provides this upper bound on efficiency. For example a calculation of 3.75 workstations is rounded to 4; the ratio of 3.75/4 = .9375 and 93.75% is the highest efficiency possible with that set of tasks and takt time.

Diff: 3 Reference: Layout Decision Models Keywords: line balance, takt time AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

32) What is the optimal location for these departments in the floor plan depicted if the transportation cost is $2 per foot and the departments have a daily number of trips between each other as shown?

A B C D E

Daily Number of Trips Between Departments A B C D -20 40 60 -10 30 -0 --

E 80 50 15 5 --

Floor Plan Office Space 1 Office Space 2 Office Space 3 Office Space 4 Office Space 5

Office Space 1 2 3 4 5

A --

Distance Between Offices B C 10 20 -10 --

D 30 20 10 --

E 40 30 20 5 --

Answer: Multiple answers are possible; for example, a mirror image of DBEAC yields an identical cost.

C Total Cost =

A

Floor Plan E

B

D

× Trips × Distance

= $2/ft department A + $2/ft department B + $2/ft department C + $2/ft department D = $9800 Diff: 3 Reference: Layout Decision Models Keywords: functional layout AACSB: Analytical Thinking LO: 3.4: Develop a product-based layout using line balancing, and develop a functional layout based on total distance traveled.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 4 Business Processes Learning Objective 4-1 1) A support process performs necessary, value-added activities of an organization.

Answer: FALSE

Diff: 1 Reference: Business Processes Keywords: support process, primary AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

2) The majority of the total operating budget for most organizations is: A) engineering costs.

B) advertising costs.

C) supply chain costs.

D) equipment maintenance costs.

Answer: C Diff: 2 Reference: Introduction Keywords: supply chain AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

3) A set of logically related tasks or activities performed to achieve a defined business outcome is a: A) process.

B) primary process.

C) support process.

D) development process.

Answer: A Diff: 1 Reference: Business Processes Keywords: business process AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

4) A set of tasks or activities that addresses the main value-added activities of an organization is a: A) process.

B) primary process.

C) support process.

D) development process.

Answer: B Diff: 1 Reference: Business Processes Keywords: primary process AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

5) Which of the following statements best describes current thinking regarding processes?

A) If companies concentrate on how functional areas like marketing, finance, and operations are organized, then everything will be fine.

B) Managing functional areas like marketing, finance, and operations is essentially the same thing as managing what a business does.

C) If the individual functional strategies of marketing, finance, and accounting are aligned with the overall business strategy, then everything will be fine.

D) Developing superior business processes requires a cross-functional and cross-organizational perspective.

Answer: D Diff: 2 Reference: Business Processes Keywords: cross-functional, cross-organizational AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

6) A ________ process performs the main, value-added activities of an organization.

Answer: primary Diff: 1 Reference: Business Processes Keywords: primary process AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

7) A process that seeks to improve the performance of main value-added and necessary, nonvalue-added activities is a(n) ________ process.

Answer: development Diff: 1 Reference: Business Processes Keywords: development process AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

8) Describe the three types of processes and the relationships between them.

Answer: The three types of processes are primary, support, and development. A primary process is one that addresses the main value-added activities of an organization. A process is value-added if a customer is willing to pay for the resulting outputs. A support process is one that performs necessary, albeit not value-added, activities. A development process is one that seeks to improve the performance of primary and support processes. Without development processes, a firm will become frozen at the point in time that development ceased. Customers go to a firm and reap the benefits of their primary processes and are often unaware of the firm's support and development processes. The firm must be keenly aware of all three, and apply development processes to primary and support processes in order to remain competitive and stay in business.

Diff: 3 Reference: Business Processes Keywords: primary process, support process, development process AACSB: Application of Knowledge LO: 4.1: Explain what a business process is and how the business process perspective differs from a traditional, functional perspective.

Learning Objective 4-2 1) Mapping creates a common understanding of process activities, their results, and who performs the steps.

Answer: TRUE Diff: 1 Reference: Mapping Business Processes Keywords: process mapping AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

2) The primary focus of a swim lane process map is to depict flows of objects, information, and money.

Answer: FALSE Diff: 1 Reference: Mapping Business Processes Keywords: swim lane map, process map AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

3) In a process map, a circle represents a step or activity in the process.

Answer: FALSE Diff: 1 Reference: Mapping Business Processes Keywords: process map, circle AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

4) Mapping does NOT: A) create a common understanding of the content of a process.

B) define the boundaries of a process.

C) provide a detailed view of all elements external to the process.

D) provide a baseline against which to measure the impact of improvement efforts.

Answer: C Diff: 2 Reference: Mapping Business Processes Keywords: process map AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

5) An arrow in a process map represents a: A) move activity.

B) start or finish point.

C) delay.

D) creation of a document.

Answer: A Diff: 2 Reference: Mapping Business Processes Keywords: process map, activity AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

6) Peter prints out a cover for the TPS report he just completed. This activity would be represented on a process map with which symbol?

A) B) C) D) Answer: B Diff: 2 Reference: Mapping Business Processes Keywords: process map, document created AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

7) Every customer that exited the store was subjected to close scrutiny of their shopping cart and receipt by a highly trained inspector. This activity would be represented on a process map with which symbol?

A) B) C) D) Answer: C Diff: 2 Reference: Mapping Business Processes Keywords: process map, inspection AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

8) Many states have a mandatory 90-day waiting period from the time a divorce is filed to when it can be finalized. This activity would be represented on a process map with which symbol?

A) B) C) D) Answer: B Diff: 2 Reference: Mapping Business Processes Keywords: process map, delay AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

9) After calculating the applicant's credit score, the system required the applicant to provide a health history. This activity would be represented on a process map with which symbol?

A) B) C) D) Answer: D Diff: 3 Reference: Mapping Business Processes Keywords: process map, input AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

10) Which tool should be used to track the movement of a customer's complaint from one department to the next until it is resolved?

A) process map B) swim lane map C) entity map D) data flow map Answer: B Diff: 2 Reference: Mapping Business Processes Keywords: swim lane map AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

11) When an employee team develops a process map, they should document the process ________.

Answer: as it is Diff: 3 Reference: Mapping Business Processes Keywords: process map AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

12) What is the general procedure for developing a swim lane process map?

Answer: The steps for developing a swim lane process map are similar to those for a more generic process map, with the exception that the symbols are aligned with different entities in the organization (or process) that are responsible at each step.

The steps are as follows: The entity that will serve as the focal point is identified. This can be a tangible good, a customer, a customer order, or any other entity of interest.

Clear boundary, starting, and ending points are identified.

The process map is developed by thinking about the elemental process steps that are performed.

There is a tendency to use too much detail, so it is often helpful to take a macro view and then develop cascading levels of greater detail for portions of the process that are problematic. These process steps can be aligned with rows (or columns) that represent the organization's entities/departments to illustrate the handoffs that occur throughout the process. It is easier if the actual map is developed in two or three steps — first the macro view, and then the boxes representing potential participants are drawn on a blank sheet of paper.

The boxes are linked using arrows that indicate the type of flow and its direction Any boxes that do not have any arrows going in or out of them are removed from the map. New boxes may be added as needed.

After arrows are roughed out on the first copy of the map, the map may be redrawn to provide a good overview of the relationships between the various process participants.

Diff: 3 Reference: Mapping Business Processes Keywords: relationship map, process mapping, swim lane map AACSB: Application of Knowledge LO: 4.2: Create process maps for a business process and use them to understand and diagnose a process.

Learning Objective 4-3 1) Productivity is measured as the ratio of inputs to outputs.

Answer: FALSE Diff: 2 Reference: Managing and Improving Business Processes Keywords: productivity AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

2) A laundry tracks clean linen output in pounds and their inputs of gas, water, electricity, and labor. A productivity measure incorporating all of these inputs is a multifactor measure.

Answer: TRUE Diff: 2 Reference: Managing and Improving Business Processes Keywords: multifactor productivity AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

3) A person who fails to meet output standards could still have an efficiency measurement of more than 100%.

Answer: FALSE

Diff: 2 Reference: Managing and Improving Business Processes Keywords: efficiency AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

4) Cycle time is the total time needed to complete a business process.

Answer: TRUE Diff: 2 Reference: Managing and Improving Business Processes Keywords: cycle time AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

5) While efficiency can exceed 100%, percent value-added time has a maximum of 100%.

Answer: TRUE Diff: 2 Reference: Managing and Improving Business Processes Keywords: efficiency, percent value-added AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

6) Your university sends a contingent of top-ranking officials to Las Vegas hotels to study ways to improve dormitory living conditions. This is an example of process benchmarking.

Answer: TRUE Diff: 2 Reference: Managing and Improving Business Processes Keywords: process benchmarking AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

7) When McDonald's studies the drive-through operations of Burger King, they are engaging in competitive benchmarking.

Answer: TRUE Diff: 1 Reference: Managing and Improving Business Processes Keywords: competitive benchmarking AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

8) A Six Sigma Champion is a full-time Six Sigma expert that is responsible for training, mentoring, deployment, and results.

Answer: FALSE Diff: 1 Reference: Managing and Improving Business Processes Keywords: Six Sigma, champion, master black belt

AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

9) A check sheet, also called an Ishikawa diagram, is used to record how frequently a certain event occurs.

Answer: FALSE Diff: 2 Reference: Managing and Improving Business Processes Keywords: check sheet, Ishikawa AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

10) The Five Whys can be used during all three phases of construction of a Pareto chart.

Answer: FALSE Diff: 2 Reference: Managing and Improving Business Processes Keywords: five whys, Pareto AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

11) The magnitude of changes created by a continuous improvement program is generally larger than those created by a business process reengineering program.

Answer: FALSE Diff: 2 Reference: Managing and Improving Business Processes Keywords: business process reengineering, continuous improvement AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

12) A car wash services 200 customers in a 4-hour span on a lovely Saturday afternoon. The car wash employs 5 washers at $6 per hour. An appropriate measure of productivity is: A) 200 cars/hour.

B) 0.6 $/car.

C) 8.3 cars/$.

D) 1.7 cars/$.

Answer: D Diff: 2 Reference: Managing and Improving Business Processes Keywords: productivity, single-factor AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

13) A car wash services 200 customers in an hour on a lovely Saturday afternoon. The car wash employs 5 washers at $6 per hour and uses $50 of water and $5 of electricity per hour. An appropriate measure of productivity is: A) 80%.

B) 2.35 cars/$.

C) 8 cars/$.

D) 0.425 $/car.

Answer: B Diff: 2 Reference: Managing and Improving Business Processes Keywords: productivity, multifactor AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

14) A car wash services 200 customers in an hour on a lovely Saturday afternoon. The car wash employs 5 washers at $6 per hour and uses $50 of water and $5 of electricity per hour. They charge $10 per car for their standard wash job. Which of these changes would have the greatest positive impact on their productivity?

A) increasing their service rate so they can process 210 cars per hour B) cutting their employee pay by $1 per hour C) charging $11 per standard wash job D) introducing a new waterless system Answer: D Diff: 3 Reference: Managing and Improving Business Processes Keywords: productivity, multifactor AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

15) A car wash services 200 customers an hour on a lovely Saturday afternoon. The car wash employs 5 washers at $6 per hour and uses $50 of water and $5 of electricity per hour. They charge $10 per car for their standard wash job. Which of these changes would have the greatest positive impact on their productivity?

A) increasing their service rate by 10% B) decreasing wages by 5% C) increasing their per-car fee by 20% D) decreasing water usage by 10% Answer: C Diff: 3 Reference: Managing and Improving Business Processes Keywords: productivity, multifactor AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

16) A professor is expected to cover 16 chapters in an operations management text each semester. One semester the professor dismisses class 30 minutes early every Monday and Friday and is able to cover only 12 chapters. What is the professor's efficiency?

A) 75% B) 4 C) 133% D) -4 Answer: A Diff: 2 Reference: Managing and Improving Business Processes Keywords: efficiency AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

17) A professor is expected to cover 16 chapters in an operations management text each semester. The class is scheduled to meet for one hour three times a week for 15 weeks. One semester the professor dismisses class 30 minutes early every Monday and Friday and is able to cover only 12 chapters using two boxes of chalk and case of bourbon. What is the professor's labor productivity?

A) 0.27 chapters per hour B) 1.25 chapters per week C) 1.06 chapters per week D) 0.4 chapters per hour Answer: D Diff: 2 Reference: Managing and Improving Business Processes Keywords: efficiency AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

18) A maintenance worker maintains an alibi sheet of all work activities performed in an 8 hour shift. If the work standard is such that 90% efficiency is expected, what is the actual amount of time that should be documented?

A) 8.9 hours B) 111% C) 7.2 hours D) 0.8 hours Answer: C Diff: 2 Reference: Managing and Improving Business Processes Keywords: efficiency, standard output AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

19) It takes one day for Peter Gibbons to complete a TPS report and attach the cover sheet.

During that day, Peter spends about 15 minutes a day performing actual work and the other 7 hours and 45 minutes spacing out. Which of the following statements is correct?

A) Peter's cycle time is 7 hours and 30 minutes.

B) Peter's efficiency is 25%.

C) Peter's productivity is 8 hours per TPS report.

D) Peter's percent value-added time is just over 3%.

Answer: D Diff: 2 Reference: Managing and Improving Business Processes Keywords: percent value added time AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

20) Consider a typical cycle of emailing a professor a question about class and waiting for a response. Which of the following statements is correct?

A) The percent value-added time is low.

B) The cycle time is impossible to determine with any accuracy.

C) The quality of the response is easy to measure.

D) The professor's productivity is easy to measure.

Answer: A Diff: 2 Reference: Managing and Improving Business Processes Keywords: percent value added AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

21) Which of the following approaches to process improvement could be described as process benchmarking?

A) Employees at McDonald's ignore the way they have always processed customer orders and design an entirely new way to do so.

B) Employees at the campus housing and dining service visit Ritz Carlton to pick up ideas on managing long-term guests.

C) Employees at Ford purchase automobiles from an array of car manufacturers and take them apart to get design ideas for their next generation Taurus.

D) Employees at XEROX take classes in quality improvement and make small, incremental changes to their order filling processes.

Answer: B Diff: 2 Reference: Managing and Improving Business Processes Keywords: process benchmarking AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

22) Which of the following approaches to process improvement could be described as competitive benchmarking?

A) Employees at XEROX ignore the way they have always processed customer orders and design an entirely new way to do so.

B) Employees at XEROX visit GM to pick up ideas on processing customer orders.

C) Employees at XEROX purchase a Canon copier and take it apart to get design ideas for their next generation of copiers.

D) Employees at XEROX take classes in quality improvement and make small, incremental changes to their order filling processes.

Answer: C Diff: 1 Reference: Managing and Improving Business Processes Keywords: competitive benchmarking AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

23) In statistical terms, a process that achieves Six Sigma quality will generate about: A) zero defects per million opportunities.

B) six defects per million opportunities.

C) three defects per million opportunities.

D) thirty-four defects per million opportunities.

Answer: C Diff: 2 Reference: Managing and Improving Business Processes Keywords: Six Sigma AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

24) Green Belts have: A) more Six Sigma training than Black Belts but less Six Sigma training than Champions.

B) more Six Sigma training than Champions but less Six Sigma training than Team Members.

C) more Six Sigma training than Black Belts but less Six Sigma training than Master Black Belts.

D) more Six Sigma training than Team Members but less Six Sigma training than Black Belts.

Answer: D Diff: 2 Reference: Managing and Improving Business Processes Keywords: Six Sigma, green belt AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

25) Which of these represent the Six Sigma process sequence to create a completely new business process or product?

A) DMAIC B) DMADV C) 5W1H D) WD40 Answer: B Diff: 1 Reference: Managing and Improving Business Processes Keywords: Six Sigma, DMADV AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

26) Which of these elements is in the Six Sigma process sequence to create a completely new business process or product but NOT in the Six Sigma process to improve an existing business process?

A) Define B) Derive C) Design D) Create Answer: C Diff: 1 Reference: Managing and Improving Business Processes Keywords: Six Sigma, DMADV AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

27) Which of these steps is NOT part of the Six Sigma process sequence?

A) Design B) Measure C) Analyze D) Improve Answer: A Diff: 1 Reference: Managing and Improving Business Processes Keywords: Six Sigma, DMAIC AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

28) When constructing a fishbone diagram, brainstorming takes place during the: A) closed phase.

B) narrow phase.

C) wide phase.

D) open phase.

Answer: D Diff: 1 Reference: Managing and Improving Business Processes Keywords: open phase, root cause, fishbone diagram, brainstorming AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

29) Which of the continuous improvement tools is used to conduct root-cause analysis?

A) statistical process control (SPC) B) flow chart C) Ishikawa diagram D) Pareto chart Answer: C Diff: 2 Reference: Managing and Improving Business Processes Keywords: root cause, fishbone diagram, Ishikawa AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

30) A professor assigns a massive homework set the first day of class that will be due the day the students walk in to take their first exam of the semester. Over the weekend he grades the homework and the exam papers and as he reviews the results, it occurs to him that students that worked more of the 40 problems in the homework assignment appeared to be more successful on the exam. Which of the continuous improvement tools would be most appropriate for displaying this phenomenon?

A) statistical process control (SPC) B) scatter plot C) Ishikawa diagram D) Pareto chart Answer: B Diff: 3 Reference: Managing and Improving Business Processes Keywords: root cause, fishbone diagram, Ishikawa, scatter plot AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

31) Which two continuous improvement tools are most similar in appearance?

A) scatter plot and check sheet B) Pareto chart and histogram C) histogram and fishbone diagram D) check sheet and fishbone diagram Answer: B Diff: 2 Reference: Managing and Improving Business Processes Keywords: Pareto chart, histogram AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

32) Which of these continuous improvement tools would be best suited for showing all of the steps required to change your major to operations management?

A) process map B) cause-and-effect diagram C) Pareto chart D) scatter plot Answer: A Diff: 2 Reference: Managing and Improving Business Processes Keywords: process map AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

33) ________ is a measure of process performance that is a ratio of output to inputs.

Answer: Multifactor productivity Diff: 2 Reference: Managing and Improving Business Processes Keywords: productivity, multifactor AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

34) The elapsed time needed to complete a business process is called ________.

Answer: cycle time Diff: 1 Reference: Managing and Improving Business Processes Keywords: cycle time AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

35) A(n) ________ is used to record how frequently a certain event occurs.

Answer: check sheet Diff: 1 Reference: Managing and Improving Business Processes Keywords: check sheet AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

36) When an organization compares their processes to those of another firm outside their industry, they are engaging in ________.

Answer: process benchmarking Diff: 1 Reference: Managing and Improving Business Processes Keywords: process benchmarking AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

37) Lisa manages customer service representatives in a call center. The center's computer system tracks a number of metrics for each employee including the total number of customer calls they complete, the amount of time the service representative spends talking to customers, and the total time the service representative was clocked in each day. The work standard developed by the call center is to complete 150 calls in an 8-hour shift. Answer the following questions using the information provided in the table. a. What is the productivity of employee J? b. What is the efficiency of employee K? c. What is the percent value added time for employee M? Employee # Calls Completed Total Time on Calls J 165 8 hours K 140 7 hours 30 minutes M 135 7 hours 20 minutes

Total Time Clocked In 8 hours 8 hours 8 hours

Answer: Employee J's productivity = 165 calls/8 hours = 20.625 calls/hour Employee K's efficiency = 140/150 = 93.3% Employee M's percent value added time = 7.333 hours/8 hours = 91.67% Diff: 3 Reference: Managing and Improving Business Processes Keywords: productivity, efficiency, percent value-added AACSB: Analytical Thinking LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

38) What is benchmarking and how do the two types differ?

Answer: Benchmarking is the process of identifying, understanding, and adapting outstanding practices from within the same organization or from other businesses to help improve performance. Competitive benchmarking requires the comparison of processes with those of a direct competitor. Process benchmarking requires the comparison of processes from a noncompetitor; either an outside organization or another internal function.

Diff: 2 Reference: Managing and Improving Business Processes Keywords: competitive benchmarking, process benchmarking, benchmarking AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

39) A tenured professor lights a cigar, cradles a snifter of brandy in his claw-like hand, and reviews his student evaluations from the previous semester. The numbers were unspectacular, but he beamed with pride as he read the comments. For the first time in a long time, no one responded to the "What can the professor do to improve the course?" question with the classic response "not teach it anymore." There were a number of comments, and since he took his craft seriously, he set about summarizing and organizing the comments into the alphabetical list you see here. Take this data and analyze it using the appropriate tool for continuous improvement.

Then recommend to the professor the next tool (out of the tools for continuous improvement) that he should use to take the next step in this analysis.

Comment Can't understand the book Enjoyed the class Expect me to remember prerequisites Need more feedback on homework Prefer one class night a week Slow down Tests too hard Work more examples

Count 2 5 7 3 7 15 9 14

Answer: The data should scream Pareto chart at the students. Sort in descending order by Count and plot using the comments as major categories.

It would be entirely reasonable to combine the two leftmost categories — if the professor worked more examples, he would, in effect, move more slowly through the material. Combining these categories makes the Pareto effect more pronounced.

A Pareto chart provides an excellent starting point for a cause and effect diagram. The tallest bar is the effect that most customers are complaining about. Troubleshooting this element of his course will address the major issue most students have with his class and set him well down the path of Professor of the Year. Or not — what does he care, he's tenured.

Diff: 3 Reference: Managing and Improving Business Processes Keywords: fishbone diagram, Pareto chart AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

40) An assistant professor designs his fall semester class so that a major homework assignment is due the day his students waltz into class to take their first exam. The results are mixed so he rewrites his exam for the spring semester and repeats the process, again collecting a major homework assignment on exam day and grading and returning both the homework assignments and exams the following class meeting. Use an appropriate tool from the tools for continuous improvement to analyze the data. What conclusions do you draw?

Homework grade 2 5 13 14 16 16 19 20 22 28 29 30 31 33 36 38 57 59 67 67 72 82 98

Exam Grade Spring 18 20 20 23 23 24 29 29 29 30 31 32 35 42 45 48 48 50 54 62 62 66 67

Exam Grade Fall 51 34 36 69 46 60 20 66 44 53 42 40 55 65 54 59 26 49 32 43 60 34 55

Answer: The best tool for this occasion would be the scatter diagram. Plotting exam score against homework grade yields some insight.

Since the homework is completed and due before the exam experience, it is reasonable to test whether performance on the exam depends on performance on the homework. This does not appear to be the case in the fall semester; as homework grade improves from near zero to near 100, the level of exam score doesn't change significantly. The spring semester data tell a different story. There is a marked change in level as homework grade improves, suggesting that diligence on homework in some way prepares the student for an exam. Truly a remarkable notion.

Diff: 3 Reference: Managing and Improving Business Processes Keywords: scatter plot AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

41) Describe the process of root cause analysis and include in your description the tools that it uses.

Answer: Root cause analysis is a process by which organizations brainstorm about possible causes of problems and then, through structured analysis and data-gathering efforts, gradually narrow the focus to a few root causes. The three phases of root cause analysis are the open, narrow and closed phases. The open phase is devoted to brainstorming, where all team members make suggestions, no matter how wild. Teams use a cause-and-effect diagram to organize their thoughts, often around the Five M categories of manpower, methods, materials, machines, measurements. The second phase of analysis is the narrow phase where the brainstormed list is reduced to a manageable number using the Five Whys. In the closed phase of analysis, the team validates the suspected root causes through the analysis of available data. The data might be collected using a check sheet and analyzed with simple graphical tools like a scatter plot, histogram, bar graph, Pareto chart, or a run chart.

Diff: 2 Reference: Managing and Improving Business Processes Keywords: root cause, fishbone diagram, cause and effect, Ishikawa diagram AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

42) Describe continuous improvement and business process reengineering and compare their advantages and disadvantages in relation to each other.

Answer: Continuous improvement is the philosophy that small, incremental improvements can add up to significant performance improvements over time. Business process reengineering (BPR) is a procedure that involves the fundamental rethinking and radical redesign of business processes to achieve dramatic organizational improvements in such critical measures of performance as cost, quality, service, and speed. The discrepancy between the two is the magnitude of change in existing processes. Continuous improvement uses the current process as a starting point and allows for an easy transition to the next stage, which is more comfortable for many people and could be sufficient if the existing process is performing well. If a company is suffering due to inadequacy of a process, then continuous improvement may not be fast enough to permit survival in the market. BPR would allow for a quantum leap in process performance as long as all components of an organization are prepared to accept the process changes required.

Diff: 3 Reference: Managing and Improving Business Processes Keywords: continuous improvement, business process reengineering, BPR AACSB: Application of Knowledge LO: 4.3: Describe Six Sigma methodology and apply some common continuous improvement tools.

Learning Objective 4-4 1) Level 1 of the SCOR model is organized around the five core management processes: plan, source, make, deliver, and return.

Answer: TRUE Diff: 1 Reference: Business Process Challenges and the SCOR Model Keywords: SCOR, supply chain AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

2) One reason the SCOR model is widely accepted is its consistency. It mandates the same information and physical flows for all products, regardless of the degree of customization.

Answer: FALSE Diff: 2 Reference: Business Process Challenges and the SCOR Model Keywords: SCOR, supply chain AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

3) The procedure of rethinking and radical redesign of business processes to achieve dramatic organizational improvements is called: A) competitive benchmarking.

B) continuous improvement.

C) process benchmarking.

D) business process reengineering.

Answer: D Diff: 1 Reference: Business Process Challenges and the SCOR Model Keywords: business process reengineering AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

4) Which of these SCOR model flows moves in the opposite direction from the others?

A) Plan B) Return C) Source D) Make Answer: B Diff: 1 Reference: Business Process Challenges and the SCOR Model Keywords: SCOR, return AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

5) Which of these statements about the SCOR model is best?

A) The SCOR model consists of four levels that describe supply chain processes in increasing detail.

B) The core management processes of the model are Source, Collaborate, Operations, and Return.

C) The model makes provisions for different levels of customization.

D) The process types detailed in level one are Planning, Execution, and Enable.

Answer: C Diff: 2 Reference: Business Process Challenges and the SCOR Model Keywords: SCOR, return, supply chain AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

6) ________ is a process improvement philosophy that results in small, incremental changes while ________ is a process improvement philosophy that results in dramatic organizational changes.

Answer: Continuous improvement, business process reengineering Diff: 2 Reference: Business Process Challenges and the SCOR Model Keywords: business process reengineering, BPR AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

7) Level two of the SCOR model divides SCM activities into _________.

Answer: process types Diff: 2 Reference: Business Process Challenges and the SCOR Model Keywords: SCOR, process types AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

8) ________ is the SCOR model process that addresses the movement of defective product from the customer.

Answer: Return

Diff: 2 Reference: Business Process Challenges and the SCOR Model Keywords: SCOR, core levels AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

9) Briefly describe the five core management processes that comprise Level 1 of the SCOR model.

Answer: The five core management processes are plan, source, make, deliver, and return.

Planning describes processes that balance aggregate resources with requirements, i.e., the ability to match supply with demand. Sourcing processes procure goods and services to meet planned or actual demand. The make process transforms product to a finished state to meet planned or actual demand. Delivery processes provide finished goods and services to meet planned or actual demand and include order management, logistics, and distribution activities. Return processes allow the receipt of products that are returned for any reason, whether they are being returned from customer to primary firm or from the firm to one of its suppliers.

Diff: 2 Reference: Business Process Challenges and the SCOR Model Keywords: SCOR, supply chain AACSB: Application of Knowledge LO: 4.4: Explain what the Supply Chain Operations Reference (SCOR) model is and why it is important to businesses.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 5 Managing Quality Learning Objective 5-1 1) Joseph Juran's definition of quality as "fitness for use" is an example of the value perspective of quality.

Answer: TRUE Diff: 2 Reference: Quality Defined Keywords: value perspective, Juran AACSB: Application of Knowledge LO: 5.1: Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.

2) Garvin's dimension of durability is satisfied if the product fails infrequently.

Answer: TRUE Diff: 2 Reference: Quality Defined Keywords: durability, Garvin AACSB: Application of Knowledge LO: 5.1: Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.

3) A quality perspective that focuses on whether or not a product was made or a service was performed as intended is the: A) performance perspective.

B) value perspective.

C) conformance perspective.

D) intention perspective.

Answer: C Diff: 1 Reference: Quality Defined Keywords: conformance perspective AACSB: Application of Knowledge LO: 5.1: Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.

4) The ________ dimension of quality asks how long a product can go between failures or the need for maintenance.

A) warranty B) lifetime C) serviceability D) reliability Answer: D Diff: 1 Reference: Quality Defined Keywords: reliability dimension AACSB: Application of Knowledge LO: 5.1: Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.

5) On the first day of class at a new university you made judgments about the quality of the class before the professor had entered the room. You noted the comfort of the accommodations, the fine works of art in the halls and on the classroom wall and the soothing music piped in over the sound system. This dimension of quality is: A) aesthetics.

B) performance.

C) features.

D) perceived quality.

Answer: A Diff: 2 Reference: Quality Defined Keywords: aesthetic dimension AACSB: Application of Knowledge LO: 5.1: Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.

6) A person or company taking the stance that quality must be judged, in part, by how well the characteristics of a particular product or service align with the needs of a specific user is taking the ________ perspective.

Answer: value Diff: 2 Reference: Quality Defined Keywords: value perspective AACSB: Application of Knowledge LO: 5.1: Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.

7) A customer that concentrates on the ease of repair or support for the product or service is concerned primarily with the ________ dimension of quality.

Answer: serviceability Diff: 1 Reference: Quality Defined Keywords: serviceability dimension AACSB: Application of Knowledge LO: 5.1: Discuss the various definitions and dimensions of quality and why quality is important to operations and supply chains.

Learning Objective 5-2 1) Appraisal costs can occur when a company has NOT produced any defective items.

Answer: TRUE Diff: 1 Reference: Total Cost of Quality Keywords: appraisal cost AACSB: Application of Knowledge LO: 5.2: Describe the different costs of quality, including internal and external failure, appraisal, and prevention costs.

2) Money spent training an employee how to do the job mistake free is an example of an appraisal cost.

Answer: FALSE Diff: 2 Reference: Total Cost of Quality Keywords: prevention cost AACSB: Application of Knowledge LO: 5.2: Describe the different costs of quality, including internal and external failure, appraisal, and prevention costs.

3) Costs incurred by defects that occur prior to delivery to the customer are called: A) external failure costs.

B) internal failure costs.

C) appraisal costs.

D) prevention costs.

Answer: B Diff: 2 Reference: Total Cost of Quality Keywords: internal failure cost AACSB: Application of Knowledge LO: 5.2: Describe the different costs of quality, including internal and external failure, appraisal, and prevention costs.

4) A(n) ________ cost is incurred by a company to assess its quality levels.

Answer: appraisal cost Diff: 2 Reference: Total Cost of Quality Keywords: appraisal cost AACSB: Application of Knowledge LO: 5.2: Describe the different costs of quality, including internal and external failure, appraisal, and prevention costs.

5) Describe the four quality-related costs and tell how they are related.

Answer: The four quality-related costs are internal failure costs, external failure costs, appraisal costs, and prevention costs. Internal failure costs are caused by defects that occur prior to delivery to the customer, including money spent on repairing or reworking defective products, as well as time wasted on these activities. External failure costs are costs incurred by defects that are not detected until a product or service reaches the customer. Appraisal costs occur when a company assesses its quality levels. Prevention costs are those costs incurred by an organization to actually prevent defects from occurring to begin with. Classically, we expect that as prevention and appraisal efforts (and costs) rise, that internal and external failure costs should drop.

Diff: 2 Reference: Total Cost of Quality Keywords: prevention cost, appraisal cost, external failure, internal failure AACSB: Application of Knowledge LO: 5.2: Describe the different costs of quality, including internal and external failure, appraisal, and prevention costs.

Learning Objective 5-3 1) Total Quality Management is the management of an entire organization so that it excels in all quality dimensions that are important to customers.

Answer: TRUE Diff: 1 Reference: Total Quality Management Keywords: total quality management, TQM AACSB: Application of Knowledge LO: 5.3: Describe what TQM is, along with its seven core principles.

2) Process owners are empowered employees that have the authority and responsibility for improving the organization's business processes.

Answer: TRUE Diff: 2 Reference: Total Quality Management Keywords: process owner AACSB: Application of Knowledge LO: 5.3: Describe what TQM is, along with its seven core principles.

3) Which of the following is NOT a core idea of total quality management?

A) cost reduction B) leadership improvement C) employee empowerment D) continuous improvement Answer: A Diff: 1 Reference: Total Quality Management Keywords: TQM, total quality management AACSB: Application of Knowledge LO: 5.3: Describe what TQM is, along with its seven core principles.

4) A technique used to translate customer requirements into technical requirements is: A) quality assurance.

B) statistical quality control.

C) quality function deployment.

D) continuous improvement.

Answer: C Diff: 1 Reference: Total Quality Management Keywords: TQM, total quality management AACSB: Application of Knowledge LO: 5.3: Describe what TQM is, along with its seven core principles.

5) ________ are teams or individuals who have the authority and responsibility for improving the organization's business processes.

Answer: Process owners Diff: 2 Reference: Total Quality Management Keywords: process owner AACSB: Application of Knowledge LO: 5.3: Describe what TQM is, along with its seven core principles.

6) What are the seven core ideas of total quality management?

Answer: The seven core principles of total quality management are customer focus, leadership involvement, continuous improvement, employee empowerment, quality assurance, supplier partnerships, and strategic quality plan.

Diff: 1 Reference: Total Quality Management Keywords: TQM, total quality management AACSB: Application of Knowledge LO: 5.3: Describe what TQM is, along with its seven core principles.

7) Define employee empowerment and process ownership. How are these two concepts related?

Answer: Employee empowerment means giving employees the responsibility, authority, training, and tools necessary to manage quality. A process owner is a team or individual who has the authority and responsibility for improving the organization's business processes and who is rewarded accordingly. Process ownership is one way many organizations empower employees and completes the circle of employee empowerment by including process performance in the reward system.

Diff: 1 Reference: Total Quality Management Keywords: employee empowerment, process ownership AACSB: Application of Knowledge LO: 5.3: Describe what TQM is, along with its seven core principles.

Learning Objective 5-4 1) Reductions in process variance result in higher process capability.

Answer: TRUE Diff: 2 Reference: Statistical Quality Control Keywords: process variance, process capability, Cp AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

2) Six Sigma quality means that the difference between the upper and lower tolerance levels is six standard deviations wide.

Answer: FALSE Diff: 2 Reference: Statistical Quality Control Keywords: process standard deviation, process capability, Six Sigma AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

3) If a contact lens has a scratch on it, the manufacturer classifies it as defective. This is an example of a continuous variable.

Answer: FALSE Diff: 1 Reference: Statistical Quality Control Keywords: defective, attributes AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

4) The upper and lower limits of a control chart should be wider than the upper and lower tolerance limits.

Answer: FALSE Diff: 2

Reference: Statistical Quality Control Keywords: tolerance limits, control limits AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

5) An R chart is used to track how much the individual observations within a sample vary.

Answer: TRUE Diff: 1 Reference: Statistical Quality Control Keywords: R chart, variance AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

6) Producer's risk rises as consumer's risk falls.

Answer: TRUE Diff: 2 Reference: Statistical Quality Control Keywords: producer's risk, consumer's risk AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

7) With everything else held constant, a sampling plan with c = 1 will have a lower producer's risk than a sampling plan with .

Answer: FALSE Diff: 3 Reference: Statistical Quality Control Keywords: producer's risk, consumer's risk AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

8) Taguchi's quality loss function runs counter to the notion that product falling within tolerance limits is acceptable.

Answer: TRUE Diff: 3 Reference: Statistical Quality Control Keywords: Taguchi, quality loss AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

9) A barbecue sauce producer sells their product in a 20-ounce bottle. Their historical process mean has been 20 ounces with a standard deviation of 0.25 ounces. If their tolerance limits are set at 20 ounces plus or minus 1 ounce, what is the process capability ratio of the bottle filling process?

A) 1.00 B) 1.33 C) 1.75 D) 2.00 Answer: B Diff: 2 Reference: Statistical Quality Control Keywords: process capability ratio AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

10) A barbecue sauce producer sells their product in a 20-ounce bottle. Their current process mean is 19.80 ounces with a standard deviation of 0.3 ounces. If their tolerance limits are set at 20 ounces plus or minus 1 ounce, what is the process capability index of the bottle filling process?

A) 0.89 B) 1.00 C) 1.11 D) 1.33 Answer: A Diff: 2 Reference: Statistical Quality Control Keywords: process capability index AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

11) A barbecue sauce producer makes their product in an 80-ounce bottle for a specialty store.

Their historical process mean has been 80.1 ounces and their tolerance limits are set at 80 ounces plus or minus 1 ounce. What does their process standard deviation need to be in order to sustain a process capability index of 1.5?

A) 0.10 B) 0.15 C) 0.20 D) 0.25 Answer: C Diff: 3 Reference: Statistical Quality Control Keywords: process capability index AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

12) A barbecue sauce producer makes their product in an 80-ounce bottle for a specialty store.

Their historical process mean has been 80 ounces and their tolerance limits are set at 80 ounces plus or minus 1 ounce. What does their process standard deviation need to be in order to sustain a process capability ratio of 1.66?

A) 0.10 B) 0.20 C) 0.25 D) 0.33 Answer: B Diff: 3 Reference: Statistical Quality Control Keywords: process capability ratio AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

13) An automobile windshield manufacturer wants to verify that their process is producing windshields of an appropriate thickness. The best tool to determine this information is a(n): A) process capability ratio.

B) process capability index.

C) x-bar chart.

D) operating characteristics curve.

Answer: C Diff: 2 Reference: Statistical Quality Control Keywords: statistical quality control, x-bar chart, SPC AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

14) A pizza delivery service wants to track their delivery times. They take eight samples of four deliveries and record the following data. What are the upper and lower control limits of their Rchart?

Sample # Item #1 Item #2 Item #3 Item #4

1 21.1 21.7 23.0 20.3

2 20.2 20.6 24.5 23.5

3 24.1 21.7 23.2 24.4

4 22.6 21.7 23.0 25.0

5 21.2 24.1 20.6 20.7

6 20.9 23.5 22.8 23.2

7 22.4 24.6 23.4 23.3

8 20.9 24.7 22.8 24.5

A) 24.9, 20.3 B) 7.2, 0.0 C) 3.1, 0.0 D) 22.6, 0.0 Answer: B Diff: 3 Reference: Statistical Quality Control Keywords: statistical quality control, R chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

15) A pizza delivery service wants to track their delivery times. They take eight samples of four deliveries and record the following data. What are the upper and lower control limits of their Xbar chart?

Sample # Item #1 Item #2 Item #3 Item #4 Sum

1 21.1 21.7 23.0 20.3 86.1

2 20.2 20.6 24.5 23.5 88.8

3 24.1 21.7 23.2 24.4 93.4

4 22.6 21.7 23.0 25.0 92.3

5 21.2 24.1 20.6 20.7 86.6

6 20.9 23.5 22.8 23.2 90.4

7 22.4 24.6 23.4 23.3 93.7

8 20.9 24.7 22.8 24.5 92.9

A) 24.9, 20.3 B) 23.8, 21.4 C) 22.6, 19.5 D) 21.1, 17.6 Answer: A Diff: 3 Reference: Statistical Quality Control Keywords: statistical quality control, x-bar chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

16) The fill size for a small bag of peanuts distributed by a popular airline is 50 grams. The producer wishes to set up a set of control charts for this process and collects the data shown in the table. What are the upper and lower control limits of their R-chart?

Sample Item #1 1 54.5 2 50.6 3 51.1 4 52.7 5 51.7 6 51.1 7 54.0 8 53.2 9 51.9

Item #2 54.3 53.5 54.3 52.1 51.2 51.5 52.3 50.4 50.2

Item #3 53.8 53.2 50.4 51.3 54.7 54.7 54.7 53.4 50.2

Item #4 50.4 54.9 50.7 51.0 54.3 50.4 51.4 51.4 52.9

Sum 213.0 212.3 206.6 207.2 211.8 207.7 212.4 208.4 205.1

A) 6.22, 0.62 B) 6.77, 0.42 C) 7.22, 0.22 D) 7.79, 0.00 Answer: D Diff: 3 Reference: Statistical Quality Control Keywords: statistical quality control, R chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

17) The fill size for a small bag of peanuts distributed by a popular airline is 50 grams. The producer wishes to set up a set of control charts for this process and collects the data shown in the table. What are the upper and lower control limits of their X-bar chart?

Sample Item #1 1 54.5 2 50.6 3 51.1 4 52.7 5 51.7 6 51.1 7 54.0 8 53.2 9 51.9

Item #2 54.3 53.5 54.3 52.1 51.2 51.5 52.3 50.4 50.2

Item #3 53.8 53.2 50.4 51.3 54.7 54.7 54.7 53.4 50.2

Item #4 50.4 54.9 50.7 51.0 54.3 50.4 51.4 51.4 52.9

Sum 213.0 212.3 206.6 207.2 211.8 207.7 212.4 208.4 205.1

A) 54.84, 49.85 B) 54.41, 50.32 C) 53.87, 50.78 D) 53.51, 51.18 Answer: A Diff: 3 Reference: Statistical Quality Control Keywords: statistical quality control, x-bar chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

18) A cell phone manufacturer inspects the video display on each color phone to verify that the screen can display all colors with the brilliance their customers have come to expect. Each phone is turned on, run through a self-test procedure, and classified as either acceptable or unacceptable based on test performance. Based on historical data, the manufacturer produces 0.1 percent defective displays. If they inspect 5000 phones each day for the next 10 days, what are the upper and lower control limits for their control chart if their sample mean mirrors their historical process average?

A) 0.0002, 0.0001 B) 0.0142, 0.0058 C) 0.1127, 0.0873 D) 0.0023, 0.0000 Answer: D Diff: 3 Reference: Statistical Quality Control Keywords: statistical quality control, p chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

19) A cell phone manufacturer inspects the video display on each color phone to verify that the screen can display all colors with the brilliance their customers have come to expect. Each phone

is turned on, run through a self-test procedure, and classified as either acceptable or unacceptable based on test performance. Based on historical data, the process engineer expects about 0.1 percent defective displays. How many phones should they sample to establish an average fraction defective for their statistical quality control initiative?

A) 5 B) 50 C) 500 D) 5000 Answer: D Diff: 3 Reference: Statistical Quality Control Keywords: sample size, p chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

20) A cell phone manufacturer inspects the video display on each color phone to verify that the screen can display all colors with the brilliance their customers have come to expect. Each phone is turned on, run through a self-test procedure, and classified as either acceptable or unacceptable based on test performance. The production team takes a sample of 350 phones and finds one with a defective display. How many additional phones should they sample to establish an average fraction defective for their statistical quality control initiative?

A) 1400 B) 1750 C) 2100 D) 2450 Answer: A Diff: 3 Reference: Statistical Quality Control Keywords: sample size, p chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

21) Floyd Electric is fabricating flanges for a new electrical motor. The flange is to be 25 millimeters in diameter with an upper tolerance limit of 26.5 millimeters and a lower tolerance limit of 23.5 millimeters. Bill Floyd took a sample consisting of ten flanges, measured the diameter and recorded the observations in the table.

25.69 25.58 24.78 24.94 24.87 24.63 25.70 25.52 24.95 24.91 What is Floyd Electric's process standard deviation?

A) 0.15 B) 0.17 C) 0.42 D) 0.39 Answer: C Diff: 3 Reference: Statistical Quality Control Keywords: standard deviation AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

22) Floyd Electric is fabricating flanges for a new electrical motor. The flange is to be 25 millimeters in diameter with an upper tolerance limit of 26.5 millimeters and a lower tolerance limit of 23.5 millimeters. Bill Floyd took a sample consisting of ten flanges, measured the diameter and recorded the observations in the table.

25.69 25.58 24.78 24.94 24.87 24.63 25.70 25.52 24.95 24.91 What is Floyd Electric's process capability index?

A) 1.08 B) 1.33 C) 1.42 D) 1.66 Answer: A Diff: 3 Reference: Statistical Quality Control Keywords: process capability index AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

23) Floyd Electric is fabricating flanges for a new electrical motor. The flange is to be 25 millimeters in diameter with an upper tolerance limit of 26.5 millimeters and a lower tolerance limit of 23.5 millimeters. Bill Floyd took a sample consisting of ten flanges, measured the diameter and recorded the observations in the table. He has heard discussion of 6 sigma in the business news recently and would like to join the club.

25.69 25.58 24.78 24.94 24.87 24.63 25.70 25.52 24.95 24.91 What percentage decrease in process standard deviation would be required for Floyd Electric to achieve 6-sigma process capability? Assume that his process mean remains where it is.

A) 36% B) 40% C) 46% D) 58% Answer: B Diff: 3 Reference: Statistical Quality Control Keywords: process capability AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

24) A housekeeping supervisor inspects rooms after the staff has cleaned them and compares their staff's performance against a checklist of items that should be cleaned, replaced, etc., according to standard operating procedure at the hotel. Over the past week she finds three rooms that have cleaning mistakes out of the 140 rooms she has inspected. How many additional rooms should she sample to establish an average fraction defective for the p chart she would like to make to monitor this process?

A) 78 B) 93 C) 108 D) 133 Answer: B Diff: 3 Reference: Statistical Quality Control Keywords: sample size, p chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

25) The probability of rejecting a lot with quality better than the acceptable quality level is: A) the lot tolerance percent defective.

B) the lot tolerance percent acceptable.

C) the consumer's risk.

D) the producer's risk.

Answer: D Diff: 3 Reference: Statistical Quality Control Keywords: producer's risk, OC curve, alpha, operating characteristic curve AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

26) Taguchi defines quality in terms of: A) parts per million.

B) losses.

C) lot tolerance percent defective.

D) acceptable quality levels.

Answer: B Diff: 2 Reference: Statistical Quality Control Keywords: Taguchi, quality loss AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

27) The ability of a non-centered process to meet certain quality standards is measured by its ________.

Answer: process capability index Diff: 2 Reference: Statistical Quality Control Keywords: process capability index, Cpk, process capability AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

28) ________ measures refer to the presence or absence of a particular characteristic.

