Operations Management Handbook With Questions & Answers

Ch.
1 Introduction
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Chapter One Summary
Operations Management is responsible for creating value in the form of
goods and services. The objective of operations management is to
balance supply with demand. Operations Management works in
conjunction with both finance and marketing. An operation is the act of
converting inputs into outputs. It is concerned with value-added, which is
the difference between the cost of inputs and the value or the price of
outputs.
The Scope of Operations Management: Operations management is used in producing goods or services.
Systems design deals with the layout of facilities. An example is what equipment is necessary to produce
a certain capacity. Purchasing involves buying the materials or equipment, managers need evaluate the
quality of materials and equipment. Overlooking poor quality of materials can delay project completion
and add costs, due to reworking and overtime pay. Industrial engineering handles variances. The
methods used to make the products and the product should be uniform and up to standards. Operations
managers need to make sure distribution of goods are sent out to their final locations in a timely
manner. Maintenance is responsible for keeping the facility running. This may include disposing of scrap,
lubing up machines, or keeping security on premises to reduce theft. Operations management can have
any number of responsibilities, ranging from product and service design, to making sure machines are
operating correctly. Operations management is also responsible for forecasting, capacity planning,
scheduling , managing inventories, assuring quality, motivating employees, deciding where to locate
facilities and many more issues to help run the organization efficiently and effectively.
Process Management Process management is essential to operations management, and is the central
role of all management roles. Process management transforms inputs into outputs . In addition, a
business process is composed of three categories: Upper-management processes, Operational
processes, and Supporting processes. A major business process may consist of any sub-processes, and
each one of them have their own goals that contribute to the overall process. Business processes form a
sequence of suppliers and customers. Managers establish the amount of capacity of a process needed to
meet demand.
Supply Chains A supply chain is a sequence of activities and organizations having some role in providing
a product to a customer. Supply chains typically link many different facilities and activities as raw
materials are secured, work-in-process is finished, and final output is distributed. Supply chain
management integrates the activities of these differing operations, addressing issues such as
forecasting, purchasing and logistics. A simple product supply chain consists of suppliers, direct
suppliers, producers, distributors, and final customers. Supply chain management also can include
partners outside the firm when goods and services are outsourced. Outsourcing has many risks and
benefits that must be explored before a company decides to outsource part of its operations. Valued-
added is the difference between the cost of inputs and the value or price of outputs. Therefore, a
higher value-added is beneficial for a company.
Current Issues Managers must contend with ever changing globalization, quality and process
improvement, the management of technology, and agility. Three issues that have a major impact are
supply chain management, e-commerce, and the Internet. (Not enough information)
Key Trends and Issues in Business The environment constantly changes so organizations need to adapt
and change as their environment does. Globalization and new technologies have stimulated changes in
organizations. This varies from how they communicate with other organizations to the manner in which
they penetrate other country's markets. The Internet is a great tool that many choose to use as an
advantage. E-business is the use of the Internet for business transactions, and e-commerce is consumer-
to-business transactions. Three technologies that can have major impacts on costs, productivity and
competitiveness are: 1) product and service technology, 2) process technology, and 3) information
technology. Information Technology is very important because it is the manner in which businesses
store, process, and send information.
Industrial Revolution The Industrial Revolution can also be referred to as the "historical evolution of
operations management." Before the 18th century, companies relied on workers (humans) to produce
the product, the use of craft production. At the start of the 18th century, several developments of the
machine increased production levels. The new machine power lead to the creation of various methods
such as: mass production, interchangeable parts, and division of labor. All of the following methods
revolutionized the way goods were manufactured, along with creating a boom in the economy and
increasing the success of businesses throughout the country.
It also led to the creation of Scientific Management. This form of management focused on developing
the most efficient work methods that would produce the greatest output (assembly lines). Managers
were responsible for planning, training, and implementing each step of the production process.
Although this style was not very popular with employees, it increased profits and production for the
company. Pioneers such as Fredrick Winslow Taylor, Frank Gilbreth, and Henry Ford all developed
scientific management and helped to further the progress of the industrial revolution.
Basic Functional Areas: Business organizations typically have three basic functional areas: finance,
marketing, and operations. Finance is responsible for securing financial resources at favorable prices and
allocating those resources throughout the organization; this includes budgeting, analyzing investment
proposals, and providing funds for operations. Marketing and operations are the primary or "line"
functions. Marketing is responsible for assessing consumer wants and needs, and selling/promoting the
organization's goods or services. Operations is responsible for producing the goods or providing the
services offered by the organization.
Goods and Services Goods are referred to as physical (tangible) products, such as computers or bicycles
because you can touch them. Services are abstract and they are actions that are provided by people, like
healthcare and education. More interaction with customers is required by the service side. There are
more variables involved in services than there are in goods. Goods are usually manufactured under
specific conditions, and services have a wide range of possibilities. Services, such as, haircuts, gym
training, and product troubleshooting are always different depending on the customer, which makes it
harder to tend to the customers' needs. Operations run smoother while manufacturing goods, as
opposed to services. Because of this, it is harder to measure how productive employees are in the
service department. The value of a good is not realized as fast as a service is. There is a time gap
between the production and the sale of a good, where as the value of a service is usually realized soon
after. Various companies patent certain goods so that competitors cannot replicate their product.
Unfortunately, services cannot be patented, which cause other companies to imitate companies with
the best services.
Other Important Trends Companies have switched from ignoring