Answer: Attributes Diff: 2 Reference: Statistical Quality Control Keywords: attributes measure, control chart AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

29) The probability of accepting a lot with worse quality than the lot tolerance percent defective level is ________.

Answer: beta, consumer's risk Diff: 2 Reference: Statistical Quality Control Keywords: acceptance sampling, beta, consumer's risk AACSB: Application of Knowledge LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

30) An airline wants to monitor the performance of their baggage handling crew on the daily flight from Oklahoma City to Dallas that is always filled to its 140 passenger capacity. They track the number of passengers that lose bags each flight for a two-week period. The data are displayed in the following table. Determine control limits for the appropriate chart and indicate any points that are out of control.

Day # # Bags Lost 1 3 2 4 3 3 4 2 5 5 6 7 7 6 8 8 9 1 10 7 11 6 12 2 13 1 14 7 Answer: This is attribute data, so a p-chart is called for. The upper and lower control limits are 0.076 and 0 and all samples fall comfortably within this range.

=

=

= = (0.0316) Sp = = = 0.0148 UCL = + 3Sp LCL = - 3Sp UCL = 0.0316 + 3(0.0148) LCL = 0.0316 - 3(0.0148) UCL = 0.076 LCL = -0.013 ∴LCL = 0

Day # # Bags Lost P (# Lost/140) 1 3 0.0214 2 4 0.0286 3 3 0.0214 4 2 0.0143 5 5 0.0357 6 7 0.0500 7 6 0.0429 8 8 0.0571 9 1 0.0071 10 7 0.0500 11 6 0.0429 12 2 0.0143 13 1 0.0071 14 7 0.0500

Diff: 3 Reference: Statistical Quality Control Keywords: SQC, p-chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

31) A hot tub manufacturer wants the thermostat to control water temperature to within one degree when set at 130 degrees Fahrenheit. They randomly select 10 hot tubs, set the thermostats to 130, and record the following data with an infrared thermometer that has recently been calibrated.

Temp 129.9 129.7 130.2 129.7 129.8

130

129.6

131

130.3 129.8

What is their process capability?

Answer:

=

=

= = 130.0 = = 0.416 The process is centered so the process capability ratio is calculated as CP = CP = CP = 0.80 Their process capability is poor.

Diff: 3 Reference: Statistical Quality Control Keywords: process capability, standard deviation, Cp AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

32) Floyd Electric is fabricating flanges for a new electrical motor. The flange is to be 25 millimeters in diameter with an upper tolerance limit of 26.5 millimeters and a lower tolerance limit of 23.5 millimeters. Bill Floyd took a sample consisting of ten flanges, measured the diameter and recorded the observations in the table.

25.69 25.58 24.78 24.94 24.87 24.63 25.70 25.52 24.95 24.91 What is Floyd Electric's process capability?

Answer: =

=

= = 25.16 = = 0.42 The process is not centered so the process capability index is calculated as CPK = Min

CPK = Min CPK = 1.07 Their process capability is poor.

Diff: 3 Reference: Statistical Quality Control Keywords: process capability, standard deviation AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

33) The fill size for a small bag of peanuts distributed by a popular airline is 50 grams. The producer wishes to set up a set of control charts for this process and collects the data shown in the table. Develop the proper statistical quality control charts. Is the process in control?

Sample Item #1 1 54.5 2 50.6 3 51.1 4 52.7 5 51.7 6 51.1 7 54.0 8 53.2 9 51.9

Item #2 54.3 53.5 54.3 52.1 51.2 51.5 52.3 50.4 50.2

Answer: Sample 1 2 3 4 5 6 7 8 9

Xbar 53.2 53.1 51.6 51.8 53.0 51.9 53.1 52.1 51.3

R 4.1 4.3 3.9 1.7 3.5 4.3 3.3 3.0 2.7

Item #3 53.8 53.2 50.4 51.3 54.7 54.7 54.7 53.4 50.2

Item #4 50.4 54.9 50.7 51.0 54.3 50.4 51.4 51.4 52.9

Sum 213.0 212.3 206.6 207.2 211.8 207.7 212.4 208.4 205.1

Sample range and mean values for the nine samples are indicated in the table. The overall average range is 3.4 and average sample mean is 52.3, which become the center lines for the R and X-bar charts respectively. For n = 4, the A2 = 0.73, D3 = 0, and D4 = 2.28 UCLR = 2.28 × 3.4 = 7.79 LCLR = 0.00 × 3.4 = 0.00 UCLXbar = 52.3 + 0.73 × 3.4 = 54.84 LCLXbar = 52.3 - 0.73 × 3.4 = 49.85

Both charts reflect an in-control situation.

Diff: 3 Reference: Statistical Quality Control Keywords: statistical quality control, R chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

34) A cell phone manufacturer inspects the video display on each color phone to verify that the screen can display all colors with the brilliance their customers have come to expect. Each phone is turned on, run through a self-test procedure, and classified as either acceptable or unacceptable based on test performance. The production team takes a sample of 350 phones and finds one with a defective display. How many additional phones should they sample to establish an average fraction defective for their statistical quality control initiative?

Answer: The initial sample has a fraction defective of 1/350 = 0.002857. The sample size n must be such that Min(np, n(1-p)) = 5. Since p is smaller than 0.5, solving for np = 5 will yield the total number of phones that must be sampled. n(.002857) = 5 n = 5/.002857 = 1750 They have already sampled 350 phones so 1750 - 350 = 1400 phones left to sample.

Diff: 3 Reference: Statistical Quality Control Keywords: sample size, p chart AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

35) A tailor decides to use Taguchi's quality loss function to analyze his shirt making process.

Knowing it to be parabolic in shape and of the form L(y) = k(y - t)2 where t is the target, y is the actual measurement, and k is the process constant, the tailor decides to use a recent customer order to calculate his process parameters. He takes the custom shirt and measures the collar, which was requested to have a 17.5" collar but actually has a 17.75" collar. The customer notices the difference and demands a 50% reduction in the price of the shirt, which cost the tailor $45 to make. Instead of selling the shirt for $175, the tailor will reduce his price to $87.50. What is the tailor's process constant for a silk shirt?

Answer: The tailor is missing out on $87.50 of profit by reducing his price to this extent, so the L(y) = 87.50 = k(y - t)2 where t = 17.50 and y = 17.75.

So, $87.50 = k(17.5 - 17.75)2 k = $1400/inch squared Diff: 3 Reference: Statistical Quality Control Keywords: Taguchi Loss Function AACSB: Analytical Thinking LO: 5.4: Calculate process capability ratios and indices and set up control charts for monitoring continuous variables and attributes, and describe they key issues associated with acceptance sampling and the use of OC curves.

Learning Objective 5-5 1) ISO 9001:2008 can be used by both manufacturing and service companies.

Answer: TRUE Diff: 1 Reference: Managing Quality Across the Supply Chain Keywords: ISO 9000 AACSB: Application of Knowledge LO: 5.5: Discuss some of the important issues associated with managing quality across the supply chain.

2) One international standard for managing quality across the supply chain is: A) ISO 9000.

B) ISO 14000.

C) AQL. D) LTPD. Answer: A Diff: 2 Reference: Managing Quality Across the Supply Chain Keywords: ISO 9000 AACSB: Application of Knowledge LO: 5.5: Discuss some of the important issues associated with managing quality across the supply chain.

3) ________ is a family of standards, developed by the International Organization for Standardization, representing an international consensus on good quality management practices.

Answer: ISO 9000 Diff: 1 Reference: Managing Quality Across the Supply Chain Keywords: ISO 9000 AACSB: Application of Knowledge LO: 5.5: Discuss some of the important issues associated with managing quality across the supply chain.

4) Describe the ISO 9000 family of standards, including the objectives and process of becoming certified.

Answer: ISO 9000 is a family of standards supported by the International Organization for Standardization, representing an international consensus on good quality management practices.

ISO 9000 addresses business processes, rather than specific outcomes. ISO 9001:2008 seeks to help organizations deliver products or services that meet the customer's quality requirements and applicable regulatory requirements, while aiming to enhance customer satisfaction and achieve continual improvement of the performance in pursuit of these objectives. Companies seeking certification (or registration) will have independent auditors certify that their businesses are ISO 9000 compliant. ISO 9004:2009 is used to extend the benefits obtained from ISO 9001:2008 to all parties that are interested in or affected by a business's operations.

Diff: 2 Reference: Managing Quality Across the Supply Chain Keywords: ISO 9000, ISO 9001 AACSB: Application of Knowledge LO: 5.5: Discuss some of the important issues associated with managing quality across the supply chain.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 6 Managing Capacity Learning Objective 6-1 1) Capacity is the capability of a worker, machine, work center, plant, or organization to produce output per time period.

Answer: TRUE Diff: 1 Reference: Capacity Keywords: capacity, output AACSB: Application of Knowledge LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

2) A traditional university classroom has room for 30 students and is scheduled for use during 12 consecutive one hour periods from 8:00 a.m. to 8:00 p.m. in the spring semester. Its theoretical capacity is therefore half of its rated capacity.

Answer: FALSE Diff: 1 Reference: Capacity Keywords: theoretical capacity, rated capacity AACSB: Analytical Thinking LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

3) In general, higher conformance quality reduces capacity since the extra care taken during production slows the output rate.

Answer: FALSE Diff: 2 Reference: Capacity Keywords: capacity AACSB: Application of Knowledge

LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

4) A firm's capacity can be limited by members of its supply chain.

Answer: TRUE Diff: 2 Reference: Capacity Keywords: capacity AACSB: Application of Knowledge LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

5) Which of the following is NOT an appropriate measure of capacity?

A) square yards of carpet installed per hour B) number of cars assembled per month C) thickness of laminate on a desktop D) printed pages per minute Answer: C Diff: 1 Reference: Capacity Keywords: capacity, output AACSB: Application of Knowledge LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

6) Which of the following statements about theoretical capacity is best?

A) Theoretical capacity allows adjustments for preventive maintenance.

B) Running a factory at this level for a short time is often better than permanently raising resource levels.

C) Theoretical capacity levels are usually lower than rated capacity levels.

D) Theoretical capacity levels take into account that machines occasionally break and that workers occasionally call in sick.

Answer: B Diff: 2 Reference: Capacity Keywords: theoretical capacity, rated capacity AACSB: Application of Knowledge LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

7) A bottling machine has a theoretical capacity of 100 bottles per minute. During every ten hour shift it operates continuously but is shut down once for 30 minutes for cleaning, inspection, and lubrication. What is its rated capacity?

A) 100 bottles/minute B) 95 bottles/minute C) 90 bottles/minute D) 85 bottles/minute Answer: B Diff: 2 Reference: Capacity Keywords: theoretical capacity, rated capacity AACSB: Analytical Thinking LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

8) The maximum output capability of a system, allowing for no adjustments for scheduled or unscheduled maintenance is the ________.

Answer: theoretical capacity Diff: 1 Reference: Capacity Keywords: theoretical capacity AACSB: Application of Knowledge LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

9) Define theoretical and rated capacity and name four factors that affect a company's capacity.

Indicate how each factor impacts rated capacity.

Answer: Theoretical capacity is the maximum output capability per time period, allowing for no adjustments for preventive maintenance, unplanned downtime, and the like. Rated capacity is the long-term, expected output capability of a resource or system; in other words, it takes into account unplanned downtime, preventive maintenance, and other typical disruptions to planned output. Rated capacity is affected by the number of shifts and lines being operated. As a plant moves from one to two or more shifts or lines, capacity increases. Product variations are another source of variation in capacity. Setups in between products reduce capacity and some products can be made with fewer resources than others, thereby increasing capacity. In general, conformance quality is directly related to rated capacity; as conformance quality increases, capacity increases and vice-versa. Other factors include the capacity of other members of the supply chain, especially if one is functioning as a constraint, and the status of temporary workers and their mix of skills.

Diff: 2 Reference: Capacity Keywords: theoretical capacity, rated capacity AACSB: Application of Knowledge LO: 6.1: Explain what capacity is, how firms measure capacity, and the difference between theoretical and rated capacity.

Learning Objective 6-2 1) A firm is able to meet current demand. If it adopts a lead capacity strategy, then it is probably making the assumption that demand will increase in the future.

Answer: TRUE Diff: 2 Reference: Three Common Capacity Strategies Keywords: capacity, lead strategy AACSB: Application of Knowledge LO: 6.2: Describe the pros and cons associated with three difference capacity strategies: lead, lag, and match.

2) Virtual supply chains have the advantage of efficiency, but this advantage is gained in a tradeoff with decreased flexibility.

Answer: FALSE Diff: 2 Reference: Three Common Capacity Strategies Keywords: virtual strategy, capacity AACSB: Application of Knowledge LO: 6.2: Describe the pros and cons associated with three difference capacity strategies: lead, lag, and match.

3) Which of the following statements about capacity strategies is NOT correct?

A) Lead capacity strategy can be used to preempt competitors who might be planning to expand their own capacity.

B) A lag capacity strategy tends to have greater productivity due to higher utilization levels.

C) A match capacity strategy tends to avoid periods of high under- or overutilization.

D) A lag capacity strategy would be well-suited for a period of high growth.

Answer: D Diff: 2 Reference: Three Common Capacity Strategies Keywords: lag strategy, capacity AACSB: Application of Knowledge LO: 6.2: Describe the pros and cons associated with three difference capacity strategies: lead, lag, and match.

4) A lead capacity strategy has the advantage of: A) a reduced risk of overbuilding.

B) greater productivity due to high utilization levels.

C) ensuring adequate capacity during all types of growth.

D) the ability to put off large investments as long as possible.

Answer: C Diff: 2 Reference: Three Common Capacity Strategies Keywords: capacity, lead strategy AACSB: Application of Knowledge LO: 6.2: Describe the pros and cons associated with three difference capacity strategies: lead, lag, and match.

5) The ________ capacity strategy attempts to adjust the current capacity to a level equivalent to the current demand.

Answer: match Diff: 1 Reference: Three Common Capacity Strategies Keywords: match strategy, capacity AACSB: Application of Knowledge LO: 6.2: Describe the pros and cons associated with three difference capacity strategies: lead, lag, and match.

6) A collection of companies decides to work together for a while to provide service for what they see as a short term window of opportunity. These firms plan to coordinate their activities by deploying sophisticated information systems to share critical data. Each of these companies is skilled at one or two core activities — design, manufacturing, distribution, marketing, and so on.

This association of companies can be described as a(n) ________.

Answer: virtual supply chain Diff: 2 Reference: Three Common Capacity Strategies Keywords: virtual strategy, capacity AACSB: Application of Knowledge LO: 6.2: Describe the pros and cons associated with three difference capacity strategies: lead, lag, and match.

7) Describe the three capacity strategies and the advantages of each.

Answer: The three common capacity strategies are lead, lag, and match. Capacity is added in anticipation of demand in a lead capacity strategy. The advantages of this approach are that the organization has adequate capacity to meet all demand, even during high periods of growth and that this capacity can be used to preempt competitors that are planning to expand their own capacity. A lag capacity strategy is realized by adding capacity only after increased demand has materialized. The authors indicate three clear advantages to this strategy are a reduced risk of overbuilding, greater productivity due to higher utilization levels, and the ability to put off large investments as long as possible. A match capacity strategy strikes a balance between the lead and lag approaches by attempting to meet demand needs exactly, thereby avoiding periods of high over or underutilization.

Diff: 2 Reference: Three Common Capacity Strategies Keywords: capacity, lead strategy, lag strategy, match strategy AACSB: Application of Knowledge LO: 6.2: Describe the pros and cons associated with three difference capacity strategies: lead, lag, and match.

Learning Objective 6-3 1) Building rental and depreciation on capital equipment are examples of fixed costs.

Answer: TRUE Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: fixed cost AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

2) For a given fixed cost and revenue, as the variable cost rises, the break-even point also rises.

Answer: TRUE Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: break-even point, fixed cost, variable cost AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

3) In a decision tree, outcome points are under direct control of the decision maker and show the results of choices.

Answer: FALSE Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: decision tree AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

4) A firm is more likely to develop the internal capacity to perform activities that are strategically important to its success than it is to outsource those activities.

Answer: TRUE Diff: 1 Reference: Methods of Evaluating Capacity Alternatives Keywords: outsourcing, strategy AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

5) A ninety percent learning curve is steeper than an eighty percent learning curve.

Answer: FALSE Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

6) Learning curve theory suggests that productivity will increase as people and systems learn to perform tasks more efficiently.

Answer: TRUE Diff: 1 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

7) An example of a variable cost is: A) a payment to your raw materials supplier.

B) a lease payment on a piece of equipment.

C) a mortgage payment on buildings.

D) a monthly licensing fee for a software package.

Answer: A Diff: 1 Reference: Methods of Evaluating Capacity Alternatives Keywords: variable cost AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

8) If a firm cannot make a profit regardless of output volume, then: A) FC > VC. B) VC > FC. C) VC > R. D) BEP > VC. Answer: C Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: variable cost, fixed cost, break-even point AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

9) Four entrepreneurial students want to open a shaved ice business during the coming summer.

Maxine thinks that demand will be high and therefore they should purchase a large stand and acquire a premium ice shaving machine. Minnie feels strongly that demand will be low and that they should purchase a tarp and some basic hand tools to work the ice. Midelia is pretty sure that demand will fall in-between these two extremes, so they can get by with a shack and a used ice shaving machine. Their financial wizard of the bunch, Probableah, has estimated the costs, revenues, and likelihoods of each level of demand and created the table shown below. What is the expected profit for this venture?

Demand Low Medium High

Total Revenue $500 $2,000 $5,000

Total Expenses $15 $125 $519

Probability .2 .3 .5

A) $1700 B) $2300 C) $2900 D) $3300 Answer: C Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: expected value AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

10) The MBA program at the University of Central Oregon features seven team-taught courses, five credit hours apiece. Each team is composed of somewhat reluctant professors in two distinct disciplines, each of which brings his own perspective to the topic du jour. The program is difficult to coordinate and makes transferring course credit in and out of the program near impossible, so the MBA Redesign Committee spends three years crafting a new program that features twenty one courses, two credit hours each, that will unfortunately take 18 months to complete compared to the current program's 12 months. The current MBA program brings in about 60 students each semester with the main selling point being the integration between disciplines. It is thought that if the new program can be successfully marketed as an easy fit with other MBA programs in the area, the ability to transfer credits in might attract as many as 70 new students each semester. If the new program is unveiled but the market is still interested in integrated courses, enrollment in the new program might drop to 40 students per semester. If this were the case, the new courses could be scheduled at the same time in the same room and might attract 65 students each semester (with a 0.6 probability) or might attract as few as 50 students with a 0.4 probability. If the existing program is retained but the market is seeking courses that are more transferable, then enrollment in the existing program might fall to 45 new students per semester. If this happens, then the existing courses might be broken in half each night into two classes back to back. Doing so has a .7 probability of increasing new student demand to 65 but has a .3 probability of increasing demand to 55. The MBA Director believes that the market is ready for a less integrated program, and she pegs the probability of that hunch at 0.6, with a 0.4 probability that the market prefers the current integrated program. What is the difference in expected outcomes between the two alternatives?

A) 2.2 new students per semester B) 3.2 new students per semester C) 3.4 new students per semester D) 4.4 new students per semester Answer: D Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: expected value AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

11) A company with fixed costs of $200,000 per month believes that they have this holiday season's hot selling item, a towel that folds itself into a variety of shapes so you can turn your own home into a cruise ship cabin. They believe they can sell 100,000 units and need to determine a minimum price that will cover their fixed and variable costs, with the latter being $45 per unit.

A) $45.20 B) $46.50 C) $46.80 D) $47.00 Answer: D Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: break-even AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

12) A company with fixed costs of $10,000 per month has a target price of $165 for their sole product, a heat shield for masonry fireplaces. What level of output represents their break-even point if their variable cost for producing is $35 per unit?

A) between 60 and 70 units B) between 70 and 80 units C) between 80 and 90 units D) between 90 and 100 units Answer: B Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: variable cost, fixed cost, break-even point AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

13) An entrepreneur identifies a product that he knows will sell like crazy if he can only figure out a way to bring it to her area. The idea is so fantastic that I can't tell you what it is, so we will just refer to it as X. The entrepreneur has identified four ways to bring X to the masses; she can import it, she can smuggle it, she can try to produce it on her own, and she can have a local reputable producer make it for her. The fixed and variable costs for each of these alternatives are shown below. What is her best course of action if she believes the demand will be 55,000 units?

Fixed Cost Variable Cost

Import $0 $30

Produce $500,000 $10

Smuggle $200,000 $15

Outsource $0 $37

A) Import B) Produce C) Smuggle D) Outsource Answer: C Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: variable cost, fixed cost, break-even point AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

14) An entrepreneur identifies a product that he knows will sell like crazy if he can only figure out a way to bring it to her area. The idea is so fantastic that I can't tell you what it is, so we will just refer to it as X. The entrepreneur has identified four ways to bring X to the masses; she can import it, she can smuggle it, she can try to produce it on her own, and she can have a local reputable producer make it for her. The fixed and variable costs for each of these alternatives are shown below. Which of these methods is never the preferred alternative?

Import Fixed Cost $25,000 Variable Cost $30

Produce $500,000 $10

Smuggle $200,000 $15

Outsource $0 $32

A) Import B) Produce C) Smuggle D) Outsource Answer: A Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: variable cost, fixed cost, break-even point AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

15) A haberdashery conducts an exhaustive analysis and calculates their profit function as 4x2 + 3x - 57. What is their fixed cost?

A) 4 B) 4x2 C) 57 D) 3x Answer: C Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: fixed cost, break-even point AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

16) Saul Goodman represents several clients and bills by the hour at a reasonable $500 per. He forgot to record the time it took to complete each activity, but he knows his eight hour day was spent representing 13 clients involved in one high profile case. He also remembers that Walt told him once that his learning curve percentage was 80%. How many hours should Saul bill his first client?

A) one hour eight minutes and forty five seconds B) one hour two minutes and thirty six seconds C) fifty six minutes and twenty eight seconds D) fifty minutes and five seconds Answer: B Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

17) Saul Goodman represents several clients and bills at $400 per hour. He forgot to record the time it took to complete each activity, but he knows his eight hour day was spent representing three clients involved in one high profile case. He also remembers that Walt told him once that his learning curve percentage was 85%. How much more should Saul bill his first client than his third client?

A) about $277 B) about $292 C) about $303 D) about $283 Answer: A Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

18) A subdivision is planned for forty houses, each with its own in-ground swimming pool. A contractor estimates it will take him 30 hours to build the first pool and that there is a 90%

learning curve associated with this process. How long will it take to build the last pool?

A) 27.2 hours B) 23.9 hours C) 20.5 hours D) 17.1 hours Answer: D Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

19) The first three rooms took The Painter a total of 9 hours to paint. If the learning curve rate is 85%, how long will it take The Painter to paint all 20 rooms in Stately Wayne Manor?

A) less than 20 hours B) between 20 and 30 hours C) between 31 and 40 hours D) more than 40 hours Answer: D Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

20) Which of the following statements about learning curves is best?

A) Learning improvements always follow a constant pattern.

B) Frequent design changes and reengineering have no effect on learning rates.

C) Underestimated learning effects may cause overestimation of capacity needs.

D) An eighty percent learning curve means that each unit takes twenty percent less time to produce than its immediate predecessor.

Answer: C Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

21) Total cost to produce is the sum of expenses incurred regardless of output plus the variable cost per unit of business activity multiplied by ________.

Answer: amount of business activity, output Diff: 1 Reference: Methods of Evaluating Capacity Alternatives Keywords: fixed cost, variable cost AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

22) When demand is uncertain, the expected value criterion may be used. To do so, demandlevel scenarios and their ________ must be identified.

Answer: probabilities, likelihood Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: expected value, probability AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

23) The ________ is the output volume level where the firm realizes a $0 net profit.

Answer: break-even point Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: break-even point AACSB: Application of Knowledge LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

24) A learning percentage of 80 means that each time output is doubled, it takes ________ percent less time to produce than before.

Answer: twenty Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

25) Saul Goodman represents several clients and bills at $400 per hour. He forgot to record the time it took to complete each activity, but he knows his eight hour day was spent representing three clients involved in one high profile case. He also remembers that Walt told him once that his learning curve percentage was 85%. How much more should Saul bill each of his three clients?

Answer: T1 + T2 + T3 = 8

T1 +

+

=8

T1 +

+

=8

T1 +

+

=8

2.623T1 = 8 T1 = 3.05 hours → $1220 T2 = 2.59 hours → $1036 T3 = 2.35 hours → $940 Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

26) A major computer manufacturer is interested in establishing a customer service center to handle business for the next decade. They conduct exhaustive research on land and construction costs, utilities, tax breaks, and wages at three sites, Oklahoma City, Austin, and Nashville.

Answer these questions using these costs as displayed in the table below.

Costs Fixed ($) Variable ($/unit)

Austin 200,000 7

Nashville 150,000 10

Oklahoma City 300,000 4

Graph the total cost curves and indicate the range of output that is best for each prospective site.

What are the assumptions you have made in this analysis?

Answer: The total cost equations are as follows: TCAustin = 200,000 + 7x TCNashville = 150,000 + 10x TCOklahoma City = 300,000 + 4x

Intersection points of interest are at Nashville and Austin and at Austin and Oklahoma City.

Nashville & Austin 150,000 + 10x = 200,000 + 7x 3x = 50,000 x = 16,666.

Austin & Oklahoma City 200,000 + 7x = 300,000 + 4x 3x = 100,000 x = 33,333.

The best location for each range of output is 0 units through 16,666 units = Nashville 16,667 units through 33,333 units = Austin More than 33,334 units = Oklahoma City This analysis assumes that costs are linear through the entire range of 0 to over 33,333 units.

Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: fixed cost, variable cost AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives,

including expected value and break-even analysis, decision trees, and learning curves.

27) An entrepreneur identifies a product that he knows will sell like crazy if he can only figure out a way to bring it to her area. The idea is so fantastic that I can't tell you what it is, so we will just refer to it as X. The entrepreneur has identified four ways to bring X to the masses; she can import it, she can smuggle it, she can try to produce it on her own, and she can have a local reputable producer make it for her. The fixed and variable costs for each of these alternatives are shown below. Develop a graph showing the ideal alternative across a range of demand that reflects all decision points.

Import Fixed Cost $25,000 Variable Cost $30

Produce $500,000 $10

Smuggle $200,000 $15

Outsource $0 $37

Answer: The graph is shown below. Outsourcing is the best alternative from 0 to 3,571 units.

From that point up to 11,666.6 units, importing is the best alternative after which smuggling has the lowest cost up to 60,000 units. From that point onward, producing the item has the lowest cost.

Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: variable cost, fixed cost, break-even point AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

28) A Seattle entrepreneur must decide on the size of a latte stand to construct. The manager has narrowed the choice down to large or small. If he builds large and experiences low demand he could grin and bear it for a $200 daily profit, lower prices ($225 daily profit), or hire street performers to attract attention ($175 daily profit). If he builds small and experiences high demand he could do nothing ($175 profit per day), stay open longer hours (profit of $225/day), improve processes ($250/day profit), or raise prices ($200/day profit). Building large for high

demand has an expected payoff of $250/day and building small for low demand has an expected payoff of $175/day. There is a 0.7 probability of high demand and 0.3 probability of low demand. Sketch a decision tree for this scenario and determine what size stand should be constructed to slake the unquenchable thirst of caffeine addicts.

Answer:

Large Stand = 0.7 × $250 + 0.3 × $225 = $242.50 Small Stand = 0.7 × $250 + 0.3 × $175 = $227.50 Therefore, choose the large stand.

Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: expected value, decision tree AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

29) A wise professor crafts a midterm that is beautiful to behold, painful to take, and a chore to grade. The first exam takes almost an hour and a half to grade (89 minutes and 24.7 seconds to be precise) but the second one takes only seventy-six minutes to complete. Realizing that learning effects are at work, the professor looks at his social calendar and spots an important social engagement at this time on the following day, exactly 24 hours from now. How long will it take to grade the third exam? How long will it take to finish grading exams for the entire class of 30 students?

Answer: The second exam takes 76/89.41167 or 85% of the first, so the learning percentage is 85%.

The third exam will take Tn = T1nb = 89.411 × 3ln(.85)/ln(2) T3 = 89.411 × 3-0.2345 = 89.411 × 0.77298 = 69.10497 minutes All 30 exams will take: T1-n = T1 = 89.4118 minutes × 17.091 = 1528.137 minutes = 25 hours 28 minutes 8.22 seconds Our story does have a happy ending. Since he has already graded two exams in 89.4117 minutes and 76 minutes, only 1362.723 more minutes (22 hours 42 minutes and 43.38 seconds) are needed to grade the last 28 exams, giving him adequate time to grade papers and clean up before the big event.

Diff: 3 Reference: Methods of Evaluating Capacity Alternatives Keywords: learning curve AACSB: Analytical Thinking LO: 6.3: Apply a wide variety of analytical tools for choosing between capacity alternatives, including expected value and break-even analysis, decision trees, and learning curves.

Learning Objective 6-4 1) The Theory of Constraints would support the statement that a chain is only as strong as its weakest link.

Answer: TRUE Diff: 2 Reference: Understanding and Analyzing Process Capacity Keywords: TOC, Theory of Constraints AACSB: Application of Knowledge LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

2) A busy toll highway that has four toll collectors for northbound traffic is an example of a single-channel, single-phase system.

Answer: FALSE Diff: 2

Reference: Understanding and Analyzing Process Capacity Keywords: waiting line, queuing, single channel, single phase AACSB: Application of Knowledge LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

3) In operations and supply chain environments that must deal with random demand and variable processing time, it is virtually impossible to achieve very high capacity utilization levels and still provide acceptable customer service.

Answer: TRUE Diff: 1 Reference: Understanding and Analyzing Process Capacity Keywords: waiting line, queuing, utilization AACSB: Application of Knowledge LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

4) Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below. Which statement is best?

A) The overall system output is 220 units/hr.

B) The process that determines the system's capacity is process 4.

C) If process 3 experiences 5 minutes of unplanned downtime, the system's overall output is diminished.

D) Overall system improvement efforts should focus on process 1.

Answer: D Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: TOC, theory of constraints AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

5) Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand exceeds the company's ability to produce. Which statement is best?

A) The overall system output is 220 units/hr.

B) The overall system output is 70 units/hr.

C) The overall system output is 40 units/hr.

D) The overall system output is 55 units/hr.

Answer: C Diff: 2 Reference: Methods of Evaluating Capacity Alternatives Keywords: TOC, theory of constraints AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

6) Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand of 40 units per hour drives the conveyor belt. Assume that no defective units are made. Which statement is best?

A) The average time a unit spends in Process 1 is 2 and a half minutes.

B) The average time a unit spends in Process 2 is 5 minutes.

C) The flow time for a unit through the entire process is 33 minutes.

D) The flow rate through the entire process is 160 units per hour.

Answer: C Diff: 3 Reference: Understanding and Analyzing Process Capacity Keywords: Little's Law AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

7) Consider the system composed of four processes linked by a conveyor belt. There is no storage between these processes pictured below and market demand of 50 units per hour drives the conveyor belt. Assume that no defective units are made. Which statement is best?

A) There are about 18 units in the process at any given time.

B) There is more actual time spent in Process 2 and Process 3 combined than in Process 1 and Process 4 combined.

C) The flow rate through Process 1 is the highest.

D) The flow rate through Process 4 is the highest.

Answer: A Diff: 3 Reference: Understanding and Analyzing Process Capacity Keywords: Little's Law AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

8) Students arrive at a professor's office every 20 minutes during final exam week according to a Poisson distribution. What is the probability that the professor's one hour afternoon nap will not be disrupted by any student arrivals?

A) 0.00 B) 0.05 C) 0.15 D) 0.45 Answer: B Diff: 3 Reference: Understanding and Analyzing Process Capacity Keywords: probability, waiting line, queuing AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

9) Wally's Filling Station is manned by one capable attendant that can fill your tank and check your tires, oil, and water in 5 minutes. If four customers arrive each hour, and the service and arrival rates are governed by the Poisson distribution, what is the utilization of the attendant?

A) 0.33 B) 0.50 C) 0.66 D) 0.80 Answer: A Diff: 2 Reference: Understanding and Analyzing Process Capacity Keywords: utilization, waiting line, queuing AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

10) Customers arrive at Rent a Wreck and hope to score an inexpensive and unsightly vehicle to use for what typically is a short period of time. About twenty customers show up in any hour of the day and it takes the customer service representative about two minutes to photocopy their driver's license and insurance card and take an impression of a credit card. Assume that the service and arrival rates are governed by the Poisson distribution; how long does it take for the average customer to clear the system?

A) 10 minutes B) 6 minutes C) 3.33 minutes D) 3 minutes Answer: B Diff: 2 Reference: Understanding and Analyzing Process Capacity Keywords: time in system, queuing AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

11) Business at the Kwik-E-Mart is brisk, with one customer arriving at a rate of six per hour on average. Ringing up purchases is an easy matter for owner/operator Apu; he can usually do so in 2 minutes. If both arrival and service rates are Poisson distributed, how many customers are in the store on average?

A) 0.05 B) 0.16 C) 0.25 D) 0.50 Answer: C Diff: 3 Reference: Understanding and Analyzing Process Capacity Keywords: utilization, waiting line, queuing AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

12) The average waiting time on a Thursday night for a table at a popular Chinese restaurant is 30 minutes. If customers arrive at the rate of four per hour and both the service and arrival rates are Poisson distributed, what is the average service time?

A) greater than 3 but less than 4 per hour B) greater than 4 but less than 5 per hour C) greater than 5 but less than 6 per hour D) cannot be determined from the information provided.

Answer: C Diff: 3 Reference: Understanding and Analyzing Process Capacity Keywords: waiting time, queuing AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

13) The process step that limits throughput for the entire process chain is the ________.

Answer: constraint, bottleneck Diff: 1 Reference: Understanding and Analyzing Process Capacity Keywords: bottleneck, constraint, TOC AACSB: Application of Knowledge LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

14) In waiting line theory, a customer service attendant is a(n) ________.

Answer: channel Diff: 2 Reference: Understanding and Analyzing Process Capacity Keywords: channel, waiting line, queuing AACSB: Application of Knowledge LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

15) A steady stream of eager fresh-faced students waits in line to register for spring semester classes. Students arrive at the rate of 100 per hour and it takes the registrar 30 seconds to check their schedule and verify they have paid in full. What is the average time waiting in line and the average number of people in line? How busy is the registrar?

Answer: TW = The average time in line:

=

= 0.041 hours = 2.5 minutes CW = The average number of people in line:

=

= 4.1 students The average system utilization: ρ =

=

= 0.8

Diff: 3 Reference: Understanding and Analyzing Process Capacity Keywords: waiting line, queuing utilization AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

16) Customers arrive at Rent a Wreck and hope to score an inexpensive and unsightly vehicle to use for what typically is a short period of time. About twenty customers show up in any hour of the day and it takes the customer service representative about two minutes to photocopy their driver's license and insurance card and take an impression of a credit card. Assume that the service and arrival rates are governed by the Poisson distribution. Calculate the system's vital statistics.

Answer: ρ= = = 0.67 server utilization CS =

=

= 2 customers in system

TS =

=

= 0.1 hours = 6 minutes

CW =

=

= 1.33 customers waiting

TW =

=

= .07 hours = 4 minutes

Diff: 3 Reference: Understanding and Analyzing Process Capacity Keywords: time in system, number in system, utilization, queuing AACSB: Analytical Thinking LO: 6.4: Apply the Theory of Constraints, waiting line theory, and Little's Law to analyze and understand capacity issues in a business process environment.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 7 Supply Management Learning Objective 7-1 1) For the average manufacturer, over 50 percent of the value of shipments comes from materials.

Answer: TRUE Diff: 1 Reference: Why Supply Management Is Critical Keywords: material value, financial impact AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

2) Company A spends $250 million purchasing materials and subassemblies that it processes and sells for a total of $350 million. The cost of goods sold by Company A is $350 million.

Answer: FALSE Diff: 1 Reference: Why Supply Management Is Critical Keywords: CGS, cost of goods sold AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

3) The ratio of earnings to sales for a given time period is a firm's profit margin.

Answer: TRUE Diff: 1 Reference: Why Supply Management Is Critical Keywords: profit margin AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

4) Firms do not compete only against global competitors, but against: A) their suppliers.

B) themselves.

C) the customers of their competitors.

D) their competitors' supply chains.

Answer: D Diff: 1 Reference: Why Supply Management Is Critical Keywords: supply chain AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

5) The percentage of value of shipments that come from materials for the average manufacturer is: A) greater than or equal to 40 and less than or equal to 49 percent.

B) greater than or equal to 50 and less than or equal to 59 percent.

C) greater than or equal to 60 and less than or equal to 69 percent.

D) greater than or equal to 70 percent.

Answer: B Diff: 1 Reference: Why Supply Management Is Critical Keywords: material value, financial impact AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

6) The ratio of earnings to sales for a given time period is the: A) cost of goods sold.

B) merchandise inventory.

C) profit margin.

D) return on assets.

Answer: C Diff: 2 Reference: Why Supply Management Is Critical Keywords: profit margin AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

7) The analyst turned on his banker's lamp, adjusted his eye shade, and slowly pulled a legal pad

from his desk. His weathered hands punched the buttons on his desk calculator deliberately as he divided earnings by total assets in order to calculate: A) return on assets.

B) cost of goods sold.

C) merchandise inventory.

D) profit margin.

Answer: A Diff: 2 Reference: Why Supply Management Is Critical Keywords: ROA, return on assets AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

8) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

What is Flingers' return on assets?

A) 16% B) 20% C) 25% D) 40% Answer: C Diff: 2 Reference: Why Supply Management Is Critical Keywords: ROA, return on assets AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

9) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

What is Flingers' profit margin?

A) 5% B) 16% C) 2% D) 4% Answer: A Diff: 2 Reference: Why Supply Management Is Critical Keywords: profit margin AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

10) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

Every dollar Flingers saves in purchasing has the same impact as what amount of increased sales?

A) $10 B) $14 C) $17 D) $20 Answer: D Diff: 3 Reference: Why Supply Management Is Critical Keywords: profit leverage effect AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

11) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales. What will Flingers' return on assets figure be for 2015?

A) 26% B) 29% C) 33% D) 38% Answer: D Diff: 2 Reference: Why Supply Management Is Critical Keywords: ROA, return on assets AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

12) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales. What will Flingers' profit margin be for 2015?

A) 5% B) 7.5% C) 9% D) 11% Answer: B Diff: 2 Reference: Why Supply Management Is Critical Keywords: profit margin AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

13) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

Upper management plans to cut cost of goods sold by 5% for the coming year but retain the same sales. What will Flingers' profit leverage effect be for 2015?

A) $13.33 B) $14.71 C) $17.50 D) $18.50 Answer: A Diff: 3 Reference: Why Supply Management Is Critical Keywords: profit leverage effect AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

14) The phenomenon that a dollar in cost savings increases pretax profits by a dollar, while a dollar increase in sales increases pretax profits only by the dollar multiplied by the pretax profit margin is known as the: A) profit margin.

B) return on assets.

C) saving to spending ratio.

D) profit leverage effect.

Answer: D Diff: 2 Reference: Why Supply Management Is Critical Keywords: profit leverage effect AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

15) Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced. Breezy submits a bid of $40 per unit with a defect rate of 2%; Lady's bid is $50 per unit with a defect rate of 0.5%; and Spike's bid is $30 per unit with a defect rate of 5%. If a section of fence fails, it costs an average of $500 in losses and herding costs to round up all of the capybaras. Dusty believes it will take 1000 units to fence in this pasture configuration; what is the lowest total cost?

A) $47,500 B) $50,000 C) $52,500 D) $55,000 Answer: B Diff: 3 Reference: Why Supply Management Is Critical Keywords: performance impact, failure cost AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

16) Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced. Breezy submits a bid of $40 per unit with a defect rate of 3%; Lady's bid is $50 per unit with a defect rate of 0.5%; and Spike's bid is $30 per unit with a defect rate of 5%. If a section of fence fails, it costs an average of $500 in losses and herding costs to round up all of the capybaras. Dusty believes it will take 500 units to fence in this pasture configuration; which supplier should win the business?

A) Spike B) Breezy C) Lady D) no difference between Breezy and Spike Answer: C Diff: 3 Reference: Why Supply Management Is Critical Keywords: performance impact, failure cost AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

17) Dusty is evaluating two bids to supply fence hardware for the 5 acres of pasture that need to be fenced. Breezy submits a bid of $40 per unit with a defect rate of 3%; Lady's bid is $50 per unit and their product manager estimates the defect rate to be around 0.5%. If a section of fence fails, it costs an average of $500 in losses and herding costs to round up all of the capybaras.

Dusty believes it will take 500 units to fence in this pasture configuration. The product manager's uncertainty has Dusty concerned; what defect rate for Lady would make Dusty indifferent between the two suppliers as far as total cost is concerned?

A) 1% B) 0.5% C) 0.33% D) 0% Answer: A Diff: 3 Reference: Why Supply Management Is Critical Keywords: performance impact, failure cost AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

18) Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced. Breezy submits a bid of $40 per unit, Lady's bid is $50 per unit, and Spike's bid is $30 per unit. If a section of fence fails, it costs an average of $500 in losses and herding costs to round up all of the capybaras. Dusty believes it will take 500 units to fence in this pasture configuration. What defect rates for the three suppliers would make Dusty indifferent among them from a total cost standpoint?

A) Breezy 5%, Spike 6%, Lady 2% B) Breezy 3%, Spike 5%, Lady 1% C) Breezy 1%, Spike 3%, Lady 2% D) Breezy 2%, Spike 3%, Lady 4% Answer: B Diff: 3 Reference: Why Supply Management Is Critical Keywords: performance impact, failure cost AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

19) Profit margin is the ratio of ________ to ________.

Answer: earnings; sales Diff: 1 Reference: Why Supply Management Is Critical Keywords: profit margin AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

20) Briefly discuss the three trends that make supply management so critical in today's business climate.

Answer: Several trends have pushed supply management to the forefront of the business consciousness: the changing global competitive landscape, the financial impact of supply management, and its impact on performance dimensions.

The first trend, the changing global competitive landscape, is best summarized by the statement that firms do not compete only against global competitors, but also against their competitors' supply chains. In order to compete globally, you must purchase globally from world-class suppliers. The financial impact of supply management is best illustrated by two numbers, the percentage of purchased materials that go into shipped materials and the profit leverage effect.

For most manufacturers, over 50% of the value of shipments comes from materials, and for some services, the number is much higher. The profit leverage effect illustrates the value of not spending a dollar; the firm needs to sell far more than a dollar to make up for a dollar spent due to taxes. Finally, purchased goods and services can have a major effect on other performance dimensions such as quality, delivery, and the ability of companies to exploit new technologies.

Purchasing can also help an organization incorporate state-of-the-art technologies into its products and services.

Diff: 3 Reference: Why Supply Management Is Critical Keywords: global competition, financial performance, performance impact AACSB: Application of Knowledge LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

21) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

Calculate Flingers' profit margin, return on assets, and leverage effect Answer: Profit margin = = = 5% Return on assets = Leverage effect =

=

= 25% =

= $20

Diff: 3 Reference: Why Supply Management Is Critical Keywords: profit margin, return on assets, ROA, leverage effect AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

22) Flingers Inc. reveals the following information in their annual report for FY 2014.

Earnings and Expenses Sales Cost of goods sold Pretax earnings

$10,000,000 $5,000,000 $500,000

Selected Balance Sheet Items Merchandise inventory Total assets

$80,000 $2,000,000

They plan to aggressively pursue cost savings in the purchasing area for FY 2015 and expect to lower their cost of goods sold by 8% while maintaining the same level of sales. Calculate Flingers' leverage effect for 2014 and their expected leverage effect for 2015. Compare the two results for your leverage effect calculations and provide insight as their relative magnitude.

Answer: Leverage effect 2014 = = = $20 Leverage effect 2025 =

=

= $11.11

The leverage effect drops for 2014 to 2015 because Flingers is purchasing more economically, or at least plans to, for 2015. They do not need as large an increase in sales to offset the dollar saved in purchasing because their operations have become more efficient.

Diff: 3 Reference: Why Supply Management Is Critical Keywords: profit margin, return on assets, ROA, leverage effect AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

23) Dusty is evaluating three bids to supply fence hardware for the 5 acres of pasture that need to be fenced. Breezy submits a bid of $40 per unit with a defect rate of 2%; Lady's bid is $50 per unit with a defect rate of 0.5%; and Spike's bid is $30 per unit with a defect rate of 5%. If a section of fence fails, it costs an average of $500 in losses and herding costs to round up all of the capybaras. Dusty believes it will take 1000 units to fence in this pasture configuration; what is the BEST choice for supplier?

Answer: Total cost is a combination of the material cost plus anticipated losses. The table shows all costs for each supplier, with Breezy's total cost of $50,000 being the lowest.

Price per unit % good Material Cost # Units failing Failure cost Total Cost (material + failure)

Lady $50.00 0.995 $50,000.00 5 $2,500.00

Breezy Spike $40.00 $30.00 0.98 0.95 $40,000.00 $30,000.00 20 50 $10,000.00 $25,000.00

$52,500.00

$50,000.00 $55,000.00

Diff: 3 Reference: Why Supply Management Is Critical Keywords: performance impact, failure cost AACSB: Analytical Thinking LO: 7.1: Discuss the rise of global sourcing and the important financial and operational performance impacts of supply management activities.

Learning Objective 7-2 1) The first step of the purchasing process is to select the supplier.

Answer: FALSE Diff: 2 Reference: The Strategic Sourcing Process Keywords: needs identification, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

2) Maverick spending is often promoted by top management as a way to improve the bottom line and break out of a purchasing cycle.

Answer: FALSE Diff: 2 Reference: The Strategic Sourcing Process Keywords: maverick spending, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

3) Outsourcing can be risky because it decreases the firm's strategic flexibility.

Answer: FALSE

Diff: 2 Reference: The Strategic Sourcing Process Keywords: outsourcing, strategic flexibility, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

4) Total cost analysis divides costs into direct (costs that are tied to the level of operations or supply chain activities) and indirect (costs that are not tied to the level of operations or supply chain activity).

Answer: TRUE Diff: 2 Reference: The Strategic Sourcing Process Keywords: direct cost, indirect cost, total cost, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

5) Portfolio analysis begins with assignment to a quadrant before a sourcing strategy is formulated.

Answer: TRUE Diff: 2 Reference: The Strategic Sourcing Process Keywords: portfolio analysis, quadrant, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

6) A company that uses portfolio analysis would probably classify things like office supplies in the Bottleneck quadrant.

Answer: FALSE Diff: 1 Reference: The Strategic Sourcing Process Keywords: portfolio analysis, bottleneck quadrant, strategic sourcing process, routine quadrant AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

7) A manufacturer seeking to reduce the variability of the quality of purchased products should use multiple sourcing.

Answer: FALSE Diff: 2 Reference: The Strategic Sourcing Process Keywords: single-sourcing, multiple-sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

8) A manufacturer that wants to make sure that suppliers do not become complacent should use multiple sourcing.

Answer: TRUE Diff: 2 Reference: The Strategic Sourcing Process Keywords: single-sourcing, multiple-sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

9) Cross sourcing is a strategy in which two suppliers are used for the same purchased product or service.

Answer: FALSE Diff: 1 Reference: The Strategic Sourcing Process Keywords: cross sourcing, dual sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

10) The weighted-point evaluation system allows for a completely objective decision to be made.

Answer: FALSE Diff: 2 Reference: The Strategic Sourcing Process Keywords: weighted point evaluation, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

11) The request for quotation is a formal request for suppliers to deliver a product or service that includes key terms and conditions, such as price, delivery, and quality requirements.

Answer: FALSE Diff: 2 Reference: The Strategic Sourcing Process Keywords: RFQ, PO, request for quotation, purchase order, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

12) In the description of the purchasing process, the product should be described only by brand or specification.

Answer: FALSE Diff: 1 Reference: The Strategic Sourcing Process Keywords: description activity, brand, specification, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

13) When a preferred supplier does not exist, competitive bidding and negotiation are two methods commonly used for final supplier selection.

Answer: TRUE Diff: 2 Reference: The Strategic Sourcing Process Keywords: preferred supplier, competitive bidding, negotiation, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

14) In a cost-based contract, the stated price does not change, regardless of fluctuations in the general overall economic conditions.

Answer: FALSE Diff: 2 Reference: The Strategic Sourcing Process Keywords: fixed-based contract, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

15) Use of EDI in the supply chain has led to shorter lead times and lower inventory.

Answer: TRUE Diff: 2 Reference: The Strategic Sourcing Process Keywords: EDI, electronic data interchange, strategic sourcing process AACSB: Information Technology LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

16) The purchasing team examined all of its purchasing patterns in order to identify any irregularities or possible areas of cost savings in a little scheme the team liked to call: A) internal auditing.

B) purchase consolidation.

C) spend analysis.

D) cooking the books.

Answer: C Diff: 2 Reference: The Strategic Sourcing Process Keywords: spend analysis, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

17) Which of the following is required in order to execute a successful spend analysis?

A) graphics capabilities found in charting packages and Visio B) a sophisticated statistical software package such as SPSS or SAS C) ability to analyze large quantities of data D) a minimum of six months uninterrupted work time Answer: C Diff: 2 Reference: The Strategic Sourcing Process Keywords: spend analysis, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

18) The use of supply chain partners to provide products or services is called: A) outsourcing.

B) insourcing.

C) offloading.

D) partnering.

Answer: A Diff: 1 Reference: The Strategic Sourcing Process Keywords: outsourcing, insourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

19) One advantage of outsourcing is that it: A) gives the company a high degree of control over its operations.

B) increases the company's access to state-of-the-art products and processes.

C) protects the company's proprietary designs and processes.

D) discourages the development of the company's core competencies.

Answer: B Diff: 1 Reference: The Strategic Sourcing Process Keywords: outsourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

20) Which of these is a direct cost associated with outsourcing?

A) direct material B) direct labor C) variable overhead D) price from invoice Answer: D Diff: 2 Reference: The Strategic Sourcing Process Keywords: outsourcing, direct cost, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

21) Which of these is an indirect cost associated with insourcing?

A) maintenance B) purchasing C) receiving D) quality control Answer: A Diff: 2 Reference: The Strategic Sourcing Process Keywords: insourcing, indirect cost, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

22) A supplier that has previously demonstrated its performance capabilities through purchase contracts may well receive: A) maverick status.

B) a request for description.

C) preferred supplier status.

D) a request for proposal.

Answer: C Diff: 1 Reference: The Strategic Sourcing Process Keywords: strategic sourcing process, preferred supplier AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

23) A company using portfolio analysis correctly decides to streamline the purchasing process for a few items by use of EDI and automated requisitions to the greatest extent possible. The quadrant that these items fall in is most probably the: A) bottleneck quadrant.

B) critical quadrant.

C) leverage quadrant.

D) routine quadrant.

Answer: D Diff: 2 Reference: The Strategic Sourcing Process Keywords: portfolio analysis, routine quadrant, EDI, strategic sourcing process AACSB: Information Technology LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

24) Competitive bidding, active sourcing, and using industry standards are all actions that are appropriate if the sourcing strategy is to: A) form partnerships with suppliers.

B) maximize commercial advantage.

C) simplify the acquisition process.

D) ensure supply continuity.

Answer: B Diff: 2 Reference: The Strategic Sourcing Process Keywords: portfolio analysis, leverage quadrant, commercial advantage, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

25) When compared with single sourcing, multiple sourcing has the advantage of: A) spreading risk.

B) volume leveraging.

C) lower transportation costs.

D) reduced quality variability.

Answer: A Diff: 1 Reference: The Strategic Sourcing Process Keywords: single sourcing, multiple sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

26) Single sourcing is a better choice than multiple sourcing from the perspective of: A) increased competition.

B) ensuring that a supplier will not become complacent.

C) spreading risk.

D) gaining access to the supplier's design and engineering capabilities.

Answer: D Diff: 1 Reference: The Strategic Sourcing Process Keywords: single sourcing, multiple sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

27) A sourcing strategy in which two suppliers are used for the same purchased product or service is: A) cross sourcing.

B) dual sourcing.

C) contingency sourcing.

D) multisourcing.

Answer: B Diff: 1 Reference: The Strategic Sourcing Process Keywords: dual sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

28) This table contains the performance criteria and scores (larger numbers are better) for four potential suppliers to Kramerica Industries. Evaluate the data and identify the BEST source for Kramerica.

Performance Dimension Company A Company B Company C Company D Quality (W = 0.4) 3 4 2 5 Cost (W = 0.3) 4 3 5 3 Flexibility (W = 0.2) 5 3 4 2 Speed (W = 0.1) 2 5 5 4 A) Company A B) Company B C) Company C D) Company D Answer: D Diff: 2 Reference: The Strategic Sourcing Process Keywords: weighted-point evaluation, strategic sourcing process AACSB: Analytical Thinking LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

29) This table contains the performance criteria and scores (larger numbers are better) for four potential suppliers to Los Pollos Hermanos. Evaluate the data and identify the BEST source for Los Pollos Hermanos.

Performance Dimension Company W Company P Company D Company G Purity (W = 0.5) 5 4 2 5 Cost (W = 0.2) 4 3 5 2 Stability (W = 0.2) 2 1 4 5 Speed (W = 0.1) 3 5 5 2 A) Company W B) Company P C) Company G D) Company D Answer: C Diff: 2 Reference: The Strategic Sourcing Process Keywords: weighted-point evaluation, strategic sourcing process AACSB: Analytical Thinking LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

30) This table contains a list of three companies that have been rated on four weighted performance dimensions (larger numbers are better). Which of the following statements regarding this information is BEST? Performance Dimension Strickland Quality (W=0.5) 4 Cost (W=0.4) 4 Speed (W=0.1) 2

Thatherton 4 3 2

Mega-Low Amerigas 2 4 5 3 4 5

A) Thatherton is superior to Amerigas.

B) Amerigas is superior to Strickland.

C) Mega-Low is superior to Thatherton.

D) Strickland is superior to Mega-Low. Answer: D Diff: 2 Reference: The Strategic Sourcing Process Keywords: weighted-point evaluation, strategic sourcing process AACSB: Analytical Thinking LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

31) A description method used when a product or service is proprietary or when there is a perceived advantage to using a particular supplier's product or services is: A) description by market grade.

B) description by brand.

C) description by specification.

D) description by performance characteristics.

Answer: B Diff: 1 Reference: The Strategic Sourcing Process Keywords: purchasing process, description by brand, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

32) The two basic types of purchasing contracts are: A) fixed-price and cost-based.

B) bid-rigged and cost-plus.

C) cost-zero and fixed-variable.

D) fixed-quantity and variable-cost.

Answer: A Diff: 1 Reference: The Strategic Sourcing Process Keywords: purchasing contract, fixed-price, cost-based, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

33) The purchasing team occasionally examined its spending patterns to identify irregularities as part of a(n) ________.

Answer: spend analysis Diff: 1 Reference: The Strategic Sourcing Process Keywords: spend analysis, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

34) ________ are high level, often strategic decisions regarding which products or services will be provided internally and which will be provided by external supply chain members.

Answer: Sourcing decisions Diff: 1 Reference: The Strategic Sourcing Process Keywords: sourcing, make-or-buy, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

35) ________ is the name for a technique requiring a company to identify and determine all of the major costs associated with different sourcing possibilities.

Answer: Total cost analysis Diff: 2 Reference: The Strategic Sourcing Process Keywords: sourcing, total cost analysis, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

36) The bulk of insourcing costs are usually ________ costs.

Answer: indirect Diff: 2 Reference: The Strategic Sourcing Process Keywords: insourcing, indirect cost, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

37) A company that regularly outsources goods and services may have established close relationships with their suppliers and therefore will allow these suppliers the first opportunity to bid for new business needs. These suppliers are known as ________.

Answer: preferred suppliers Diff: 2 Reference: The Strategic Sourcing Process Keywords: preferred supplier, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

38) A company using portfolio analysis decides to form partnerships with suppliers; the products in question probably fall in the ________ quadrant.

Answer: critical Diff: 2 Reference: The Strategic Sourcing Process Keywords: portfolio analysis, critical quadrant, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

39) Use of a single supplier for a part or service in part of the business and another supplier with the same capability for a different part or service in another area of the business is known as ________.

Answer: cross sourcing Diff: 2 Reference: The Strategic Sourcing Process Keywords: cross sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

40) Among the disadvantages of ________ are that different product attributes with varying qualities may be produced and that it can actually result in reduced supplier loyalty over time.

Answer: multiple sourcing Diff: 2 Reference: The Strategic Sourcing Process Keywords: multiple sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

41) ________ is a purchasing description method that focuses attention on the outcomes the customer wants.

Answer: Description by performance characteristics Diff: 2 Reference: The Strategic Sourcing Process Keywords: description by performance, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

42) Perhaps the best way for standard items is ________ which is a description method that is applicable when the requirements are well understood.

Answer: description by market grade or industry standard Diff: 2 Reference: The Strategic Sourcing Process Keywords: description by market grade, industry standard, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

43) Horace Smithfield, Esq., was insistent that he pay a flat rate of $10,000,000 and not a penny more to transfer his inheritance through your checking account so he could move vast sums of cash out of his country. Sure, he had fallen out of favor with the government and the economy in his country was in a dire situation, but a deal was a deal and $10,000,000 was all he could afford to pay. This type of purchase contract was to be a(n) ________ if you would kindly provide your account information..

Answer: fixed-price contract Diff: 2 Reference: The Strategic Sourcing Process Keywords: fixed-price contract, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

44) Define outsourcing and discuss its advantages and disadvantages.

Answer: Outsourcing is the use of supply chain partners to provide products or services. The advantages of outsourcing are a very low investment risk, improved cash flow, access to state-ofthe-art products and services, and high strategic flexibility. The disadvantages of outsourcing include the possibility of choosing a bad supplier, loss of control over the process and core technologies, communication and coordination challenges with the supplier, and a "hollowing out" of the corporation.

Diff: 1 Reference: The Strategic Sourcing Process Keywords: insourcing, outsourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

45) What is sourcing portfolio analysis? Discuss the model and the strategies and tactics associated with each quadrant.

Answer: In portfolio analysis, the products or services to be sourced are assigned to one of four strategic quadrants, based on their relative complexity and/or risk impact to the firm and their value potential. In general, the more money a company spends on a particular good or service, the higher its value potential. Depending on what quadrant a product or service is assigned to, the buying firm can then identify the most appropriate sourcing strategy, tactics, and actions.

The four quadrants are Routine, Leverage, Bottleneck, and Critical.

The "Routine" Quadrant. Products or services in the routine quadrant are readily available and represent a relatively small portion of a firm's purchasing expenditures. Typical examples include office supplies and cleaning services. The sourcing strategy therefore becomes one of simplifying the acquisition process, thereby lowering the costs associated with purchasing items in this quadrant. Specific actions can include automating the purchasing process, reducing the number of suppliers used, and using electronic data interchange (EDI) or purchase cards to streamline payment.

The "Leverage" Quadrant. Products or services in the leverage quadrant tend to be standardized and readily available, and they represent a significant portion of spending. The sourcing strategy therefore focuses on leveraging the firm's spending levels to get the most favorable terms possible.

The "Bottleneck" Quadrant. Bottleneck products or services have unique or complex requirements that can be met only by a few potential suppliers. In this case, the primary goal of the sourcing strategy is to not run out; in effect, the goal is to ensure supply continuity. This might involve carrying extra inventory to protect against interruptions in supply or contracting with multiple vendors to reduce supply chain risks.

The "Critical" Quadrant. Like bottleneck items, products or services in the critical quadrant have complex or unique requirements coupled with a limited supply base. The primary difference is that these items can represent a substantial level of expenditure for the sourcing firm. In cases such as this, the sourcing firm will spend considerable time negotiating favorable deals and building partnerships with suppliers, as well as preparing contingency plans in case of an interruption in supply.

Diff: 1 Reference: The Strategic Sourcing Process Keywords: strategic sourcing process, portfolio analysis AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

46) What are the four sourcing strategies, how do they work, and what are the advantages of each?

Answer: The main sourcing strategies are single, multiple, dual, and cross sourcing. In single sourcing, the firm depends on a single company for all or nearly all of a product or service, but in multiple sourcing, the firm shares its business across three or more suppliers. In between those ends of the spectrum is dual sourcing, where two suppliers are used for the same purchased product or service, and cross sourcing, where different business units in a single firm use different suppliers for similar parts.

Single sourcing has the advantages of volume leveraging, lower transportation costs, reduced quality variability, and stronger relationships with suppliers. Multiple sourcing creates competition, spreads risk, can help ensure that suppliers do not become complacent, may be required if the purchased volume is too great for one supplier, and may be desired if the buyer wishes to meet obligations to support minority suppliers. Dual sourcing accrues the same advantages as multiple sourcing as does cross sourcing.

Diff: 2 Reference: The Strategic Sourcing Process Keywords: multiple sourcing, single sourcing, cross sourcing, dual sourcing, strategic sourcing process AACSB: Application of Knowledge LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

47) This table contains the performance criteria and scores (larger numbers are better) for four potential suppliers to Los Pollos Hermanos. Evaluate the data and identify the BEST source for Los Pollos Hermanos.

Performance Dimension Purity (W = 0.5) Cost (W = 0.2) Stability (W = 0.2) Speed (W = 0.1)

Company W Company P Company D Company G 5 4 2 5 4 3 5 2 2 1 4 5 3 5 5 2

Answer: Company G has the highest score, 4.1, and would be the supplier of choice ScoreX = ScoreW = 0.5 × 5 + 0.2 × 4 + 0.2 × 2 + 0.1 × 3 = 4.0 ScoreP = 0.5 × 4 + 0.2 × 3 + 0.2 × 1 + 0.1 × 5 = 3.3 ScoreD = 0.5 × 2 + 0.2 × 5 + 0.2 × 4 + 0.1 × 5 = 3.3 ScoreG = 0.5 × 5 + 0.2 × 2 + 0.2 × 5 + 0.1 × 2 = 4.1 Diff: 2 Reference: The Strategic Sourcing Process Keywords: weighted-point evaluation, strategic sourcing process AACSB: Analytical Thinking LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

48) This table contains the performance criteria and scores (larger numbers are better) for four potential suppliers to Satriale's Pork Store. Evaluate the data and identify the BEST source for Satriale's. Consider the two runners-up to the best source and what points of negotiation might lead them to becoming the optimal supplier.

Performance Dimension Innovation (W = 0.4) Cost (W = 0.3) Stability (W = 0.2) Speed (W = 0.1)

Company T Company C Company S Company P 4 4 2 5 4 3 5 2 2 1 4 5 3 5 5 2

Answer: Company P has the highest score, 3.8, and would be the supplier of choice ScoreX = ScoreT = 0.4 × 4 + 0.3 × 4 + 0.2 × 2 + 0.1 × 3 = 3.5 ScoreC = 0.4 × 4 + 0.3 × 3 + 0.2 × 1 + 0.1 × 5 = 3.2 ScoreS = 0.4 × 2 + 0.3 × 5 + 0.2 × 4 + 0.1 × 5 = 3.6 ScoreP = 0.4 × 5 + 0.3 × 2 + 0.2 × 5 + 0.1 × 2 = 3.8 Company S is two-tenths behind Company P, and has an abysmal innovation score to thank for this position. If the innovation factor is based on new product or service lines, then Satriale's might request that Company S consider exploring new products more aggressively. Company T is only three-tenths behind Company P, and is slightly behind in the Innovation factor but far behind on the Stability factor. An increase of 1 point in the stability score raises the overall score of Company T by two tenths, so whatever Company T can do to become more stable should be considered. Satriale's might take a partnership stance, perhaps increase the frequency of meetings in order to help Company T in the stability arena. A single digit increase in Innovation raises a score by four tenths of a point, but Company T has a high score already in this area. It might be easier to raise an extremely low score (Stability) than squeeze another point higher in an area where they are already performing well.

Diff: 3 Reference: The Strategic Sourcing Process Keywords: weighted-point evaluation, strategic sourcing process AACSB: Analytical Thinking LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

49) The entire plant needs a fresh coat of paint so you, as the operations manager, are charged with securing a painting contract to accomplish this. You locate four painting contractors and ask them for their performance on four criteria. Their responses, along with your minimum standards and the importance you place on each criterion, is shown in the table. Assign scores from 1 to 5 where 1 is terrible and 5 is excellent, for each contractor's performance on each criterion and determine who should be awarded the contract. Write a brief explanation for all the 1s and 5s you assign.

Cost Contractor 20% 1 $22,000

Paint Time 25% 5 days

Experience 20% 15 years

2 3

$20,000 $25,000

4 days 8 days

10 years 3 years

4

$22,500

5 days

25 years

Less than 1 week

5 years in business

Minimum Less than Standard $25,000

References Paint Quality 20% 15% Positive 20 year Strongly positive Lifetime Positive 25 year Strongly positive 20 year No negative references out 15 year of three guarantee

Answer: Answers will vary. Contractor 3 cannot meet the paint time criterion, does not have 5 years of experience, and is past the limit on cost. They should either be excluded from bidding or possibly assigned a score of 1 in each of those categories. Contractor 2 is best in cost, time, and paint quality and is tied for best in references and should probably be the highest overall score.

Diff: 2 Reference: The Strategic Sourcing Process Keywords: weighted-point evaluation, strategic sourcing process AACSB: Analytical Thinking LO: 7.2: Identify and describe the various steps of the strategic sourcing process, and apply some of the more common analytical tools, including spend analysis, portfolio analysis, and total cost analysis.

Learning Objective 7-3 1) Money is automatically drawn from the buyer's account and deposited into the supplier's account in an electronic funds transfer (EFT).

Answer: TRUE Diff: 2 Reference: The Procure-to-Pay Cycle Keywords: electronic funds transfer, EFT, procure-to-pay cycle AACSB: Information Technology LO: 7.3: Describe the major steps of the procure-to-pay cycle.

2) Terms and conditions for a purchased service that indicate what services will be performed and how the service provider will be evaluated is called a: A) request for quotation.

B) bid specification.

C) preferred supplier contract.

D) statement of work.

Answer: D Diff: 2 Reference: The Procure-to-Pay Cycle Keywords: statement of work, strategic sourcing process AACSB: Application of Knowledge LO: 7.3: Describe the major steps of the procure-to-pay cycle.

3) Authorization to a supplier to deliver a product, known as a(n) ________, increasingly takes the form of a technology known as ________.

Answer: purchase order (PO); electronic data interchange (EDI) Diff: 3 Reference: The Procure-to-Pay Cycle Keywords: procure-to-pay process, purchase order (PO), electronic data interchange (EDI) AACSB: Information Technology LO: 7.3: Describe the major steps of the procure-to-pay cycle.

4) Business partners that transfer payments between banks using an information system are using ________.

Answer: electronic funds transfer (EFT) Diff: 2 Reference: The Procure-to-Pay Cycle Keywords: electronic funds transfer, EFT, procure-to-pay cycle AACSB: Information Technology LO: 7.3: Describe the major steps of the procure-to-pay cycle.

5) What takes place in each step in the procure-to-pay cycle and which step is most critical?

Answer: Answers may vary on which step is most critical.

In contrast to the strategic sourcing process, the procure-to-pay cycle is decidedly tactical in nature: It involves day-to-day communications and transactions between the buyer and supplier, and it is completed once the goods or services have been received, the supplier has been paid, and the information has been recorded into the database.

The five main steps of the procure-to-pay cycle are: • Ordering – The most common way the ordering step begins is through the release of a purchase order. A purchase order is simply a document that authorizes a supplier to deliver a product or service and often includes terms and conditions, such as price, delivery, and quality requirements.

• Follow-up and expediting – Someone (typically purchasing or materials personnel) must monitor the status of open purchase orders.

• Receipt and inspection – When the order for a physical good arrives at the buyer's location, it is received and inspected to ensure that the right quantity was shipped and that it was not damaged in transit. If the product or service was provided on time, it will be entered into the company's purchasing transaction system. Physical products delivered by suppliers then become part of the company's working inventory.

• Settlement and payment – Once an item or a service is delivered, the buying firm will issue an authorization for payment to the supplier. Payment is then made through the firm's accounts payable department.

• Records maintenance – After a product or service has been delivered and the supplier paid, a record of critical events associated with the purchase is entered into a supplier performance database.

Diff: 3 Reference: The Procure-to-Pay Cycle Keywords: procure to pay cycle AACSB: Application of Knowledge LO: 7.3: Describe the major steps of the procure-to-pay cycle.

Learning Objective 7-4 1) A recent trend in supply management is a move towards a more sustainable supply chain.

Answer: FALSE Diff: 2 Reference: Trends in Supply Management Keywords: sustainable, sustainability AACSB: Ethical Understanding and Reasoning LO: 7.4: Discuss some of the longer-term trends in supply management and why they are important.

2) A recent survey of executives at Global 1000 companies uncovered what fear?

A) the fear of a supply chain disruption B) the fear of the unknown C) the fear of improperly weighting performance dimensions D) the fear of misclassifying direct and indirect costs Answer: A Diff: 2 Reference: Trends in Supply Management Keywords: supply chain disruption AACSB: Application of Knowledge LO: 7.4: Discuss some of the longer-term trends in supply management and why they are important.

3) Which of these factors is most likely to increase the risk of a missed shipment, communication problem, or human error?

A) supply base reduction B) global outsourcing C) multicriteria decision models D) electronic data interchange Answer: B Diff: 2 Reference: Trends in Supply Management Keywords: supply chain disruption, global sourcing AACSB: Application of Knowledge LO: 7.4: Discuss some of the longer-term trends in supply management and why they are important.

4) Top executives name ________ as a significant threat to their companies' revenue streams.

Answer: (supply chain) disruptions, disruptions Diff: 2 Reference: Trends in Supply Management Keywords: supply chain disruption AACSB: Application of Knowledge LO: 7.4: Discuss some of the longer-term trends in supply management and why they are important.

5) Identify the major trends in supply management and their impact from a strategic perspective.

Answer: The trends in supply management identified in this section are sustainable supply and supply chain disruptions. Sustainable supply or "eco-friendly" production, is becoming an important supplier selection criterion. Firms are looking for ways to reduce, reuse, and recycle, especially as the end user becomes more aware of supply chain membership and votes with their wallet.

As supply chains become more extended and firms depend even more on outside companies to provide critical goods and services, many firms are feeling the sting of disruptions to the supply chain. Causes of supply chain disruptions vary from natural disasters to manmade, but in a recent survey of senior executives at Global 1000 companies, the respondents identified supply chain disruptions as the single biggest threat to their companies' revenue streams. The complexity associated with multiple links in the supply chain increases the probability of disruptions.

From a strategic perspective, a company perceived as being "greener" than its competition may win orders that it otherwise wouldn't. Streamlining and outsourcing (or offshoring) allow a company to become more productive by having companies better-suited to produce the outsourced component or service do just that. This carries with it the risk of supply chain disruption, which is deleterious to their competitive position.

Diff: 2 Reference: Trends in Supply Management Keywords: sustainable supply, supply chain disruption AACSB: Ethical Understanding and Reasoning LO: 7.4: Discuss some of the longer-term trends in supply management and why they are important.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 8 Logistics Learning Objective 8-1 1) Packaging is a logistics activity.

Answer: TRUE Diff: 1 Reference: Introduction Keywords: logistics, packaging AACSB: Application of Knowledge LO: 8.1: Describe why logistics is important, and discuss the major decision areas that make up logistics.

2) The net result of the renaissance in logistics is that logistics costs are expected to decline.

Answer: FALSE Diff: 2 Reference: Why Logistics Is Critical Keywords: logistics cost AACSB: Application of Knowledge LO: 8.1: Describe why logistics is important, and discuss the major decision areas that make up logistics.

3) Which of these is NOT a logistics activity?

A) material handling B) inventory management C) warehousing

D) inspection Answer: D Diff: 1 Reference: Introduction Keywords: logistics AACSB: Application of Knowledge LO: 8.1: Describe why logistics is important, and discuss the major decision areas that make up logistics.

4) What percent of North American gross domestic product is accounted for by logistics?

A) almost 8 percent B) almost 12 percent C) almost 16 percent D) almost 20 percent Answer: A Diff: 2 Reference: Why Logistics Is Critical Keywords: logistics expense AACSB: Application of Knowledge LO: 8.1: Describe why logistics is important, and discuss the major decision areas that make up logistics.

5) Define logistics and explain why it is critical.

Answer: The Council of Supply Chain Management Professionals put it best when they said logistics "is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers' requirements." Logistics has a significant impact on a business's cost, flexibility, and delivery performance. Logistics costs account for between 5 and 35 percent of total sales costs and represent one of the largest costs in international commerce. Logistics is one component of lead time, so as the time spent in this phase drops, lead time also drops. Lower cost and time result improved performance for any business.

Diff: 1 Reference: Introduction, Why Logistics Is Critical Keywords: logistics AACSB: Application of Knowledge LO: 8.1: Describe why logistics is important, and discuss the major decision areas that make up logistics.

Learning Objective 8-2 1) In the United States, the value of goods transported via highway is greater than the value of goods transported by all other transportation modes.

Answer: TRUE Diff: 2 Reference: Logistics Decision Areas Keywords: transportation, highway AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

2) Between any two locations, a less-than-truckload shipment probably experiences fewer stops and handling than a direct truck shipment.

Answer: FALSE Diff: 1 Reference: Logistics Decision Areas Keywords: direct truck shipment, LTL, less than truckload, highway, transportation AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

3) Roadrailers are considered a multimodal solution when all of their capabilities are utilized.

Answer: TRUE Diff: 2 Reference: Logistics Decision Areas Keywords: roadrailers, multimodal solution, transportation AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

4) Cross-docking is essentially the reverse flow from consolidation warehousing.

Answer: TRUE Diff: 2 Reference: Logistics Decision Areas Keywords: cross-docking, consolidation warehousing, warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

5) Assortment warehousing is a form of warehousing that combines classic operations with light manufacturing and packaging duties in order to assure short customer lead times.

Answer: FALSE Diff: 1 Reference: Logistics Decision Areas Keywords: postponement warehousing, assortment warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

6) The most detailed level of a logistics information system is the execution system.

Answer: TRUE Diff: 1 Reference: Logistics Decision Areas Keywords: logistics information system, execution system AACSB: Information Technology LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

7) A material handling system includes equipment and procedures that are needed to move items within a facility, between a facility and a transportation mode, and between different transportation modes.

Answer: TRUE Diff: 1 Reference: Logistics Decision Areas Keywords: material handling system AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

8) Inventory pooling occurs when a warehouse operator fails to complete shipments and is left with inventory that should be elsewhere.

Answer: FALSE Diff: 1 Reference: Logistics Decision Areas Keywords: inventory pooling, warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

9) The transportation mode with the highest dollar value of freight in the United States is: A) water.

B) rail.

C) highway.

D) pipeline.

Answer: C Diff: 1 Reference: Logistics Decision Areas Keywords: transportation, highway AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

10) The transportation mode other than highway with the highest annual tonnage in the United States is: A) air.

B) water.

C) rail.

D) pipeline.

Answer: C Diff: 2 Reference: Logistics Decision Areas Keywords: transportation, rail AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

11) This transportation mode is often the most expensive on a per pound basis.

A) air B) rail C) water D) highway Answer: A Diff: 1 Reference: Logistics Decision Areas Keywords: transportation, air AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

12) The mode of transportation that is highly cost effective for bulky items but has relatively poor delivery speed is: A) highway.

B) water.

C) rail.

D) air.

Answer: B Diff: 1 Reference: Logistics Decision Areas Keywords: transportation, water AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

13) Cargo is loaded and unloaded only once with: A) direct truck shipment.

B) less-than-truckload shipment.

C) multimodal solutions.

D) None of these modes always has only one loading and unloading.

Answer: A Diff: 1 Reference: Logistics Decision Areas Keywords: transportation, direct truck shipment AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

14) Which of the following is an example of consolidation warehousing?

A) Large shipments from multiple suppliers are re-sorted into customized shipments to individual stores.

B) A single manufacturer takes output directly from a single manufacturing plant and sends it directly to a single customer.

C) A single manufacturer takes output from several of its manufacturing plants and combines them into one shipment to a major customer.

D) A single manufacturer holds a wide array of goods close to the source of demand.

Answer: C Diff: 2 Reference: Logistics Decision Areas Keywords: consolidation warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

15) Hub and spoke systems are characterized by: A) "spokes" that are represented by the sites that receive the goods.

B) "hubs" that hold inventory until the appropriate season or upswing in demand.

C) inventory locations that are close to producers, not customers.

D) warehouses that are used as sorting facilities.

Answer: D Diff: 2 Reference: Logistics Decision Areas Keywords: hub and spoke, warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

16) One form of warehousing that features light manufacturing and packaging duties and allows firms to put off final assembly or packaging until the last possible moment is: A) assortment warehousing.

B) spot stock warehousing.

C) postponement warehousing.

D) pac-man warehousing.

Answer: C Diff: 1 Reference: Logistics Decision Areas Keywords: postponement warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

17) The fireworks that were produced year-round in South Africa were sent to warehouses around the United States during the months of May and June in anticipation of large demand for the July 4th holiday. The warehousing system that is BEST suited to handle this situation is the: A) assortment warehouse.

B) postponement warehouse.

C) spot stock warehouse.

D) break-bulk warehouse.

Answer: C Diff: 2 Reference: Logistics Decision Areas Keywords: spot stock warehouse, warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

18) A logistics manager uses this type of logistics information system to select a carrier for an outgoing shipment or to develop a weekly schedule of deliveries.

A) decision support B) planning C) execution D) operating Answer: B Diff: 3 Reference: Logistics Decision Areas Keywords: logistics information system, planning systems AACSB: Information Technology LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

19) The most detailed level of logistics information systems is the: A) decision support system.

B) planning system.

C) material handling system.

D) execution system.

Answer: D Diff: 3 Reference: Logistics Decision Areas Keywords: logistics information system, execution systems AACSB: Information Technology LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

20) Which of the following is a type of material handling equipment?

A) 3PL B) ASRS C) LTL D) RFID Answer: B Diff: 3 Reference: Logistics Decision Areas Keywords: material handling system AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

21) Which of these statements about inventory management is BEST? A) Spot stock warehouses are more useful with less inventory in the system.

B) A system using air transportation experiences higher costs due to higher levels of inventory.

C) Cross-docking facilities don't need to match incoming and outgoing demand since they typically retain much of their inventory for a week or longer.

D) A system using water and rail transportation tends to have higher levels of inventory.

Answer: D Diff: 3 Reference: Logistics Decision Areas Keywords: inventory management, transportation AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

22) The ________ mode of transportation is highly cost effective for bulky items but has relatively poor delivery speed.

Answer: water Diff: 1 Reference: Logistics Decision Areas Keywords: transportation, water AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

23) A(n) ________ uses more than one transportation mode through physical, information, and monetary flows that are as seamless as possible.

Answer: multimodal solution Diff: 1 Reference: Logistics Decision Areas Keywords: transportation, multimodal solution AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

24) It looked like a scene right out of the Transformers series, albeit in a far more functional format. With the push of a button the rail car's wheels folded up into the body of the car and wheels suitable for highway transportation appeared out of nowhere. The whole process took only a minute or so and the ________ was ready to deliver steaming burritos to the growing crowd at the center of town.

Answer: roadrailer Diff: 1 Reference: Logistics Decision Areas Keywords: roadrailers, multimodal solution AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

25) ________ is a form of warehousing in which smaller outgoing shipments are created from large incoming shipments.

Answer: Cross-docking Diff: 2 Reference: Logistics Decision Areas Keywords: warehousing, cross-docking AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

26) The goods entered doors on one side of the massive building and crossed the floor to the other side, where they were loaded on delivery trucks headed out on their delivery routes. The screams of the workers were drowned out by the constant traffic from the nearby airport and rail yard, making this an ideal ________ for the retail giant.

Answer: hub and spoke system Diff: 2 Reference: Logistics Decision Areas Keywords: hub and spoke system, warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

27) The printer manufacturer shipped all finished goods to a centrally located warehouse just down the street from an international airport. When orders came in from one country, workers at the warehouse added instruction manuals in that language and included a power supply that fit the appropriate electrical distribution system. This is an example of ________.

Answer: postponement warehousing Diff: 2 Reference: Logistics Decision Areas Keywords: postponement warehousing AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

28) Seasonal goods such as holiday decorations and recreational equipment may be placed in a(n) ________ close to the marketplace.

Answer: spot stock warehouse Diff: 2 Reference: Logistics Decision Areas Keywords: warehousing, spot stock warehouse AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

29) The online tracking systems offered by overnight carriers are examples of logistics information systems known as ________.

Answer: execution systems Diff: 2 Reference: Logistics Decision Areas Keywords: logistics information system, execution systems AACSB: Information Technology LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

30) Compare any four transportation modes by volume of goods moved in the United States and apparent strengths and weaknesses.

Answer: The five widely recognized transportation modes are highway, water, air, rail, and pipeline. Based on Table 8.1 in the text, from a dollar volume of goods moved, highway is over four times the volume of all other modes combined. From a tonnage standpoint, highway has two-thirds of the share, with water and rail each over 10% of share. From a ton-miles perspective, rail has 37% of the business, highway has almost 30% of the market with water and

pipeline at 20% or lower. Highway transportation has great flexibility but is neither the fastest nor cheapest option. Water and rail are both highly cost effective for bulky items and are somewhat limited in locations, especially water transportation. Both also suffer from relatively poor delivery reliability and speed. Air is the quickest mode of delivery but also usually the most expensive on a per-pound basis. Pipelines are suitable for fluids and lack flexibility.

Diff: 2 Reference: Logistics Decision Areas Keywords: transportation, highway, air, water, rail, pipeline AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

31) Choose a major manufacturer and a major retailer and describe two types of warehousing each might use and why they use it.

Answer: Answers will vary depending on examples chosen. A major manufacturer might ship goods to a cross-docking facility that will enable them to parcel out their production to several smaller locations. They might also use break-bulk warehousing for the same purpose. Both techniques would lower costs by negating the need for long routes served by trucks with very limited variety. A retailer might use cross-docking to take large shipments from many suppliers and send a small portion to each of several retail locations. A retailer might also use a hub and spoke system as part of their distribution chain. Finally, retailers can use assortment warehousing or spot stock warehousing to serve as a buffer for periods of high demand so they can fill unexpectedly large orders.

Diff: 2 Reference: Logistics Decision Areas Keywords: warehousing, consolidation warehousing, spot-stock warehouses, assortment warehouses, hub and spoke systems, break bulk warehousing, cross-dock AACSB: Application of Knowledge LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

32) What are the three main categories of logistics information systems? What function does each serve?

Answer: Logistics information systems fall into three major categories: decision support tools, planning systems, and execution systems.

Logistics managers often use decision support tools to design and fine-tune their logistics systems. Such tools help managers choose locations for their warehouses, determine the number of containers or vessels they need, and estimate costs and travel times. Some decision support tools even have simulation and optimization capabilities.

Planning systems help managers with specific activities, such as selecting a carrier for an outgoing shipment or developing a weekly schedule of deliveries. Of course, such activities have been going on for a long time. But with the aid of computer-based planning systems, today's logistics managers can more quickly analyze a wider range of options and identify the delivery schedule or carrier that best suits their needs.

Execution systems are the most detailed level of a logistics information system. As the name implies, execution systems take care of the hundreds of small details associated with logistics activities, ensuring that planned activities take place as expected. They oversee order and shipment management, shipper/receiver management, satellite and bar code tracking, and automated payment and billing systems. Execution systems can also help managers monitor the logistics system and identify problems before they get out of hand.

Diff: 2 Reference: Logistics Decision Areas Keywords: logistics information system, decision support tools, planning system, execution system AACSB: Information Technology LO: 8.2: List the strengths and weaknesses of various modes of transportation, discuss the role of multimodal solutions, and identify the major types of warehousing solutions and their benefits.

Learning Objective 8-3 1) A company interested in consistently achieving a high level of on-time delivery would be best served by the highway or air modalities of transportation.

Answer: TRUE Diff: 1 Reference: Logistics Strategy Keywords: transportation, highway AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

2) The difference between a contract carrier and a common carrier is that the common carrier handles shipments on a case-by-case basis while the contract carrier handles shipments based on long-term contracts.

Answer: TRUE Diff: 1 Reference: Logistics Strategy Keywords: common carrier, contract carrier, transportation AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

3) The perfect order measures how effectively logistics serves the customer while the landed cost measures how efficiently logistics provides that service.

Answer: TRUE Diff: 1 Reference: Logistics Strategy Keywords: landed cost, perfect order AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

4) The landed cost is the sum of all of the logistics activities from packaging at the producer's site through transportation, handling, customs, and any other logistics fees to the point of sale.

Answer: FALSE Diff: 1 Reference: Logistics Strategy Keywords: landed cost AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

5) A reverse logistics system handles repairs, recycling, returns and remanufacturing.

Answer: TRUE Diff: 2 Reference: Logistics Strategy Keywords: reverse logistics AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

6) A firm that is interested in consistent on-time delivery would probably design their transportation and warehousing system to include: A) air transportation with a spot stock warehouse.

B) rail transportation with a consolidation warehouse.

C) water transportation with a hub and spoke warehouse.

D) pipeline transportation with a postponement warehouse.

Answer: A Diff: 2 Reference: Logistics Strategy Keywords: logistics strategy, spot stock warehousing AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

7) A service firm that takes care of all of the logistics requirements for other companies is a: A) common carrier.

B) contract carrier.

C) third party logistics provider.

D) freight forwarder.

Answer: C Diff: 1 Reference: Logistics Strategy Keywords: 3PL, third party logistics provider AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

8) Last year the Perfection Logistics Company delivered 3.1 million packages and damaged 45,000 deliveries, sent 28,000 to the wrong address, and was late 20,000 times. Assuming no package had more than one error, Perfection's percent perfect order is: A) 93000 B) 3007000 C) 97% D) 93.7% Answer: C Diff: 1 Reference: Logistics Strategy Keywords: perfect order AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

9) Last year the Monroe Logistics Company reported 40,000 damaged deliveries, 18,000 deliveries to the wrong address, 15,000 late deliveries, 1,200 deliveries billed incorrectly, and 127,000 deliveries handled properly. Assuming no delivery had more than one error, Monroe's percent perfect order is: A) 37% B) 42% C) 58% D) 63% Answer: D Diff: 1 Reference: Logistics Strategy Keywords: perfect order AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

10) Last year the Monroe Logistics Company reported 4,000 damaged deliveries, 1,000 deliveries to the wrong address, 500 late deliveries, and 200 deliveries billed incorrectly.

Assuming no delivery had more than one error, how many deliveries were properly handled if their percent perfect order is 87%?

A) 38,145 B) 40,622 C) 43,845 D) 47,561 Answer: A Diff: 2 Reference: Logistics Strategy Keywords: perfect order AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

11) The drought of 2011 devastated hay crops in the plains states and horse owners ranged far and wide to purchase hay for their horses when winter arrived. Hay can be purchased "up north" for $4 a bale and a few entrepreneurs with large trailers were more than willing to pick up a few hundred bales and haul them south where demand was high. The transportation cost was $6 per bale and a packing and loading cost of $1 was typical. The landed cost of a bale of hay this winter was: A) $4.

B) $6.

C) $10.

D) $11.

Answer: D Diff: 1 Reference: Logistics Strategy Keywords: landed cost AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

12) The landlord's favorite place to buy shrimp in New Orleans was the Cajun Seafood market on Claiborne and he did not hesitate to stock up on shrimp when he dropped by the shotgun double house he bought as an investment a few years ago. Sadly, it was 685 miles one way to visit the property and even though gas was available at $1.88 per gallon and the car achieved 25 miles per gallon, it was an expensive trip. He packed a cooler with $12 worth of ice regardless of the quantity of shrimp he bought to bring home. The shrimp were a bargain at $7.99 per pound for jumbos and he always tried to fit 35 pounds of the crustaceans in the cooler. What is the landed cost of a pound of shrimp?

A) $11.28 B) $9.80 C) $9.42 D) $8.78 Answer: A Diff: 2 Reference: Logistics Strategy Keywords: landed cost AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

13) The landlord's favorite place to buy shrimp in New Orleans was the Cajun Seafood market on Claiborne and he did not hesitate to stock up on shrimp when he dropped by the shotgun double house he bought as an investment a few years ago. Sadly, it was 685 miles one way to visit the property and even though gas was available at $1.88 per gallon and the car achieved 25 miles per gallon, it was an expensive and lengthy trip. Therefore he bought the cheapest plane tickets he could muster at $299 round trip and packed a cooler with $12 worth of ice. The shrimp were a bargain at $7.99 per pound for jumbos and he always tried to fit 35 pounds of the crustaceans in the cooler. What is the landed cost of a pound of shrimp?

A) $11.28 B) $16.88 C) $9.80 D) $14.78 Answer: B Diff: 2 Reference: Logistics Strategy Keywords: landed cost AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

14) The landlord's favorite place to buy shrimp in New Orleans was the Cajun Seafood market on Claiborne and he did not hesitate to stock up on shrimp when he dropped by the shotgun double house he bought as an investment a few years ago. Sadly, it was 685 miles one way to visit the property and even though gas was available at $1.88 per gallon and the car achieved 25 miles per gallon, it was an expensive and lengthy trip. The cheapest plane tickets that were routinely available cost $199 round trip, but occasionally there was a super sale where the price dropped lower than that. He always packed a cooler with $12 worth of ice regardless of how much shrimp he actually bought. The shrimp were a bargain at $7.99 per pound for jumbos and he always tried to fit 35 pounds of the crustaceans in the cooler. What is the price of round trip airfare that would make the landed cost of a pound of shrimp the same for both driving and flying?

A) $112.85 B) $168.87 C) $103.02 D) $147.26 Answer: C Diff: 2 Reference: Logistics Strategy Keywords: landed cost AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

15) Universal Exports has several crates it needs to send from the United Kingdom to North Korea. They have located a firm that specializes in transferring cargo to the actual carrier that will bring the crates into North Korea. This firm could be described as: A) an interlocuter.

B) a customs broker.

C) a freight forwarder.

D) a mercenary.

Answer: C Diff: 1 Reference: Logistics Strategy Keywords: freight forwarder AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

16) Which of these statements about reverse logistics is BEST? A) Reverse logistics systems are usually less cost-efficient than forward-based systems.

B) Reverse logistics systems are usually designed to be less flexible than forward-based systems.

C) Reverse logistics systems usually play no role in customer satisfaction.

D) Reverse logistics systems usually use the same processes and players that comprise the forward-based system.

Answer: A Diff: 2 Reference: Logistics Strategy Keywords: reverse logistics AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

17) Your new Garden Weasel fails to "completely satisfy" you so you decide to return it for a full refund. What is the name for the system that will carry your weasel back to the manufacturer?

A) upstream logistics B) reverse ordering C) upstream ordering D) reverse logistics Answer: D Diff: 1 Reference: Logistics Strategy Keywords: reverse logistics AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

18) A(n) ________ can handle shipments on an as-needed basis with no long-term contract required.

Answer: common carrier Diff: 1 Reference: Logistics Strategy Keywords: common carrier AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

19) The complicated gift basket was delivered exactly as it was designed and in plenty of time to be enjoyed during seasonal celebrations. From a logistics performance standpoint, the product could be considered a(n) ________.

Answer: perfect order Diff: 2 Reference: Logistics Strategy Keywords: perfect order AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

20) What is a perfect order and what are five elements that might comprise such a measure?

Answer: A perfect order is the timely, error-free provision of a product or service in good condition. Answers will vary on the elements used to measure a perfect order. Some elements might be level of damage to goods, invoice accuracy, complete shipment, on-time delivery, correct location, and order tracking information consistently available and updated.

Diff: 1 Reference: Logistics Strategy Keywords: perfect order AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

21) The landlord's favorite place to buy shrimp in New Orleans was the Cajun Seafood market on Claiborne and he did not hesitate to stock up on shrimp when he dropped by the shotgun double house he bought as an investment a few years ago. Sadly, it was 685 miles one way to visit the property and even though gas was available at $1.88 per gallon and the car achieved 25 miles per gallon, it was an expensive and lengthy trip. The cheapest plane tickets that were routinely available cost $199 round trip, but occasionally there was a super sale where the price dropped lower than that. He always packed a cooler with $12 worth of ice regardless of how much shrimp he actually bought. The shrimp were a bargain at $7.99 per pound for jumbos and he always tried to fit 35 pounds of the crustaceans in the cooler. What is the price of round trip airfare that would make the landed cost of a pound of shrimp the same for both driving and flying and what is that landed cost?