operations strategy to recognizing the importance of incorporating
strategies into their business decisions. Companies have reduced the
number of workers and have made their companies operate more
efficiently by placing an emphasis on cost control and productivity
improvement. Companies use revenue management to manipulate
prices and influence demand to maximize revenues. Hotels, theme parks
and airliners are key examples of companies using revenue
management to their benefit. Six sigma is a process of reducing costs,
improving quality, and increasing customer satisfaction. Lean production
was first incorporated into businesses in the 1990's in an effort to make
production more efficient. It uses a highly skilled workforce and flexible
equipment to accomplish an increasing level of quality with less
resources compared to mass production which uses space, inventory,
and workers to produce a comparable amount of output. These workers
have higher expectations than in traditional systems. This also leads to
more anxiety and stress among workers in the organization.
Practice Questions
1) Which of the following functional areas are part of a business

organization? (p. 4)
A) Accounting
B) Marketing
C) Operations
D) All of the above
E) None of the above
Answer: D
2) Which of the following are major trends that affect an organization? (p
26)
A) Globalization
B) Outsourcing
C) Ethical behavior
D) The Internet
E) All of the above
Answer: E
3) Which of the following activities is important in achieving effective use

of workers and equipment? (page 11)
A) Forecasting
B) Facilities and Layout
C) Locating Facilities
D) Assuring quality
E) Scheduling
Answer:B
4) Which of the following is NOT part of a Simple Product Supply Chain?

(p. 5)
A) Direct Suppliers
B) Final Customers
C) Management
D) Producer
E) Distributor
Answer: C
5) Which of the following would NOT be considered a model used by

decision makers in operations management? (pg. 18)
A) Mathematical
B) Physical
C) Supply
D) Schematic
Answer: C
6) Which of following is NOT a supporting function in Operations
interface? (page 16)
A) Legal
B) MIS
C) Accounting
D) Marketing
E) Financing
Answer:E
7) Which of the following would be considered an input when converting

inputs into outputs during the transformation process? (page 6)
A) Land
B) Capital
C) Raw Materials
D) Facilities
E) All of the above
Answer:E
8) Which of the following is considered an output during the

transformation process? (pg. 6)
A) Processes
B) High service percentage
C) Finances
D) Equipment
E) All of the above
Answer: B
9) Measurements taken at various points in the transformation process

for control purposes are called: p.g. 5
A) feedback
B) control charts
C) tracking
D) cost control
E) productivity measurement
Answer: A
10) Which type of variation is the result of a deliberate choice of a

business? p.g. 11
A) assignable
B) variety
C) random
D) seasonal
E) none of the above
Answer: B
11) Who is considered the "father of scientific management": p.g. 22

A) Frank Gilbreth
B) Professor Ouskel
C) Frederick Winslow Taylor
D) Henry Ford
E) Pareto
Answer: C
12) The key concept that launched mass production was: p.g. 23
A) modular design
B) interchangeable parts
C) low-skilled workers
D) high demand for products
E) all of the above
Answer: B
13) I:The operations and sales functions are line functions, and all other
functions are support functions.
II: A systems approach refers to the systems in an organization, such as
its accounting system or transportation system. p.g. 12 & 13
A) I is true, II is true
B) I is true, II is false
C) I is false, II is true
D) I is false, II is false
Answer:B
14) The Industrial Revolution led to which of the following methods?