Answer: The driving cost is given by: 685 miles × 2 = 1370 miles round trip = 54.8 gallons 54.8 gallons × $1.88/gallon = $103.02 If the plane ticket drops to $103.02 round trip, the cost would be the same. The total landed cost of a pound of shrimp is: $7.99/pound × 35 pounds = $279.65 +$12 ice +$103.02 transportation $394.67 for 35 pounds = $11.28/pound Diff: 3 Reference: Logistics Strategy Keywords: landed cost AACSB: Analytical Thinking LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

22) Compare the advantages and disadvantages of ownership of logistics assets. What factors should be considered when deciding whether to own or outsource the assets needed to execute the logistics function?

Answer: Advantages and disadvantages should be linked to the organization's expertise in logistics and their overall strategy and business plan. If the firm has no expertise in the logistics area and time (deliverability) is how they have chosen to win orders in the market, then they are probably best served by outsourcing the function. If they have the expertise or can build it quickly and see delivery speed and flexibility as important, then they might consider owning their own logistics assets, depending on their fit with the following factors.

Some of the major considerations are reflected in the following questions: Does the firm have the volume needed to justify a private logistics system? Firms with low volumes or sporadic shipping needs (e.g., transport of seasonal produce) are probably better off contracting for those services.

Would owning the logistics system limit the firm's ability to respond to changes in the marketplace or supply chain? Investing in a private fleet of trucks or network of warehouses ties up capital and commits a firm to managing those systems. While that may be fine for firms with stable supply chains, it can present a problem for firms whose markets or supply chain partners are changing rapidly. A manufacturer that wants the flexibility to quickly change from domestic to foreign suppliers probably should not own the trucks and warehouses it uses.

Is logistics a core competency for the firm? Core competencies were defined as organizational strengths or abilities, developed over a long period, that customers find valuable and competitors find difficult or impossible to copy. Many firms have decided that logistics is not one of their core competencies. These firms generally outsource the logistics function to common carriers (also known as public carriers), which handle shipments on a case-by-case basis, or to contract carriers, which enter into long-term agreements with firms. Another choice is third-party logistics providers (3PLs), which are service firms that handle all of the logistics requirements for other companies. Using 3PLs allows companies to focus on their core competencies yet still enjoy access to state-of-the-art logistics capabilities.

Diff: 2 Reference: Logistics Strategy Keywords: outsourcing, outsourcing strategy AACSB: Application of Knowledge LO: 8.3: Discuss the purpose of a logistics strategy, and give examples of how logistics can support the overall business strategy.

Learning Objective 8-4 1) In order for the weighted center of gravity method to yield an optimal solution all of the transportation costs in the area must be identical.

Answer: TRUE Diff: 2 Reference: Logistics Decision Models Keywords: weighted center of gravity AACSB: Application of Knowledge LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

2) The solution obtained from an assignment problem is an optimal answer to the problem of shipping goods from multiple sources to multiple destinations.

Answer: TRUE

Diff: 2 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Application of Knowledge LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

3) In order for the assignment problem method to yield an optimal solution all of the transportation costs in the area must be identical.

Answer: FALSE Diff: 2 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Application of Knowledge LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

4) Acme wants to locate a warehouse to serve their major customers that are shown in the table.

What is the location that will minimize the transportation costs for their family of products?

Customer Annual Volume X-Coordinate Y-Coordinate Coyote, LLC 25 3 7 Destry 13 5 2 Kingston Inc. 6 8 4 Ed Wood Productions 4 1 5 A) Near (3,4) B) Near (4,5) C) Near (5,6) D) Near (6,5) Answer: B Diff: 2 Reference: Logistics Decision Models Keywords: weighted center of gravity AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

5) The Times-Picayune is searching for an ideal spotting station for the morning paper.

Neighborhoods, their location on an XY grid of the city, and morning volume are shown in the table. What is the location that will minimize the transportation costs for the newspaper?

Customer Florida Desire Lafitte Iberville Guste CJ Peete

Annual Volume X-Coordinate Y-Coordinate 250 3 7 125 7 5 178 1 3 264 2 5 137 1 6 55 1 4

A) Near (3.1,4.6) B) Near (4.3,5.8) C) Near (2.5,5.2) D) Near (6.4,2.5) Answer: C Diff: 2 Reference: Logistics Decision Models Keywords: weighted center of gravity AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

6) The Times-Picayune is searching for an ideal spotting station for the morning paper.

Neighborhoods, their location on an XY grid of the city, and morning volume are shown in the table. What is the location that will minimize the transportation costs for the newspaper?

Customer Florida Desire Lafitte Iberville Guste CJ Peete

Annual Volume X-Coordinate Y-Coordinate 7 3 7 39 7 5 245 1 3 116 2 5 55 1 6 284 1 4

A) Near (3.0, 4.5) B) Near (4.5, 5.0) C) Near (2.5, 2.5) D) Near (1.5, 4.0) Answer: D Diff: 2 Reference: Logistics Decision Models Keywords: weighted center of gravity AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

7) Using the map and annual volumes shown next to each location, what is the BEST location for a central warehouse that can be used to service all of the locations?

A) Near (2,3) B) Near (3,2) C) Near (3,4) D) Near (4,3) Answer: B Diff: 3 Reference: Logistics Decision Models Keywords: weighted center of gravity AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

Plants A, B, C, and D produce the same item that is demanded by customers W, X, Y, and Z. Customer demand and plant capacity are shown in the bottom row and rightmost column in the table. The cost to ship one unit between each combination of plants and customers is also shown in the table. The corporation wishes to minimize the total transportation costs of this assignment problem. Use the table to answer the following questions.

A B C D Total Demand

W $3 $7 $10 $12

X $6 $10 $13 $15

Y $4 $8 $11 $13

Z $2 $6 $9 $11

25,000

15,000

18,000

12,000

Total Supply 22,000 19,000 14,000 15,000

8) Refer to the scenario above. What is a suitable constraint?

A) Minimize Cost = $3∗SAW + $6∗SAX + $4∗SAY + $2∗SAZ B) Minimize Cost = $3∗SAW + $7∗SBW + $10∗Scw + $12∗SDW C) SAW + SBW + SCW + SDW ≤ 25,000 D) SAW + SAX + SAY + SAZ ≤ 22,000 Answer: D Diff: 3 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

9) Refer to the scenario above. Which of these is part of an appropriate objective function?

A) $12∗DW + $15∗DX + $13∗DY + $11∗DZ B) -$3∗AW - $7∗BW - $10∗CW - $12∗DW C) CW + CX + CY + CZ = 14,000 D) CW + CX + CY + CZ ≤ 14,000 Answer: A Diff: 2 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

Plants in Vienna, Lucerne, Bruhl, and Salzburg produce the same item that is demanded by customers in London, Paris, Milan, and Athens. Customer demand and plant capacity are shown in the bottom row and rightmost column in the table. The cost to ship one unit between each combination of plants and customers is also shown in the table. The corporation wishes to minimize the total transportation costs of this assignment problem. Use the table below to answer the following questions.

Vienna Lucerne Bruhl Salzburg Total Demand

London $19 15 13 16

Paris 16 17 18 18

Milan 3 17 18 18

Athens 8 13 7 7

500

450

620

400

Total Capacity 600 500 400 470

10) Refer to the scenario above. What is a suitable constraint?

A) Minimize Cost = $19∗SVL + $16∗SVP + $3∗SVM + $8∗SVA B) Minimize Cost = $19∗SVL + $15∗SLL + $13∗SBL + $16∗SSL C) SBL + SBP + SBM + SBA ≤ 400 D) 3∗SVM + 17∗SLM + 18∗SBM + 18∗SSM = 620 Answer: C Diff: 3 Reference: Logistics Decision Models Keywords: assignment problem, constraint AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

11) Refer to the scenario above. What of these equations would be part of the appropriate objective function?

A) $19∗SVL + $16∗SLL + $3∗Sbl + $8∗SSL B) SBL + SBP + SBM + SBA C) $19∗SVL + $16∗SVP + $3∗SVM + $8∗SVA D) 3∗SVM + 17∗SLM + 18∗SBM + 18∗SSM Answer: C Diff: 3 Reference: Logistics Decision Models Keywords: assignment problem, objective function AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

12) Each of the four production sites ships ten units to each of the four customers. What is the cost of this initial trial shipment plan?

A) $1960 B) $2080 C) $2120 D) $2230 Answer: D Diff: 3 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

13) The assignment model assumes that: A) there are no economies of scale in shipping from one point to another.

B) the total amount shipped must exceed plant capacity.

C) the total amount shipped must not exceed demand at each location.

D) negative shipment quantities are acceptable as long as they are balanced by a positive shipment elsewhere.

Answer: A Diff: 2 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

14) A location model that looks at the problem of serving various demand points from multiple supply points at the lowest cost is the ________.

Answer: assignment problem Diff: 1 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Application of Knowledge LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

15) A producer of action figures is in a quandary about where to locate a central warehouse that will serve all of their regional centers for the coming millennium. They have predicted average annual demands for the following locations in the table.

Location Gotham City Metropolis Central City Gateway City Capitol City

Demand X-Coordinate Y-Coordinate 200 9 8 500 7 5 800 5 5 600 0 5 150 8 6

Where should they locate their central warehouse?

Answer:

Weighted X Coordinate =

=

Weighted X Coordinate = 4.

Weighted Y Coordinate =

=

Weighted Y Coordinate = 5.

Diff: 2 Reference: Logistics Decision Models Keywords: weighted center of gravity method AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

16) The Times-Picayune is searching for an ideal spotting station for the morning paper.

Neighborhoods, their location on an XY grid of the city, and morning volume are shown in the table. What is the location that will minimize the transportation costs for the newspaper?

Customer Florida Desire Lafitte Iberville Guste CJ Peete

Annual Volume X-Coordinate Y-Coordinate 7 3 7 39 7 5 245 1 3 116 2 5 55 1 6 284 1 4

Answer: Sum of Weights = 7 + 39 + 245 + 116 + 55 + 284 = 746 X-coordinate = 7 × 3 + 39 × 7 + 245 × 1 + 116 × 2 + 55 × 1 + 284 × 1 = 1110 X-coordinate = = 1.48 Y-coordinate = 7 × 7 + 39 × 5 + 245 × 3 + 116 × 5 + 55 × 6 + 284 × 4 = 3025 Y-coordinate = = 4.05 Diff: 2 Reference: Logistics Decision Models Keywords: weighted center of gravity AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

Plants in Vienna, Lucerne, Bruhl, and Salzburg produce the same item that is demanded by customers in London, Paris, Milan, and Athens. Customer demand and plant capacity are shown in the bottom row and rightmost column in the table. The cost to ship one unit between each combination of plants and customers is also shown in the table. The corporation wishes to minimize the total transportation costs of this assignment problem. Use this tidy table to answer the following questions.

Vienna Lucerne Bruhl Salzburg Total Demand

London $19 15 13 16 500

Paris 16 17 18 18 450

Milan 3 17 18 18 620

Athens Total Capacity 8 600 13 500 7 400 7 470 400

17) Refer to the scenario above. What is the objective function?

Answer: Min Z = 19∗SVL + 16∗SVP + 3∗SVM + 8∗SVA + 15∗SLL + 17∗SLP + 17∗SLM + 13∗SLA + 13∗SBL + 18∗SBP + 18∗SBM + 7∗SBA + 16∗SSL + 18∗SSP + 18∗SSM + 7∗SSA Diff: 3 Reference: Logistics Decision Models Keywords: assignment problem, objective function AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

18) Refer to the scenario above. Formulate an appropriate objective function and constraints to model this as an assignment problem.

Answer: Min Z = 19∗SVL + 16∗SVP + 3∗SVM + 8∗SVA + 15∗SLL + 17∗SLP + 17∗SLM + 13∗SLA + 13∗SBL + 18∗SBP + 18∗SBM + 7∗SBA + 16∗SSL + 18∗SSP + 18∗SSM + 7SSA Subject to: SVL + SVP + SVM + SVA ≤ 600 SLL + SLP + SLM + SLA ≤ 500 SBL + SBP + SBM + SBA ≤ 400 SSL + SSP + SSM + SSA ≤ 470 SVL + SLL+ SBL + SVL ≥ 500 SVP + SLP + SBP + SSP ≥ 450 SVM + SLM + SBM + SSM ≥ 620 SVA + SLA+ SBA+ SSA ≥ 400 all S ≥ 0 Diff: 3 Reference: Logistics Decision Models Keywords: assignment problem, objective function AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

19) Plants A, B, C, and D produce the same item that is demanded by customers W, X, Y, and Z in the amounts shown in the table. The cost to ship one unit between each combination of plants and customers is also shown in the table. The corporation wishes to minimize the total transportation costs of this assignment problem.

What are the decision variables?

What is the objective function?

What are the constraints?

A B C D Total Demand

W $3 $7 $10 $12 25,000

X $6 $10 $13 $15 15,000

Y $4 $8 $11 $13 18,000

Z Total Supply $2 22,000 $6 19,000 $9 14,000 $11 15,000 12,000

Answer: The decision variables are the quantities that are to be shipped between each combination of plant and customer.

SAW, SAX, SAY, SAZ, SBW, SBX, SBY, SBZ, SCW, SCX, SCY, SCZ, SDW, SDX, SDY, SDZ The objective function will be to minimize cost as a linear sum of all possible combinations of locations. Using S to represent the amount shipped from any plant to any customer: Min Cost = $3∗SAW + $6∗SAX + $4∗SAY + $2∗SAZ + $7∗SBW + $10∗SBX + $8∗SBY + $6∗SBZ + $10∗SCW + $13∗SCX + $11∗SCY + $9∗SCZ + $12∗SDW + $15∗SDX + $13∗SDY + $11∗SDZ The constraints are that each plant cannot ship more than it produces and that each customer cannot receive less than they want.

Plant A: SAW + SAX + SAY + SAZ ≤ 22,000 Plant B: SBW + SBX + SBY + SBZ ≤ 19,000 Plant C: SCW + SCX + SCY + SCZ ≤ 14,000 Plant D: SDW + SDX + SDY + SDZ ≤ 15,000 Customer W: SAW + SBW + SCW + SDW ≥ 25,000 Customer X: SAX + SBX + SCX + SDX ≥ 15,000 Customer Y: SAY + SBY + SCY + SDY ≥ 18,000 Customer Z: SAZ + SBZ + SCZ + SDZ ≥ 12,000 SAW, SAX, SAY, SAZ, SBW, SBX, SBY, SBZ, SCW, SCX, SCY, SCZ, SDW, SDX, SDY, SDZ ≥ 0 Diff: 3 Reference: Logistics Decision Models Keywords: assignment problem AACSB: Analytical Thinking LO: 8.4: Use the weighted center of gravity method to identify a potential location for a business, and develop, and then solve, using Microsoft Excel's Solver function, an assignment problem.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 9 Forecasting

Learning Objective 9-1 1) A video game publishing company needs to predict the total sales in the European market for the next year. This is an example of a(n): A) firm-level demand forecast.

B) overall market demand forecast.

C) supply forecast.

D) price forecast.

Answer: B Diff: 2 Reference: Forecast Types Keywords: overall market demand AACSB: Application of Knowledge LO: 9.1: Differentiate between demand forecasts, supply forecasts, and price forecasts.

Learning Objective 9-2 1) Forecasts are almost always wrong.

Answer: TRUE Diff: 1 Reference: Laws of Forecasting Keywords: laws of forecasting AACSB: Application of Knowledge LO: 9.2: Describe the four laws of forecasting.

2) Fed up with her working conditions at the call center, Lisa decides to invest in a state-of-theart sewing machine and produce limited quantities of her own clothing designs. After a few months of operation, she decides to apply some of the forecasting techniques she mastered in school. Which of these statements about her forecasts is correct?

A) Her forecasts will probably be 100% accurate.

B) Her demand forecasts for a year from now will probably be more accurate than her demand forecasts for three months from now.

C) Her demand forecasts for each style of skirt will be more accurate than her demand forecasts for all skirts.

D) The best way for her to determine the amount of fabric she needs is to forecast it based on her customer orders for each type of skirt.

Answer: D Diff: 2 Reference: Laws of Forecasting Keywords: laws of forecasting AACSB: Application of Knowledge LO: 9.2: Describe the four laws of forecasting.

3) What are the laws of forecasting and what are their implications for operations and supply chain managers?

Answer: Forecasts are almost always wrong; forecasts for the near term tend to be more accurate; forecasts for groups of products or services tend to be more accurate; and forecasts are no substitute for calculated values. The first law suggests that operations managers recognize that achieving a close estimate is beneficial, and that the amount of time, effort, and money required to improve a forecast have diminishing returns. The second law recognizes that the immediate future is more predictable and that techniques to shorten the time horizon for a forecast, such as delayed differentiation, are in the firm's best interest. The third law accounts for overforecasting and underforecasting errors to cancel each other. If a producer can standardize parts or models and delay differentiation, perhaps by making model differences attributable to software, then the effects of this law can be mitigated. Finally, if it is possible to directly calculate values, such as with dependent demand items, this should be done instead of forecasting.

Diff: 2 Reference: Laws of Forecasting Keywords: laws of forecasting AACSB: Application of Knowledge LO: 9.2: Describe the four laws of forecasting.

Learning Objective 9-3 1) Qualitative forecasts are used when there is plenty of relevant data.

Answer: FALSE Diff: 1 Reference: Selecting a Forecasting Method Keywords: qualitative forecast, quantitative forecast AACSB: Application of Knowledge LO: 9.3: Select the most appropriate type of forecasting approach, given different forecasting situations.

Learning Objective 9-4 1) The Delphi method, panel consensus forecasting, and market surveys are all qualitative forecasting methods, but only market surveys do NOT use experts.

Answer: TRUE Diff: 1 Reference: Qualitative Forecasting Methods Keywords: qualitative forecast, Delphi method, panel consensus, market survey AACSB: Application of Knowledge LO: 9.4: Describe four qualitative forecasting techniques — market surveys, panel consensus forecasting, the Delphi method, and life cycle analogy — and explain when they should be used.

2) A qualitative forecasting technique well-suited for demand forecasts of a new product or service is the: A) Delphi method.

B) build-up forecast.

C) life cycle analogy method.

D) market survey.

Answer: C Diff: 1 Reference: Qualitative Forecasting Methods Keywords: qualitative forecast, life cycle, analogy method AACSB: Application of Knowledge LO: 9.4: Describe four qualitative forecasting techniques — market surveys, panel consensus forecasting, the Delphi method, and life cycle analogy — and explain when they should be used.

3) A qualitative forecasting technique in which individuals familiar with specific market segments estimate the demand within these sectors that are then summed to get an overall forecast is called a: A) market survey.

B) life cycle analogy.

C) panel consensus forecasting.

D) build-up forecast.

Answer: D Diff: 1 Reference: Qualitative Forecasting Methods Keywords: qualitative forecast, build-up forecast AACSB: Application of Knowledge LO: 9.4: Describe four qualitative forecasting techniques — market surveys, panel consensus forecasting, the Delphi method, and life cycle analogy — and explain when they should be used.

4) The panel consensus forecasting approach requires that the forecasting team discuss their forecast as a team but the ________ requires that each member of the team develop a separate forecast initially.

Answer: Delphi method Diff: 2 Reference: Qualitative Forecasting Methods Keywords: Delphi method, panel consensus forecasting AACSB: Application of Knowledge LO: 9.4: Describe four qualitative forecasting techniques — market surveys, panel consensus forecasting, the Delphi method, and life cycle analogy — and explain when they should be used.

5) Describe the mechanics of three qualitative forecasting techniques and compare their strengths and weaknesses.

Answer: Answers may vary as the text presents five such methods; market surveys, panel consensus forecasting, the Delphi method, the life cycle analogy method, and build-up forecasts.

Market surveys are structured questionnaires submitted to potential consumers, often to gauge potential demand. The surveys can be expensive and time consuming but if structured well and properly administered and interpreted, can be very effective.

Panel consensus forecasting is a technique that brings experts together to jointly discuss and develop a forecast. The Delphi method is a technique where experts work individually to develop forecasts that are subsequently shared among the group, after which each participant is allowed to modify his forecast based upon the other group members' ideas. This is an iterative process that is repeated until consensus is reached. Both methods are expensive and time consuming but can be quite accurate if done correctly. Panel consensus allows for immediate feedback and group synergy. While Delphi lacks immediate feedback and synergy inherent in group discussion, it avoids the problem of a dominant group member.

The life cycle analogy method attempts to identify time frames and demand levels for the introduction, growth, maturity, and decline life cycle stages of a new product or service. This method can be effective for a new product but requires that a product's cycle map neatly onto the PLC framework.

The build-up forecast method sums the specific market forecasts of individuals familiar with those segments. This technique, while accurate, requires that market segments divide neatly and avoid channel confusion.

Diff: 2 Reference: Qualitative Forecasting Methods Keywords: qualitative forecast Delphi, life cycle analogy, build-up forecast, panel consensus AACSB: Application of Knowledge LO: 9.4: Describe four qualitative forecasting techniques — market surveys, panel consensus forecasting, the Delphi method, and life cycle analogy — and explain when they should be used.

Learning Objective 9-5 1) Over the long run, fluctuations in demand due to seasonality are greater than those due to randomness.

Answer: TRUE Diff: 2 Reference: Time Series Forecasting Models Keywords: time series, seasonality, randomness AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

2) A seasonal pattern in time series data is evident when the level of the variable of interest moves erratically up or down from one period to the next.

Answer: FALSE Diff: 2 Reference: Time Series Forecasting Models Keywords: seasonal, time series, randomness AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

3) The greater the randomness in the model, the greater the number of periods should be used in a moving average forecast.

Answer: TRUE Diff: 2 Reference: Time Series Forecasting Models Keywords: moving average, randomness AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

4) Exponential smoothing with an alpha of one will yield identical results to a last period forecast.

Answer: TRUE Diff: 2 Reference: Time Series Forecasting Models Keywords: time series, exponential smoothing, last period AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

5) When there is a significant upward or downward trend in the data, the two best forecasting models are adjusted exponential smoothing and linear regression.

Answer: TRUE Diff: 2 Reference: Time Series Forecasting Models Keywords: time series, exponential smoothing, linear regression, trend AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

6) The independent variable is the quantity the forecaster is interested in estimating with a linear regression model.

Answer: FALSE Diff: 2 Reference: Time Series Forecasting Models Keywords: linear regression, independent variable, dependent variable AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

7) A seasonal index less than 1.0 means that the model is overforecasted.

Answer: TRUE Diff: 2 Reference: Time Series Forecasting Models Keywords: seasonal adjustment index, overforecasted AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

8) The slope of the regression equation is positive if the r-squared value is greater than 0.0.

Answer: FALSE Diff: 3 Reference: Time Series Forecasting Models Keywords: r-squared, slope, correlation, regression AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

9) A long-term movement up or down in a time series is called: A) seasonality.

B) trend.

C) randomness.

D) cycle.

Answer: B Diff: 1 Reference: Time Series Forecasting Models Keywords: time series, trend AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

10) A firm's demand data from the last two quarter is displayed in the table. Use a three period moving average to forecast demand for July.

Month January February March April May June

Demand 154 148 214 180 225 246

A) 206 B) 217 C) 223 D) 226 Answer: B Diff: 2 Reference: Time Series Forecasting Models Keywords: time series, moving average AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

11) A firm's demand data from the last two quarter is displayed in the table. Use a three period weighted moving average with Wt = 0.7, Wt-1 = 0.2, and Wt-2 = 0.1 to forecast demand for July.

Month January February March April May June

Demand 154 148 214 180 225 246

A) 235.2 B) 195.6 C) 158.8 D) 180.4 Answer: A Diff: 2 Reference: Time Series Forecasting Models Keywords: time series, weighted moving average AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

12) Heidi favors using a two period moving average but Tim is "an exponential-smoothing man."

Tim's demand forecast for May was identical to Heidi's. What value of alpha would Tim need to use in order for his June forecast to be identical to Heidi's if each sticks with their preferred

technique?

Month January February March April May June

Demand 154 148 214 180 225 246

A) .085 B) .196 C) .237 D) .348 Answer: B Diff: 3 Reference: Time Series Forecasting Models Keywords: exponential smoothing, moving average AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

13) A drive-in restaurant has experienced the following customer loads on the past 8 Friday nights. If their forecast for period 7 was 59 customers, then what is their forecast for period number 8 using a smoothing constant of 0.7?

Friday 1 2 3 4 5 6 7 8

# Customers 49 55 57 59 56 61 62 63

A) 61.10 B) 62.43 C) 59.90 D) 60.83 Answer: A Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, exponential smoothing AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

14) A counseling service records the number of calls to their hotline for the last year. What is the forecast for July if the service uses a simple moving average of three periods?

Month January February March April May June July August September October November December

Demand 111 127 146 159 165 165 178 182 191 208 223 228

A) 169 B) 163 C) 157 D) 178 Answer: B Diff: 2 Reference: Time Series Forecasting Models Keywords: time series, exponential smoothing AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

15) A counseling service records the number of calls to their hotline for the last year. What is the forecast for August if the forecast for June was 164 and the service uses exponential smoothing with an alpha of 0.8?

Month January February March April May June July August September October November December

Demand 111 127 146 159 165 165 178 182 191 208 223 228

A) 164.80 B) 188.93 C) 180.67 D) 175.36 Answer: D Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, exponential smoothing AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

16) A counseling service records the number of calls to their hotline for the last year. What is the forecast for August if a regression equation is used to model this data?

Month January February March April May June July August September October November December

Demand 111 127 146 159 165 165 178 182 191 208 223 228

A) 188.3 B) 179.9 C) 180.6 D) 175.7 Answer: A Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, trend, regression AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

17) A counseling service records the number of calls to their hotline for the last year. What is the forecast for October if a weighted moving average with weights of 0.5, 0.3, and 0.2 is used to model this data?

Month January February March April May June July August September October November December

Demand 111 127 146 159 165 165 178 182 191 208 223 228

A) 177.4 B) 185.7 C) 197.7 D) 190.3 Answer: B Diff: 2 Reference: Time Series Forecasting Models Keywords: time series, weighted moving average AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

18) A counseling service records the number of calls to their hotline for the last year. What is the forecast for March if an adjusted exponential smoothing model is used with α=0.8 and β=0.7?

The unadjusted forecast for January is 123.5.

Month January February March April May June July August September October November December

Demand 111 127 146 159 165 165 178 182 191 208 223 228

A) 135.44 B) 138.53 C) 132.76 D) 144.34 Answer: C Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, adjusted exponential smoothing AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

19) A company keeps track of unit sales and notes a strong trend during the past eight periods.

They use an adjusted exponential smoothing model with an alpha equal to 0.7 and a beta equal to 0.6. Using the demand data and previous forecasts shown in the table, develop a forecast for period 4.

Week # Units 1 68 2 72 3 80 4 93 5 108 6 121 7 125 8 139

Unadjusted Forecast 65.0 67.1

Trend 0.0 1.3

Adjusted Forecast 65.0 68.4

A) 82.2 B) 84.9 C) 87.5 D) 91.6 Answer: A Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, adjusted exponential smoothing AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

20) Consider the data that generate this plot covering time months 1 to 50. What characteristic is most prominent in the pattern?

A) trend B) seasonality C) randomness D) none Answer: B Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, seasonal adjustment, seasonal index AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

21) ________ is unpredictable movement from one time period to the next.

Answer: Randomness Diff: 2 Reference: Time Series Forecasting Models Keywords: randomness, time series AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

22) Two smoothing models that yield identical forecasts are exponential smoothing with an alpha equal to ________ and a moving average with n equal to ________.

Answer: one; one Diff: 2 Reference: Time Series Forecasting Models Keywords: exponential smoothing, moving average, alpha AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

23) The greater the randomness in the data, the ________ the value of the alpha should be in an exponential smoothing forecast.

Answer: lower Diff: 2 Reference: Time Series Forecasting Models Keywords: exponential smoothing, randomness, alpha AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

24) Two time series techniques that are appropriate when the data display a strong upward or downward trend are ________ and ________.

Answer: adjusted exponential smoothing; linear regression Diff: 3 Reference: Time Series Forecasting Models Keywords: linear regression, adjusted exponential smoothing AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

25) Dividing actual demand by the model's forecast yields an index that can be used to adjust for ________ in the data.

Answer: seasonality Diff: 3 Reference: Time Series Forecasting Models Keywords: seasonality, seasonal index AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

26) Examine these two graphs and based on the demand pattern and axis scaling, recommend a forecasting technique (and the required parameters) that would work best for each one. Justify your recommendations.

Answer: Demand Pattern A shows a strong linear trend from 103 up to 207 but Demand Pattern B fluctuates around 169 and (with a standard deviation of 4) is purely random. Adjusted exponential smoothing or linear regression are the only suitable methods for Demand Pattern A. A linear equation of the form Y = 95.98 + 5.82X yields an R squared of 0.99. The randomness in Demand Pattern B is pure noise and therefore not predictable. Moving averages with a large n or exponential smoothing with a low alpha will smooth this randomness but don't truly add much in the way of predictive ability.

Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, trend, adjusted exponential smoothing, regression, moving average, exponential smoothing AACSB: Application of Knowledge LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

27) Develop forecasts for periods 7 through 10 for the demand data in the table using a three period moving average, a weighted moving average using 0.6, 0.3, and 0.1, and exponential smoothing with alpha = 0.7. Use a 6th period forecast of 135 as the starting point for the exponential smoothing technique.

Period Actual MA n = 3 WMA 1 64 2 84 3 91 4 97 5 115 6 135 7 137 8 144 9 153 10 171 Answer: Period Actual MA n = 3 WMA 1 64 2 84 3 91 4 97 5 115 6 135 7 137 115.7 125.2 8 144 129.0 134.2 9 153 138.7 141 10 171 144.7 148.7

Exp. Smoothing

Exp. Smoothing

135 136.4 141.7 149.6

Sample calculations for each follow:

Moving Average: F7 =

= = 115.7

Weighted Moving Average:

=

F7 = 0.6 × 135 + 0.3 × 115 + 0.1 × 97 = 125.2 Exponential Smoothing: Ft+1 = αDt + (1 - α)Ft F7 = 0.7 × 135 + 0.3 × 135 = 135

Diff: 3

Reference: Time Series Forecasting Models Keywords: time series, exponential smoothing, moving average, weighted moving average AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

28) Using the data shown in the table, develop a regression line that can be used to predict the demand for time period number 20. What is the prediction equation and what is your forecast for period 20?

Period Demand Period ∗ Demand 1 16 16 2 20 40 3 24 72 4 27 108 5 29 145 6 30 180 7 32 224 8 35 280 9 36 324 10 38 380 Sums 55 287 1769 Answer: =

= -

=

= 28.7 - 2.3

= 2.3

(5.5) = 16

The equation is y = 16 + 2.3 x The forecast for period #20 is y = 16 + 2.3 × 20 = 62.

Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, trend, regression AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

29) A counseling service records the number of calls to their hotline for the last year. Plot the data and determine which forecasting technique would be best among a moving average, weighted moving average, exponential smoothing, and trend line.

Month January February March April May June July August September October November December

Demand 111 127 146 159 165 165 178 182 191 208 223 228

Answer: The plot shows a strong upward trend, so the regression line approach would be the best choice to model the data. Any exponential smoothing or averaging technique would need to emphasize the most recent periods strongly or have a short memory to avoid huge errors. The trend projection equation is Demand = 109.742 + 9.822 ∗ Time.

Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, adjusted exponential smoothing, regression AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

30) The Pancake House did a brisk business on the weekend and the maître d' was always on the lookout for ways to improve the customer experience. He carefully tracked the number of customers that graced their establishment over the last four weekends. He was hopeful that he could forecast the number of customers that would come for the world's finest pancakes the next weekend.

Friday Saturday Sunday

Weekend 1 131 225 166

Weekend 2 216 311 249

Weekend 3 286 408 330

Weekend 4 355 490 415

Using the data in the table, first plot the data and comment on the appearance of the demand pattern. Then develop a forecast for weekend #5 that fits the data.

Answer: Data are highly seasonal as the graph and data table indicate.

The overall average for the data set is 298.5. Dividing each day's average by the overall average yields the seasonal relatives shown in the table.

Day Friday Saturday Sunday

Average 247 358.5 290

Seasonal 0.827 1.201 0.972

Dividing each entry in the table by the seasonal relative and using linear regression with the first Friday as 1 and the last Sunday as 12 yields the regression equation Customers = 122.8 + 27.03 ∗ Day # Reseasoning the forecasted values by the seasonal relatives gives the results in the table and the graph below.

Day #

Day

Customers

Regression

1 2 3 4 5 6 7 8 9 10 11 12

Friday Saturday Sunday Friday Saturday Sunday Friday Saturday Sunday Friday Saturday Sunday

131 225 166 216 311 249 286 408 330 355 490 415

149.83 176.86 203.89 230.92 257.95 284.98 312.01 339.04 366.07 393.10 420.13 447.16

Adjusted Regression 123.91 212.41 198.18 190.97 309.80 277.00 258.03 407.19 355.82 325.09 504.58 434.64

Diff: 3 Reference: Time Series Forecasting Models Keywords: season, seasonality index AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

31) Using the data in the table, first plot the data and comment on the appearance of the demand pattern. Then develop a forecast for periods 51-70 that fits the data.

Time 1 2 3 4 5 6 7 8 9 10 11 12 13

Output 12.5 14.8 15.3 15 11.5 11.6 12.8 51.9 11 -19.7 11.9 17.8 20.3

Time 14 15 16 17 18 19 20 21 22 23 24 25 26

Output 16.4 11.7 11.1 11.9 11.3 13.7 16.3 13.1 10.8 10.3 11 51.4 11.6

Time 27 28 29 30 31 32 33 34 35 36 37 38 39

Output -19.2 10.6 16.8 22.5 15.5 11.7 11.9 13 11.9 13.5 16.5 14 11

Time 40 41 42 43 44 45 46 47 48 49 50

Output 11.3 11.1 52.5 11.3 -19.3 12 15.5 20.5 16.5 12.5 10.5

Answer: Data are highly seasonal as the graph and data table indicate.

Peaks near 50 occur at points 8, 25 and 42, and this seasonality is reflected in the other significant features of the graph, e.g., lows near -20 at points 10, 27 and 44. The data are rearranged in this table into three 17 observation rows with a seasonal average and seasonal relative appended to the right. The overall average for the data is 13.828; the column labeled "Seasonal" is each average divided by the 13.828 figure.

Time 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Output 12.5 14.8 15.3 15 11.5 11.6 12.8 51.9 11 -19.7 11.9 17.8 20.3 16.4 11.7 11.1 11.9

Time 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

Output 11.3 13.7 16.3 13.1 10.8 10.3 11 51.4 11.6 -19.2 10.6 16.8 22.5 15.5 11.7 11.9 13

Time 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Overall

Output Average Seasonal 11.9 11.9 0.861 13.5 14.0 1.012 16.5 16.0 1.159 14 14.0 1.015 11 11.1 0.803 11.3 11.1 0.800 11.1 11.6 0.841 52.5 51.9 3.756 11.3 11.3 0.817 -19.3 -19.4 -1.403 12 11.5 0.832 15.5 16.7 1.208 20.5 21.1 1.526 16.5 16.1 1.167 12.5 12.0 0.865 10.5 11.2 0.808 13.828 12.45 0.934

Dividing each entry in the table by the seasonal relative and using linear regression with independent variables ranging from 1-50 yields the regression equation Output = 14.03752-0.00899 ∗ Time Reseasoning the forecasted values by the seasonal relatives gives the results in the table and the graph below.

Time Regression 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68

13.58 13.57 13.56 13.55 13.54 13.53 13.53 13.52 13.51 13.50 13.49 13.48 13.47 13.46 13.45 13.44 13.44 13.43

Adjusted by Seasonally Factor Adjusted .86 11.69 1.01 13.74 1.16 15.72 1.01 13.75 0.82 10.87 0.80 10.83 0.84 11.38 3.76 50.76 0.82 11.04 -1.4 -18.94 0.83 11.22 1.21 16.28 1.52 20.56 1.17 15.71 0.87 11.64 0.81 10.86 0.93 12.54 0.86 11.55

The graph below is a plot of the original data for points 1-50 and the forecast points 51-72

Diff: 3 Reference: Time Series Forecasting Models Keywords: regression, seasonality index AACSB: Analytical Thinking LO: 9.5: Apply a variety of time series forecasting models, including moving average, exponential smoothing, and linear regression models.

Learning Objective 9-6 1) Demand was low two years ago but increased sharply last year thanks to an aggressive marketing campaign. A time series model that puts the greatest emphasis on the most recent period is probably the best choice to predict next year's demand.

Answer: FALSE Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecasting model AACSB: Application of Knowledge LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

2) Multiple regression is used when the forecaster believes that more than one independent variable should be used to predict the variable of interest.

Answer: TRUE Diff: 1 Reference: Causal Forecasting Models Keywords: multiple regression, independent variable AACSB: Application of Knowledge LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

3) A well-educated lumberjack decides to use linear regression to predict the demand for firewood based on the ambient temperature. He has collected data on firewood sales and temperature for the last several days and has performed some preliminary calculations as shown in the table. What is his regression equation based on the data?

Temp

Ricks Temp Squared Temp ∗ # Ricks

Sums

33 19 34 34 20 24 17 30 38 23 272

17 32 20 18 33 30 34 25 16 29 254

1089 361 1156 1156 400 576 289 900 1444 529 7900

561 608 680 612 660 720 578 750 608 667 6444

A) Ricks = 50.6 - 0.93 × Temp B) Temp = 53.3 - 1.0 × Ricks C) Ricks = 0.93 - 50.6 × Temp D) Temp = 1.0 - 53.3 × Ricks Answer: A Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecast, regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

4) A poultry farmer that dabbles in statistics is interested in exploring the relationship between two types of feed, layer pellets and scratch, water, and the output of his laying hens. For ten days he records the number of ounces of layer pellets and scratch the hens consume and the number of fluid ounces of water and tracks the number of eggs that are produced. What is his regression equation based on the data?

Scratch Layer Pellets 48 29 44 27 41 22 42 21 48 23 44 28 42 22 41 28 42 22 47 29

Water 36 34 31 32 34 34 37 33 31 37

Eggs 24 22 20 20 22 23 21 22 20 24

A) Eggs = 6.56 + .38Scratch + .17Pellets + .21Water B) Eggs = 1.25 + .18Scratch + .29Pellets + .15Water C) Eggs = 0.93 - .88Scratch + .37Pellets + .41Water D) Eggs = 4.22 + .37Scratch + .67Pellets + .58Water Answer: B Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecast, multiple regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

5) A poultry farmer that dabbles in statistics is interested in exploring the relationship between layer pellets and the output of his laying hens. For ten days he records the number of ounces of layer pellets and the number of eggs that are produced. What is his regression equation based on the data?

Layer Pellets 29 27 22 21 23 28 22 28 22 29

Eggs 24 22 20 20 22 23 21 22 20 24

A) Eggs = 11.3 + 0.42Pellets B) Eggs = 1.25 + 0.29Pellets C) Eggs = 10.9 + 0.23Pellets D) Eggs = 4.22 + 0.67Pellets Answer: A Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecast, regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

6) A poultry farmer that dabbles in statistics is interested in exploring the relationship between two types of feed, layer pellets and scratch, water, and the output of his laying hens. For ten days he records the number of ounces of layer pellets and scratch the hens consume and the number of fluid ounces of water and tracks the number of eggs that are produced. After running a multiple regression model, he obtains the following report. What is the best interpretation of these statistics?

Regression Statistics Multiple R 0.993633 R Square 0.987307 Adjusted R Square 0.98096 Standard Error 0.213764 Observations 10 A) The probability that the number of eggs is correctly predicted by the amount of scratch, layer pellets, and water consumed is 99.36%.

B) The prediction of the amount of eggs is 98.7% accurate based on the amount of scratch, layer pellets, and water consumed.

C) 98.7% of the variability in egg production is explained by the amount of water, scratch, and layer pellets consumed.

D) The prediction of the amount of eggs is 99.36% accurate based on the amount of scratch, layer pellets, and water consumed.

Answer: C Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecast, r-squared, regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

7) A poultry farmer that dabbles in statistics is interested in exploring the relationship between two types of feed, layer pellets and scratch, water, and the output of his laying hens. For ten days he records the number of ounces of layer pellets and scratch the hens consume and the number of fluid ounces of water and tracks the number of eggs that are produced. After running a multiple regression model, he obtains the following report. What is the best interpretation of these statistics?

Intercept Scratch Layer Pellets Water

Coefficients Std Error 1.256 1.249 0.185 0.032 0.295 0.026 0.149 0.041

t Stat 1.006 5.714 11.539 3.587

P-value 0.353 0.001 0.000 0.012

A) For every egg produced, about 0.185 ounces of scratch must be consumed.

B) The standard error for the model intercept is as large as the coefficient, thus the intercept is the most important predictor of egg production.

C) Layer pellets are not good predictors of egg production because the p-value is 0.

D) For every ounce of water consumed, the chickens produce 0.15 eggs, holding all other independent variables constant.

Answer: D Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecast, regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

8) McMahon and Tate advertising company is interested in an appropriate mix of print, radio, and television ads for their new client. Darrin Stevens performs a multiple regression on the effects of dollars spent on each type of media on dollars of sales of product. Darrin uses data from the most recent advertising campaigns and develops the following equation: y = 254,215 + 6.79 × Print - 1.4 × Radio + 16.87 × Television The r-squared statistic is 0.77. Which of the following statements is best?

A) At a minimum, the client will sell $254,215 worth of product after the new advertising campaign.

B) At a maximum, the client will sell $254,215 worth of product after the new advertising campaign.

C) This equation will be of no use in predicting the amount of sales based on advertising in these media.

D) The client should spend more money on television advertising than on radio advertising.

Answer: D Diff: 2 Reference: Causal Forecasting Models Keywords: causal forecast, multiple regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

9) Which of these quantitative techniques is a causal model?

A) linear regression

B) last period C) exponential smoothing D) weighted moving average Answer: A Diff: 1 Reference: Causal Forecasting Models Keywords: causal model, regression AACSB: Application of Knowledge LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

10) Heidi runs a multiple regression for the output of cheese curds by using the daily temperature and the consumption of sweet clover. The intercept term is 23, the slope coefficient for the daily temperature is 1.5 and the slope coefficient for the consumption of sweet clover is 0. Which of these conclusions is most appropriate?

A) Heidi should collect more data.

B) The most important term in Heidi's model is the intercept.

C) As the daily temperature rises, the intercept term probably decreases.

D) Heidi should drop the sweet clover term from her model.

Answer: D Diff: 1 Reference: Causal Forecasting Models Keywords: multiple regression, independent variable AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

11) Models that predict demand based upon some independent factor(s) other than time are ________ forecasting models.

Answer: causal Diff: 1 Reference: Causal Forecasting Models Keywords: causal model AACSB: Application of Knowledge LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

12) Multiple regression was used to forecast success in college (GPA) based upon SAT score, high school GPA, and hours spent on-line. Use the regression output shown and comment on the overall fit of the model, the usefulness of each independent variable, and the value to an admissions department of using the model to make admission decisions. What is the model's forecast for an applicant having a high school GPA of 2.5 and an SAT score of 1000 that spends 20 hours a week on-line? What other variables do you feel would make good indicators of college GPA?

Answer: This model was created based on 10 observations so alas, the overall model is not statistically significant nor are any of the independent variables. The r-squared is 0.516, so the model explains over half of the variation in a student's college GPA. The independent variables with the lowest p-values are HS GPA (0.22) and SAT (0.18) so these may be of practical significance if not statistical significance. Perhaps more data could be collected; with power so low, it's tough to find significance.

For the applicant in question, the model predicts the following: = 0.541 + 0.423 × 2.5 + 0.001 × 1000 + 0.01 × 20 = 2.7985 Not exactly Dean's List material but higher than my undergraduate GPA… Answers may vary on other predictors but possibilities include the number of hours a week spent working and studying, socioeconomic background, parents' education, and many others.

Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecasting, multiple regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

13) A poultry farmer that dabbles in statistics is interested in exploring the relationship between two types of feed, layer pellets and scratch, water, and the output of his laying hens. For ten days he records the number of ounces of layer pellets and scratch the hens consume and the number of fluid ounces of water and tracks the number of eggs that are produced. What is his regression equation based on the data?

Scratch Layer Pellets 48 29 44 27 41 22 42 21 48 23 44 28 42 22 41 28 42 22 47 29

Water 36 34 31 32 34 34 37 33 31 37

Eggs 24 22 20 20 22 23 21 22 20 24

Answer: Excel output for this model is shown below; the equation is: Eggs = 1.256 + 0.185 Scratch + 0.295 Pellets + 0.149 Water

ANOVA df Regression Residual Total

3 6 9

Significance F 4.45217E21.325829 7.10861 155.5661 06 0.2741706 0.045695 21.6 SS

Coefficient s Std Error Intercept 1.256 1.249 Scratch 0.185 0.032 Layer Pellets 0.295 0.026 Water 0.149 0.041

MS

F

t Stat 1.006 5.714 11.539 3.587

P-value 0.353 0.001 0.000 0.012

Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecast, regression AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

14) A poultry farmer that dabbles in statistics is interested in exploring the relationship between two types of feed, layer pellets and scratch, water, and the output of his laying hens. For ten days he records the number of ounces of layer pellets and scratch the hens consume and the number of fluid ounces of water and tracks the number of eggs that are produced. What is his regression equation based on the data?

Scratch Layer Pellets

Water

Eggs

48 44 41 42 48 44 42 41 42 47

29 27 22 21 23 28 22 28 22 29

36 34 31 32 34 34 37 33 31 37

24 22 20 20 22 23 21 22 20 24

He develops one equation based on three predictors, the scratch, pellets, and water, and another equation based only on the layer pellet consumption. The output for the two models are shown side by side. Comment on the two models and which one should be used.

Multiple R R Square Adjusted R Square Standard Error Observations

Pellets, Scratch, Water 0.994 0.987 0.981 0.214 10

Pellets 0.904 0.817 0.794 0.703 10

Answer: Both models are good predictors of the egg output. Predictably, the model using three predictors has a higher R square(d) and therefore explains more of the variance in day to day egg production. There is something to be said for parsimony, however; if the poultry farmer can track just one input and still do a good job of predicting the day's egg output, then this model has some appeal.

Diff: 3 Reference: Causal Forecasting Models Keywords: causal forecast, regression, R squared AACSB: Analytical Thinking LO: 9.6: Develop causal forecasting models using linear regression and multiple regression.

Learning Objective 9-7 1) The forecast data matches the actual data perfectly if the mean absolute deviation is 0.0.

Answer: TRUE Diff: 2 Reference: Measures of Forecast Accuracy Keywords: MAD, mean absolute deviation AACSB: Analytical Thinking LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

2) A model with a positive mean forecast error suggests that, on average, the model underforecasts.

Answer: TRUE Diff: 2 Reference: Measures of Forecast Accuracy Keywords: MFE, mean forecast error, underforecast AACSB: Application of Knowledge LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

3) The tracking signal calculated for the first forecast is always either +1 or -1.

Answer: FALSE Diff: 3 Reference: Measures of Forecast Accuracy Keywords: forecast error, tracking signal AACSB: Application of Knowledge LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

4) Which of these forecasts is the BEST? A) the one with a MAD of zero B) the one with the tracking signal of +4 C) the one with the tracking signal of -4 D) the one where the tracking signal times the MAD equals zero Answer: A Diff: 2 Reference: Measures of Forecast Accuracy Keywords: mean absolute deviation, MAD, tracking signal AACSB: Application of Knowledge LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

5) Nora Damus reviews her forecasting triumphs and failures as part of her annual report to the Chief Operating Officer. She notes that her monthly forecast for batteries has a mean forecast error of 20, and a mean absolute deviation of 20. Which of the following statements about her forecast is BEST? A) Nora has miscalculated her mean forecast error.

B) Nora has miscalculated her mean absolute deviation.

C) Nora has a negative tracking signal.

D) Nora has a positive tracking signal.

Answer: D Diff: 2 Reference: Measures of Forecast Accuracy Keywords: mean absolute deviation, forecast error, MAD, tracking signal AACSB: Application of Knowledge LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

6) A counseling service records the number of calls to their hotline for the last year. Based on MAD, which of these models does the best job of forecasting?

Month January February March April May June July August September October November December

Demand 111 127 146 159 165 165 178 182 191 208 223 228

A) A simple moving average of three periods B) A simple moving average of five periods C) A weighted moving average of .7, .2, .1 D) A weighted moving average of .5, .2, .2, .1 Answer: C Diff: 3 Reference: Time Series Forecasting Models Keywords: time series, weighted moving average AACSB: Analytical Thinking LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

7) In order to indicate ________ in a forecast model, you should use the mean forecast error approach rather than the mean absolute deviation approach.

Answer: bias Diff: 1 Reference: Measures of Forecast Accuracy Keywords: causal model AACSB: Application of Knowledge LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

8) A tracking signal value between ________ and ________ would suggest that the forecasting technique in use is appropriate.

Answer: -4; +4 Diff: 1 Reference: Measures of Forecast Accuracy Keywords: tracking signal AACSB: Application of Knowledge LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

9) A forecaster is assessing two different models for demand. The output from each model and the actual demand data appear in the table. Use MAD and a tracking signal to compare the two models. Which model does a better job of forecasting?

Demand Model 1 Model 2 52 55.0 51.0 52 54.7 51.9 60 54.4 52.0 56 55.0 59.2 58 55.1 56.3 58 55.4 57.8 52 55.6 58.0 57 55.3 52.6 53 55.4 56.6 57 55.2 53.4 Answer: Based on calculations given in the table, it appears that Model 1 does a slightly better job of predicting Demand based on a lower MAD, 2.7 versus 3.2 for Model 2. Tracking signals for both models fall within the plus or minus 4 control limits suggested in the text.

Demand Model 1 Model 2 AD 1 AD 2 Tracking 1 Tracking 2 FE 1 52 55.0 51.0 3.0 1.0 -1.0 1.0 -3.0 52 54.7 51.9 2.7 0.1 -2.0 2.0 -2.7 60 54.4 52.0 5.6 8.0 0.0 3.0 5.6 56 55.0 59.2 1.0 3.2 0.3 1.9 1.0 58 55.1 56.3 2.9 1.7 1.2 2.7 2.9 58 55.4 57.8 2.6 0.2 2.2 3.3 2.6 52 55.6 58.0 3.6 6.0 0.9 0.6 -3.6 57 55.3 52.6 1.7 4.4 1.6 2.0 1.7 53 55.4 56.6 2.4 3.6 0.7 0.8 -2.4 57 55.2 53.4 1.8 3.6 1.4 2.0 1.8 MAD 2.7 3.2

FE 2 1.0 0.1 8.0 -3.2 1.7 0.2 -6.0 4.4 -3.6 3.6

Diff: 3 Reference: Measures of Forecast Accuracy Keywords: forecast accuracy, forecast error, MAD, mean absolute deviation, tracking signal AACSB: Analytical Thinking LO: 9.7: Calculate measures of forecasting accuracy and interpret the results.

Learning Objective 9-9 1) A collaborative planning, forecasting and replenishment system eliminates the need for forecasting.

Answer: FALSE Diff: 2 Reference: Collaborative Planning, Forecasting, and Replenishment (CPFR) Keywords: collaborative planning, forecasting, and replenishment; CPFR AACSB: Application of Knowledge LO: 9.9: Explain what collaborative planning, forecasting, and replenishment (CPFR) is and how it helps supply chain partners synchronize their plans and actions.

2) What distinguishes collaborative planning, forecasting, and replenishment (CPFR) systems from traditional planning approaches is the emphasis on forecasting.

Answer: FALSE Diff: 2 Reference: Collaborative Planning, Forecasting, and Replenishment (CPFR) Keywords: collaborative planning, forecasting, and replenishment; CPFR AACSB: Application of Knowledge LO: 9.9: Explain what collaborative planning, forecasting, and replenishment (CPFR) is and how it helps supply chain partners synchronize their plans and actions.

3) Which one of the following statements regarding collaborative planning, forecasting, and replenishment (CPFR) systems is best?

A) In CPFR, each business develops a sales and operations plan and the mainframe system reconciles these plans to find a middle ground that all businesses work towards.

B) CPFR is a set of business processes.

C) CPFR has the Project Management Body of Knowledge (PMBOK©) as its basis.

D) Studies have demonstrated that manual, paper-based CPFR systems are more responsive and more accurate than computer-based CPFR systems.

Answer: B Diff: 2 Reference: Collaborative Planning, Forecasting, and Replenishment (CPFR) Keywords: CPFR, collaborative planning AACSB: Application of Knowledge LO: 9.9: Explain what collaborative planning, forecasting, and replenishment (CPFR) is and how it helps supply chain partners synchronize their plans and actions.

4) Supply chain partners might use a(n) ________ to develop joint sales and operations plans and projections of output if they have agreed on a common set of objectives.

Answer: collaborative planning, forecasting, and replenishment (CPFR) approach Diff: 1 Reference: Collaborative Planning, Forecasting, and Replenishment (CPFR) Keywords: collaborative planning, forecasting, and replenishment; CPFR AACSB: Application of Knowledge LO: 9.9: Explain what collaborative planning, forecasting, and replenishment (CPFR) is and how it helps supply chain partners synchronize their plans and actions.

5) What is a collaborative planning, forecasting, and replenishment system and how might it benefit those who choose to use it?

Answer: CPFR is a set of business processes, backed up by information technology, in which

supply chain partners agree to mutual business objectives and measures, develop joint sales and operational plans, and collaborate to generate and update sales forecasts and replenishment plans. What distinguishes CPFR from traditional planning and forecasting approaches is the emphasis on collaboration. Experience shows that supply chains are better at meeting demand and managing resources when the partners synchronize their plans and actions. The increased communication among partners means that when demand, promotions, or policies change, managers can adjust jointly managed forecasts and plans immediately, minimizing or even eliminating costly after-the-fact corrections.

Diff: 3 Reference: Collaborative Planning, Forecasting, and Replenishment (CPFR) Keywords: collaborative planning, forecasting, and replenishment; CPFR AACSB: Application of Knowledge LO: 9.9: Explain what collaborative planning, forecasting, and replenishment (CPFR) is and how it helps supply chain partners synchronize their plans and actions.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 10 Sales and Operations Planning (Aggregate Planning) Learning Objective 10-1 1) Detailed planning and control is riskier than strategic planning.

Answer: FALSE Diff: 2 Reference: S&OP in the Planning Cycle Keywords: detailed planning and control, strategic planning AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

2) Sales and operations planning indicates how the organization will use its tactical capacity resources to meet expected customer demand.

Answer: TRUE Diff: 1 Reference: S&OP in the Planning Cycle Keywords: sales and operations planning, S&OP AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

3) Compared to other levels of planning, detailed planning and control offers the greatest ability to adjust capacity.

Answer: FALSE Diff: 1 Reference: S&OP in the Planning Cycle Keywords: detailed planning and control AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

4) Within the context of the planning cycle, the planning that takes place at the highest levels of the firm is called: A) strategic planning.

B) operational planning.

C) tactical planning.

D) detailed planning and control.

Answer: A Diff: 1 Reference: S&OP in the Planning Cycle Keywords: strategic planning, AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

5) Planning numbers are somewhat aggregated (month by month) in what planning level?

A) strategic planning B) operational planning C) tactical planning D) detailed planning and control Answer: C Diff: 2 Reference: S&OP in the Planning Cycle Keywords: tactical planning AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

6) There are few, if any, options for adjusting capacity levels for managers involved in what planning level?

A) strategic planning B) operational planning C) tactical planning D) detailed planning and control Answer: D Diff: 2 Reference: S&OP in the Planning Cycle Keywords: detailed planning and control AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

7) To develop a superior plan, sales and operations planning must consider: A) customer demand.

B) capabilities of suppliers.

C) capabilities of logistics service providers.

D) All of these must be considered when performing S&OP. Answer: D Diff: 1 Reference: S&OP in the Planning Cycle Keywords: S&OP, sales and operations planning, suppliers, logistics AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

8) What is the purpose of S&OP and what takes place at the strategic, tactical, and detailed planning and control levels?

Answer: Sales and operations planning is a business process that helps the firm plan and coordinate operations and supply chain decisions over a tactical time horizon. The objective of this is to agree on a single operating plan that allocates critical resources of people, capacity, materials, time and money to most effectively meet the marketplace in a profitable way.

Strategic decisions are made on a long-term basis, much longer than S&OP can be done practically, however the process choice and market decisions made at this level will shape the firm's ability to generate and to meet demand. The tactical level, usually four months to a year out, is where workforce, inventory, subcontracting and logistics decisions are made. Planning numbers are aggregated month by month for the purpose of generating a sales and operations plan. Finally, the time period for the detailed planning and control level may be as short as hours or as long as weeks ahead. The planning done at this level may be as simplistic as which job to run next with the capacity that was provided by the tactical level planning.

Diff: 2 Reference: S&OP in the Planning Cycle Keywords: S&OP, strategic planning, tactical planning, detailed planning and control AACSB: Application of Knowledge LO: 10.1: Distinguish among strategic planning, tactical planning, and detailed planning and control and describe why sales and operations planning (S&OP) is important to an organization and its supply chain partners.

Learning Objective 10-2 1) Bottom-up planning should be used when the product/service mix is unstable and resource requirements vary greatly across the offerings.

Answer: FALSE Diff: 1 Reference: Major Approaches to S&OP Keywords: bottom-up planning AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

2) The alternative production strategies of level, chase, or mixed that are available in top-down planning cannot be used in bottom-up planning.

Answer: FALSE

Diff: 1 Reference: Major Approaches to S&OP Keywords: bottom-up planning, top-down planning, level, chase, mixed AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

3) Last month a firm made 100 model A's using all of their available labor. If they have already taken orders for 150 model A's for next month, then their planning value must be 1.5.

Answer: FALSE Diff: 2 Reference: Major Approaches to S&OP Keywords: planning values AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

4) Planning values are used in bottom-up planning, but cannot be used in top-down planning.

Answer: FALSE Diff: 2 Reference: Major Approaches to S&OP Keywords: planning values, bottom-up planning, top-down planning AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

5) When the products and services have very different resource requirements and the mix is unstable from one period to the next, bottom-up planning works best.

Answer: TRUE Diff: 2 Reference: Major Approaches to S&OP Keywords: bottom-up planning AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

6) At the beginning of the semester, you decide to devote 12 hours a week outside of class time to your operations management studies, regardless of scheduled tests, assignments, or project due dates. This is a level plan approach to your favorite course.

Answer: TRUE Diff: 1 Reference: Major Approaches to S&OP Keywords: level production plan AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

7) Net cash flow is the difference between the value added and the cash on hand at the end of the period.

Answer: FALSE Diff: 1 Reference: Major Approaches to S&OP Keywords: net cash flow AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

8) Willow Trees Inc. makes seven different products, four of which are within their first year of existence. The demands for all products, especially the newest ones, are not well known. The newest products are intended to complement their existing products and take different materials, different processes, and an entirely different set of labor skills for production. Which of these statements regarding their likely sales and operations planning activities is BEST? A) The planning values for the oldest items in the product line should be used for the new items in the product line.

B) Willow Trees Inc. should avoid using sales and operations planning until their product line matures.

C) Willow Trees Inc. should use top-down planning.

D) Willow Trees Inc. should use bottom-up planning.

Answer: D Diff: 1 Reference: Major Approaches to S&OP Keywords: bottom-up planning AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

9) Seventy percent of a house painter's business is exterior work and the other thirty percent is interior. The average exterior paint job takes 20 hours of labor and $400 of paint and primer, but the average interior job takes only 6 hours of labor and $75 of paint and primer. If he gets 20 service calls for the coming month, which of the following resource requirements is correct?

A) The painter has supply costs of $4750 for next month.

B) The painter has a labor demand of 260 hours for next month.

C) The painter has supply costs of $6050 for next month.

D) The painter has a labor demand of 204 hours for next month.

Answer: C Diff: 2 Reference: Major Approaches to S&OP Keywords: planning values AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

10) Forty percent of a house painter's business is exterior work and the other sixty percent is interior. The average exterior paint job takes 30 hours of labor and $500 of paint and primer, but the average interior job takes only 6 hours of labor and $80 of paint and primer. If he gets 25 service calls for the coming month and 30 calls for the month after that, which of the following resource requirements is correct?

A) The painter has supply costs of greater than $13,500 but less than $13,600 for the next two months.

B) The painter has a labor demand of greater than 800 hours but less than 850 hours for the next two months.

C) The painter has supply costs of greater than $13,400 but less than $13,500 for the next two months.

D) The painter has a labor demand of greater than 850 hours but less than 900 hours for the next two months.

Answer: D Diff: 3 Reference: Major Approaches to S&OP Keywords: planning values AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

11) This graph of expected sales level and expected output shows:

A) a chase production plan is being used.

B) a level production plan is being used.

C) a mixed production plan is being used.

D) planning levels have been computed.

Answer: B Diff: 2 Reference: Major Approaches to S&OP Keywords: level production plan AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

12) The standard equation used by Gigi Enterprises for production planning is Production = Demand. The sales and operations planner is probably using: A) a mixed production approach.

B) a level production approach.

C) a chase production approach.

D) a bottom-up planning approach.

Answer: C Diff: 1 Reference: Major Approaches to S&OP Keywords: chase production plan AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

13) A company has a sales forecast for the following five months as shown in the table. If they have a beginning inventory of 100 units, what amount should be produced under a level plan in order for them to have an ending inventory of zero units at the end of the five-month period?

Month January February March April May

Forecast 350 400 300 500 350

A) 320 units per month B) 360 units per month C) 400 units per month D) 440 units per month Answer: B Diff: 2 Reference: Major Approaches to S&OP Keywords: level production plan AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

14) A company has a sales forecast for the following five months as shown in the table. If they have a beginning inventory of 350 units, what amount should be produced under a level plan in order for them to have an ending inventory of zero units at the end of the five month period?

Month January February March April May

Forecast 525 600 650 750 875

A) 580 units per month B) 595 units per month C) 610 units per month D) 640 units per month Answer: C Diff: 3 Reference: Major Approaches to S&OP Keywords: level production plan AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

15) A company has a sales forecast for the following five months as shown in the table. If they have a beginning inventory of 225 units, what amount should be produced under a level plan in order for them to have an ending inventory of zero units at the end of the five month period?

Month January February March April May

Forecast 825 600 650 550 475

A) 580 units per month B) 595 units per month C) 585 units per month D) 575 units per month Answer: D Diff: 3 Reference: Major Approaches to S&OP Keywords: level production plan AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

16) A company has a sales forecast for the following five months as shown in the table. If they have a beginning inventory of 1225 units, what amount should be produced under a level plan in order for them to have an ending inventory of zero units at the end of the five month period?

Month January February March April May

Forecast 1575 1420 1680 1750 1975

A) 1,435 units per month B) 1,595 units per month C) 1,385 units per month D) 1,515 units per month Answer: A Diff: 3 Reference: Major Approaches to S&OP Keywords: level production plan AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

17) What is the ending inventory level for April in the production plan shown in the table? All entries in the table are in terms of sales units.

Month January February March April

Regular Overtime Ending Forecast Production Production Inventory 250 250 0 0 200 300 0 300 325 25 500 400 25

A) 150 units B) 125 units C) 100 units D) 75 units Answer: D Diff: 2 Reference: Major Approaches to S&OP Keywords: S&OP, ending inventory AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

18) It costs $10 to make a single unit using regular production and $15 to make a single unit using overtime production. Total overtime production is limited to 1000 units for the five month period. The manufacturing plant has a regular production capacity of 250 units per month and 225 units in inventory at the start of the planning period. There is a $5 per unit charge for holding inventory at the end of each month and a limit of 600 units ending inventory for any period.

What is the minimum cost production plan if the forecast must be met?

Month January February March April May

Forecast 250 200 300 400 500

A) $15,850 B) $16,150 C) $16,500 D) $16,800 Answer: C Diff: 3 Reference: Major Approaches to S&OP Keywords: net cash flow AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

19) It costs $12 to make a single unit using regular production and $15 to make a single unit using overtime production. Total overtime production is limited to 500 units for the five month

period. The manufacturing plant has a regular production capacity of 250 units per month and 50 units in inventory at the start of the planning period. There is a $5 per unit charge for holding inventory at the end of each month and a limit of 250 units ending inventory for any period.

What is the lowest cost production plan if the forecast must be met?

Month January February March April May

Forecast 250 200 300 400 500

A) $20,850 B) $19,750 C) $19,500 D) $20,550 Answer: D Diff: 3 Reference: Major Approaches to S&OP Keywords: net cash flow AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

20) It costs $12 to make a single unit using regular production and $15 to make a single unit using overtime production. Total overtime production is limited to 500 units for the five month period. The manufacturing plant has a regular production capacity of 250 units per month and 50 units in inventory at the start of the planning period. There is a $5 per unit charge for holding inventory at the end of each month and a limit of 250 units ending inventory for any period.

What is the total number of units to be produced using overtime throughout the entire planning period if the forecast must be met and costs are to be minimized?

Month January February March April May

Forecast 250 200 300 400 500

A) 450 B) 500 C) 400 D) 350 Answer: A Diff: 3 Reference: Major Approaches to S&OP Keywords: production plan, S&OP AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

21) It costs $10 to make a single unit using regular production and $15 to make a single unit using overtime production. Finished units sell for $17 and are built to order. The manufacturing plant has a regular production capacity of 250 units per month and no inventory at the start of the planning period. What is the BEST net cash flow for the entire planning period if the manufacturer uses a chase plan?

Month January February March April

Forecast 250 200 300 400

A) $6,800 B) $7,050 C) $7,300 D) $7,550 Answer: B Diff: 3 Reference: Major Approaches to S&OP Keywords: net cash flow AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

22) Regular production costs $25 per unit and selling a unit represents a cash inflow of $30 per unit. Assume that all units reflected on the forecast will be sold. What is the cumulative net cash flow at the end of April?

Month January February March April

Forecast Regular Production 250 250 200 200 300 300 400 400

A) $10,000 B) $12,000 C) $5,750 D) $2,000 Answer: C Diff: 3 Reference: Major Approaches to S&OP Keywords: cash flow analysis, net cash flow AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

23) Regular production costs $15 per unit and selling a unit represents a cash inflow of $25 per unit. Assume that all units reflected on the forecast will be sold. What is the net cash flow for March?

Month January February March April

Forecast Regular Production 250 250 200 200 300 300 400 400

A) $11,500 B) $7,500 C) $4,500 D) $3,000 Answer: D Diff: 2 Reference: Major Approaches to S&OP Keywords: cash flow analysis, net cash flow AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

24) Regular production costs $13 per unit and selling a unit represents a cash inflow of $28 per unit. Assume that all units reflected on the forecast will be sold. What is the cumulative net cash flow through March?

Month January February March April

Forecast Regular Production 250 250 200 200 300 300 400 400

A) $11,250 B) $4,500 C) $8,400 D) $3,900 Answer: A Diff: 2 Reference: Major Approaches to S&OP Keywords: cash flow analysis, net cash flow AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

25) A(n) ________ production plan matches production in each time period with the sales forecast.

Answer: chase Diff: 1 Reference: Major Approaches to S&OP Keywords: chase production plan AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

26) A sales and operations plan that varies both production and inventory levels is called a(n) ________ production plan.

Answer: mixed Diff: 1 Reference: Major Approaches to S&OP Keywords: mixed production plan AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

27) In order for ________ planning to work, the mix of products or services must be essentially the same from one time period to the next or the products must have very similar resource requirements.

Answer: top-down Diff: 1 Reference: Major Approaches to S&OP Keywords: top-down planning AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

28) A production planner can confirm future capacity requirements based on released or planned orders by referring to a(n) ________.

Answer: load profile Diff: 2 Reference: Major Approaches to S&OP Keywords: load profile AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

29) Tim subtracted his cash outflows for 2015 from his cash inflows for the same period to arrive at his ________.

Answer: net cash flow Diff: 1 Reference: Major Approaches to S&OP Keywords: net cash flow AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

30) Describe how both top-down and bottom-up planning work and the situations where one approach is superior to the other.

Answer: Top-down planning is an approach to S&OP where a single, aggregated sales forecast drives the planning process. This aggregate sales forecast is translated into resource requirements, effectively moving from sales figures to labor and machine hours and amounts of raw materials, purchased parts or subassemblies. Finally, alternative production plans are generated and compared to see which is best. For top-down planning to work, the mix of products or services must be essentially the same from one time period to the next, or the products or services to be provided must have very similar resource requirements.

Bottom-up planning is an approach to S&OP that is used when the product or service mix is unstable and resource requirements vary greatly across the offerings. Under these conditions, managers will estimate the requirements for each set of products or services separately, translating sales figures into resource requirements just as is done in top-down planning, and then add them up to get an overall picture of the resource requirements.

Diff: 2 Reference: Major Approaches to S&OP Keywords: S&OP, top-down plan, bottom-up plan, sales and operations planning AACSB: Application of Knowledge LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

31) Describe the differences between level, chase, and mixed production plans. Use the forecast in the table to show the differences by creating a plan of each type. There is no beginning inventory and regular production capacity is 350 units. Overtime costs $10 extra and is limited to 50 units per month. Subcontracting is limited to 100 units per month and costs $15 per unit. Back orders cost $40 per unit and there is a cost of $5 per month to hold a unit in inventory. There is room for only 100 units in inventory.

Month January February March April

Forecast 250 300 500 350

Answer: Production is held constant in a level production plan while inventory is used to absorb differences between production and the sales forecast. In a chase production plan, production is changed each time period to match the sales forecast. A mixed production plan varies both production and inventory levels in an effort to develop the most cost effective plan.

Production plans will vary.

Total forecasted demand for the planning period is 250 + 300 + 500 + 350 = 1400 This neatly divides by 4 as 350 units per month, exactly equal to capacity. Unfortunately this exceeds the limit on ending inventory.

Level Plan Month January February March April

Ending Forecast Regular Overtime Subcontracting Inventory 250 325 75 300 325 100 500 325 -75 350 325 -100

The chase plan has a regular capacity opportunity in March, but this can be covered by overtime and subcontracting that are both at their limit.

Chase Plan Month January February March April

Ending Forecast Regular Overtime Subcontracting Inventory 250 250 0 300 300 0 500 350 50 100 0 350 350 0

The mixed plan has almost infinite possiblities.

Mixed Plan Month January February March April

Ending Forecast Regular Overtime Subcontracting Inventory 250 300 50 300 300 50 500 350 50 50 0 350 350 0

Diff: 3 Reference: Major Approaches to S&OP Keywords: level production plan, chase production plan, mixed production plan AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

32) It costs $12 to make a single unit using regular production and $15 to make a single unit using overtime production. Total overtime production is limited to 500 units for the five month period. The manufacturing plant has a regular production capacity of 250 units per month and 50 units in inventory at the start of the planning period. There is a $5 per unit charge for holding inventory at the end of each month and a limit of 250 units ending inventory for any period.

Develop a minimum cost production plan if the forecast must be met and costs must be minimized.

Month January February March April May

Forecast 250 200 300 400 500

Answer: The minimum cost production plan is shown below:

Month January February March April May

Forecast 250 200 300 400 500

Regular Output 200 200 250 250 250

Overtime Ending Output Inventory 0 0 0 0 50 0 150 0 250 0

Cost $2,400 $2,400 $3,750 $5,250 $6,750

Total cost is $20,550 Diff: 3 Reference: Major Approaches to S&OP Keywords: production plan, S&OP AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

33) Create a level plan with a zero ending inventory for the forecast shown in the table. There is no beginning inventory and regular production capacity is 300 units. Overtime costs $15 extra and is limited to 25 units per month and subcontracting is limited to 60 units per month and costs $10 per unit. Back orders cost $50 per unit and there is a cost of $5 per month to hold a unit in inventory. What is the total plan cost?

Month January February March April

Forecast Regular Overtime Subcontracting 250 300 400 350

Ending Inventory

Answer: The total demand forecast for the planning period is 1300 units, so 325 units should be produced every month. This is 25 units over capacity so they should be made as cheaply as possible, in this case subcontracting. Total plan cost for this four month period is 100($10) + 200($5) = $2000.

Month January February March April

Forecast Regular Overtime Subcontracting 250 300 25 300 300 25 400 300 25 350 300 25

Ending Inventory 75 100 25 0

Diff: 2 Reference: Major Approaches to S&OP Keywords: level production plan AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

34) Create a minimum cost chase plan for the forecast shown in the table. There is no beginning inventory and regular production capacity is 350 units. Overtime costs $20 extra and is limited to 50 units per month and subcontracting is limited to 100 units per month and costs $15 per unit.

Back orders cost $40 per unit and there is a cost of $5 per month to hold a unit in inventory.

There is room for only 100 units in inventory. What is the total plan cost?

Month January February March April

Forecast Regular Overtime Subcontracting 250 400 500 350

Ending Inventory

Answer: Total cost for this chase plan is 50($20) + 150($15) = $3250

Month January February March April

Forecast Regular Overtime Subcontracting 250 250 400 350 50 500 350 50 100 350 350

Ending Inventory 0 0 0 0

Diff: 2 Reference: Major Approaches to S&OP Keywords: chase production plan AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

35) Regular production costs $25 per unit and selling a unit represents a cash inflow of $30 per unit. Assume that all units reflected on the forecast will be sold. What is the cumulative net cash flow at the end of April?

Month January February March April

Forecast 250 200 300 400

Regular Production 250 200 300 400

Answer: The cumulative net cash flow at the end of April is $5750. The table shows the monthby-month accumulation.

Month January February March April

Regular Forecast Production 250 250 200 200 300 300 400 400

Cash Inflows 7500 6000 9000 12,000

Cash Outflows Cumulative 6250 1250 5000 2250 7500 3750 10,000 5750

Diff: 2 Reference: Major Approaches to S&OP Keywords: cash flow analysis, net cash flow AACSB: Analytical Thinking LO: 10.2: Describe the differences between top-down and bottom-up S&OP and discuss the strengths and weaknesses of level, chase, and mixed production strategies.

Learning Objective 10-3 1) Sales and operations planning is a necessary task for all companies, but is never a source of competitive advantage.

Answer: FALSE Diff: 1 Reference: Organizing for and Implementing S&OP Keywords: competitive advantage, sales and operations planning, S&OP AACSB: Application of Knowledge LO: 10.3: Discuss the organizational issues that arise when firms decide to incorporate S&OP into their efforts.

2) Last month, the sales and operations plan showed projections from January through April.

This month, the sales and operations plan shows projections from February through May. This is an example of a rolling planning horizon.

Answer: TRUE Diff: 1 Reference: Organizing for and Implementing S&OP Keywords: rolling planning horizon AACSB: Application of Knowledge LO: 10.3: Discuss the organizational issues that arise when firms decide to incorporate S&OP into their efforts.

3) An organization has developed three alternate sales and operations plans for the coming six months and now must choose between them. They should consider: A) how their plan will impact supply chain partners.

B) what the cash flows are like.

C) how flexible the plan is.

D) All of these are useful criteria for a sales and operation plan.

Answer: D Diff: 1 Reference: Organizing for and Implementing S&OP Keywords: sales and operations plan, S&OP AACSB: Application of Knowledge LO: 10.3: Discuss the organizational issues that arise when firms decide to incorporate S&OP into their efforts.

4) Sales and operations plans must be updated as time progresses, so most firms establish a(n) ________.

Answer: rolling planning horizon Diff: 2 Reference: Organizing for and Implementing S&OP Keywords: rolling planning horizon AACSB: Application of Knowledge LO: 10.3: Discuss the organizational issues that arise when firms decide to incorporate S&OP into their efforts.

5) There are three phases to sales and operations planning implementation. The first phase, during which employees are trained, information systems implemented, and ideal products are identified for initial efforts is called ________.

Answer: developing the foundation Diff: 2 Reference: Organizing for and Implementing S&OP Keywords: S&OP implementation AACSB: Application of Knowledge LO: 10.3: Discuss the organizational issues that arise when firms decide to incorporate S&OP into their efforts.

6) An organization with twenty people developing sales and operations plans might receive twenty different proposals. What are some factors an organization might consider when deciding among these alternative plans? Provide a ranking for your factors and support your ranking with examples from recent business news media.

Answer: The text mentions the following five factors that might be considered when weighing options. Factor ranking and examples are subject to the whims of the students and latest headlines.

1. What impact will the plan have on supply chain partners such as key suppliers and transportation providers? This could be particularly important if production levels vary considerably from one period to the next.

2. What are cash flows like? Some plans may be profitable at the end of the planning cycle but still include periods in which cash expenses exceed revenues.

3. Do the supply chain partners and the firm itself have the space needed to hold any planned inventories?

4. Does the plan contain significant changes in the workforce? If so, what would be the impact on workforce satisfaction and productivity? Could the HR department handle the additional workload?

5. How flexible is the plan? That is, how easy or difficult would it be to modify the plan as conditions warrant?

Diff: 2 Reference: Organizing for and Implementing S&OP Keywords: sales and operations planning, S&OP AACSB: Application of Knowledge LO: 10.3: Discuss the organizational issues that arise when firms decide to incorporate S&OP into their efforts.

7) Your book describes three phases in the implementation of sales and operations planning in an organization. What are the three phases and what takes place in each?

Answer: The three phases are 1) developing the foundation; 2) integrating and streamlining the process; and 3) gaining competitive advantage. Within each phase the following actions take place: Developing the Foundation: In the first phase of implementing S&OP, companies build the managerial support and infrastructure needed to make S&OP a success. Key steps include educating all participants about the benefits of S&OP, identifying the appropriate product or service families to plan around, and establishing the information systems needed to provide accurate planning values.

Integrating and Streamlining the Process: In the second phase of implementation, S&OP becomes part of the organization's normal planning activities. Managers become accustomed to updating the plan on a regular basis, and more importantly, they use the planning results to guide key demand and resource decisions. The sales and operations plan becomes a focal point for cross-functional coordination. Managers also look for ways to improve the S&OP process further.

Gaining a Competitive Advantage: In the final phase of implementing S&OP, a few companies reach the point where their S&OP process actually becomes a source of competitive advantage — a core competency, if you will. Companies know they have reached this last phase when there is a well-integrated demand planning process, including the use of forecasting models; continuous improvement is planned and monitored as an integral part of the S&OP process; capital equipment planning can be triggered at any time; what-if analyses are a way of life; and the S&OP database is networked to provide ready access to S&OP data.

Diff: 1 Reference: Organizing for and Implementing S&OP Keywords: sales and operations plan, S&OP AACSB: Application of Knowledge LO: 10.3: Discuss the organizational issues that arise when firms decide to incorporate S&OP into their efforts.

Learning Objective 10-4 1) A routine flight from LaGuardia Airport to Will Rogers Airport may have passengers that have paid radically different ticket prices. These prices fluctuate based on an approach called yield management.

Answer: TRUE Diff: 2 Reference: Services Considerations Keywords: yield management AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

2) A home improvement store adds several workers to the garden center in the summer in order to meet the demands of do-it-yourselfers for their dazzling array of plants. Once gardening season is over, both the workers' jobs (and the plants they sold) will perish. The home improvement store is following an offloading strategy.

Answer: FALSE Diff: 2 Reference: Services Considerations Keywords: offloading, tiered workforce AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

3) The Super Bowl is right around the corner and Gowgem Hotels is aquiver with anticipation.

They'd like to price their rooms at their three city locations, next to the stadium, near the airport, and in the suburbs, as high as possible but still achieve 100% occupancy. The approach they should take to this opportunity is: A) yield management.

B) a tiered workforce.

C) a load profile.

D) a chase plan.

Answer: A Diff: 1 Reference: Services Considerations Keywords: yield management AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

4) As potato harvest season approaches, the number of year-round llama wranglers is insufficient to meet the demand, so a few wranglers are hired just for the month it takes to haul the harvest down from the mountains to the anxious potato-festival crowd. This approach to meeting the labor requirements is called: A) a tiered workforce.

B) offloading.

C) labor management.

D) yield management.

Answer: A Diff: 1 Reference: Services Considerations Keywords: tiered workforce AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

5) A major retailer has recently deployed self-checkout stands at the front of the store. As long as you don't have items like paint, cold medicine, beer, fruits, or vegetables in your shopping cart, you can check out quickly in one of these lines. This retailer is providing a prime example of: A) a tiered workforce.

B) the strategy of offloading.

C) the strategy of yield management.

D) a constraint.

Answer: B Diff: 1 Reference: Services Considerations Keywords: offloading AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

6) A hotel using yield management would ________ prices if demand is higher than expected only if the expected result is ________.

Answer: raise; higher profit Diff: 2 Reference: Services Considerations Keywords: yield management AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

7) An organization that meets seasonal swings in demand by hiring and then laying off temporary workers while maintaining a few full-time permanent workers is employing a(n) ________ strategy.

Answer: tiered workforce Diff: 2 Reference: Services Considerations Keywords: tiered workforce AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

8) What are the possibilities for matching capacity to sales and vice versa when doing S&OP in a service environment?

Answer: Inventory cannot be used as a buffer in a pure service environment, so a service sales and operations plan must make sales match capacity or make capacity match sales. Pricing and promotion can be used to bring sales in line with capacity and one technique to do so is yield management, in which prices are regularly adjusted to maximize total profit. In order to make capacity match sales, a service provider can use overtime, a tiered workforce, or offloading. A tiered workforce is one where seasonal workers are hired during peak demand periods and let go during bust periods of sales. A service provider that offloads work has the customers perform part of the work themselves.

Diff: 2 Reference: Services Considerations Keywords: S&OP, yield management, offloading, tiered workforce AACSB: Application of Knowledge LO: 10.4: Describe the managerial considerations surrounding the use of S&OP in a service environment.

Learning Objective 10-5 1) Each entity in a supply chain should produce its own sales and operations plan independent of the other members in order to improve the overall cost performance in a supply chain.

Answer: FALSE Diff: 1 Reference: Linking S&OP throughout the Supply Chain Keywords: supply chain, S&OP, sales and operations planning AACSB: Application of Knowledge LO: 10.5: Examine how S&OP can be used to coordinate activities up and down the supply chain.

2) Sales and operations planning across a supply chain is similar in nature to collaborative planning, forecasting, and replenishment.

Answer: TRUE Diff: 1 Reference: Linking S&OP throughout the Supply Chain Keywords: S&OP, supply chain, CPFR AACSB: Application of Knowledge LO: 10.5: Examine how S&OP can be used to coordinate activities up and down the supply chain.

3) Which of these is NOT an advantage of linking sales and operations planning throughout the supply chain?

A) Increased sales revenue B) Greater coordination C) Improved productivity D) Fewer disruptions in the flow of goods and services Answer: A Diff: 2 Reference: Linking S&OP throughout the Supply Chain Keywords: S&OP, supply chain AACSB: Application of Knowledge LO: 10.5: Examine how S&OP can be used to coordinate activities up and down the supply chain.

4) How can and why should a firm link S&OP throughout the supply chain?

Answer: Firms can link S&OP with their supply chain partners by sharing information both upstream and downstream in the chain. Sales forecasts and capacity levels can be communicated with supply chain partners just as orders are communicated. A firm should link S&OP plans throughout the supply chain to help partners do a better job of coordinating overall supply chain performance, particularly in the area of cost. Second, linking plans can help eliminate uncertainty, thereby improving synchronization between supply chain partners.

Diff: 2 Reference: Linking S&OP throughout the Supply Chain Keywords: S&OP, supply chain AACSB: Application of Knowledge LO: 10.5: Examine how S&OP can be used to coordinate activities up and down the supply chain.

Learning Objective 10-6 1) The objective function of an optimization modeling approach to S&OP should not allow available labor or equipment time to be exceeded.

Answer: FALSE Diff: 2 Reference: Applying Optimization Modeling to S&OP Keywords: optimization, objective function, constraint AACSB: Application of Knowledge LO: 10.6: Apply optimization modeling techniques to the S&OP process.

2) A company that makes the rocket widget has one machine capable of producing this unique item. The machine requires an attendant, who works 40 hours a week for $12 per hour and has made himself available for a maximum of 8 hours of overtime. It costs $20 per hour to run the machine and it is capable of producing 10,000 rocket widgets per hour. The widgets sell for $10 per hundred and cost $1 per hundred in materials. If the production manager wishes to develop a sales and operations plans using an optimization model, which of the following statements is valid?

A) The objective function should limit overtime to less than 8 hours per week.

B) The objective function should maximize the amount of rocket widgets produced.

C) The objective function should be to minimize costs.

D) None of these statements will help plan production using optimization modeling.

Answer: C Diff: 3 Reference: Applying Optimization Modeling to S&OP Keywords: optimization, objective function, constraints AACSB: Analytical Thinking LO: 10.6: Apply optimization modeling techniques to the S&OP process.

3) A company that makes the rocket widget has one machine capable of producing this unique item. The machine requires an attendant, who works 40 hours a week for $12 per hour and has made himself available for a maximum of 8 hours of overtime. It costs $20 per hour to run the machine and it is capable of producing 10,000 rocket widgets per hour. The widgets sell for $10 per hundred and cost $1 per hundred in materials. If the production manager wishes to develop a sales and operations plans using an optimization model, which of the following statements is valid?

A) A constraint should limit overtime to less than 8 hours per week.

B) The objective function should maximize the amount of rocket widgets produced.

C) The objective function must be to minimize the overtime.

D) A constraint should limit the cost to run the machine to less than or equal to $20 per hour.

Answer: A Diff: 2 Reference: Applying Optimization Modeling to S&OP Keywords: optimization, objective function and constraint AACSB: Analytical Thinking LO: 10.6: Apply optimization modeling techniques to the S&OP process.

4) A company that makes the rocket widget has one machine capable of producing this unique item. The machine requires an attendant, who works 40 hours a week for $12 per hour and has made himself available for a maximum of 8 hours of overtime. It costs $20 per hour to run the machine and it is capable of producing 10,000 rocket widgets per hour. It is possible to outsource some production, as long as the total output is limited to less than ten percent of total output. The widgets sell for $10 per hundred and cost $1 per hundred in materials. If the production manager wishes to develop a sales and operations plans using an optimization model, which of the following statements is valid?

A) A constraint should limit the cost of materials to less than or equal to $1.

B) A constraint should be to limit outsourced output to less than 10% of total output.

C) The objective function must be to produce at least 10,000 rocket widgets per hour.

D) A constraint should limit the cost to run the machine to less than or equal to $20 per hour.

Answer: B Diff: 2 Reference: Applying Optimization Modeling to S&OP Keywords: optimization, objective function and constraint AACSB: Analytical Thinking LO: 10.6: Apply optimization modeling techniques to the S&OP process.

5) A(n) ________ limits our ability to increase profits or cut costs by reducing the set of possible solutions in an optimization model.

Answer: constraint Diff: 1 Reference: Applying Optimization Modeling to S&OP Keywords: constraint, optimization AACSB: Application of Knowledge LO: 10.6: Apply optimization modeling techniques to the S&OP process.

6) It costs $12 to make a single unit using regular production and $15 to make a single unit using overtime production. Total overtime production is limited to 500 units for the five month period.

The manufacturing plant has a regular production capacity of 250 units per month and 50 units in inventory at the start of the planning period. There is a $5 per unit charge for holding inventory at the end of each month and a limit of 250 units ending inventory for any period. Develop an objective function and constraints to solve this problem.

Month January February March April May

Forecast 250 200 300 400 500

Answer: Min Cost = 12 subject to:

+ 15

+5

+ ≥ Min Cost Regular Output ≤ 250 Ending Inventory ≤ 250 Ending Inventory ≥ 0 Diff: 3 Reference: Applying Optimization Modeling to S&OP Keywords: constraint, optimization, objective function AACSB: Analytical Thinking LO: 10.6: Apply optimization modeling techniques to the S&OP process.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 11 Managing Inventory throughout the Supply Chain Learning Objective 11-1 1) Cycle stock can occur at more than one point in a supply chain.

Answer: TRUE Diff: 1 Reference: The Role of Inventory Keywords: cycle stock, supply chain AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

2) Companies do not plan to use safety stock.

Answer: TRUE Diff: 1 Reference: The Role of Inventory Keywords: safety stock AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and

inventory drivers, and distinguish between independent demand and dependent demand.

3) Dependent demand inventory never needs to hold hedge inventory.

Answer: FALSE Diff: 1 Reference: The Role of Inventory Keywords: hedge inventory, dependent demand AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

4) The inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time is called: A) safety stock.

B) anticipation inventory.

C) hedge inventory.

D) smoothing inventory.

Answer: A Diff: 1 Reference: The Role of Inventory Keywords: safety stock, inventory AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

5) Individual links in the supply chain can stabilize their production at the most efficient level by using: A) safety stock.

B) anticipation inventory.

C) linkage inventory D) smoothing inventory.

Answer: D Diff: 2 Reference: The Role of Inventory Keywords: smoothing inventory AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

6) Inventory that is "in the pipeline" moving from one link to another is: A) anticipation inventory.

B) transportation inventory.

C) smoothing inventory.

D) hedge inventory.

Answer: B Diff: 1 Reference: The Role of Inventory Keywords: transportation inventory AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

7) The mismatch between timing of customer demand and supply chain lead times is what drives the need for: A) safety stock.

B) anticipation inventory.

C) cycle stock.

D) hedge inventory.

Answer: B Diff: 2 Reference: The Role of Inventory Keywords: anticipation inventory AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

8) Tata Motors assembles cars from their own parts and subassemblies and also controls the mining and fabrication of the materials used to create those parts. When Anand ordered his luxury sedan with the platinum dashboard he knew he wouldn't be taking delivery of his dream car the next week. Rather, he would be waiting a while thanks to: A) a mismatch between supply chain lead time and customer demand.

B) a mismatch between overall demand levels and productive capacity.

C) a mismatch between demand and the most efficient production volume.

D) a mismatch between demand and the most efficient shipment volume.

Answer: A Diff: 1 Reference: The Role of Inventory Keywords: mismatch AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

9) Which of the following relationships shows dependent demand inventory?

A) A business purchases a new car when the old one wears out.

B) A tire maker buys cleaning supplies.

C) An automaker purchases four tires for each car they produce.

D) A winemaker buys grapes from farmers in the Columbia Valley.

Answer: C Diff: 2 Reference: The Role of Inventory Keywords: dependent demand, inventory AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

10) Gordon went to the grocery store and bought a bag of carrots. He needed only three for his cottage pie recipe, but they came twelve to a bag so he diced three and tossed the rest in the crisper compartment of his stainless steel refrigerator. As he screamed his insults at his children they reminded themselves that he wasn't upset with them, rather he was concerned about the high level of ________ stock he was holding.

Answer: cycle Diff: 3 Reference: The Role of Inventory Keywords: cycle stock, supply chain AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

11) Extra inventory that is held to protect against uncertainties in either demand or lead time is called ________.

Answer: safety stock Diff: 1 Reference: The Role of Inventory Keywords: safety stock, inventory AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

12) Inventory items with demand levels that are beyond an organization's complete control are termed ________.

Answer: independent demand Diff: 1 Reference: The Role of Inventory Keywords: inventory, independent demand AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

13) Describe any four types of inventory and the drivers that spur their need.

Answer: Answers will vary depending on the types chosen. The inventory types discussed in the text are cycle stock, safety stock, anticipation inventory, hedge inventory, transportation inventory, and smoothing inventory.

Cycle stock is components or products that are received in bulk by a downstream partner, gradually used up, and then replenished again in bulk by the upstream partner. The driver for cycle stock is a mismatch between downstream partner's demand and most efficient production or shipment volumes for upstream partner.

Safety stock is extra inventory that companies hold to protect themselves against uncertainties in either demand or replenishment time. The safety stock driver is uncertainty in supply or demand.

Anticipation inventory is held in anticipation of customer demand and is driven by a mismatch between timing of customer demand and supply chain lead times.