(Page 22-24)
A) Craft Production
B) Mass Production
C) Interchangeable Parts
D) Division of Labor
E) All of the above
Answer: E
15) Accounting, human resources, and IT are considered: (Page 10)

A) Upper-management processes
B) Operational processes
C) Supporting processes
D) Business processes
E) All of the above
Answer: C
16) High goods percentages such as houses, automobiles, clothing,

computers, and machines best relate to what part in the operations
function? (Page 6)
A) Inputs
B) Conversion Process
C) Outputs
D) Innovating
Answer: C
17) What originator contributed to the concept of "interchangeable

parts?" (Page 25)
A) Adam Smith
B) Eli Whitney
C) Henry Gantt
D) George Dantzig
Answer: B
18) A Six Sigma Process includes all of the following except: (Page 28)
A) Reducing costs
B) Improving quality
C) Increasing customer satisfaction
D) Reducing the number of employees
E) All of the above are included
Answer: D
19) Which of the following terms relates to the idea that "the whole is
greater than the sum of its individual parts"? (Page 20)
A) Systems Management
B) Conversion Process
C) Modular Design
D) Pareto phenomenon
E) Model
Answer: A
20) As outsourcing _ , organizations are spending _ amounts on various

supply-related activities such as packaging and moving. (Page 29)
A) decreases, increasing
B) increases, decreasing
C) decreases, decreasing
D) increases, increasing
Answer: D
21) Which of the following is Operations Management Technology not concerned with? p.g. 26 N.M.
A)Product & Service Technology
B)Process Technology
C) Globalization technology
D)Information Technology
E)All of the above
Answer: C
22) Which of the following models is most abstract? p.g. 18

A) Physical Models
B) Schematic Models
C) Mathematical Models
D) Quantitative Model
E) Statistical Model
Answer: C
23) What is the main goal of a company?

A) Obtain the highest profit
B) Find solutions that will be in the best interests of stakeholders
C) Produce as many products as possible
D) A and C
Answer: B
24) Which one of these are important trends? p.g. 28
A) Operations Strategy
B) Revenue Management
C) Lean Production
D) Working with fewer resources
E) All of the above
Answer: E
25) All of these result from lean production except: p.g. 28

A) Flattening of organizational structure
B) Emphasis on Quality
C) Time Reduction
D) Product Liability
E) Teamwork
Answer: D
26) Which of the following is the correct order of supply chain?( pg5)
A)Direct suppliers--producer--distributor--suppliers' suppliers--final customers
B)Suppliers' suppliers--distributor--direct suppliers--producer--final customers
C)Suppliers' suppliers--Direct suppliers--producer--distributor--final customers
D) Final customers--Suppliers' suppliers--direct suppliers--producer--distributor
E)Suppliers' suppliers--final customers--direct suppliers--distributor--producer
Answer:C
27) Which one of the following is a major trend in business? (p26)

A) Management of supply chains
B) Outsourcing
C) Agility
D) Ethical behavior
E) All of the above
Answer:E
28) Which of the following is not a key element of supply chain management?(p31)
A)Purchasing
B) Suppliers
C) Location
D) Logistics
E) Managers decision
Answer: E
29)Which one of the following statements is FALSE?(p26)

A) e-business involves the use of the Internet to transact business
B)E-commerce involve consumer-business transactions
C)System is a set of interrelated parts that do not work together
D)Pareto phenomenon- a few factors account for a high percentage of the occurrence of some events.
E) All of the above are true.
Answer:C
30) Why are models beneficial to managers? (P19)

A) they decrease understanding of the problem
B) they enable managers to analyze "What If?" questions
C) they are generally hard to use and more expensive than dealing directly with the actual situation
D) they serve as a inconsistent tool for evaluation
E) All of the above
Answer:B
31) What is craft production? (P22)