Hedge inventory is a form of inventory buildup to buffer against some event that may not happen and is driven by uncertainty in supply or demand.

Transportation inventory is inventory that is moving from one link in the supply chain to another.

This is driven by a mismatch between timing of customer demand and supply chain lead times.

Smoothing inventories are inventories used to smooth out differences between upstream production levels and downstream demand. Smoothing inventories are driven by a mismatch between downstream demand levels and upstream production capacity.

Diff: 2 Reference: The Role of Inventory Keywords: cycle stock, safety stock, anticipation inventory, hedge inventory, transportation inventory, smoothing inventory AACSB: Application of Knowledge LO: 11.1: Describe the various roles of inventory, including the different types of inventory and inventory drivers, and distinguish between independent demand and dependent demand.

Learning Objective 11-2 1) The order quantity in a periodic review system rises as the on-hand inventory falls.

Answer: TRUE

Diff: 1 Reference: Periodic Review Systems Keywords: order quantity, periodic review, inventory AACSB: Application of Knowledge LO: 11.2: Calculate the restocking level for a periodic review system 2) The restocking level increases as the service level falls.

Answer: FALSE Diff: 2 Reference: Periodic Review Systems Keywords: reorder point, service level AACSB: Application of Knowledge LO: 11.2: Calculate the restocking level for a periodic review system 3) The beef jerky driver shows up every Monday to take orders from his convenience store customers. One fine Monday morning he stops in the Quik-E Mart and notes that there are only three sticks on the shelves. Consulting his route sheet, he discovers that the restocking level is 40. The order quantity is therefore: A) 3 sticks.

B) 37 sticks.

C) 40 sticks.

D) Cannot be determined with the information given.

Answer: B Diff: 1 Reference: Periodic Review Systems Keywords: periodic review, order quantity, restocking level AACSB: Analytical Thinking LO: 11.2: Calculate the restocking level for a periodic review system 4) In a periodic review system, if the average demand increases by 100%, the restocking level is: A) increased by 200%.

B) decreased by 100%.

C) decreased by 50%.

D) increased by 40%.

Answer: B Diff: 3 Reference: Periodic Review Systems Keywords: restocking level, safety stock, periodic review AACSB: Analytical Thinking LO: 11.2: Calculate the restocking level for a periodic review system

5) In a periodic review system, if the average demand increases by 100%, the safety stock level is: A) increased by 200%.

B) increased by 100%.

C) decreased by 50%.

D) increased by 40%.

Answer: B Diff: 3 Reference: Periodic Review Systems Keywords: restocking level, safety stock, periodic review AACSB: Analytical Thinking LO: 11.2: Calculate the restocking level for a periodic review system 6) A hospital's biomedical repair shop uses a 4-week periodic system to maintain the inventory on the blood pressure cuff repair parts. They use an average 40 adult arm cuffs with a standard deviation of 6 cuffs every 4 weeks. Cuffs aren't the most critical item they carry, but the manager would like to avoid the embarrassment of a stockout at least 95% of the time. What should their restocking level be?

A) 40 cuffs B) 46 cuffs C) 50 cuffs D) 52 cuffs Answer: C Diff: 2 Reference: Periodic Review Systems Keywords: periodic review, restocking level AACSB: Analytical Thinking LO: 11.2: Calculate the restocking level for a periodic review system Learning Objective 11-3 1) A company that orders at their economic order quantity has an annual ordering cost that is half of their total cost.

Answer: TRUE Diff: 2 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, ordering cost, continuous review AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

2) In order for the economic order quantity model to work, demand must be known and constant.

Answer: TRUE Diff: 2 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, continuous review AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

3) Decreases in the standard deviation of demand reduce the amount of safety stock that should be held.

Answer: TRUE Diff: 2 Reference: Continuous Review Systems Keywords: demand, safety stock, standard deviation, continuous review AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

4) In order to find the lowest cost ordering policy in a quantity discount model, you must compare the holding cost, ordering cost, and the price per unit for various order quantities.

Answer: TRUE Diff: 2 Reference: Continuous Review Systems Keywords: demand, EOQ, economic order quantity, quantity discount AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

5) Which of these conditions is NOT necessary for the economic order quantity model to be valid?

A) The item has a constant demand.

B) The item has a constant lead time.

C) The item has a constant price.

D) The item has a constant safety stock.

Answer: D Diff: 2 Reference: Continuous Review Systems Keywords: continuous review, EOQ, economic order quantity AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

6) The cashier waved the can of golden hominy across the holographic bar code reader and it emitted a piercing beep. At the same time the customer's bill was rising, the grocery store's inventory was automatically being reduced by 1 can of golden hominy down to 3 cans. This was the bare minimum amount of hominy the store manager dared carry in inventory, so the

computer system automatically sent a message to the hominy man, who loaded a few cases onto his delivery truck for tomorrow morning's trip to replenish the store. This is a classic example of: A) a periodic review system.

B) safety stock.

C) a continuous review system.

D) cycle stock.

Answer: C Diff: 1 Reference: Continuous Review Systems Keywords: inventory replenishment, hominy, continuous review AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

7) If annual demand increases by 100%, the average inventory held in a system governed by the EOQ model is: A) increased 100%.

B) decreased by 100%.

C) decreased by 50%.

D) increased by 40%.

Answer: D Diff: 2 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

8) A law firm always orders 50 cases of paper from their office supply company. They incur an annual holding cost of $15 per case and have an ordering cost of $25 each time they place an order. If their annual demand is 480 cases, how much could they save annually by switching to their economic order quantity?

A) $15 B) $25 C) $40 D) $80 Answer: A Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, total cost, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

9) The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply) at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is their optimal order quantity?

A) 150 B) 200 C) 1,000 D) 2,000 Answer: B Diff: 2 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

10) The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply) at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is the total cost if they order at their optimal order quantity?

A) $1,650 B) $1,500 C) $1,000 D) $2,000 Answer: C Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, continuous review, total cost AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

11) The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply) at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is the difference in the total cost if they order at their optimal order quantity compared to their current policy?

A) $4,550 B) $5,050 C) $3,550 D) $4,050 Answer: D Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, continuous review, total cost AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

12) The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply) at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is the difference in their holding cost if they order at their optimal order quantity compared to their current policy?

A) $4,500 B) $4,400 C) $4,200 D) $4,000 Answer: A Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, continuous review, total cost AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

13) A manufacturer replenishes their packaging materials according to the economic order quantity model. They use 25,000 cases of packaging materials per year and order 500 cases at a time. Their cost to carry a case in inventory for a year is $12. How much does it cost them to place an order with their supplier?

A) $12 B) $60 C) $720 D) $5 Answer: B Diff: 2 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, order cost, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

14) Which of these conditions is likely to cause a decrease in the probability of a stockout?

A) higher lead time variance B) lower lead time C) higher demand level variance D) lower service level Answer: B Diff: 2 Reference: Continuous Review Systems Keywords: ROP, reorder point, variance, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

15) Safety stock increases when: A) probability of a stockout increases.

B) average demand increases.

C) delivery speed increases.

D) demand fluctuations decrease.

Answer: B Diff: 2 Reference: Continuous Review Systems Keywords: safety stock, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

16) Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence, as slowly) as possible. Central Perk uses 80 filters a day with a standard deviation of 5 days. It would be disastrous if they ran out of these filters, years ago customers caught them using paper towels from the men's room and business suffered. They have set their service level at 99% in hopes of avoiding a similar situation. It takes a fortnight to receive a shipment and the standard deviation of the shipping time is two days. What is their reorder point?

A) 1120 filters B) 1450 filters C) 1490 filters D) 1515 filters Answer: C Diff: 2 Reference: Continuous Review Systems Keywords: ROP, reorder point, variance, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

17) Central Perk orders their organic coffee filters from a South American supplier that mails them as inexpensively (hence, as slowly) as possible. Central Perk uses 80 filters a day with a standard deviation of 15 days. It would be disastrous if they ran out of these filters, years ago

customers caught them using paper towels from the men's room and business suffered. They have set their service level at 99.5% in hopes of avoiding a similar situation. It takes a fortnight to receive a shipment and the standard deviation of the shipping time is five days. What is their reorder point?

A) 1865 filters B) 1962 filters C) 2074 filters D) 2158 filters Answer: D Diff: 3 Reference: Continuous Review Systems Keywords: ROP, reorder point, variance, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

18) A university orders all office supplies, including red grading pens, out of a catalog from the same supplier. Conservative estimates of the demand for these red pens are 12,000 pens per year.

There is a $25 charge for placing an order and the university has a $10 annual cost for holding these pens. Prices for the pens are based on the quantity purchased, so if less than 100 are ordered, the unit price is $2.50, if 100 to 299 are ordered, the unit price is $2.40, if 300 to 499 are ordered, the unit price is $2.30, and if 500 or more are ordered, the unit price is $2.20. What order quantity will result in the lowest total annual cost to the university?

A) 100 B) 245 C) 300 D) 500 Answer: D Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, quantity discount AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

19) A haberdashery orders cravats from manufacturers overseas to satisfy their demand rate of 5,000 units per year that has been stable for the past decade. Placing an order costs 15 euro and holding each cravat in inventory for a year costs 2 euro. The manufacturer offers price breaks for large orders: ordering between 1 and 99 cravats earns the haberdashery a price of 3.5 euro, but ordering 100 to 999 carries a 3.4 euro price. An order of 1000 cravats or more drops the price to 3.3 euro. What's the optimal order quantity for the haberdashery?

A) 99 B) 274 C) 382 D) 999 Answer: B Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, quantity discount AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

20) In a(n) ________ review system, orders are placed at a constant time interval, but in a(n) ________ review system, a constant order is placed at a variable time level.

Answer: periodic; continuous Diff: 2 Reference: Continuous Review Systems Keywords: periodic review, continuous review AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

21) A replenishment order for inventory is made when a predetermined stock level is reached in a(n) ________ inventory system.

Answer: continuous Diff: 2 Reference: Continuous Review Systems Keywords: continuous review, EOQ, economic order quantity AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

22) A company using the basic EOQ model has annual ________ costs equal to annual ________ costs.

Answer: holding; ordering (or reversed) Diff: 2 Reference: Continuous Review Systems Keywords: continuous review system AACSB: Application of Knowledge LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

23) Cavalier Enterprises elects to hold no safety stock. Their service level is therefore ________.

Answer: 0.5 or 50% Diff: 2 Reference: Continuous Review Systems Keywords: service level, safety stock, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

24) Derive the economic order quantity model, beginning with a definition of terms and graph of cost curves.

Answer: S is the cost to place a single order from a supplier.

H is the cost to hold one unit in inventory for a year.

D is the demand for the item for one year.

Q is the quantity ordered from the supplier.

The total cost is defined as: TC = ordering cost + carrying cost TC = cost to place 1 order × # orders per year + average inventory × cost to hold 1 item TC = S + H

To find the minimum point on the total cost line, take the first derivative of the total cost equation with respect to Q and set the result equal to zero as follows: TC =

+ =

+

=0

= Q2 = Q= Diff: 2 Reference: Continuous Review Systems Keywords: economic order quantity, continuous review, EOQ AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

25) The campus bookstore sells 4,000 sets of graduation regalia each year. Placing an order from their supplier costs $25 regardless of order quantity, so they usually place a large order (a half year's supply) at a time. It costs $5 per year to hold a cap and gown in inventory, primarily insurance costs for the highly flammable material. What is the difference in their holding cost if they order at their optimal order quantity compared to their current policy?

Answer: Their optimal order quantity is: Q* =

= 200

The total cost at an optimal order quantity is TC* = + = $1000 Their cost of ordering 2000 cap and gown sets at a time is TC* = + = $5050 which is a difference of $4050.

Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, economic order quantity, continuous review AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

26) A catfish bait manufacturer uses a secret blend of ingredients to make their infamous bait.

One of these ingredients, we'll call it X for proprietary reasons, is the major component in the mixture. X is ordered in 55 gallon barrels from out of state and is used at the rate of 800 barrels per year. Each order that is placed with the supplier costs $45 to process. Storage space is at a premium on the manufacturing floor and out in the yard, so their annual cost to hold inventory is $80 per barrel. The owner's brother-in-law provides transportation services and his record has been less than stellar, so lead time has averaged 6 days with a standard deviation of 3 days.

Stopping the process would be disastrous, so the plant manager has set a 99% service level on the reorder point.

What is the best order quantity?

What is the total cost at this reorder point?

What is the reorder point?

What is the cost of holding this safety stock?

Answer: The best order quantity: Q* =

=

= 30 barrels

The total cost at this order quantity: TC = + = + = $2400 The reorder point: ROP = dL + zSS =

6 + 2.33

32

ROP = 13.15 + 2.33(6.57) = 28.47 barrels The cost of holding this safety stock: Cost = H × SS Cost = $80(2.33 × 6.57) = $1224.65 Diff: 3 Reference: Continuous Review Systems Keywords: continuous review, EOQ, economic order quantity, ROP, reorder point AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

27) Nothing is too good for my cats, so all their food is custom made at Catastic, who operates a specialty organic food mill in an adjacent state. We need 500 pounds of food per year, distributed evenly throughout the year. It costs $20 shipping and handling to place and receive an order for this delicious food. The cats are fed only on week days, so the 500 pounds per year translates to 2 pounds per day (we go out to restaurants on the weekends). Of course, my cats don't always eat exactly 2 pounds per day, their demand could more precisely be described as an average of 2 pounds and a standard deviation of 0.3 pounds per day. It takes ten days on average to receive an order for food once I place it. It costs $35 to hold a pound of food in inventory for a year and the food costs $850 per pound. It's expensive, yes, but again, nothing is too good for my cats.

What amount should I order and when should I order it if I want only a 1% chance of running out of food for my cats?

Answer: The economic order quantity is Q ∗ =

= 23.9 pounds.

The reorder point is 2 ∗ 10 + 2.32 ∗ = 20 + 2.33 ∗ .94 = 22.207 pounds *meow* Diff: 3 Reference: Continuous Review Systems Keywords: continuous review, EOQ, economic order quantity, ROP, reorder point AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

28) A small refrigeration shop stocks up on electric motors from a catalog supplier located in the Midwest. The price of the motors varies depending on the quantity purchased; the price breaks are shown in the table. The refrigeration shop knows it will need around 600 motors for the coming season and that it will cost them about $40 to place an order. Storage cost for the motors is $10 each. In previous years they have bought all 600 at once and they are considering doing this again. What order quantity would you advise and how much can they save using your recommendation instead of their one order per year strategy?

Quantity

Price/unit $35.00 $34.00 $33.00 $30.00

1-49 50-99 100-499 500 or more Answer: Q* =

=

= 69.28 motors

This quantity isn't sufficient for the lowest cost, so costs at this volume and a price of $34 should be compared to the lowest quantity at the next break point, 100 motors for $33 each.

TCQ = 69 =

+

+ DP =

TCQ = 100 =

+

+ DP =

+

+ 600($34) = $21,092.83 +

+ 600($33) = $20,540.00

Buying in quantities of 100 motors results in a lower cost. Buying 600 motors at a time results in a total cost of: TCQ = 600 = + + DP = + + 600($30) = $21,040.00 It will save the company $500 to purchase 100 motors per order instead of 600 per order.

Diff: 3 Reference: Continuous Review Systems Keywords: EOQ, quantity discount AACSB: Analytical Thinking LO: 11.3: Calculate the economic order quantity (EOQ) and reorder point (ROP) for a continuous review system, and determine the best order quantity when volume discounts are available.

Learning Objective 11-4 1) The excess cost of an item is the profit you would have made on it.

Answer: FALSE Diff: 2 Reference: Single-Period Inventory Systems Keywords: excess cost, single period AACSB: Application of Knowledge LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

2) A target service level is the point where the expected cost of a shortage equals the expected cost of having excess units.

Answer: TRUE Diff: 2 Reference: Single-Period Inventory Systems Keywords: target service level, single period AACSB: Application of Knowledge LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

3) Buying advance tickets for the Giraffe Massacre concert on New Year's Eve saves the buyer one-tenth of one percent on the face value of the tickets. It would be wise to buy tickets well in advance of the concert date.

Answer: FALSE Diff: 2 Reference: Single-Period Inventory Systems Keywords: target service level, single period AACSB: Application of Knowledge LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

4) In a single period inventory system, as the average demand rises, the standard deviation of demand falls.

Answer: FALSE Diff: 2 Reference: Single-Period Inventory Systems Keywords: single period AACSB: Application of Knowledge LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

5) The food engineers at Moria Foods have developed a new variety of banana they have named the "mayfly banana" which holds perfect ripeness for exactly one day before becoming a blackskinned sack of putrid mush. Which of these actions will result in a lower order quantity from the many retail establishments clamoring to stock up on this new foodstuff?

A) an increase in the price consumers are willing to pay for the mayfly banana B) an increase in the standard deviation of the number of mayfly bananas demanded by consumers C) a decrease in the salvage value of the mayfly bananas D) a decrease in the disposal cost of the mayfly bananas Answer: C Diff: 3 Reference: Single-Period Inventory Systems Keywords: single-period, salvage value AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

6) A local barbecue joint makes one massive batch of potato salad each day. If they run out of this savory side before the end of the day, their last few customers are less than satisfied, but if they make too much, they sell it to the local hog farmer for feed. Every serving costs an equivalent of $0.23 to make, but can be sold for $1.50 to customers and for $0.08 to the hog farmer. The average daily demand is for 200 servings with a standard deviation of 20 servings.

How many servings should be made each day?

A) 220 B) 225 C) 230 D) 235 Answer: B Diff: 3 Reference: Single-Period Inventory Systems Keywords: target stocking point, single period AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

7) A local barbecue joint makes one massive batch of potato salad each day. If they run out of this savory side before the end of the day, their last few customers are less than satisfied, but if they make too much, they sell it to the local hog farmer for feed. Every serving costs an equivalent of $0.23 to make, but can be sold for $2.50 to customers and for $0.12 to the hog farmer. The average daily demand is for 400 servings with a standard deviation of 40 servings.

How many servings should be made each day?

A) 467 B) 453 C) 462 D) 455 Answer: A Diff: 3 Reference: Single-Period Inventory Systems Keywords: target stocking point, single-period AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

8) Geoff hesitated as he read the fast food menu, unsure whether he should supersize his order of delicious golden French fries. Doing so would increase his cost from $0.99 to $1.59 and just might provide him the nutrition he needed to make it through the second half of his day at the office. Of course, if he finished his hamburger and the usual amount of fries, he would simply throw the extra ones away. However, if he failed to supersize his order, he would have to take a candy bar break mid-afternoon and they weren't exactly giving them away in the break room vending machines. He would likely need two candy bars, which sold for $0.95 each. What is Geoff's target service level?

A) 0.29 B) 0.61 C) 0.76 D) 0.87 Answer: C Diff: 3 Reference: Single-Period Inventory Systems Keywords: single period, target service level AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

9) Warren hesitated as he read the fast food menu, unsure whether he should supersize the orders of delicious golden French fries. As the office lunch boy, he was responsible for buying enough food to keep his coworkers satiated during the rest of the work day. Supersizing would increase his cost from $0.99 to $1.59 and just might provide his colleagues the nutrition they needed to make it through the second half of his day at the office. Of course, if they finished his hamburger and the usual amount of fries, Warren would simply throw the extra ones away. However, if he failed to supersize the orders, he would have to purchase candy bars during the afternoon and they weren't exactly giving them away in the break room vending machines. Each hungry colleague would likely need two candy bars, which sold for $1.25 each. With a demand that is normally distributed with a mean of 15 and standard deviation of five, what is Warren's optimal supersize decision?

A) 16.3 B) 17.3 C) 18.3 D) 19.3 Answer: D Diff: 3 Reference: Single-Period Inventory Systems Keywords: target service level, single-period AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

10) Degan routinely drove the 400-mile round trip to his favorite grocery store to stock up on bread, which cost $1.50 per loaf. Running out would be disastrous — an unplanned trip to this store would mean a custom order that would run $7.75 per loaf. Overstocking wasn't a big issue, he could sell it to his teaching partner for $0.10 per loaf. With a demand that is normally distributed with a mean of 125 and standard deviation of 15, what is Degan's optimal purchase quantity on his next trip to the store?

A) 139 B) 173 C) 115 D) 128 Answer: A Diff: 3 Reference: Single-Period Inventory Systems Keywords: target stocking point, single-period AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

11) In a single period system, the target ________ is the balancing point between shortage costs and excess costs.

Answer: service level Diff: 2 Reference: Single-Period Inventory Systems Keywords: single period AACSB: Application of Knowledge LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

12) Three Chums Fish Company buys fresh salmon daily from the fishermen that ply the deep waters of Puget Sound. Salmon are purchased for $2.50 per pound and sold to the public at $8.50 per pound. The salmon are kept fresh by displaying them on ice but at the end of the day, any unsold fish have a noticeable odor and are sold to a nearby chowder stand for $1 per pound. The past year's demand for salmon on Saturdays is shown in the table. Based on this information, what should their target service level and stocking point be? What is the significance of the target stocking level?

Daily Demand (pounds) 300 320 340 360 380 400 420 440 460

# Days at This Level 3 4 6 9 9 8 6 5 2

Answer: The target service level is calculated as follows: CShortage = Sale Price - Item Cost CShortage = $8.50 - $2.50 = $6.00 CExcess = Item Cost + Disposal Cost - Salvage Value CExcess = $2.50 - $1.00 = $1.50 SLT = Daily Demand (pounds) 300 320 340 360 380 400 420 440 460

=

# Days at This Level 3 4 6 9 9 8 6 5 2

= 0.80

Percentage 5.8% 7.7% 11.5% 17.3% 17.3% 15.4% 11.5% 9.6% 3.8%

Cumulative Pct 5.8% 13.5% 25.0% 42.3% 59.6% 75.0% 86.5% 96.2% 100%

In order to hit the target service level of 80%, the fish company should purchase 420 pounds of salmon from the fishermen. This target stocking point is where the expected cost of a shortage equals the expected cost of having excess units and in the long run, this will maximize the fishmonger's profits.

Diff: 3

Reference: Single-Period Inventory Systems Keywords: single-period, target stocking point AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

13) Tickets for the gala Opening Night festivities in Oklahoma City are available for $80 in advance at a couple of area businesses. If you wait until you arrive at the venue, you will pay full face value of $100 per ticket to enjoy the same festivities. If you buy a ticket and don't use it, you can buy $25 worth of chemicals and treat the ticket so that it can be used the following year. You have been taking orders from your friends for a few years and historically demand has been normally distributed with a mean of 50 tickets and a standard deviation of 10. What's the best quantity of tickets to purchase for this year's event?

Answer: The shortage cost is $20 (pay $100 on the day versus $80 beforehand) and the excess cost is just $5 (the $80 ticket can be doctored using $25 of chemicals for a total cost of $105 versus paying $100 the next year). The target service level is 20/25 = 0.8 and the z-score is 0.8416. The order quantity is .

Another popular answer is that the cost of excess is $25 (for the chemicals) based on the possibility of paying $80 in advance the next year versus $100 the night of the event. In this case the target service level is 0.4444 and the z-score is -0.1397 for an order quantity of . Since the base price of the ticket is $100, the 58.4 answer is preferred.

Diff: 3 Reference: Single-Period Inventory Systems Keywords: single-period, shortage, excess AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

14) A local barbecue joint makes one massive batch of potato salad each day. If they run out of this savory side before the end of the day, their last few customers are less than satisfied, but if they make too much, they sell it to the local hog farmer for feed. Every serving costs an equivalent of $0.23 to make, but can be sold for $2.50 to customers and for $0.12 to the hog farmer. The average daily demand is for 400 servings with a standard deviation of 40 servings.

How many servings should be made each day? One day the hog farmer cancels the contract — evidently there are some things that even hogs won't eat. With no fallback position, how many servings of potato salad should the barbecue joint make? Discuss the discrepancy between the two numbers.

Answer: If the hog farmer will take the leftovers: CS = $2.50 - 0.23 = $2.27 CE = $0.23 - 0.12 = $0.11 SLT = = 0.9538 Z = 1.683 Q = 400 + 1.683 × 40 = 467.3 If the hog farmer won't take the leftovers: CS = $2.50 - 0.23 = $2.27 CE = $0.23 - 0 = $0.23 SLT = = 0.908 Z = 1.33 Q = 400 + 1.33 × 40 = 453.1 The discrepancy, about 14 servings, shows that the barbecue joint can't be as aggressive in their production of potato salad each morning. In the new scenario, leftover potato salad is just thrown away, costing the restaurant 23 cents per serving.

Diff: 3 Reference: Single-Period Inventory Systems Keywords: target stocking point, single-period AACSB: Analytical Thinking LO: 11.4: Calculate the target service level and target stocking point for a single period inventory system.

Learning Objective 11-5 1) The bullwhip effect says that a small change in demand downstream in the supply chain causes a large change in demand upstream.

Answer: TRUE Diff: 2 Reference: Inventory in the Supply Chain Keywords: bullwhip effect, demand AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

2) The flexibility of inventory increases as materials move down the supply chain.

Answer: FALSE Diff: 2 Reference: Inventory in the Supply Chain Keywords: bullwhip effect, supply chain AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

3) The value of goods on a "per unit" basis upstream in a supply chain is greater than the value of those same goods downstream in a supply chain.

Answer: FALSE Diff: 2 Reference: Inventory in the Supply Chain Keywords: downstream, supply chain, upstream AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

4) Order quantity decisions are typically made in isolation from considerations of transportation, packaging, and material handling.

Answer: FALSE Diff: 1 Reference: Inventory in the Supply Chain Keywords: supply chain AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

5) The factory produces product and ships it to the distributor. The distributor sends it to the wholesaler when they receive an order. The wholesaler ships the product to the retailer as the retailer requests replenishment. The customer visits the retailer's bricks and mortar store to purchase the product when they run out. Which of these supply chain members is most likely subjected to the greatest variability in customer demand?

A) retailer B) wholesaler C) distributor D) factory Answer: D Diff: 3 Reference: Inventory in the Supply Chain Keywords: bullwhip effect, demand AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

6) Supply chain inventory: A) increases in cost as materials move downstream.

B) decreases in value as materials progress downstream.

C) increases in flexibility as materials progress upstream.

D) is governed by the bullwhip effect, which says a small change upstream can cause a large change downstream.

Answer: A Diff: 3 Reference: Inventory in the Supply Chain Keywords: supply chain, inventory, bullwhip effect AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

7) The ________ is an extreme change in the supply position upstream generated by a small change in demand downstream.

Answer: bullwhip effect Diff: 1 Reference: Inventory in the Supply Chain Keywords: supply chain, bullwhip effect AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

8) Define the bullwhip effect and discuss the advantages of holding inventory far upstream or downstream in the supply chain.

Answer: The bullwhip effect is the phenomenon of a small change in demand downstream in the supply chain causing an extreme change in the inventory position upstream in the supply chain.

Inventory increases in cost and value but decreases in flexibility as materials move down the supply chain. There is a trade-off between the advantages of having shelves full of inventory ready to be sold to customers and the lack of flexibility and increased costs attached to that finished goods inventory. Operations and supply chain managers must strike a balance between these two when deciding where to place inventory in the supply chain.

Diff: 2 Reference: Inventory in the Supply Chain Keywords: bullwhip effect, supply chain, inventory AACSB: Application of Knowledge LO: 11.5: Describe how inventory decisions affect other areas of the supply chain. In particular, describe the bullwhip effect, inventory positioning issues, and the impacts of transportation, packaging, and material handling considerations.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 12 Managing Production across the Supply Chain Learning Objective 12-1 1) Material requirements planning is performed at greater level of detail than master scheduling.

Answer: TRUE Diff: 1 Reference: Introduction Keywords: MRP, material requirements planning, master scheduling AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

2) Since the booked orders figure represents actual customer demand in a master schedule, that value is always less than or equal to forecasted demand.

Answer: FALSE Diff: 2 Reference: Master Scheduling Keywords: forecasted demand, booked orders, master scheduling AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

3) From a revenue standpoint, a producer would rather have higher forecasted demand than booked orders.

Answer: FALSE Diff: 2 Reference: Master Scheduling Keywords: forecasted demand, booked orders, master scheduling AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

4) A unit that has not been sold or otherwise committed to any other customer should be considered available to promise.

Answer: TRUE

Diff: 2 Reference: Master Scheduling Keywords: available to promise, ATP AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

5) Throughout every MRP record, ending inventory is equal to the ending inventory from the previous period, plus the master production schedule quantity, minus the orders booked for that period.

Answer: FALSE Diff: 2 Reference: Master Scheduling Keywords: MRP, material requirements planning, ending inventory, booked orders, MPS quantity, master scheduling AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

6) Available to promise inventory is always zero for the first week in the master production schedule.

Answer: FALSE Diff: 2 Reference: Master Scheduling Keywords: ATP, available to promise, master scheduling AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

7) The longer the production and supplier lead times, the longer the master scheduling record's planning horizon needs to be.

Answer: TRUE Diff: 2 Reference: Master Scheduling Keywords: MRP, planning horizon, lead time AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

8) Which step comes first in sales and operations planning?

A) master scheduling B) material requirements planning C) production activity control D) vendor order management Answer: A Diff: 1 Reference: Introduction Keywords: master scheduling, sales and operations planning AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

9) Which of the following statements regarding master production scheduling calculations is BEST? A) Forecasted demand always exceeds booked orders.

B) Booked orders always exceed forecasted demand.

C) If booked orders are greater than forecasted orders, there must be a master production schedule for that period.

D) If ending inventory is greater than or equal to zero, there is no master production schedule quantity for that period.

Answer: D Diff: 2 Reference: Master Scheduling Keywords: master scheduling, ending inventory AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

10) Given the forecast and booked orders shown in the table, and a beginning inventory of 25, what is the master production schedule quantity for period 4?

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 70 80

2 65 50

3 60 30

4 55 10

55 0

A) 35 B) 40 C) 55 D) 70 Answer: C Diff: 2 Reference: Master Scheduling Keywords: master scheduling AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

11) Given the forecast and booked orders shown in the table, and a beginning inventory of 20, what is the available to promise inventory for the first period? There are no LOT quantity constraints.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 200 190

2 220 80

3 240 30

4 200 10

A) 0 B) 10 C) 20 D) 40 Answer: B Diff: 2 Reference: Master Scheduling Keywords: master scheduling, ATP, available to promise AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

12) Given the forecast and booked orders shown in the table, and a beginning inventory of 0, what is the available to promise inventory for period 3? There are no LOT quantity constraints.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 100 103

2 100 87

3 90 54

4 90 21

A) 0 B) 12 C) 24 D) 36 Answer: D Diff: 3 Reference: Master Scheduling Keywords: master scheduling, ATP, available to promise AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

13) Given the forecast and booked orders shown in the table, and a beginning inventory of 75, what is the available to promise inventory for period 4? The company operates with a lot size of 50.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 500 520

2 450 400

3 400 325

4 600 450

A) 150 B) 145 C) 155 D) 140 Answer: A Diff: 3 Reference: Master Scheduling Keywords: master scheduling, ATP, available to promise AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

14) Given the forecast and booked orders shown in the table, and a beginning inventory of 120, what is the MPS for period 4? The company operates with a lot size of 144.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 500 520

2 450 400

3 400 325

4 600 450

A) 432 B) 576 C) 288 D) 144 Answer: B Diff: 3 Reference: Master Scheduling Keywords: master scheduling, MPS AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

15) Given the forecast and booked orders shown in the table, and a beginning inventory of 120, what is the ATP for period 4? The company operates with a lot size of 144.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 500 520

2 450 400

3 400 325

4 600 450

A) 92 B) 108 C) 126 D) 144 Answer: C Diff: 3 Reference: Master Scheduling Keywords: master scheduling, ATP, available to promise AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

16) Given the forecast and booked orders shown in the table, and a beginning inventory of 120, what is the projected ending inventory for period 4? The company operates with a lot size of 144.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 500 520

2 450 400

3 400 325

4 600 450

A) 34 B) 38 C) 46 D) 22 Answer: D Diff: 3 Reference: Master Scheduling Keywords: master scheduling, ending inventory, MPS AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

17) ________ translates the master schedule for final products into detailed requirements.

Answer: Material requirements planning (MRP) Diff: 1 Reference: Introduction Keywords: MRP, material requirements planning AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

18) Confirmed demand for products is called ________ in master scheduling.

Answer: booked orders Diff: 1 Reference: Master Scheduling Keywords: master scheduling, booked orders AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

19) The estimated inventory level of an end item at the end of each planning period, whether the period is a week or a month is the ________.

Answer: projected ending inventory Diff: 1 Reference: Master Scheduling Keywords: projected ending inventory, master scheduling AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

20) The longer the production and supplier lead times, the ________ the MRP record's ________ should be.

Answer: longer; planning horizon Diff: 1 Reference: Master Scheduling Keywords: master scheduling, planning horizon AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

21) Describe the scope, inputs, and outputs of sales and operations planning, master scheduling, and MRP. Answer: Sales and operations planning establishes overall production, workforce, and inventory levels and is considered to be tactical capacity planning.

The outputs of sales and operations planning (overall production, workforce, and inventory levels) are the inputs to master scheduling. Master scheduling determines when specific products will be made, when specific customer orders will be filled, and what products/capacities are still available to meet new demand.

The outputs of master scheduling are the inputs to material requirements planning (MRP). MRP calculates the timing and quantities of material orders needed to support the master schedule. It translates the master schedule for final products into detailed material requirements. The output of material requirements planning is the input order quantity and timing from the manufacturer's own production floor and from vendors.

Diff: 2 Reference: Introduction Keywords: S&OP, sales and operations planning, master scheduling, MRP, material requirements planning AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

22) Explain all of the information that is provided by a master schedule.

Answer: A master schedule is a manufacturing plant's scheduling tool that tracks production output and matches this output to actual sales. A manufacturing plant begins by forecasting demand for their products for the short-term future. The forecast helps provide a rough estimate, but the plant should schedule to produce the amount of each item that is actually ordered by customers, called the booked orders, or the forecast amount, whichever is larger. If the plant already has some finished inventory as they enter a production period, then they do not need to produce as much, only the amount of the actual orders (or forecast) less the beginning inventory.

This reduced quantity is the master production schedule amount. Finally, at the end of each production period, the manufacturer will have a number of units in stock. Some of these will have been promised to customers as booked orders. The remaining inventory is available to promise, that is, the next customer placing an order may receive this available to promise inventory since it has not already been committed to another customer.

Diff: 1 Reference: Master Scheduling Keywords: master schedule, available to promise, ATP, booked orders, forecast, ending inventory, MPS AACSB: Application of Knowledge LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

23) A manufacturing company enters 2016 with a forecast and customer orders as shown in the table. They have a beginning inventory of 25 units and a batch size of 25 units (all MPS quantities must be in multiples of 25). Complete the rest of the master production schedule by filling in the projected ending inventory, master production schedule quantity, and available to promise rows.

Month Forecast Booked Orders Projected Ending Inventory Master Production Schedule Available to Promise Answer: Month Forecast Booked Orders Projected Ending Inventory Master Production Schedule Available to Promise

1 140 145

2 150 120

3 170 95

4 190 50

5 225 0

6 275 0

1 140 145

2 150 120

3 170 95

4 190 50

5 225 0

6 275 0

5

5

10

20

20

20

125

150

175

200

225

275

5

30

80

150

225

275

Diff: 2 Reference: Master Scheduling Keywords: master scheduling, MPS, available to promise AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

24) Given the forecast and booked orders shown in the table, and a beginning inventory of 120, complete this master production schedule. The company operates with a lot size of 144.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise Answer: Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 500 520

2 450 400

3 400 325

4 600 450

1 500 520 32 432 32

2 450 400 14 432 32

3 400 325 46 432 107

4 600 450 22 576 126

Diff: 3 Reference: Master Scheduling Keywords: master scheduling, ATP, available to promise, MPS AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

25) Given the forecast and booked orders shown in the table, and a beginning inventory of 12, complete this master production schedule. The company operates with a lot size of 144.

Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise Answer: Period Forecasted Demand Booked Orders Projected ending inventory Master production schedule Available to Promise

1 268 520

2 355 400

3 480 325

4 660 450

5 840 420

6 900 300

1 268 520

2 355 400

3 480 325

4 660 450

5 840 420

6 900 300

68

100

52

112

136

100

576 68

432 32

432 107

720 270

864 444

864 564

Diff: 3 Reference: Master Scheduling Keywords: master scheduling, ATP, available to promise, MPS AACSB: Analytical Thinking LO: 12.1: Complete the calculations for the master schedule record and interpret the results.

Learning Objective 12-2 1) Material requirements planning is used to manage independent demand inventory.

Answer: FALSE Diff: 1 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, independent demand, dependent demand AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

2) MRP uses backward scheduling.

Answer: TRUE Diff: 1 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, backward scheduling AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

3) Component J is ordered on February 1, is received, and is ready to use on February 8. Its planning lead time is seven days.

Answer: TRUE Diff: 1 Reference: Material Requirements Planning Keywords: planning lead time, material requirements planning, MRP, AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

4) Gross requirements in an MRP record can be met by inventory from previous weeks, scheduled receipts, or planned receipts.

Answer: TRUE Diff: 2 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, gross requirements, inventory AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

5) Company B has no inventory at any level and a structure tree as shown below. They will need 145 E's to make 12 units of end item X.

Answer: FALSE Diff: 2 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

6) In a bill of material, a parent may have many children but a child may have only one parent.

Answer: FALSE Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, BOM, bill of material, parent, child AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

7) MRP nervousness refers to the notion that a small change at the top of a bill of material can have drastic effects on items farther down the bill of material.

Answer: TRUE Diff: 2 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, BOM, bill of material, MRP nervousness AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

8) The planning technique that uses the master production schedule to monitor key resource requirements is: A) rough-cut capacity planning.

B) horizon planning.

C) resource planning.

D) handfield planning.

Answer: A Diff: 2 Reference: Material Requirements Planning Keywords: rough-cut capacity planning AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

9) If a manufacturer had no inventory of any kind but had orders for 10 finished units of their sole product, their buyer would know what parts to order if they were supplied with a: A) backward schedule.

B) bill of material.

C) rough-cut capacity plan.

D) planning horizon order sheet.

Answer: B Diff: 2 Reference: Material Requirements Planning Keywords: bill of material, BOM AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

10) Consider the product structure tree shown below:

With a beginning inventory of zero for all components and finished items, how many assembly A's are needed to produce 25 product X's?

A) 125 B) 250 C) 325 D) 400 Answer: C Diff: 2 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

11) Consider the product structure tree shown below:

With a beginning inventory of zero for all components and finished items, how many assembly E's are needed to produce 20 product X's?

A) 900 B) 1000 C) 1200 D) 1500 Answer: D Diff: 3 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

12) Consider the product structure tree shown below:

With a beginning inventory of ten for all components on level one, five for all components on level two, and zero for all components on level three and finished items, how many assembly E's are needed to produce 20 product X's?

A) 1175 B) 1500 C) 1325 D) 1225 Answer: A Diff: 3 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

13) Consider the product structure tree shown below:

With a beginning inventory of twenty for all components on level one, five for all components on level two, and zero for all components on level three and finished items, how many K's are needed to produce 25 product X's?

A) 530 B) 540 C) 550 D) 560 Answer: B Diff: 3 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

14) Consider the product structure tree shown below:

With a beginning inventory of twenty for all components on level one, five for all components on level two, and zero for all components on level three and finished items, how many more K's than F's are needed to produce 25 product X's?

A) 15 B) 10 C) 5 D) 0 Answer: C Diff: 3 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

15) With a beginning inventory of zero for all components and finished items, how many assembly E's are needed to produce 20 product X's with the product structure tree as shown below?

A) 180 B) 220 C) 260 D) 300 Answer: D Diff: 2 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

16) With an inventory as shown in the table, how many assembly E's should be produced or purchased to produce 15 product X's with this product structure tree?

Item Inventory

X 5

A 15

B 20

C 8

D 6

E 17

A) 91 B) 147 C) 193 D) 225 Answer: A Diff: 3 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

17) Using this MRP record and a lead time of 3 weeks, what should the planned orders be in week 1?

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

1

2

0

0

100

100

3 400 0

4 500 0

5 300 0

300

A) 200 B) 300 C) 400 D) 500 Answer: D Diff: 2 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned orders AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

18) There is no beginning inventory. What are the net requirements in week 4 if there is a scheduled receipt of 100 units each week and a two week production lead time?

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

1 500 100

2 450 100

3 400 100

4 500 100

450 300

400 300

300

300

5 300 100

A) 250 B) 300 C) 350 D) 400 Answer: B Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, net requirements AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

19) There are 200 units in inventory at the start of week 1. What are the net requirements in week 4 if there is a scheduled receipt of 100 units every other week and a two week production lead time?

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

1 550 100

2 450 0

350 350

450 300

3 400 100

4 400 0

5 500 100

A) 250 B) 300 C) 350 D) 400 Answer: A Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, net requirements AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

20) There are 50 units in inventory at the start of week 1 for this company, which runs a lot-forlot MRP system. There is a one week lead time for all shipping and production quantities regardless of volume. What are the quantities of the planned order releases for this item for the first six weeks?

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

1 50

2 20

3 30

4

5 40

6

7

8

A) 20, 30, 0, 40, 20, 0 B) 35, 0, 60, 0, 0, 0 C) 5, 30, 0, 40, 20, 0 D) 35, 0, 0, 40, 20, 0 Answer: A Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

21) A mechanical cat is made of two front leg assemblies, a body assembly, one tail, one head assembly, and two back leg assemblies. Each head assembly has two eyes, one nose, one mouth, and 24 whiskers. Each back leg assembly has one foot, five claws, one each fibula, tibia, and femur. The cat production company runs a lot for lot system on everything except the legs, which they order in cases of 50, and the claws, which come by the gross. Lead time for assembly and shipping is shown in the table. Use the master production schedule for mechanical cats to complete the MRP record. What's the planned order release for claws in week 2?

Item Mechanical Cat LT = 1 week

Week MPS Due Date Start Assembly

Item Leg Assembly

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

LT = 2 weeks Begin Inv = 20

Claw LT = 1 week Begin. Inv. = 65

1

2 75

3 125

4 240

5 300

6 250

70

Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

A) 2,304 B) 2,376 C) 2,448 D) 2,880 Answer: A Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

22) A mechanical cat is made of two front leg assemblies, a body assembly, one tail, one head assembly, and two back leg assemblies. Each head assembly has two eyes, one nose, one mouth, and 24 whiskers. Each back leg assembly has one foot, five claws, one each fibula, tibia, and femur. The cat production company runs a lot for lot system on everything except the legs, which they order in cases of 50, and the claws, which come in boxes of 60. Lead time for assembly and shipping is shown in the table. Use the master production schedule for mechanical cats to complete the MRP record. What are the net requirements for claws in week 3?

Item Mechanical Cat LT = 1 week

Week MPS Due Date Start Assembly

Item Leg Assembly

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

LT = 2 weeks Begin Inv = 20

1

2 75

3 125

4 240

5 300

6 250

70

Claw

Scheduled receipts Projected ending LT = 1 week Inventory Begin. Inv. = 195 Net Requirements Planned Receipts Planned Orders A) 2,275 B) 2,295 C) 2,325 D) 2,455 Answer: D Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

23) A mechanical cat is made of two front leg assemblies, a body assembly, one tail, one head assembly, and two back leg assemblies. Each head assembly has two eyes, one nose, one mouth, and 24 whiskers. Each back leg assembly has one foot, five claws, one each fibula, tibia, and femur. The cat production company runs a lot for lot system on everything except the legs, which they order in cases of 36, and the claws, which come by the gross. Lead time for assembly and shipping is shown in the table. Use the master production schedule for mechanical cats to complete the MRP record. What's the planned order release for leg assemblies in week 3?

Item Mechanical Cat LT = 1 week

Week MPS Due Date Start Assembly

Item Leg Assembly

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

LT = 2 weeks Begin Inv = 20

Claw LT = 1 week Begin. Inv. = 65

1

2 75

3 125

4 240

5 300

6 250

70

Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

A) 504 B) 612 C) 468 D) 596 Answer: A Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

24) A mechanical cat is made of two front leg assemblies, a body assembly, one tail, one head assembly, and two back leg assemblies. Each head assembly has two eyes, one nose, one mouth, and 24 whiskers. Each back leg assembly has one foot, five claws, one each fibula, tibia, and femur. The cat production company runs a lot for lot system on everything except the heads, which they order in cases of 24, and the whiskers, which come in boxes of 1000. Lead time for assembly and shipping is shown in the table. Use the master production schedule for mechanical cats to complete the MRP record. What's the planned order release for whiskers in week 2?

Item Mechanical Cat LT = 1 week

Week MPS Due Date Start Assembly

Item Head Assembly

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

LT = 2 weeks Begin Inv = 88

1

2 75

3 125

4 240

5 300

6 250

70

Whiskers

Scheduled receipts Projected ending LT = 1 week Inventory Begin. Inv. = 147 Net Requirements Planned Receipts Planned Orders A) 6000 B) 5000 C) 4000 D) 8000 Answer: B Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

25) A mechanical cat is made of two front leg assemblies, a body assembly, one tail, one head assembly, and two back leg assemblies. Each head assembly has two eyes, one nose, one mouth, and 24 whiskers. Each back leg assembly has one foot, five claws, one each fibula, tibia, and femur. The cat production company runs a lot for lot system on everything except the heads, which they order in cases of 250, and the whiskers, which come in boxes of 800. Lead time for assembly and shipping is shown in the table. Use the master production schedule for mechanical cats to complete the MRP record. What are the net requirements for whiskers in week 2?

Item Mechanical Cat LT = 1 week

Week MPS Due Date Start Assembly

Item Head Assembly

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

LT = 2 weeks Begin Inv = 88

1

2 75

3 125

4 240

5 300

6 250

70

Whiskers

Scheduled receipts Projected ending LT = 1 week Inventory Begin. Inv. = 147 Net Requirements Planned Receipts Planned Orders A) 5733 B) 5600 C) 5453 D) 5853 Answer: C Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

26) A deluxe model mechanical cat is made of two front leg assemblies, a body assembly, one tail, two head assemblies, and two back leg assemblies. Each head assembly has two eyes, one nose, one mouth, and 24 whiskers. Each back leg assembly has one foot, five claws, one each fibula, tibia, and femur. The cat production company runs a lot for lot system on everything except the heads, which they order in cases of 250, and the whiskers, which come in boxes of 600. Lead time for assembly and shipping is shown in the table. Use the master production schedule for mechanical cats to complete the MRP record. What is the planned order release for whiskers in week 2?

Item Mechanical Cat LT = 1 week

Week MPS Due Date Start Assembly

Item Head Assembly

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

LT = 2 weeks Begin Inv = 88

1

2 75

3 125

4 240

5 300

6 250

70

Whiskers

Scheduled receipts Projected ending LT = 1 week Inventory Begin. Inv. = 230 Net Requirements Planned Receipts Planned Orders A) 18,000 B) 16,000 C) 14,000 D) 12,000 Answer: D Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

27) A deluxe model mechanical cat is made of two front leg assemblies, a body assembly, one tail, two head assemblies, and two back leg assemblies. Each head assembly has two eyes, one nose, one mouth, and 24 whiskers. Each back leg assembly has one foot, five claws, one each fibula, tibia, and femur. The cat production company runs a lot for lot system on everything except the heads, which they order in cases of 125, and the whiskers, which come in boxes of 333. Lead time for assembly and shipping is shown in the table. Use the master production schedule for mechanical cats to complete the MRP record. What is the planned order release for whiskers in week 1?

Item Mechanical Cat LT = 1 week

Week MPS Due Date Start Assembly

Item Head Assembly

Gross Requirements Scheduled receipts Projected ending Inventory Net Requirements Planned Receipts Planned Orders

LT = 2 weeks Begin Inv = 88

1

2 75

3 125

4 240

5 300

6 250

70

Whiskers

Scheduled receipts Projected ending LT = 1 week Inventory Begin. Inv. = 230 Net Requirements Planned Receipts Planned Orders A) 18,000 B) 16,000 C) 14,000 D) 12,000 Answer: D Diff: 3 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, planned order release AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

28) An MRP system cannot answer the question: A) "how much?"

B) "when?"

C) "what?"

D) "why?"

Answer: D Diff: 3 Reference: Material Requirements Planning Keywords: material requirements planning, MRP AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

29) Which of these actions would tend to make an MRP system less nervous?

A) using the same component, such as a fastener, at multiple levels throughout the product structure tree B) eliminating lot size requirements wherever possible C) increasing the number of levels in a product structure tree D) increasing the minimum order quantities only at the highest level of a bill or materials Answer: B Diff: 3 Reference: Material Requirements Planning Keywords: MRP nervousness AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

30) MRP is NOT capable of: A) lowering inventory levels.

B) helping a firm meet their master schedule commitments.

C) telling a firm's suppliers what needs to be made and by when.

D) sequencing jobs at a machining center.

Answer: D Diff: 2 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, sequencing AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

31) A(n) ________ is a record or graphical rendering that shows how all the subassemblies, intermediates, parts, and raw materials are put together to make the Level 0 item.

Answer: product structure tree Diff: 2 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

32) The process of ________ occurs when a planner works backwards from the master production schedule and the product structure tree to determine when all parts and subassemblies must be ordered and assembled in order to meet MPS due dates.

Answer: exploding the BOM Diff: 2 Reference: Material Requirements Planning Keywords: BOM, exploding the BOM, bill of materials AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

33) Cow Company used the master schedule to determine how many workers and the number of machine hours would be needed for each production period. This approach is known as ________.

Answer: rough-cut capacity planning Diff: 1 Reference: Material Requirements Planning Keywords: rough-cut capacity planning, master scheduling AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

34) In material requirements planning, units already on order are referred to as ________ receipts and new orders are termed ________ receipts.

Answer: scheduled; planned Diff: 2 Reference: Material Requirements Planning Keywords: MRP, material requirements planning, scheduled receipts, planned receipts AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

35) Consider the product structure tree shown below:

Assume that the company using this product structure tree has 5 items each at the 0 level, 10 items each at the 1 level and 20 items each at the 2 level. How many units of A, B, and E will the company need to acquire in order to ship an order of 20 X's?

Answer: Working from top to bottom, we need 20 X's and have 5 on hand, so we need to come up with 15 more X's.

15 X's require 30 D's and 45 C's and we have 10 units of both D and C, so our net requirements are 20 D's and 35 C's.

The 20 D's need 40 A's and 60 E's.

The 35 C's need 70 B's and 105 E's and 105 A's Our total gross requirements are 145 A's and 70 B's and 165 E's, but we have 20 each on hand.

Our net requirements at level 2 are 125 A's; 50 B's; and 145 E's.

Diff: 1 Reference: Material Requirements Planning Keywords: bill of material, BOM, product structure tree AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

36) The table shows a master schedule for end item Z that is produced according to the product structure tree shown below. Beginning inventories and lead times for components of Z are given in the table. The lot sizes for A, B, and C are 100 units. Complete a materials requirement plan for components A, B, and C. Period MPS Qty

1 0

2 0

3 0

4 250

5 275

Component Lead Time Beginning Inv

A 1 50

B 2 75

C 2 100

D 2 15

E 1 40

6 275

Answer: Week Z

1 0

2 0

3 0

4 250

5 275

6 275

Week E Gross Sched Rec End Inv Net Req Plan Rec Plan Ord

1

2

3

4

5

6

550 0 0 550 550 550

550 0 0 550 550

460

500 0 0 460 460 550

3

4

5

6

920

1850

1925

825

30 870 900 1900

80 1820 1900 1900

55 1845 1900 800

30 770 800

6

Week A Gross Sched Rec End Inv Net Req Plan Rec Plan Ord Week B Gross Sched Rec End Inv Net Req Plan Rec Plan Ord Week C Gross Sched Rec End Inv Net Req Plan Rec Plan Ord

40

1

50

40

2

50

900

40

1

2

3 920 920

4 1100 1100

5 1100 1100

75

75

55 1045 1100

55 1045 1100

900

1100

55 845 900 1100

1

2

3

4

5

1380

1650

1650

20 1280 1300 1600

70 1630 1700

20 1580 1600

100

100

1300

1700

6

Diff: 3 Reference: Material Requirements Planning Keywords: material requirements planning, MRP, exploding the BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

37) Consider the product structure tree shown below:

With a beginning inventory of twenty for all components on level one, five for all components on level two, and zero for all components on level three and finished items, how many of each component on level three are needed to produce 25 product X's?

Answer: To make 25 X's, we need Level 1: A = 30; B = 5, and C = 55 Level 2: D = 195; H = 135; G = 160 Level 3: E = 1260; F = 535; K = 540; J = 320 Diff: 3 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

38) Consider the product structure tree shown below:

With a beginning inventory of fifteen for all components on level one, twenty for all components on level two, and zero for all components on level three and finished items, how many of each component on level three are needed to produce 20 product X's?

Answer: To make 20 X's, we need Level 1: A = 25; B = 5, and C = 45 Level 2: D = 145; H = 95; G = 115 Level 3: E = 925; F = 395; K = 380; J = 230 Diff: 3 Reference: Material Requirements Planning Keywords: product structure tree, bill of material, BOM AACSB: Analytical Thinking LO: 12.2: Complete the calculations for the MRP record and interpret the results.

39) What are three advantages of using an MRP system?

Answer: The text lists these three benefits of MRP: MRP is directly tied to the master production schedule and indicates the exact timing and quantity of orders for all components. By eliminating a lot of the guesswork associated with the management of dependent demand inventory, MRP simultaneously lowers inventory levels and helps firms meet their master schedule commitments.

MRP allows managers to trace every order for lower-level items through all the levels of the BOM, up to the master production schedule. This logical linkage between higher and lower levels in the BOM is sometimes called the parent/child relationship. If for some reason the supply of a lower-level item is interrupted, a manager can quickly check the BOM to see the impact of the shortage on production.

MRP tells a firm and its suppliers precisely what needs to be made when. This information can be invaluable in scheduling work or shipments, or even in planning budgets and cash flows. In fact, MRP logic is often called the "engine" of planning and control systems. MRP plays a big part in many enterprise resource planning (ERP) systems, described in the supplement.

Diff: 1 Reference: Material Requirements Planning Keywords: material requirements planning, MRP AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

40) What organizational disciplines are required in order for an organization to successfully run a material requirements planning system?

Answer: An MRP system needs accurate inputs in the form of a master schedule, bill of materials, inventory records, and planning lead times. An organization must have the organizational discipline to maintain inventory records as they use materials, receive orders from vendors, and ship finished goods. The organization must begin with accurate BOM data and update the data as product configurations change. The organization must have open lines of communication with their customers and vendors in order to verify that lead time and order quantity information is accurate and up-to-date.

Diff: 2 Reference: Material Requirements Planning Keywords: material requirements planning, MRP AACSB: Application of Knowledge LO: 12.2: Complete the calculations for the MRP record and interpret the results.

Learning Objective 12-3 1) If a job has a negative critical ratio then it must be early.

Answer: FALSE Diff: 3 Reference: Production Activity Control and Vendor Order Management Systems Keywords: critical ratio, job sequencing AACSB: Application of Knowledge LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

2) RFID tags can be used to trace the movement and location of materials.

Answer: TRUE Diff: 1 Reference: Production Activity Control and Vendor Order Management Systems Keywords: RFID, radio frequency identification AACSB: Information Technology LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

3) Using the information in the table, determine a schedule for these five jobs using the critical ratio sequence.

Job A B C D E

Process Time Due Date 2 7 8 16 4 4 10 17 5 15

A) C-D-B-E-A B) A-C-E-B-D C) C-A-E-B-D D) A-D-B-E-C Answer: A Diff: 2 Reference: Production Activity Control and Vendor Order Management Systems Keywords: critical ratio, CR, job sequencing AACSB: Analytical Thinking LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

4) Calculate the average lateness using the earliest due date criterion to determine the schedule for these five jobs.

Job A B C D E

Process Time Due Date 2 7 8 16 4 4 10 17 5 15

A) 3 B) 10 C) 12.4 D) 14 Answer: A Diff: 2 Reference: Production Activity Control and Vendor Order Management Systems Keywords: EDD, earliest due date, average lateness, job sequencing AACSB: Analytical Thinking LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

5) What is the average lateness of these seven jobs if they are scheduled using the critical ratio criterion?

Job Job 1 Job 2 Job 3 Job 4 Job 5 Job 6 Job 7

Process Time Due Date 15 23 7 15 12 34 8 16 11 27 10 19 13 28

A) 24.3 B) 21.7 C) 22.5 D) 23.4 Answer: B Diff: 3 Reference: Production Activity Control and Vendor Order Management Systems Keywords: critical ratio, CR, average lateness AACSB: Analytical Thinking LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

6) What is the average lateness of these seven jobs if they are scheduled using the earliest due date criterion?

Job Job 1 Job 2 Job 3 Job 4 Job 5 Job 6 Job 7

Process Time Due Date 15 23 7 15 12 34 8 16 11 27 10 19 13 28

A) 19.2 B) 18.7 C) 17.8 D) 16.5 Answer: C Diff: 3 Reference: Production Activity Control and Vendor Order Management Systems Keywords: earliest due date, EDD, average lateness AACSB: Analytical Thinking LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

7) What are the third, fourth, and fifth jobs in a critical ratio sequence?

Job Job 1 Job 2 Job 3 Job 4 Job 5 Job 6 Job 7

Process Time Due Date 15 23 7 15 12 34 8 16 11 27 10 19 13 28

A) Job 6, Job 5, Job 2 B) Job 2, Job 5, Job 7 C) Job 6, Job 4, Job 7 D) Job 4, Job 2, Job 7 Answer: D Diff: 3 Reference: Production Activity Control and Vendor Order Management Systems Keywords: critical ratio, CR, job sequencing AACSB: Analytical Thinking LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

8) For a given job, the amount of processing time remaining divided by the amount of time until the job is due is its ________.

Answer: critical ratio

Diff: 1 Reference: Production Activity Control and Vendor Order Management Systems Keywords: job, scheduling, critical ratio, CR, job sequencing AACSB: Application of Knowledge LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

9) There are six jobs that are awaiting processing at a machining center. The jobs are shown in the table with their processing time and scheduled completion time. Schedule the jobs by earliest due date, shortest processing time and the critical ratio rule and calculate average lateness for all the jobs. Which scheduling technique performs BEST? Job A B C D E F

Process Time Due Time 12 25 8 32 15 40 10 15 20 27 17 46

Answer:

Job B D A C F E

Job D A E B C F

Job E D A C F B

Shortest Processing Time Completion Process Time Due Time Time 8 32 8 10 15 18 12 25 30 15 40 45 17 46 62 20 27 82 Average

Lateness 0 3 5 5 16 55 14.0

Earliest Due Date Completion Process Time Due Time Time 10 15 10 12 25 22 20 27 42 8 32 50 15 40 65 17 46 82 Average

Lateness 0 0 15 18 25 36 15.67

Critical Ratio Completion Process Time Due Time Time 20 27 20 10 15 30 12 25 42 15 40 57 17 46 74 8 32 82 Average

Lateness 0 15 17 17 28 50 21.17

The sequence developed using the shortest processing time (SPT) rule has the lowest average lateness of 14.0. The earliest due date (EDD) sequence has an average lateness of 15.67 and the

critical ratio sequence has an average lateness of 21.17. Based on this criterion, the SPT sequence is the best.

Diff: 3 Reference: Production Activity Control and Vendor Order Management Systems Keywords: job sequencing, EDD, SPT, critical ratio, average lateness, CR, earliest due date, shortest processing time AACSB: Analytical Thinking LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

10) Determine a schedule for these jobs using the critical ratio criterion and calculate the average lateness. Then develop an earliest due date sequence and calculate average lateness.

Job Job 1 Job 2 Job 3 Job 4 Job 5 Job 6 Job 7

Process Time Due Date 15 23 7 15 12 34 8 16 11 27 10 19 13 28

Answer: Job Job 1 Job 2 Job 3 Job 4 Job 5 Job 6 Job 7

Critical Ratio Sequence Process Time Due Date Critical Ratio Sequence Lateness 15 23 1.53 1 0 7 15 2.14 4 25 12 34 2.83 7 42 8 16 2 3 17 11 27 2.45 6 37 10 19 1.9 2 6 13 28 2.15 5 25

The average lateness for this sequence is 152/7 = 21.71

Job Job 1 Job 2 Job 3 Job 4 Job 5 Job 6 Job 7

Earliest Due Date Process Time Due Date Sequence 15 23 4 7 15 1 12 34 7 8 16 2 11 27 5 10 19 3 13 28 6

Lateness 17 0 42 0 24 6 36

The average lateness for this sequence is 125/7 = 17.86 Diff: 3 Reference: Production Activity Control and Vendor Order Management Systems Keywords: critical ratio, CR, EDD, earliest due date, average lateness AACSB: Analytical Thinking LO: 12.3: Discuss the role of production activity control and vendor order management and how these functions differ from higher-level planning activities.

Learning Objective 12-4 1) Distribution requirements planning is used to synchronize supply chain partners at the production activity control level.

Answer: FALSE Diff: 2 Reference: Synchronizing Planning and Control across the Supply Chain Keywords: DRP, distribution requirements planning AACSB: Application of Knowledge LO: 12.4: Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

2) Distribution requirements planning is identical to material requirements planning except instead of gross requirements, a DRP record shows forecasted demand.

Answer: TRUE Diff: 2 Reference: Synchronizing Planning and Control across the Supply Chain Keywords: DRP, distribution requirements planning, forecasted demand, gross requirements AACSB: Application of Knowledge LO: 12.4: Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

3) A time-phased planning approach that uses planned orders at the point of demand to determine forecasted demand at the source level is: A) RFID. B) EDD. C) DRP. D) MRP. Answer: C Diff: 1 Reference: Synchronizing Planning and Control across the Supply Chain Keywords: DRP, distribution requirements planning, forecasted demand AACSB: Application of Knowledge LO: 12.4: Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

4) In distribution requirements planning the MRP records do not use the term gross requirements; instead the amount is shown as: A) net requirements.

B) total requirements.

C) distributed requirements.

D) forecasted demand.

Answer: D Diff: 2 Reference: Synchronizing Planning and Control across the Supply Chain Keywords: DRP, distribution requirements planning, forecasted demand AACSB: Application of Knowledge LO: 12.4: Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

5) Forecasts in a company using a distribution requirements planning system are typically based on: A) historical data from upstream supply partners.

B) historical data from downstream supply partners.

C) upstream supply partners' requirements.

D) downstream supply partners' requirements.

Answer: D Diff: 2 Reference: Synchronizing Planning and Control across the Supply Chain Keywords: DRP, distribution requirements planning AACSB: Application of Knowledge LO: 12.4: Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

6) ________ is a tool that can be used to synchronize supply chain partners at the master production schedule level.

Answer: Distribution requirements planning (DRP) Diff: 1 Reference: Synchronizing Planning and Control across the Supply Chain Keywords: distribution requirements planning, DRP AACSB: Application of Knowledge LO: 12.4: Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

7) The planned orders entries for members of a DRP system are rolled up into the entry labeled ________ in the distribution requirements planning system.

Answer: forecasted demand Diff: 2 Reference: Synchronizing Planning and Control across the Supply Chain Keywords: distribution requirements planning, DRP, forecasted demand AACSB: Application of Knowledge LO: 12.4: Explain how distribution requirements planning (DRP) helps synchronize the supply chain and complete the calculations for a simple example.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 13 JIT/Lean Production

Learning Objective 13-1 1) The just-in-time philosophy applies only to the production floor of a manufacturing company.

Answer: FALSE Diff: 1 Reference: Introduction Keywords: JIT, just-in-time, manufacturing AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

2) The term just-in-time production is used synonymously with the term Lean production.

Answer: TRUE Diff: 1 Reference: Introduction Keywords: JIT, just-in-time, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

3) Companies employing the Lean philosophy use only Kanban as a production control method.

Answer: FALSE Diff: 2 Reference: Introduction Keywords: JIT, just-in-time, manufacturing, kanban AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

4) Lean thinking has received considerable attention in the last decade, but tools such as kanbans cannot be used in all production environments.

Answer: TRUE Diff: 2 Reference: Introduction Keywords: kanban, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

5) Unnecessary transportation is waste according to the Lean philosophy.

Answer: TRUE Diff: 1 Reference: The Lean Perspective on Waste Keywords: JIT, just-in-time, waste, transportation, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

6) The ability of a process to produce quality output is unknown and the time to ship the output to a customer is highly variable. The combination of these two factors will lead to the waste of waiting.

Answer: FALSE Diff: 2 Reference: The Lean Perspective on Waste Keywords: JIT, just-in-time, waste, unnecessary inventory, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

7) The newest form of waste is underutilizing employees.

Answer: TRUE Diff: 1 Reference: The Lean Perspective on Waste Keywords: JIT, just-in-time, waste, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

8) Since a Lean manufacturer has very little inventory, it is vital that all incoming parts receive a thorough inspection.

Answer: FALSE Diff: 2 Reference: The Lean Perspective on Waste Keywords: JIT, just-in-time, waste, inspection AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

9) JIT or Lean can be used in: A) repetitive production.

B) job shop production.

C) many service industries.

D) All of these settings are appropriate for JIT. Answer: D Diff: 1 Reference: Introduction Keywords: JIT, just-in-time, service, manufacturing, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

10) Which of the following is NOT an element of Lean production?

A) to have only the required inventory when needed B) to increase queue lengths C) to improve quality to zero defects D) to reduce setup times Answer: B Diff: 1 Reference: Introduction Keywords: JIT, just-in-time, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

11) Inflexible or unreliable processes cause organizations to produce goods before they are required; this is called: A) excess motion.

B) inappropriate processes.

C) overproduction.

D) defects.

Answer: C Diff: 2 Reference: The Lean Perspective on Waste Keywords: JIT, just-in-time, waste, overproduction, lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

12) Scrap or rework are examples of the lean waste recognized as: A) defects.

B) inappropriate processing.

C) unnecessary motion.

D) waiting.

Answer: A Diff: 2 Reference: The Lean Perspective on Waste Keywords: JIT, lean, just-in-time, waste, defects AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

13) The delivery lead time was highly variable as was the quality of the product being shipped.

These two factors combined to contribute to the waste of: A) unnecessary transportation.

B) unnecessary inventory.

C) unnecessary motion.

D) waiting.

Answer: B Diff: 2 Reference: The Lean Perspective on Waste Keywords: JIT, lean, just-in-time, waste, unnecessary inventory AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

14) The receiving department accepts a shipment, confirms it matches the purchase order, and moves it to an area they call "deep storage." As the time approaches for the shipment to be used, they move it from deep storage to the week's holding pen, and on the day of use, it is transferred to the line near where it will fall into the product stream. When the worker needs it, she goes to where it is stored and brings it to her work station. This illustrates the waste of: A) unnecessary inventory.

B) overproduction.

C) unnecessary transportation.

D) underutilization of employees.

Answer: C Diff: 2 Reference: The Lean Perspective on Waste Keywords: JIT, lean, just-in-time, waste, transportation AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

15) The MBA recruiter had worked in one of several different positions at the university; student advisor, adjunct professor, even MBA director at a previous employer. Her sole responsibility as recruiter was attending MBA and job fairs in the area to talk to prospective students about the possibility of continuing their education. This illustrates the waste of: A) unnecessary inventory.

B) overproduction.

C) unnecessary transportation.

D) underutilization of employees.

Answer: D Diff: 2 Reference: The Lean Perspective on Waste Keywords: JIT, lean, just-in-time, waste, underutilization AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

16) Just-in-time production is also referred to as ________.

Answer: lean production (or the Toyota Production System) Diff: 1 Reference: Introduction Keywords: JIT, lean, just-in-time, lean, Toyota production system, TPS AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

17) Any activity that does not add value to the good or service in the eyes of the consumer is ________.

Answer: waste (or muda) Diff: 1 Reference: The Lean Perspective on Waste Keywords: JIT, lean, just-in-time, waste, value AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

18) Provide a definition by description of the Lean philosophy. Where can Lean be deployed?

Answer: Our trusty APICS dictionary weighs in thusly.

Lean is a philosophy of production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with the customers. Lean producers employ teams of multiskilled workers at all levels of the organization and use highly flexible, increasingly automated machines to produce volumes of products in potentially enormous variety. It contains a set of principles and practices to reduce cost through the relentless removal of waste and through the simplification of all manufacturing and support processes.

The Lean philosophy has extended beyond just manufacturing to include services and essentially all aspects of supply chain management. Firms following a Lean philosophy often experience remarkable improvements in their productivity (outputs/inputs), inventory levels, and quality.

Lean can also be applied outside of the work environment; even as I develop this test bank my garage is undergoing a magical transformation from a cluttered pit of grease and despair to a pristine, organized, car-friendly workshop.

Diff: 3 Reference: Introduction Keywords: Lean AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

19) Describe any five of the wastes and their causes identified by the lean philosophy.

Answer: According to the lean perspective, waste, or muda, is any activity that does not add value to the good or service in the eyes of the consumer. There are eight commonly recognized ones, so answers will vary depending on which five are selected. overproduction – caused by inflexible or unreliable processes that cause organizations to produce goods before they are required. waiting – caused by inefficient layouts or an inability to match demand with output levels. unnecessary transportation – always increasing costs and the risk of damage without adding value. inappropriate process – using overly complex processes when simpler, more efficient ones would do. unnecessary inventory – caused by uncertainty with regard to quality levels, delivery lead times, etc. unnecessary/excess motion – caused by poorly designed processes. defects – creating uncertainty in the process and robbing production capacity by creating products or services that require rework or must be scrapped. underutilization of employees – caused by not utilizing the skills and decision-making capabilities of their employees.

Diff: 2 Reference: The Lean Perspective on Waste Keywords: just-in-time, JIT, lean, waste AACSB: Application of Knowledge LO: 13.1: Discuss the Lean perspective on waste, and describe the eight major forms of waste, or muda, in an organization.

Learning Objective 13-2 1) A reduction in inventory levels forces a company to address poor manufacturing practices.

Answer: TRUE Diff: 1 Reference: The Lean Perspective on Inventory Keywords: JIT, lean, just-in-time, inventory AACSB: Application of Knowledge LO: 13.2: Discuss the Lean perspective on inventory.

2) In the water and rocks analogy for lean: A) water represents problems.

B) water represents inventory.

C) rocks represent inventory.

D) water wears away rocks gradually just like continuous improvement programs improve quality.

Answer: B Diff: 2 Reference: The Lean Perspective on Inventory Keywords: JIT, lean, just-in-time, inventory AACSB: Application of Knowledge LO: 13.2: Discuss the Lean perspective on inventory.

3) In the lean perspective on inventory, often when a process is running smoothly: A) it is likely that workers are underutilized.

B) it is likely that there is too little inventory in the system.

C) it is likely that there is too much inventory in the system.

D) it is likely that workers are overutilized.

Answer: C Diff: 3 Reference: The Lean Perspective on Inventory Keywords: JIT, lean, just-in-time, inventory AACSB: Application of Knowledge LO: 13.2: Discuss the Lean perspective on inventory.

4) A company has successfully implemented lean practices in their three station process. The stations are, in order, Station A, Station B, and Station C and product moves from A to B to C smoothly. One day, the equipment at Station B experiences catastrophic failure. What happens and what is the appropriate response for a lean-thinking company?

A) Continue producing at Station C and restore capacity at Station B. B) Continue producing at Station A and restore capacity at Station B. C) Continue producing at Station A and C and restore capacity at Station B. D) Everything stops and attention is focused on restoring capacity at Station B. Answer: D Diff: 3 Reference: The Lean Perspective on Inventory Keywords: JIT, lean, just-in-time, inventory AACSB: Application of Knowledge LO: 13.2: Discuss the Lean perspective on inventory.

5) The analogy of rocks in a river is often used when discussing Lean principles. In the analogy, the rocks represent ________ while the water represents ________.

Answer: problems; inventory Diff: 1 Reference: The Lean Perspective on Inventory Keywords: inventory, lean, JIT AACSB: Application of Knowledge LO: 13.2: Discuss the Lean perspective on inventory.

6) What is the Lean perspective on inventory?

Answer: The lean philosophy places a strong emphasis on reducing raw materials, work in process, and finished goods inventory throughout the system. This is not only because inventory is seen as a form of waste in and of itself, but also because inventory can cover up wasteful business practices. Lowering inventory levels forces firms to address these poor practices.

Diff: 1 Reference: The Lean Perspective on Inventory Keywords: JIT, lean, just-in-time, inventory, kanban AACSB: Application of Knowledge LO: 13.2: Discuss the Lean perspective on inventory.

Learning Objective 13-3 1) One recent development in Lean thinking is the combination of Lean and Six Sigma into Lean Six Sigma, which combines the rigor of statistical analysis and DMAIC approach with Lean's focus on waste reduction.

Answer: TRUE Diff: 1 Reference: Recent Developments in Lean Thinking Keywords: Lean Six Sigma AACSB: Application of Knowledge LO: 13.3: Describe how the concepts of the Lean supply chain and Lean Six Sigma represent natural extensions of the Lean philosophy.

2) Lean supply chain management focuses on eliminating waste: A) in a firm's sourcing and logistics activities.

B) within a firm's internal operations.

C) in flows of information and money among supply chain partners.

D) in all of the above areas.

Answer: D Diff: 2 Reference: Recent Developments in Lean Thinking Keywords: Lean supply chain management AACSB: Application of Knowledge LO: 13.3: Describe how the concepts of the Lean supply chain and Lean Six Sigma represent natural extensions of the Lean philosophy.

3) ________ combines the focus on waste reduction with the discipline of define, measure, analyze, improve, and control.

Answer: Lean Six Sigma Diff: 1 Reference: Recent Developments in Lean Thinking Keywords: Lean Six Sigma AACSB: Application of Knowledge LO: 13.3: Describe how the concepts of the Lean supply chain and Lean Six Sigma represent natural extensions of the Lean philosophy.

4) ________ could result in workers from one company working to solve production issues for a company from which they purchase components.

Answer: Lean supply chain management Diff: 2 Reference: Recent Developments in Lean Thinking Keywords: Lean supply chain management AACSB: Application of Knowledge LO: 13.3: Describe how the concepts of the Lean supply chain and Lean Six Sigma represent natural extensions of the Lean philosophy.

5) Recent developments in Lean thinking have combined these principles with Six Sigma and with supply chain management. Pick either one of these programs and describe its elements.

Then provide an example from current business news of an operation or supply chain that has embraced these principles.

Answer: Examples will vary.

Lean Six Sigma combines the organizational elements and tools of Six Sigma, with Lean's focus on waste reduction. As Paul Mullenhour and Jamie Flinchbaugh put it, "Lean encourages action along a broad front by empowering people at all levels to contribute. This allows organizations to welcome challenges and implement improvement initiatives... Six Sigma brings the discipline of define, measure, analyze, improve and control, as well as the rigor of statistical analysis, to identify a root cause, sustain improvement and provide the solid measurements that create a balanced scorecard."

Some practitioners and researchers have moved beyond Lean production to what can be called Lean supply chain management. In a nutshell, Lean supply chain management seeks to minimize the level of resources required to carry out all supply chain activities. Lean principles are applied to eliminate waste in a firm's sourcing and logistics activities, as well as within the firm's internal operations. But it doesn't end there. The Lean philosophy is applied to all relevant flows – physical, informational, and monetary – and, where possible, to supply chain partners.

This means that firms might need to work closely with key partners to eliminate waste within their operations.

Diff: 2 Reference: Recent Developments in Lean Thinking Keywords: Lean Six Sigma AACSB: Application of Knowledge LO: 13.3: Describe how the concepts of the Lean supply chain and Lean Six Sigma represent natural extensions of the Lean philosophy.

Learning Objective 13-4 1) A two-card kanban system is a planning tool that links production and movement of units at two work centers.

Answer: FALSE Diff: 1 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, inventory, kanban AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

2) The cards employed in a two-card kanban system are the production card and the move card.

Answer: TRUE Diff: 1 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, production, move, card AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

3) A pull system is a production system in which actual downstream demand sets off a chain of events that pull material through various steps in the production process.

Answer: TRUE

Diff: 1 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, pull system AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

4) The forecast for next month is 200 units so the manufacturer gathers materials for this anticipated level of production activity. This is an example of pull production.

Answer: FALSE Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, pull system AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

5) The greater the demand, the more kanbans are needed.

Answer: TRUE Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, demand AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

6) An increase in the safety factor results in an increase in the amount of inventory in a kanban system.

Answer: TRUE Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, safety factor, inventory AACSB: Analytical Thinking LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

7) In the kanban formula, the letter T represents the time it takes to empty a box of parts through building product.

Answer: FALSE Diff: 2 Reference: Kanban Systems Keywords: kanban, demand, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

8) For a kanban system to work properly, demand rates must be relatively stable, and interruptions must be minimized.

Answer: TRUE Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, demand AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

9) Some companies have found it beneficial to combine the planning capabilities of kanban with the control capabilities of MRP. Answer: FALSE Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, planning, control AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

10) A kanban can be: A) a container.

B) a card.

C) a visual cue.

D) All of these can be kanbans.

Answer: D Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, card, container AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

11) In a two-card kanban system: A) the production card signals when a move card should be moved to the next process step.

B) the move card signals when a container of parts should be produced.

C) the production card signals when a container that held parts should be returned to inventory.

D) the move card signals when a container of parts should move to the next process step.

Answer: D Diff: 2 Reference: Kanban Systems Keywords: move card, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

12) In a two-card kanban system: A) each box of finished goods has a move card so it can be sent to the next step.

B) each box of raw material has a production card so it can be made into finished goods.

C) a downstream station pulls finished material out of a production area.

D) demand for more raw materials pushes finished goods to the finished goods area.

Answer: C Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, two-card, kanban, production, move AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

13) In a single-card kanban system: A) the single card is the production card.

B) the empty container serves as the production card.

C) the single card is the move signal.

D) None of the above is correct in a single-card system.

Answer: A Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, single-card, production, move AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

14) Liversuch Industries uses a kanban system to manage production of the J-15 subassembly.

They have an hourly demand for 250 units and use containers that can hold 50 units each. It takes 90 minutes to fill and move a container of parts to the right place on the J-15 line that is currently rated at a 20% safety factor. How many production cards are needed?

A) 540 B) 100 C) 9 D) 1.5 Answer: C Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban AACSB: Analytical Thinking LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

15) Livermore Industries uses a kanban system to manage production of the KR-9 subassembly.

In a ten-hour day, they use 1500 units and use containers that can hold 50 units each. It takes 45 minutes to fill and move a container of parts to the right place on the KR-9 line that is currently rated at a 15% safety factor. How many production cards are needed?

A) 3 B) 26 C) 82 D) 155 Answer: A Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban AACSB: Analytical Thinking LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

16) Livernonions Industries uses a kanban system to manage production of the BR-549 subassembly. In an eight-hour day, they use 900 units and use containers that can hold 30 units each. It takes 120 minutes to fill and move a container of parts to the right place on the BR-549 line that is currently rated at a 15% safety factor. How many production hours of inventory are needed?

A) 18.4 B) 7.6 C) 4.3 D) 2.4 Answer: D Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, inventory AACSB: Analytical Thinking LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

17) Olivia has had enough of the theoretical equations and rejects the higher math needed to calculate the number of kanbans for her system. One approach that some organizations take in lieu of the kanban equation is to: A) start with one kanban and operate as fast as they can with the one, before adding more kanbans to bring them up to speed.

B) start with too many kanbans and gradually remove them until a problem arises.

C) fully load their system with inventory and produce until they cannot build product.

D) eliminate all inventory from the system and add material and parts until they can fill a customer order.

Answer: B Diff: 2 Reference: Kanban Systems Keywords: kanban, demand, time, safety factor, lean, JIT AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

18) Consider the adjacent work stations in this two card Kanban system. There is a move card located:

A) in box A. B) in box B. C) both in box A and box C. D) in box C. Answer: C Diff: 2 Reference: Kanban Systems Keywords: kanban, move card, two card, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

19) Consider the adjacent work stations in this two card Kanban system. There is a production card located:

A) in box A. B) in box B. C) at work center 1 and work center 2.

D) in box C. Answer: B Diff: 3 Reference: Kanban Systems Keywords: kanban, production card, two card, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

20) Consider the adjacent work stations in this two card Kanban system. There is a production card located in the box labeled Outgoing Parts B. Work Center 3 pulls the parts from Work Center 2. Where does the production card go?

A) The production card remains in the same box.

B) The production card is placed at Work Center 3.

C) The production card is placed at Work Center 2.

D) The production card is placed in the box labeled Incoming Parts A. Answer: C Diff: 3 Reference: Kanban Systems Keywords: kanban, production card, two card, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

21) Consider the adjacent work stations in this two card Kanban system. Work Center 3 has just pulled the Incoming Parts C box to their work station. What happens to the cards in the Incoming Parts C box and at the work station?

A) The move card at their station goes in the Incoming Parts C box and the production card is pulled from the Incoming Parts C box to signal the worker at Work Center 2 that there is a need to produce material.

B) The production card at the station is passed back to Work Center 2 as a signal to produce more material and the move card is left at Work Center 3 to signal that they are ready to accept materials when they are complete at Work Center 2.

C) The move card at their station goes in the box they will send downstream to Work Center 4 and the production card is placed at the Work Center 3 station while they are working on this batch of material.

D) The production card at their station goes in the Incoming Parts C box and the move card is pulled from the Incoming Parts C box to signal the worker at Work Center 2 that there is a need to move material.

Answer: D Diff: 3 Reference: Kanban Systems Keywords: kanban, production card, move card, two card, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

22) Consider the adjacent work stations in this two card Kanban system. Work Center 3 has just pulled the Incoming Parts C box to their work station. Which of these statements is best?

A) The move card will move backward from Work Center 3 to Work Center 2.

B) The production card will move backward from Work Center 3 to Work Center 2.

C) The move card will move forward from Work Center 3 to Work Center 4.

D) Despite its name, the move card doesn't actually move from one station to the next, it will simply reside at Work Center 3 until the next box is finished.

Answer: A Diff: 3 Reference: Kanban Systems Keywords: kanban, move card, two card, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

23) Consider the adjacent work stations in this two card Kanban system. Work Center 3 has just pulled the Incoming Parts C box to their work station. Plant manager Taichi Ohno grabs the microphone for the company PA system and announces that effective immediately, the company will switch to a one card system. Which of these actions is appropriate?

A) The production card will be discarded and the empty container will function as a production signal.

B) The move card will be discarded and the empty container will function as a move signal.

C) Both the move and production cards will be discarded in favor of a combined move/production card.

D) The production card will be discarded as production will be implied and the move cards will signal when items are needed downstream.

Answer: B Diff: 3 Reference: Kanban Systems Keywords: kanban, move card, single bin, two card, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

24) Which of the following statements regarding supply chain synchronization using kanbans is BEST? A) An interruption in the flow of goods within a supplier's assembly operations will have no effect on final assembly downstream in the supply chain.

B) For the system to work properly, demand rates must be relatively stable and interruptions must be minimized.

C) If final assembly demand doubles, there is no need to change kanbans at each of the suppliers.

D) Final assembly demand may rise or fall, but the sum of the kanbans among all suppliers in the supply chain will remain constant.

Answer: B Diff: 3 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, supply chain AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

25) When using MRP and kanban together: A) the control capabilities of MRP are used instead of those from kanban.

B) the planning capabilities of kanban are used instead of those from MRP. C) the demand rate should be variable in order to derive the greatest benefit from the MRP portion of the system.

D) the number of kanbans is recalculated from the MRP system's order changes throughout the horizon.

Answer: D Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, MRP AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

26) A(n) ________ is a production control approach that uses containers, cards, or visual cues to control production and movement of goods throughout the supply chain.

Answer: kanban system Diff: 1 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

27) Under two-card kanban system rules, each box of raw material must have a(n) ________, while each box of finished goods must have a(n) ________.

Answer: move card; production card Diff: 2 Reference: Kanban Systems Keywords: JIT, lean, just-in-time, kanban, production card, move card, two card AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

28) A manufacturer waits to produce until they have an order from a customer. This type of production system is called ________.

Answer: pull production Diff: 2 Reference: Kanban Systems Keywords: pull system, pull production, JIT AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

29) The number of kanbans in a production system is inversely related to the ________.

Answer: container size Diff: 3 Reference: Kanban Systems Keywords: kanban, container, lean, JIT AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

30) Companies that use MRP and kanban together use the ________ of MRP and the ________ of kanban.

Answer: planning capabilities; control capabilities Diff: 3 Reference: Kanban Systems Keywords: kanban, MRP, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

31) Describe the movements of parts and kanbans in a two-card kanban system.

Answer: A two-card kanban system has move cards in boxes of raw materials and production cards in boxes of finished goods. When a box of finished goods is pulled by a downstream position (by either a customer or another work center) the production card is removed from the box and placed at the upstream position, thus triggering the need to produce more parts at this position. To do so, the worker at this center must obtain more raw materials, so they pull a box of parts from the upstream position. As they pull this box of parts, they remove the card and place it in a conspicuous location at the upstream position. This serves as the order to fill that box with more raw materials. Once the box is filled with raw materials, the move card is put back in the box, ready for another cycle. The finished goods container works the same way; once the goods are finished, the production card is replaced and ready for the next iteration.

Diff: 3 Reference: Kanban Systems Keywords: kanban, MRP, JIT, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

32) Two modules are used to feed the final assembly station on an assembly line. The final assembly station must produce 250 units in an eight-hour day. Each finished unit needs two module A's and 3 module B's. The factory uses a standard sized container that can hold 25 module A's or 35 module B's. It takes 2 hours to fill and move a container of module A's, but only 90 minutes to fill and move a container of module B's. If both module assembly processes have safety factors of 15%, how many containers should be used for each? How many hours of demand will this satisfy?

Answer: The number of containers is governed by this equation. y= = 5.75 → 6 containers

yA =

= 4.62 → 5 containers

yB =

Due to rounding up, there is more inventory in the system than necessary and this will support more hours of production: Hours = = Module A =

=

= 0.3 days = 2.4 hours

Module B =

=

= 0.23 days = 1.87 hours

Diff: 3 Reference: Kanban Systems Keywords: kanban, demand, time, safety factor, JIT, lean AACSB: Analytical Thinking LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

33) What are the consequences of unstable demand and interrupted flows on a supply chain managed with a lean philosophy?

Answer: Lean requires that demand be relatively stable and that flows be relatively smooth. If demand rates are unstable and high, then a downstream station might exhaust all of the inventory in their system and be starved for inventory if upstream stations cannot respond quickly enough.

If flow is interrupted due to an unforeseen emergency, quality issues, etc., the downstream work station may grind to a halt while issues are worked out at the point of difficulty.

Diff: 1 Reference: Kanban Systems Keywords: just-in-time, JIT, demand, flow, lean AACSB: Application of Knowledge LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

34) Use this material requirements planning record to explain how kanbans and MRP can be used together. This plant operates on a 40-hour week, and uses a 10% safety factor on a container size of 20 units with a half-day turnaround time on a container. What features of each system should be used and for what purposes?

Week Gross Requirement Scheduled Receipts Projected Ending Inventory Net Requirements Planned Receipts Planned Orders

1 900 0 0 900 900 900

2 1000 0 0 1000 1000 1000

3 1100 0 0 1100 1100 1100

Answer: Companies that use both MRP and kanbans use the planning features of MRP and the control features of kanbans. This plant is adhering to the lean philosophy by making exactly what it needs each week with no anticipated ending inventory. As net requirements increase from week to week, the plant manager will have to increase the number of kanbans in the system according to the following calculations: y= y1 =

= 4.95 → 5 containers

y2 =

= 5.5 → 6 containers

y3 =

= 6.05 → 7 containers

Diff: 3 Reference: Kanban Systems Keywords: kanban, MRP, JIT, lean AACSB: Analytical Thinking LO: 13.4: Explain how a two-card Kanban system works, and calculate the number of Kanban cards needed in a simple production environment.

Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 14 Managing Projects Learning Objective 14-1 1) A project is a temporary undertaking designed to achieve a particular organizational goal.

Answer: TRUE Diff: 1 Reference: Introduction Keywords: project AACSB: Application of Knowledge LO: 14.1: Explain the difference between routine business activities and projects.

2) In what way are projects and typical business activities similar?

A) For most companies, projects and typical business activities can be described as routine.

B) Both projects and typical business activities have a defined ending point at which time they are complete.

C) Projects and routine business activities require significant levels of cross-functional and interorganizational coordination.

D) The successful completion of projects and business activities is essential to a firm's competitive position.

Answer: D Diff: 1 Reference: Introduction Keywords: project, business activities AACSB: Application of Knowledge LO: 14.1: Explain the difference between routine business activities and projects.

3) In what ways are projects distinct from typical business activities?

Answer: Projects are distinct from typical business activities in four ways. First, projects are nonroutine. Second, the nonroutine nature of a project makes it very difficult to manage. Third, projects typically require significant levels of cross-functional and interorganizational coordination. Fourth, projects have a defined ending point at which time the project is complete Diff: 1 Reference: Introduction Keywords: business activities, project AACSB: Application of Knowledge LO: 14.1: Explain the difference between routine business activities and projects.

4) Discuss the recent business trends that have increased the attention and interest in project management skills.

Answer: Industry trends have also pushed project management to the forefront. Two trends of particular interest are: a) the faster pace of strategic change and b) the changing role of middle management.

With regards to the pace of strategic change, new product lines must be introduced more often to fight off hungry competitors. Information technology solutions that used to last 10 years are now out of date after five, and customer and supplier networks quickly change, requiring new supply chain solutions. The result of all this is that companies find themselves involved in many more projects with strategic ramifications than they were involved in just a few years ago. As the number of projects increases, the case for improved project management becomes even stronger for a firm.

Project management has also received more attention as the traditional role of middle management has shrunk. Advanced information systems now handle many of the data analysis tasks that middle managers used to perform. At the same time, many companies have taken the authority and responsibility for work outcomes away from middle managers and pushed them down to direct supervisors and workers.

Diff: 1 Reference: The Growing Importance of Project Management Keywords: project, process AACSB: Application of Knowledge LO: 14.1: Explain the difference between routine business activities and projects.

Learning Objective 14-2 1) In the project definition phase, project planners identify, among other tasks, how to accomplish the work and how to organize for the project.

Answer: TRUE Diff: 1 Reference: Project Phases Keywords: project definition phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

2) Performance or time targets for each major group of activities in a project are set during the planning phase of a project.

Answer: TRUE Diff: 1 Reference: Project Phases Keywords: planning phase, milestone AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

3) Key points in a project, such as when a major activity or phase should be completed, are referred to as lodestones.

Answer: FALSE Diff: 1 Reference: Project Phases Keywords: milestone, planning phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

4) There are more resources required during the performance phase of a project than the project definition phase.

Answer: TRUE Diff: 1 Reference: Project Phases Keywords: performance phase, project definition phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

5) One of the primary characteristics of projects as a form of work is the movement of personnel from project to project.

Answer: TRUE Diff: 2 Reference: Project Phases Keywords: postcompletion phase, reassignment AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

6) Project planners develop a broad definition of what the project is and what its scope will be during the: A) concept phase.

B) project definition phase.

C) planning phase.

D) performance phase.

Answer: A Diff: 1 Reference: Project Phases Keywords: concept phase, scope AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

7) The budget estimates made during the concept phase are usually accurate to within: A) 20 percent.

B) 30 percent.

C) 40 percent.

D) 50 percent.

Answer: B Diff: 2 Reference: Project Phases Keywords: concept phase, budget AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

8) An expectation that a new building's foundation would be poured and cured by the end of the year is an example of a(n): A) activity.

B) scope.

C) milestone.

D) precedence.

Answer: C Diff: 2 Reference: Project Phases Keywords: milestone, planning phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

9) Work on a project's constituent activities begins in the project's: A) planning phase.

B) concept phase.

C) post-completion phase.

D) performance phase.

Answer: D Diff: 1 Reference: Project Phases Keywords: performance phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

10) During the ________, project planners identify how to accomplish the work, how to organize for the project, and the key personnel and resources needed.

Answer: project definition phase Diff: 1 Reference: Project Phases Keywords: project definition phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

11) A performance or time target for each major group of activities in a project is a(n) ________.