A) A series of steps designed to shorten lead times.
B) A concept developed by the Japanese which emphasizes quality improvement.
C) Highly skilled workers producing customized goods. (Production is low)
D) A way to take advantage of interchangeable or standardized parts.
E) Production costs decreasing as volume increases: Economies of Scale
Answer: C
32) What concept did Adam Smith write about in The Wealth of Nations? (P24)
A) Division of Labor
B) Interchangeable Parts
C) Principles of Scientific Management
D) Moving Assembly Line
E) All of the above
Answer: A
33) What company is most historically recognized for their use of mass production? (P23)
A) General Electric
B) Commonwealth Edison
C) Ford
D) Toyota
E) None of the Above
Answer: C
34) What is the importance of provision of funds? ( Pg 19)

A) careful planning can amount to lesser problems with cash-flow.
B) to alter investments in plants and equipment
C) to fund operations and create necessary time means for funding layouts
D) Both a and c
E) Both a and b
ANSWER: D
35) Which country influenced US manufacturing? p.g. 25 .

A)China
B)Japan
C) Germany
D) All of the above
E)Both b and c
ANSWER: B N.M.
36) When dealing with trends, which one of theses can be used as a business advantage? pg 24
A)E-commerce and e-business
B) Virtualization
C) Social networking sites
D) Product and Service Technology?
*note although all of these can be applied to the question, only A and D are mentioned in the book.
37) What are the three functions of business organizations?

a) distribute, supply, finalize
b) finance, operations, marketing
c) finance, operations, management
d) operations, marketing, management
Answer is b. (found on page 4)
38) Variations that are caused by defective inputs, incorrect work methods, and out of adjustment
equipment are known as:
a) random variations
b) structural variations
c) assignable variations
d) operational variation
Answer is c. (found on page 11)
39) An oil change is an example of a _ .

A) Uniformity of input
B) Uniformity of output
C) Good
D) Service
E) A & C
ANSWER: D (PAGE 6: 9th edition)
42) Which one of the following is neither an input nor an output in the food transformation process?
(9th ed. page 6)
A)Energy
B)Water
C)Labor
D)Cleaning
E)Canned Vegetables
Answer: D
43)Which is not a basic function of a business organization? (9th ed. page 4)

A)Operations
B)Accounting
C)Marketing
D)Finance
E) All of the above
Answer: B
44) What is E-Commerce? (9th ed. page 25)

A)Use of the internet to conduct business
B)Business-to-Business transactions (B2B)
C)Consumer-to-Business transactions (C2B)
D)All of the above
Answer: d
45) What is Agility? (9th ed. page 27)

A)Ability to respond to demands or opportunities at a rapid pace.
B)Ability to switch markets quickly.
C)The reducing of inputs while maintaining the same level of outputs.
D)System where workers use simple, flexible tools to produce small quantities of customized goods.
E)None of the Above
Answer: a
46 )Product packages are a combination of goods and services. (9th ed. page 4)
A)True
B)False
Answer: a
47) Which of the following would not generally be considered an aspect of

operations management?
A) Work methods
B) Secure financial resources
C) Maintain quality
D) Product or service design
E) Manage inventories
Answer: Secure Financial Resources (Pg.9)
48) Which of the following is not a typical question asked by an operations

manager?
A) How much capacity will be needed in the months ahead?
B) What is a satisfactory location for a new facility?
C) Which products/services should be offered?
D) How to motivate employees?
E) How much to sell a product for?
Answer: How much to sell a product for? pg.12
49) Which of the following is not generally considered to be an

advantage of using models for decision making?
A) Providing a systematic approach to problem solving.
B) Emphasizing quantitative information.
C) Providing an exact representation of reality.
D) Enabling managers to answer "what if" questions
E) Requiring users to be specific about objectives
Answer: Providing an exact representation of reality. (pg. 15)
50) Which comes last in the development of manufacturing techniques?

A) Lean production.
B) Division of labor.
C) Mass production.
D) Craft production.
E) Interchangeable parts
Answer: Lean Production pg. 28
51) Which one of these is specifically related to the globalization of business?

A) agility
B) the reduction of tariffs
C) craft production
D) physical models.
E) Pareto phenomenon
Answer: B pg.27
52) _ is responsible for the general up keeping and repair of land and
equipment. (pg. 11)
A) Storage
B) Maintenance
C) Distribution
D) Budgeting
E) Management
Answer: B
53) Which of the following means giving something up to do another
thing? (p.16)
A) System approach
B) Process selection
C) Trade off
D) Outsourcing
E) Managing inventories
Answer: C
54) Which of the following incorporates advantages in both mass

production and craft production. (p.28)
A) Operating production
B) Quality-based strategy
C) Project production
D) Lean production
Answer: D
55) Product designs are often _ to patent than service designs. (p.8)
A) easier
B) harder
C) faster
D) slower
E) unable
Answer: A
56) The father of "motion science" was: (p.26)

A) Frederick W. Taylor
B) Jay Forrester
C) F.W. Harris
D) Henry Ford
E) Frank Gilbreth
Answer: E
Ch. 2 Strategy and Productivity

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Summary : Competitiveness/Strategy/Productivity
Chapter 2
Covers three important aspects of any business: competitiveness,
strategy and productivity. All three aspects are vital to a company
succeeding in the world of business. Any firm, whether a manufacturer
or a service provider, must employ all three aspects as they all play in
growing revenues. A successful organization must have a competitive
advantage, a strategy to meet the company's goals, and the ability to
produce goods and services in a cost-effective manner. Most
organizations have a single company "motto" called a mission statement
that summarizes these described aspects of the company. The mission
statement should answer the question "What business are we in?". The
mission statement is the basis for organizational goals.
Summary: Goal, Mission, Strategies and Tactics (page 42-43)
The three important characteristics of any business are competitiveness,

strategy, and productivity. Competitiveness refers to how effective an
organization meets the wants and needs of customers in comparison to
its competitors that produce the same goods/services. Strategy denotes
a plan for achieving organizational goals. The two strategies discussed
in this chapter are organizational and functional level strategies.
Productivity is a measure of the effective use of resources, usually
expressed as the ratio of output to input. Productivity measures are
useful for tracking an operating units performance over time and judging
the performance of an entire industry or country.
A correct goal, mission, tactics, and strategies are the necessary things
for an organizations success. These four terms are deeply related to
each other. First, an organization needs to know its mission, which is the
reason for its existence. Such as what kind of business are they going to
pursue. Second, the mission statement gives the organization's
purpose. Goals further explain this mission. They are like the marketing
position, they express how organization wants its self-image and position
in peoples mind. Third, the organization can start planning how to reach
its goals, in other words, their strategy. Strategies have long,
intermediate or short terms for organizations different needs. Finally, the
organization can approach the strategies by using tactics. Tactics tell us
how to actually operate and process the organization and its strategies
specifically.
Chapter 2
Describes the importance of competitiveness, strategy, and productivity
in a business. Competitiveness describes how an organization meets the
needs and wants of customers compared to the competitors of the
organization, in other words, demand. Strategy helps the organization
achieve their goals by using tactics, which are the methods and actions
taken to accomplish strategies. Lastly, productivity helps the
organization know what materials are used effectively. Productivity =
Output (Goods and services) / Input. (labor, materials, energy, and other
resources.)
Competitiveness is important to a company because it determines an

organizations profits. For example, will the company be prosperous or
barely get by. A strategy is important to be defined whether they are long
term or short term. Also, they can be very specific, for example as in
tactics or, in contrast, very broad. Finally, the chapter gives us a way to
measure the companys output relative to input. Measuring productivity
is important for analyzing, scheduling, and many other type of
managerial or external functions.
Many organizations are driven by competition. To be successful in