Answer: milestone Diff: 1 Reference: Project Phases Keywords: milestone AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

12) The actual work gets done during the ________ phase of a project.

Answer: performance Diff: 1 Reference: Project Phases Keywords: performance phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

13) What are the phases of a project and the activities within each?

Answer: The five phases of a generic project are concept, definition, planning, performance, and post-completion. In the concept phase the project planners develop a broad definition of what the project is and what the scope will be. In the project definition phase, planners identify how to accomplish and organize for the work, the key personnel and resources, and develop tentative schedules and budgets. In the planning phase, items from the definition phase are revisited and expressed in greater detail. Planners prepare detailed plans that identify activities, time and budget targets, and the resources needed to complete each task. In the fourth phase of the project, the organization actually starts to execute the project plan. In the post-completion phase, the manager or team confirms the final outcome, conducts a post implementation meeting to critique the project effort and personnel, and reassigns project personnel.

Diff: 2 Reference: Project Phases Keywords: project, concept phase, project definition phase, planning phase, performance phase, and postcompletion phase AACSB: Application of Knowledge LO: 14.2: Describe the five major phases of a project.

Learning Objective 14-3 1) The best use of a Gantt chart is used to show precedence requirements for a project's constituent activities.

Answer: FALSE Diff: 1 Reference: Project Management Tools Keywords: Gantt chart, precedence requirements AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

2) Program evaluation and review technique, PERT, is a network-based technique in which there are multiple time estimates for each activity.

Answer: TRUE Diff: 1 Reference: Project Management Tools Keywords: PERT, time estimate AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

3) A critical path is composed entirely of critical activities.

Answer: TRUE Diff: 2 Reference: Project Management Tools Keywords: critical path, activity AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

4) A forward pass through a network is used to determine the earliest start times and earliest finish times for each project activity.

Answer: TRUE Diff: 2 Reference: Project Management Tools Keywords: forward pass, earliest start, earliest finish, ES, EF AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

5) The earliest finish time of an activity is always later than its latest start time.

Answer: FALSE Diff: 2 Reference: Project Management Tools Keywords: earliest finish, latest start, dummy, EF, LS AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

6) The earliest start time of an activity is dependent on the earliest finish time of its immediate predecessors.

Answer: TRUE Diff: 2 Reference: Project Management Tools Keywords: earliest start, earliest finish, ES, EF AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

7) The earliest finish time is calculated by adding the activity's duration to the predecessor's earliest finish time.

Answer: FALSE

Diff: 2 Reference: Project Management Tools Keywords: earliest start, earliest finish, predecessor, ES, EF AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

8) Activities on the critical path may have positive or negative slack as long as the overall slack time of the critical path is zero.

Answer: FALSE Diff: 2 Reference: Project Management Tools Keywords: slack, critical path AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

9) Crashing a project refers to the technique that minimizes completion time of the project.

Answer: TRUE Diff: 2 Reference: Project Management Tools Keywords: crashing AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

10) This Gantt chart can be used to show:

A) activity D must come before activity C. B) activity F can be done at the same time as D. C) activity E can begin as soon as activity A is complete.

D) activities D and B can be done simultaneously.

Answer: D Diff: 1 Reference: Project Management Tools Keywords: Gantt chart, precedence requirements AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

11) PERT is an acronym meaning: A) Project Evaluation and Review Technique.

B) Project Execution and Review Technique.

C) Program Evaluation and Review Technique.

D) Plan Estimation and Review Technique.

Answer: C Diff: 1 Reference: Project Management Tools Keywords: PERT, Program Evaluation and Review Technique AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

12) What is the latest that activity B can start if A lasts 35 days, B lasts 5, days C lasts 6 days, and D lasts 7 days?

A) 35 B) 36 C) 40 D) 41 Answer: B Diff: 2 Reference: Project Management Tools Keywords: LS, latest start AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

13) What is the latest that activity D can start if A lasts 5 days, B lasts 7 days, C lasts 4 days, D lasts 5 days, E lasts 7 days, and F is 6 days long?

A) 14 B) 15 C) 16 D) 17 Answer: A Diff: 3 Reference: Project Management Tools Keywords: LS, latest start AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

14) What is the fastest completion time of the project with activity lengths (in days) and precedence requirements as shown in the table?

Activity Length Predecessor A 15 -B 7 A C 4 A D 8 B, C A) 22 B) 25 C) 27 D) 30 Answer: D Diff: 1 Reference: Project Management Tools Keywords: critical path AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

15) A project is composed of 6 activities that have durations and precedence requirements shown in the table. Which of these activities is NOT on the critical path?

Activity Length Predecessor A 5 -B 7 A C 4 A D 7 B,C E 7 B F 6 D, E A) A B) B C) C D) D Answer: C Diff: 2 Reference: Project Management Tools Keywords: critical path, slack AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

The tablet unearthed by the archaeologist revealed an ancient culture's project plan. However, the sands of time had erased much of the information that the table once contained. Use this fragmentary record to unlock the ancient project's secrets and answer the following questions.

Activity Predecessors Time A -7 B -8 C A D A 11 E B F B 11 G D, E 6 H C K F L G, H, K 9

ES

EF

LS

LF 12 20

14

13 12 17

20 29

16) Refer to the scenario above. The project's duration is: A) 32 weeks.

B) 33 weeks.

C) 36 weeks.

D) 38 weeks.

Answer: D Diff: 3 Reference: Project Management Tools Keywords: activity duration, critical path, earliest start, ES, latest start, LS, earliest finish, EF, latest finish, LF AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

17) Refer to the scenario above. What is the earliest start time for activity H? A) Week 14 B) Week 15 C) Week 16 D) Week 17 Answer: A Diff: 3 Reference: Project Management Tools Keywords: earliest start, ES AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

18) Refer to the scenario above. What is the latest start time for activity K? A) Week 20 B) Week 19 C) Week 18 D) Week 17 Answer: B Diff: 3 Reference: Project Management Tools Keywords: latest start AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

19) Refer to the scenario above. What is the duration of activity H? A) 7 weeks B) 8 weeks C) 9 weeks D) 10 weeks Answer: C Diff: 3 Reference: Project Management Tools Keywords: activity duration AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

20) Refer to the scenario above. What is the earliest finish time for activity G? A) Week 21 B) Week 22 C) Week 23 D) Week 24 Answer: D Diff: 3 Reference: Project Management Tools Keywords: earliest finish AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

Construction of the cattery could be distilled to eight distinct steps, from the official groundbreaking ceremony to the cutting of the litterbox ribbon. The activities, their durations and predecessors are shown in the table below. Use this scenario to answer the following questions.

Activity A B C D E F G H

Predecessors Time (weeks) -10 A 8 A 7 C 11 D 12 B 11 E, F 6 E, F 9

21) Refer to the scenario above. The fastest the project can be completed is: A) 49 weeks.

B) 46 weeks.

C) 38 weeks.

D) 35 weeks.

Answer: A Diff: 2 Reference: Project Management Tools Keywords: earliest finish AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

22) Refer to the scenario above. What is the slack for activity G? A) 4 weeks.

B) 3 weeks.

C) 2 weeks.

D) 1 week.

Answer: B Diff: 2 Reference: Project Management Tools Keywords: slack AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

23) Refer to the scenario above. Suppose the duration of only one activity could be halved.

Which activity should be halved to have the greatest impact on project completion time?

A) F B) B C) E D) D Answer: C Diff: 1 Reference: Project Management Tools Keywords: critical path, activity duration AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

24) Refer to the scenario above. One activity has identical earliest finish and latest start times.

What is the common number for this unusual activity?

A) 17 B) 18 C) 21 D) 29 Answer: D Diff: 3 Reference: Project Management Tools Keywords: earliest finish, latest start AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

25) Refer to the scenario above. Which of these activities has the least slack?

A) E B) B C) G D) F Answer: A Diff: 1 Reference: Project Management Tools Keywords: critical path, slack AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

A hatmaker, fresh off a very successful showing at Lidzapalooza is excited about the prospects of providing the finest chapeaus to meet the needs of his energized customer base in the coming year. He and his space designer have identified seven activities that are necessary to expand his small shop. For the sake of simplicity, and to avoid giving away any trade secrets, the activities have been identified by letters A-G. The activities, their time estimates, and the precedence requirements are listed in the table immediately below. Use this scenario to answer the following questions.

Activity A B C D E F G

Predecessors Time (weeks) -7 A 6 A 10 C 12 B, C 5 D, E 11 D, F 8

26) Refer to the scenario above. Which of these statements is BEST? A) Only four of these activities have zero slack.

B) The late finish of D minus the late finish of C is less than the slack of B. C) B's latest start plus its slack equals F's late finish.

D) The sum of the latest start times for activities A through E is less than the sum of the latest start times for F and G. Answer: D Diff: 3 Reference: Project Management Tools Keywords: earliest start, latest start AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

27) Refer to the scenario above. Which of these activities has slack?

A) G B) E C) F D) D Answer: B Diff: 2 Reference: Project Management Tools Keywords: slack, critical path AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

28) Which of the activities in this project has the greatest amount of slack?

Activity A B C D E F

Length 7 4 8 3 2 8

Predecessor -A A B, C B D, E

A) B B) C C) D D) E Answer: D Diff: 3 Reference: Project Management Tools Keywords: critical path, slack AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

29) A seven activity project has the activity durations (in weeks) and costs shown in the table. It is possible to speed up every one of the activities by paying a little more. What is the least expensive 30-week project?

Activity Predecessor A -B -C A D B E B F C, E G D

Normal Crash Duration Normal Cost Duration Crash Cost 7 $2000 5 $3000 8 $1500 6 $2000 12 $2500 10 $2900 13 $3000 10 $4200 15 $4000 12 $5500 10 $3200 8 $4000 7 $1800 6 $2200

A) $18,900 B) $19,200 C) $19,500 D) $19,800 Answer: A Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

30) A seven activity project has the activity durations (in weeks) and costs shown in the table.

The project manager has an overall budget of $20,000, what is the fastest completion time

possible?

Activity Predecessor A -B -C A D B E B F C, E G D

Normal Crash Duration Normal Cost Duration Crash Cost 7 $2000 5 $3000 8 $1500 6 $2000 12 $2500 10 $2900 13 $3000 10 $4200 15 $4000 12 $5500 10 $3200 8 $4000 7 $1800 6 $2200

A) 29 weeks B) 28 weeks C) 27 weeks D) 26 weeks Answer: B Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

31) A seven activity project has the activity durations (in weeks) and costs shown in the table. In addition to the activity costs shown in the table, there is an additional daily fixed cost of $450.

What is the least expensive project completion cost?

Activity Predecessor A -B -C A D B E B F C, E G D

Normal Crash Duration Normal Cost Duration Crash Cost 7 $2000 5 $3000 8 $1500 6 $2000 12 $2500 10 $2900 13 $3000 10 $4200 15 $4000 12 $5500 10 $3200 8 $4000 7 $1800 6 $2200

A) $31,450 B) $31,900 C) $32,350 D) $32,700 Answer: C Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

32) The project represented by this network diagram has activity lengths in days and crash costs as shown in the table. What is the cheapest crash cost for the project if the contractor must complete all work in 45 days?

Activity Normal Duration Crash Duration Crash Cost/Day A 10 8 $250 B 16 12 $400 C 12 9 $100 D 17 16 $300 E 14 13 $300 F 6 4 $350

A) $550 B) $950 C) $1150 D) $1450 Answer: C Diff: 3 Reference: Project Management Tools Keywords: crashing, project crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

33) How many days can this project be shortened if money is no object, i.e., there is an unlimited budget?

A) 6 days B) 9 days C) 10 days D) 13 days Answer: B Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

34) What is the total cost to complete this project as quickly as possible if each day on site costs $1,000?

A) $43,100 B) $40,300 C) $39,300 D) $41,900 Answer: A Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

35) The project represented by this network diagram has activity lengths in days and crash costs as shown in the table. The fixed cost for being on site is $450. What is the lowest total completion cost for the project?

Activity Normal Duration Crash Duration Crash Cost/Day A 1 1 B 9 7 $475 C 4 3 $350 D 8 6 $500 E 10 8 $425 F 4 3 $300

A) $10,600 B) $11,000 C) $11,400 D) $12,000 Answer: A Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

36) A(n) ________ is a graphical tool used to show a project's progress as time elapses.

Answer: Gantt chart Diff: 2 Reference: Project Management Tools Keywords: Gantt chart AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

37) The longest path in a network from the start of a project to the end of a project is the ________.

Answer: critical (path) Diff: 2 Reference: Project Management Tools Keywords: critical path AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

38) An activity's duration added to its earliest start time yields the ________.

Answer: earliest finish time Diff: 2 Reference: Project Management Tools Keywords: earliest finish AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

39) For critical path activities, slack is equal to ________.

Answer: zero Diff: 2 Reference: Project Management Tools Keywords: critical path, slack AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

40) ________ is a technique to shorten the overall length of the project that usually involves a trade-off between time and cost.

Answer: Crashing Diff: 2 Reference: Project Management Tools Keywords: crashing AACSB: Application of Knowledge LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

A hatmaker, fresh off a very successful showing at Lidzapalooza is excited about the prospects of providing the finest chapeaus to meet the needs of his energized customer base in the coming year. He and his space designer have identified seven activities that are necessary to expand his small shop. For the sake of simplicity, and to avoid giving away any trade secrets, the activities

have been identified by letters A-G. The activities, their time estimates, and the precedence requirements structure are listed in the table immediately below. Use this table to answer the following questions.

Activity A B C D E F G

Predecessors Time (weeks) -7 A 6 A 10 C 12 B, C 5 D, E 11 D, F 8

41) Refer to the scenario above. Develop a Gantt chart for this project and indicate the finish times for each activity.

Answer: Gantt chart is shown below; project duration is 48.

Diff: 2 Reference: Project Management Tools Keywords: Gantt chart, precedence requirements AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

42) Refer to the scenario above. What are the earliest and latest start and finish times for all of these activities?

Answer: Activity Earliest Start Earliest Finish Late Start Latest Finish A 0 7 0 7 B 7 13 18 24 C 7 17 7 17 D 17 29 17 29 E 17 22 24 29 F 29 40 29 40 G 40 48 40 48 Diff: 2 Reference: Project Management Tools Keywords: earliest start, earliest finish, latest start, latest finish AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

43) A project is composed of the twelve activities shown in the table. What are the earliest and latest start times for each of these activities?

Activity A B C D E F G H I J K L Answer: Activity A B C D E F G H I J K L

Time (days) 3 3 15 2 12 16 2 11 9 6 15 13

ES 0 3 3 6 6 18 18 34 20 18 45 60

Predecessors -A A B B C C E, F D, G D, E H, I J, K

LS 0 19 3 34 22 18 34 34 36 54 45 60

Diff: 2 Reference: Project Management Tools Keywords: earliest start, latest start AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

44) The tablet unearthed by the archaeologist revealed an ancient culture's project plan, however the sands of time had erased much of the information that the table once contained. Unlock the ancient project's secrets by completing all of the information missing from this fragmentary record.

Activity Predecessors Time A -7 B -8 C A D A 11 E B F B 11 G D, E 6 H C K F L G, H, K 9 Answer: Activity Predecessors Time A -7 B -8 C A 7 D A 11 E B 6 F B 11 G D, E 6 H C 9 K F 10 L G, H, K 9

ES

EF

LS

LF 12 20

14

13 12 17

20 29

ES 0 0 7 7 8 8 18 14 19 29

EF 7 8 14 18 14 19 24 23 29 38

LS 5 0 13 12 17 8 23 20 19 29

LF 12 8 20 23 23 19 29 29 29 38

Diff: 3 Reference: Project Management Tools Keywords: activity duration, critical path, earliest start, latest start, earliest finish, latest finish AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

45) Construction of the cattery could be distilled to eight distinct steps, from the official groundbreaking ceremony to the cutting of the litterbox ribbon. The activities, their durations and predecessors are shown in the table below. Determine earliest and latest start and finish times for all of the activities.

Activity A B C D E F G H Answer: Activity A B C D E F G H

Predecessors -A A C D B E, F E, F

ES 0 10 10 17 28 18 40 40

EF 10 18 17 28 40 29 46 49

Time (weeks) 10 8 7 11 12 11 6 9

LS 0 21 10 17 28 29 43 40

LF 10 29 17 28 40 40 49 49

Diff: 3 Reference: Project Management Tools Keywords: earliest finish, critical path AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

46) Given the earliest and latest finish times for each of these activities, what are the activity lengths?

Activity A B C D E F G H I J

EF 3 10 5 18 15 11 8 23 15 24

LF 3 10 13 18 18 19 19 23 23 24

Predecessors -A A B B C C D, E F, G H, I

Answer: Activity Duration A 3 B 7 C 2 D 8 E 5 F 6 G 3 H 5 I 4 J 1 Diff: 3 Reference: Project Management Tools Keywords: earliest start, earliest finish, latest start, latest finish AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

47) Complete this table containing earliest and latest start times and activity lengths.

Activity Predecessor Length A -11 B A C B, D D A E D 4 F C, E, G 10 G A Answer: Activity Predecessor Length A -11 B A 6 C B, D 10 D A 9 E D 4 F C, E, G 10 G A 9

Early Start Early Finish Late Start 11 0 11 17 30 20 11 20 11

Late Finish 11 20 30 20 30

30 11

ES 0 11 20 11 20 30 11

20

EF 11 17 30 20 24 40 20

LS 0 14 20 11 26 30 21

30

LF 11 20 30 20 30 40 30

Diff: 3 Reference: Project Management Tools Keywords: earliest start, earliest finish, latest start, latest finish AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

48) The project shown below has crash costs as shown in the table. What is the minimum completion cost for this project that has a fixed cost of $1,000 per day?

Activity A B C D E F G

Normal Duration Crash Duration (days) (days) 3 3 8 5 6 4 9 4 6 5 6 4 2 1

Crash Cost ($/day) $800 $1200 $600 $400 $1100 $900

Answer: Initially, the path lengths are: ABCG = 19; ADG = 14; and AEFG = 17, so the project costs $19,000.

Reducing B by 2 days costs $1600, saves $400, and yields two critical paths of ABCG = AEFG = 17.

Reducing G by 1 day costs $900, saves $100, and yields two critical paths of ABCG = AEFG = 16.

Further reductions are possible, but these are not economical, so the minimum cost project completion time is 16 days and the total cost is 16($1000) + $1600 + $900 = $18,500.

Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

49) A seven activity project has the activity durations (in weeks) and costs shown in the table. It is possible to speed up every one of the activities by paying a little more; for example, activity A has a regular duration of 7 weeks and regular cost of $2000, but for $3000 activity A can be finished in 5 weeks and for $2500 activity A can be finished in 6 weeks. In addition to the activity costs shown in the table, there is an additional daily fixed cost of $450. What is the least expensive project completion cost?

Activity Predecessor A -B -C A D B E B F C, E G D

Normal Duration 7 8 12 13 15 10 7

Normal Cost $2000 $1500 $2500 $3000 $4000 $3200 $1800

Crash Duration 5 6 10 10 12 8 6

Crash Cost $3000 $2000 $2900 $4200 $5500 $4000 $2200

Answer: The normal completion cost is $18,000 for activities and at a 33-day duration, it incurs an additional $14,850 cost for a total uncrashed cost of $32,850. Activities B and F are critical and their per day crash cost is lower than the fixed cost of $450, so the project duration can be reduced to 29 days. The reduced project cost is $32,350, of which $19,300 is activity cost and $13,050 is fixed cost.

Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

50) A project represented by the activities shown in this table must meet a deadline of 51 days.

Sketch the network and determine the critical path. Using the crash costs and minimum activity lengths shown in the table, determine which activities to shorten and provide the total cost of finishing this project in 51 days.

Activity Predecessor A -B A C B, D D A E D F C, E, G G A

Normal Duration Crash Duration (days) (days) 14 12 5 4 7 6 16 12 18 13 19 14 18 16

Crash Cost ($/day) 485 775 460 670 50 265 400

Answer: Initially, path lengths are ABCF = 45, ADCF = 56, ADEF = 67, and AGF = 51.

Purchases made in increasing order of cost per day are as follows: Reduce E from 18 to 13 days for 5($50) = $250; ADEF = 62 days Reduce F from 19 to 14 days for 5($265) = $1325; ADEF = 57 days Reduce A from 14 to 12 days for 2($485) = $970; ADEF = 55 days Reduce D from 16 to 12 days for 4($670) = $2680; ADEF = 51 days Paths are now: ABCF = 38; ADCF = 44; ADEF = 51; AGF = 44 Total crash cost is $250 + $1325 + $970 + $2680 = $5225 Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

51) The project represented by this network diagram has activity lengths in days and crash costs as shown in the table. You have been given a budget of $2,500 and instructed to complete the project as quickly as you can using that amount. Which activities do you expedite and what is the final cost of crashing and project duration?

Activity A B C D E F

Normal Duration Crash Duration 10 8 16 12 12 9 17 16 14 13 6 4

Crash Cost/Day $250 $400 $100 $300 $300 $350

Answer: The project is initially a 49 day ordeal. Expediting activities from the least expensive to the most expensive proceeds as follows: 1) Reduce activity A by 2 days for $500 and crash cost of $500. Project is 47 days.

2) Reduce activity D by 1 day for $300 and a crash cost of $800. Project is 46 days.

3) Reduce activity F by 2 days for $700 and a crash cost of $1500. Project is 44 days.

4) Reduce activity B by 2 days for $800 and a crash cost of $2300. Project is 42 days.

Any additional crashing would exceed the budget, so we are left with a project of 42 days.

Diff: 3 Reference: Project Management Tools Keywords: crashing AACSB: Analytical Thinking LO: 14.3: Construct a Gantt chart or project network diagram, and use these tools to manage a project.

Learning Objective 14-4 1) Most project management software represents a project in AON format.

Answer: TRUE Diff: 1 Reference: Project Management Software Keywords: software AACSB: Application of Knowledge LO: 14.4: Describe some key features and advantages of project management software.

Learning Objective 14-5 1) The Guide to the Project Management Body of Knowledge (PMBOK®) is divided into two main parts, the various business processes that organizations follow in carrying out projects and the nine knowledge areas applicable to nearly all projects.

Answer: TRUE Diff: 2 Reference: PMI and the Project Management Body of Knowledge (PMBOK®) Keywords: PMI, Project Management Institute, PMBOK® AACSB: Application of Knowledge LO: 14.5: Describe what they Project Management Institute is, and what type of information can be found in the Institute's Project Management Body of Knowledge (PMBOK®) 2) Which of these needs does the Guide to the Project Management Body of Knowledge NOT serve?

A) It provides a common language for discussing project management issues.

B) It provides a blueprint for ISO certification of the project management process.

C) It identifies and disseminates generally accepted project management knowledge and practices.

D) It serves as a basic reference source for project management.

Answer: B Diff: 3 Reference: PMI and the Project Management Body of Knowledge (PMBOK®) Keywords: Project Management Institute, PMI AACSB: Application of Knowledge LO: 14.5: Describe what they Project Management Institute is, and what type of information can be found in the Institute's Project Management Body of Knowledge (PMBOK®) 3) The professional organization that serves the needs of project management professionals is ________.

Answer: the Project Management Institute Diff: 1 Reference: PMI and the Project Management Body of Knowledge (PMBOK®) Keywords: Project Management Institute, PMI AACSB: Application of Knowledge LO: 14.5: Describe what they Project Management Institute is, and what type of information can be found in the Institute's Project Management Body of Knowledge (PMBOK®) Introduction to Operations and Supply Chain Management, 6e (Bozarth/Handfield) Chapter 15 Developing Products and Services Learning Objective 15-1 1) Product design refers to the characteristics or features of a product or service that determine its ability to meet the needs of the user.

Answer: TRUE Diff: 1 Reference: Introduction Keywords: product design AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to

operations and supply chain managers.

2) All product development efforts directly benefit the consumer.

Answer: FALSE Diff: 1 Reference: Introduction Keywords: product development AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

3) If a company is capable of delivering the service time and again at a consistent level of quality it is said to have a high level of scalability.

Answer: FALSE Diff: 1 Reference: Operations and Supply Chain Perspectives on Design Keywords: design, development phase AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

4) The ease with which parts can be replaced, checked or evaluated is testability.

Answer: FALSE Diff: 1 Reference: Operations and Supply Chain Perspectives on Design Keywords: serviceability, testability AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

5) Robust design is the design of products to be less sensitive to manufacturing variation and misuse.

Answer: TRUE Diff: 1 Reference: Operations and Supply Chain Perspectives on Design Keywords: robust design, variation AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

6) An airline specifies a wider monitor for installation on their overseas flights. The airframe manufacturer will accommodate this order by issuing an engineering change.

Answer: TRUE Diff: 2 Reference: Operations and Supply Chain Perspectives on Design Keywords: engineering change AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

7) Which of the following functions is NOT typically involved in a cross-functional product development effort?

A) marketing B) operations C) finance D) All of these functions are involved.

Answer: D Diff: 1 Reference: Introduction Keywords: product development, cross-functional AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

8) The ease with which parts can be replaced or evaluated is: A) repeatability.

B) serviceability.

C) testability.

D) functionality.

Answer: B Diff: 1 Reference: Operations and Supply Chain Perspectives on Design Keywords: serviceability AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

9) A box of cake mix can be the basis for a tasty cake even if the novice baker adds olive oil instead of vegetable oil and forgets to set a timer. The cake recipe has probably been developed using: A) value analysis.

B) the development funnel.

C) robust design.

D) Design for the Environment.

Answer: C Diff: 2 Reference: Operations and Supply Chain Perspectives on Design Keywords: robust design AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

10) A revision to a drawing or design released by designers to correct a part is called a(n): A) engineering change.

B) part mod.

C) tweak.

D) lock-in.

Answer: A Diff: 2 Reference: Operations and Supply Chain Perspectives on Design Keywords: engineering change AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

11) ________ refers to the ease with which critical components or functions can be tested during production.

Answer: Testability Diff: 1 Reference: Operations and Supply Chain Perspectives on Design Keywords: testability AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

12) The unexpected expenses associated with overhead and engineering change notices are ________.

Answer: hidden costs Diff: 2 Reference: Operations and Supply Chain Perspectives on Design Keywords: hidden cost, overhead, engineering changes AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

13) What are the four reasons that a company might develop new products and services?

Answer: Four reasons why a company might develop new products or services or update its existing ones. The first reason is that new products or services can give firms a competitive advantage in the marketplace. The second reason is that new products can provide benefits to the firm (as opposed to benefiting customers directly). The third reason is that companies develop new products or services to exploit existing capabilities. Finally, companies can use new product development to block out competitors.

Diff: 2 Reference: Introduction Keywords: product development AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

14) What are robust design, testability, and serviceability and how are they related?

Answer: Robust design calls for the design of the product to be insensitive (or less sensitive than predecessors) to variations in manufacturing and misuse. This increases the probability that the product will be functional. Testability refers to the ease with which critical components or functions can be tested during production. Serviceability refers to the ease with which parts can be replaced, serviced, or evaluated. The three concepts represent the entire continuum of quality costs, with the first two classified as internal costs; robust design being prevention-related costs and testability costs falling in the appraisal category. Serviceability costs are primarily external.

Diff: 2 Reference: Operations and Supply Chain Perspectives on Design Keywords: robust design, testability, serviceability AACSB: Application of Knowledge LO: 15.1: Describe the six dimensions of product design that are of particular interest to operations and supply chain managers.

Learning Objective 15-2 1) The concept development phase addresses the feasibility of a product or service.

Answer: FALSE Diff: 1 Reference: The Development Process Keywords: concept development phase, planning phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

2) In the planning phase, the operations and supply chain function develops initial cost estimates and identifies key supply chain partners.

Answer: TRUE Diff: 2 Reference: The Development Process Keywords: planning phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

3) In the launch phase of product development it is typically the marketing department's responsibility to fill the downstream supply chain.

Answer: TRUE Diff: 2 Reference: The Development Process Keywords: launch phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

4) The development funnel demonstrates that while initial conceptual development takes a long time, product design can progress quickly through the final phases of development.

Answer: FALSE Diff: 2 Reference: The Development Process Keywords: development funnel AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

5) Products developed using a concurrent engineering process can be developed more quickly than those using a sequential development process.

Answer: TRUE Diff: 2 Reference: The Development Process Keywords: concurrent engineering, sequential development process AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

6) Customers are often brought in to lend their thoughts during the: A) concept development phase.

B) planning phase.

C) design and development phase.

D) commercial preparation phase.

Answer: B Diff: 2 Reference: The Development Process Keywords: planning phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

7) The feasibility of a product or service is evaluated during the: A) planning phase.

B) evaluation phase.

C) launch phase.

D) concept development phase.

Answer: A Diff: 2 Reference: The Development Process Keywords: planning phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

8) The operations and supply chain functions develop detailed process maps of the operations and supply chain flows and test new processes in the: A) concept development phase.

B) planning phase.

C) design and development phase.

D) commercial preparation phase.

Answer: C Diff: 3 Reference: The Development Process Keywords: design and development phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

9) Which of the following occurs during a sequential development process?

A) Activities in different development stages overlap with one another.

B) Constant communication is required between participants at various stages in the development effort.

C) Prototypes can begin before product characteristics are finalized.

D) The development funnel process takes place.

Answer: D Diff: 3 Reference: The Development Process Keywords: development funnel, sequential development process AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

10) The company begins to address the feasibility of a product or service in the ________ phase of the development process.

Answer: planning Diff: 2 Reference: The Development Process Keywords: planning phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

11) The ________ is the process whereby many ideas are considered at the concept development phase but few ideas make it to the commercial development and launch phases.

Answer: development funnel Diff: 2 Reference: The Development Process Keywords: development funnel AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

12) ________ allows activities in different development stages to overlap with one another.

Answer: Concurrent engineering Diff: 2 Reference: The Development Process Keywords: concurrent engineering AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

13) What are the phases of the product development process and what takes place in each?

Answer: The five phases in the development of a new product or service are concept development, planning, design and development, commercial preparation, and launch. The first phase, concept development, is where the company identifies ideas for new or revised products and services. The second phase, the planning phase, is where the company begins to address the feasibility of a product or service. During the design and development phase the company starts to invest heavily in the development effort and builds and evaluates prototypes. The fourth phase is commercial preparation and consists of ramping up activities associated with the introduction of a new product or service. At this stage, firms start to invest heavily in the operations and supply chain resources needed to support the new product or service. The fifth and final phase of product development is the launch phase. For physical products, this usually means filling up the supply chain with products. For services, it can mean making the service broadly available to the target marketplace.

Diff: 3 Reference: The Development Process Keywords: concept development phase, design and development phase, launch phase, commercial preparation phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

14) What is the operations and supply chain function responsible for in each of the product development phases?

Answer: The five phases in the development of a new product or service are concept development, planning, design and development, commercial preparation, and launch. In concept development, the operations and supply chain functions scan suppliers for promising technologies and capabilities. In planning, the operations and supply chain functions develop initial cost estimates and identify key supply chain partners. In design and development, the operations and supply chain functions develop detailed process maps of the operations and supply chain flows and test new processes. Commercial preparation calls for the operations and supply chain functions to build pilot units using new operations, train personnel, and verify that supply chain flows work as expected. Finally, in launch, the operations and supply chain functions ramp up volumes and meet targets for quality, cost and other performance goals.

Diff: 3 Reference: The Development Process Keywords: design and development phase, concept phase, planning phase, design phase, launch phase, commercial preparation phase AACSB: Application of Knowledge LO: 15.2: Describe the five phases of product and service development, and explain the difference between sequential development and concurrent development.

Learning Objective 15-3 1) Presourcing is the process of preapproving suppliers for specific commodities or parts.

Answer: TRUE Diff: 1 Reference: Organizational Roles in Product and Service Development Keywords: presourcing AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

2) An example of black box design would be a producer of automotive brakes working at the design table with an automobile manufacturer through all phases of product development.

Answer: FALSE Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: black box design, gray box design AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

3) The development of specifications for the manufacturing equipment needed to make the product is the responsibility of: A) engineering.

B) marketing.

C) accounting.

D) purchasing.

Answer: A Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: manufacturing specifications, engineering, product development process AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

4) The process of preapproving suppliers for specific commodities or parts is known as: A) screening.

B) presourcing.

C) presaging.

D) certifying.

Answer: B Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: presourcing AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

5) In high tech firms, the group most likely to be responsible for the success of a product development process is: A) scientists and engineers.

B) marketing.

C) consumers.

D) accounting/finance.

Answer: A Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: engineers, scientists, product development process AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

6) In most firms, the group that addresses the questions of who buys the company's product and what they are likely to pay is: A) scientists and engineers.

B) marketing.

C) consumers.

D) accounting/finance.

Answer: B Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: marketing, product development process AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

7) In most firms, the group that addresses the cost and performance information companies need to make good business decisions is: A) scientists and engineers.

B) marketing.

C) consumers.

D) accounting Answer: D Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: accounting, product development process AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

8) In most firms, the group that tracks forecasts of prices and long term supplies of key materials is: A) suppliers.

B) marketing.

C) purchasing.

D) accounting/finance.

Answer: C Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: purchasing, product development process AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

9) Your supplier works closely with you to jointly design a product in: A) gray box design.

B) black box design.

C) white box design.

D) red box design.

Answer: A Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: gray box design AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

10) Black box design works best when: A) the manufacturer is the expert.

B) the supplier is the expert.

C) the design is innovative.

D) the product is simply being redesigned, not newly developed.

Answer: B Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: black box design AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

11) ABC Corporation knew that XYZ Industries could provide the casings needed for their new line of typewriters as they had for the previous generations of typewriters. Therefore, they designated XYZ as the supplier for that key element, a practice known as ________.

Answer: presourcing Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: presourcing AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

12) In ________, the supplier works with the customer to jointly design the product.

Answer: gray box design Diff: 2 Reference: Organizational Roles in Product and Service Development Keywords: gray box design AACSB: Application of Knowledge LO: 15.3: Discuss the different roles played by areas such as marketing, engineering, and suppliers during the development process.

Learning Objective 15-4 1) Quality function deployment can be used to show linkages between customer requirements and product characteristics.

Answer: TRUE Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

2) The roof of the house of quality displays conflicts between the voice of the customer and product characteristics and permits designers to rapidly identify trade-offs.

Answer: FALSE Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

3) The output from the first QFD matrix that feeds into the second QFD matrix is the product characteristics information.

Answer: TRUE Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

4) CAD systems allow engineers to develop, modify, share, and test designs in a virtual world.

Answer: TRUE Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: CAD, computer-aided design AACSB: Information Technology LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

5) Companies can reduce the time and cost of developing new products and reduce the cost of final products by using parts standardization.

Answer: TRUE Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: parts standardization AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

6) The oil could be changed at the push of a button without dirtying your hands or peering underneath the new Chrysler Crepitus. This is an important achievement in their Design for Six Sigma program.

Answer: FALSE Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: Design for Maintainability, Design for Six Sigma AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

7) Target costing is the act of designing a process to meet a specific cost objective.

Answer: FALSE Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: target costing AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

8) Value may be increased by simultaneously increasing cost and decreasing functionality.

Answer: FALSE Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: value, functionality AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

9) The DMADV process for improving product and service designs comes to us from what methodology?

A) Project management B) Optimization C) Lean D) Six Sigma Answer: D Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: DMADV, Six Sigma, Define Measure Analyze Design Verify AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

10) What does the A represent in the acronym DMADV? A) Analyze B) Assign C) Advise D) Agenda Answer: A Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: DMADV, Six Sigma, Define Measure Analyze Design Verify AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

11) What does the M represent in the acronym DMADV? A) Metrics B) Measure C) Monitor D) Market Answer: B Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: DMADV, Six Sigma, Define Measure Analyze Design Verify AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

12) The DMADV process relies on: A) benchmarking competitors' products.

B) intuitive design championed by contractors external to the company.

C) rigorous data analysis by teams of black belts, green belts and champions.

D) black box design or gray box design.

Answer: C Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: DMADV, Six Sigma, Define Measure Analyze Design Verify AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

13) What are the implications of an empty row (i.e., one with no check marks or x's) in the main body of the matrix of the house of quality?

A) Nothing, it's just a sparse row.

B) There is no synergy among the product characteristics.

C) Product characteristics are potentially superfluous.

D) Customer requirements are potentially not being met by the product.

Answer: D Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

14) What are the implications of an empty column (i.e., one with no check marks or x's) in the main body of the matrix of the house of quality?

A) Nothing, it's just a sparse row.

B) There is no synergy among the product characteristics.

C) Product characteristics are potentially superfluous.

D) Customer requirements are potentially not being met by the product.

Answer: C Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

15) What are the implications of an empty row (i.e., one with no check marks or x's) in the roof portion of the house of quality?

A) Nothing, it's just a sparse row.

B) There is no synergy for that product characteristic with other characteristics.

C) Product characteristics are potentially superfluous.

D) Customer requirements are potentially not being met by the product.

Answer: B Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

16) The left side of the quality function deployment house of quality contains: A) product characteristics.

B) relationships between product characteristics.

C) customer requirements.

D) product specifications.

Answer: C Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

17) Which of these matrix combinations is a correct pairing for quality function deployment?

A) customer requirements and process specifications B) product characteristics and process characteristics C) product specifications and process characteristics D) process specifications and product specifications Answer: C Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

18) A consideration to create products and services that are easy to make is: A) DFE. B) CAM. C) QFD. D) DFM. Answer: D Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: DFM, design for manufacturability AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

19) Parts standardization typically does NOT: A) reduce the time to develop a new product.

B) reduce the cost of final products.

C) reduce the profit of a new product.

D) reduce the cost of developing new products.

Answer: C Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: parts standardization AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

20) A modular architecture improves: A) design for Six Sigma and design for the environment.

B) design for manufacturability and design for maintainability.

C) design for maintainability and design for the environment.

D) design for Six Sigma and design for manufacturability.

Answer: B Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: modular architecture AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

21) A process that involves examining all elements of a component, assembly, end product, or service to make sure it fulfills its intended function at the lowest total cost is: A) target costing.

B) design to cost.

C) value analysis.

D) examination costing.

Answer: C Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: value analysis AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

22) The roof of the quality function deployment house of quality displays synergies among the ________.

Answer: product characteristics Diff: 3 Reference: Approaches to Improving Product and Service Designs Keywords: QFD, quality function deployment AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

23) The initial generation of DeLorean boasted of its stainless steel skin, gull-wing doors, and 273 sizes of fasteners. The engineers lowered the product's overall inventory level and product complexity by settling on only 12 different sizes of fasteners thanks to their ________ program.

Answer: parts standardization Diff: 3 Reference: Approaches to Improving Product and Service Designs Keywords: parts standardization AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

24) ________ is a product design in which each functional element maps into its own physical chunk.

Answer: Modular architecture Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: modular architecture AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

25) Safety and health issues over the product's projected life cycle are addressed by ________.

Answer: design for the environment Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: Design for Environment, DFE AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

26) No poultry farmer in his right mind was going to pay more than $1 for a rooster helmet, so the ________ program for Rooster Boosters set that as the goal for their new product.

Answer: target costing or design to cost Diff: 1 Reference: Approaches to Improving Product and Service Designs Keywords: target costing, design to cost AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

27) The relationship between product functionality and product cost is quantified as ________.

Answer: value Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: value analysis, value AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

28) What is the Six Sigma approach to new product and process development? What takes place in each step?

Answer: The Six Sigma methodology includes a process called DMADV (Define-MeasureAnalyze-Design-Verify), which outlines the steps needed to create completely new business processes or products. As with DMAIC, the DMADV process places a premium on rigorous data analysis, and depends on teams of black belts, green belts, and champions to carry it out.

The five steps of DMADV are: Step 1. Define the project goals and customer deliverables. Since the focus is on a new process or product, the Six Sigma team must properly scope the project to ensure that the effort is carried out in a timely and efficient manner. What products or services do we want to provide and to whom? How will we know when we have completed the project successfully?

Step 2. Measure and determine customer needs and specifications. The second step requires the team to develop a clear picture of what the targeted customers want in terms of quality, delivery, cost or other measures of interest. Market research techniques as well as quality function deployment (QFD), which we describe shortly, are employed here.

Step 3. Analyze the product or process options to meet the customer needs. In this step, the Six Sigma team evaluates how the various options available stack up against the customers' requirements.

Step 4. Design the product or process. Here, the hard work of designing the product or process, takes place.

Step 5. Verify the new product or process. Finally, the team must verify the results. Does the product or process perform as intended? Does it meet the needs of the targeted customers?

Diff: 3 Reference: Approaches to Improving Product and Service Designs Keywords: Six Sigma, DMAIC, DMADV AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

29) How does quality function deployment work and what advantages are accrued when it is used?

Answer: Quality function deployment (QFD) is a graphical tool for product design developed in Japan that helps organizations move from vague notions of what customers want to specific engineering and operational requirements. The first QFD matrix translates the voice of the customer into specific product characteristics and shows the relationship between those requirements and characteristics and also among the characteristics. This helps ensure that all customer requirements are addressed by the product or service and that there are no superfluous product characteristics. The end result is that successful designs are developed and deployed in a fraction of the time of a traditional sequential product development process and that these designs tend to meet with success in their initial release.

Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: quality function deployment, QFD AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

30) Develop the first matrix for a house of quality (Customer requirements – Product characteristics) for an improved pizza box. Your house of quality should feature four rows and four columns and should identify relationships among the rows and columns. Identify relationships in the roof of your house of quality also.

Answer: Answers will vary. Possible candidates for customer requirements include keeping the pizza oven hot, ensuring the box top doesn't touch the pizza, biodegradable, made from 100% recycled materials, easy to open, use as a table, ability to track location, and others. Possible candidates for product characteristics include material, material thickness, ease of assembly, minimal storage space, RFID embedded, multisize capability, and others.

Diff: 3 Reference: Approaches to Improving Product and Service Designs Keywords: quality function deployment, QFD AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

31) Develop the product characteristics-product specifications matrix (i.e., the second matrix) for a house of quality for an improved pizza box. Your house of quality should feature four rows and four columns and should identify relationships among the rows and columns. Identify relationships in the roof of your house of quality also.

Answer: Answers will vary. Possible candidates for product characteristics include material, material thickness, ease of assembly, minimal storage space, RFID embedded, multisize capability, and others. Product specifications might include tensile strength, coefficient of kinetic friction, thickness, bursting strength, performance on edge crush test, ability to hold internal temperature for 30 minutes in a variety of external temperatures, percent composition of recycled materials, time to assemble for worker of average dexterity, and others.

Diff: 3 Reference: Approaches to Improving Product and Service Designs Keywords: quality function deployment, QFD AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

32) Develop the first matrix (customer requirements — product characteristics) for a house of quality for an improved wallet. Your house of quality should feature four rows and four columns and should identify relationships among the rows and columns. Identify relationships in the roof of your house of quality also.

Answer: Answers will vary. Possible candidates for customer requirements include holds paper money, section for change, display ID with clear pocket, holds credit cards, protects magnetic strip on credit cards, protects chip-embedded cards, bi-fold or tri-fold, holds family photos, not made from animal products, and others. Possible candidates for product characteristics include base material, stitching material, ease of assembly, ability to mass customize, fasteners, window material, shielding material, and others.

Diff: 3 Reference: Approaches to Improving Product and Service Designs Keywords: quality function deployment, QFD AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

33) What are the advantages for a manufacturer of parts standardization and modular architecture and how are they related?

Answer: Parts standardization refers to the planned elimination of superficial, accidental, and deliberate differences between similar parts in the interest of reducing part and supplier proliferation. Modular architecture is product architecture in which each functional element maps into its own physical chunk. Different chunks perform different functions; the interactions between the chunks are minimal and they are generally well-defined. Modular architecture is essentially standardization in chunks. By standardizing parts or modules, a company can streamline the supply chain, carry less inventory, simplify training for production and field service personnel, and lower costs for themselves and their customers.

Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: parts standardization, modular architecture AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

34) What is design for the environment (DFE)? Provide examples of products or services that have been developed with this in mind.

Answer: Design for the environment addresses "environmental, safety, and health issues over the product's projected life cycle in the design and development process." The authors cite several examples of Apple's efforts in this area including reduced power usage in sleep mode, reduced packaging and production material requirements, and fewer toxic chemicals used in production and the product itself. Other examples might include the local utility producing electricity using wind and solar generators, lower consumption of fuel by the Boeing 787, a move by many universities towards disseminating information electronically, e.g., not handing out a paper syllabus on the first day of class, and others.

Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: Design for the Environment, DFE AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.

35) What is value analysis and how is it typically conducted?

Answer: Value analysis (VA) is a process that involves examining all elements of a component, an assembly, an end product, or a service to make sure it fulfills its intended function at the lowest total cost. The primary objective of value analysis is to increase the value of an item or a service at the lowest cost without sacrificing quality. In equation form, value is the relationship between the function of a product or service and its cost: There are many variations of function and cost that will increase the value of a product or service. The most obvious ways to increase value include increasing the functionality or use of a product or service while holding cost constant, reducing cost while not reducing functionality, and increasing functionality more than cost (e.g., offering a five-year warranty versus a two-year warranty with no price increase raises the value of a product to the customer).

A common approach for implementing value analysis is to create a VA team composed of professionals with knowledge about a product or service. Many functional groups can contribute to the value analysis team, including engineering, marketing, purchasing, production, and key suppliers. Value analysis teams ask a number of questions to determine if opportunities exist for item, product, or service improvement. Some typical questions include the following: Is the cost of the final product proportionate to its usefulness?

Does the product need all its features or internal parts?

Is there a better production method to produce the item or product?

Can a lower-cost standard part replace a customized part?

Are we using the proper tooling, considering the quantities required?

Will another dependable supplier provide material, components, or subassemblies for less?

Are there equally effective but lower-cost materials available?

Are packaging cost reductions possible?

Is the item properly classified for shipping purposes to receive the lowest transportation rates?

Are design or quality specifications too tight, given customer requirements?

If we are making an item now, can we buy it for less (and vice versa)?

Diff: 2 Reference: Approaches to Improving Product and Service Designs Keywords: value analysis AACSB: Application of Knowledge LO: 15.4: Describe some of the most common approaches to improving product and service designs, including Define-Measure-Analyze-Design-Verify (DMADV) process, quality function deployment (QFD), design for manufacturability (DFM), and target costing.