todays competitive business environment, companies must know what
combinations of factors are most important to satisfy all of their
shareholders while also helping to fulfill their mission. These factors may
include, but are not limited to: price, quality, services, time or special
features. It is critical that organizations as a whole develop goals and
strategies to fulfill their mission. Further, each functional area in the
business should also have goals and strategies that coincide with
accomplishing the larger goals. Employees of the organization should
also focus on using all resources efficiently to maximize the productivity
of the organization. Productivity has implications not only for the
organization at stake, but society as a whole.
TEST QUESTIONS NEED PAGE NUMBERS
1) Which is NOT an example of an external factor:
a) political conditions
b) technology
c) competition
d) operations
e) all the above
Answer: d (Page 46)
2) Which of the following is an example of an organizational strategy:
a) low cost
b) high quality
c) service
d) variety
e) all the above
Answer: e (Page 44)
3) Which of the following is NOT an example of a key internal factors:
a) suppliers
b) human resources
c) customers
d) financial resources
e) legal environments
Answer: e (Page 46-47)
4) Which factors affect the productivity of a company:
a) methods
b) quality
c) capital
d) technology
e) all the above
Answer: e (Page 57)
5) Which productivity factor is included in a balanced scorecard:
a) labor
b) capital
c) energy
d) machine
e) financial
Answer: e (Page 53)
6) Which strategy focuses on reducing the time needed to accomplish a

task?
a) Time-base strategy
b) Quality-based strategy
c) Operative strategy
d) Global strategy
e) None of Above
Answer: a (Page 50)
7) Which answer describes a reason why some organizations fail?
a) Neglecting operation strategy

b) Failing to consider customer wants and needs
b) Neglecting investments in capital and human resource
d) Failing to take advantage of strengths and opportunity
e) All of the above
Answer: e (Page 41-42)
8) Coordinating internal and external operations applies to which of the

following?
a) Inventory management
b) Flexibility
c) Supply chain management
d) Location
e) Cost
Answer: c (page 41)
9) This concept is defined as the consideration of events and trends that

present threats or opportunities to a company?
a) Core competencies
b) Productivity
c) The Balanced Scorecard (BSC)
d) Environmental scanning
e) None of the above
Answer: d (page 46)
10) What do you call plans for achieving organizational goals?
a) Mission
b) Goals
c) Tactics
d) Strategies
e) Mission statement
Answer: d (page 43)
11) Which of the following would NOT be an example of partial

productivity measures?
a) labor productivity
b) economic productivity
c) capital productivity
d) energy productivity
e) machine productivity
Answer: b (page 55)
12) True/False: The Stock Market is NOT an example of a Strategic OM

Decision Area.
a) True
b) False
Answer: a (page 50)
13) Which decision areas are affected by supply chains?
a) Costs, visibility
b) Costs, new products, services, operating systems
c) Costs, quality, liability and environmental issues
d) Costs, new products, services, or operating systems
e) Costs, quality, agility, shortages, vendor relations
Answer: e (page 50)
14) What are the five time-based strategies?
a) Planning, designing, financing, changeover, delivery

b) Planning, strategies, financing, changeover, delivery
c) Planning, designing, processing, changeover, delivery
d) Planning, strategies, processing, changeover, delivery
e) Planning, strategies, financing, changeover, delivery
Answer: c
15) True/False: Marketing is a factor that affects productivity.
a) True
b) False
Answer: b (page 57)

16) Which of the following approaches is consistent with the organization
strategy, which is used to guide the operations function?
a) Quality-based strategy
b) Time-based strategy
c) Operations strategy
d) Marketing strategy
e) None of the Above
Answer: c (page 49)
17) This concept deals with the time needed to fill orders.
a) Delivery time
b) Processing time
c) Changeover time
d) Planning time
Answer: a (page 51)
18) Using the data below, find the multi-factor productivity for the
combine input of labor and machine time.
Output: $10,000
Input
Labor $2000
Material: $720
Overhead: $3000
a) 2.13
b) 1.75
c) 1.36
d) 3.12
Answer: b (Output/Labor+Materials+Overhead (Page 56))
19) All of the following are NOT external factors EXCEPT:
a) Customers
b) Human Resources
c) Financial Resources
d) Competition
e) All of the above
Answer: d (page 46)
20) What determines whether a company meets the wants and needs of
customers relative to their competitors?
a) Mission and Strategy

b) Strategy formulation
c) Competitiveness
d) Strategy and tactics
Answer: c (page 40)
21) 12 Workers were able to clean 120 rooms in 3 hours. What is the
productivity for each worker?
a) 3.33 Rooms/Hour
b) 10 Rooms/Hour
c) 30 Rooms/Hour
d) The workers are not very productive
Answer: a (Rooms Cleaned / Labor Hours Worked = 120 Rooms / [12

Workers X 3 Hours/Worker] = 3.33 Rooms/Hour (Page 55))
22) Determine the multi-factor productivity for the combined input of

labor and machine time using the following data:
Output: 10,050 units
Input:
Labor: $4,000
Materials: $780
Overhead: $1,470
a) 1.84 units per dollar input

b) .62 units per dollar input
c) 1.61 units per dollar input
d) 4.47 units per dollar input
e) Not enough information given
Answer: c (Output / [Labor + Materials + Overhead] = 10,500 units /

[$4,000 + $780 + $1,470] = 10,050 units / $6,250 = 1.61 units per dollar
input (Page 56))
23) Productivity growth is measured by:
a) [(Previous Productivity Current Productivity) / Current Productivity] X

100
b) [(Current Productivity Previous Productivity) / Previous Productivity]
X 100
c) [Current Productivity / Previous Productivity] X 100
d) [Previous Productivity / Current Productivity ] X 100
Answer: b (Page 53)
24) True / False: The Balance Scorecard (BSC) has a large role in
helping to determine strategy formation within an organization
a) True
b) False
Answer: b (The Balance Scorecard (BSC) has no role in strategy

formation. The BSC is a top-down management system that
organizations can use to clarify their vision and strategy and transform
them into action (Page 52-53))
25) True / False: Workers are the main determinant of productivity.
a) True
b) False
Answer: b (This is a common misconception of productivity. In the past,

gains in productivity have come from technological improvements such
as automation, fax machines, the internet, cell phones, e-mail,
computers, copiers, and calculators (Page 57))
26) Which strategic organization statement below contains the broadest

statement for any given company?
a) tactic
b) goals
c) operational strategies
d) mission statement
e) all of the above
Answer: d (Page 42)
27) Supermarkets, dry cleaners, ATMs and mall stores are the best
example of what kind of operations strategy?
a) low cost
b) rapid delivery
c) superior customer service
d) convenience
e) none of the above
Answer: d (Page 43)
28) What decisions affect cost, quality, liability, and environmental

issues?
a) product and service design

b) capacity
c) process selection and layout
d) inventory
e) scheduling
Answer: a (Page 49)
29) Which of the following operations, that has a major influence in

competitiveness, might involve after-sales activities customers perceive
as value-added?
a) cost
b) location
c) supply chain management
d) inventory management
e) service
Answer: e (Page 39)
30) Characteristics that customers perceive as minimum standards of

acceptability are
a) order qualifiers
b) order winners
c) examples of environmental scanning
d) None of the Above
e) All of the Above
Answer: a (Page 45)
31) Which of the following is the correct productivity growth given the
following?
Current productivity: 55
Previous productivity: 50
Last years productivity growth: 4%
a) 12%
b) 10%
c) 8%
d) 6%
e) 4%
Answer: b (Page 51)
32) Formulation of a successful strategy, businesses must take into

account:
a) Competition and markets
b) Products and services
c) Quality and flexibility
d) Order qualifiers and order winners
Answer: d (Page 46)
33) Process yield is related to:
a) Balanced Scorecard
b) Strategy
c) Productivity
d) Competitiveness
Answer: c (Page 57)
34) All are internal factors, EXCEPT:
a) Equipment
b) Suppliers
c) Financial resources
d) Markets
Answer: d (Page 46)
35) Quality-based strategies focus on reducing the time required to

accomplish various activities:
a) True
b) False
Answer: b (Time-based strategies focus on reducing the time required to

accomplish various activities. On the other hand, quality-based focus on
maintaining or improving quality.(Page 50))
36) It is important to link operation strategy to:
a) organization strategy
b) Markets
c) organization tactics
d) economic conditions
Answer: a (Page 49)
Ch. 3 Forecasting
Edit 1 175
Chapter 3
Summary : Forecasting
Forecasting helps managers and businesses develop meaningful plans
and reduce uncertainty of events in the future. Managers want to match
supply with demand; therefore, it is essential for them to forecast how
much space they need for supply to each demand.
Two important aspects associated with forecasting are the expected

level of demand and the forecast's degree of accuracy. Two general
approaches to forecasting are qualitative and quantitative. Also, there
are three types of forecasting techniques:
1. Judgmental forecasts,
2. Time-series forecasts, and
3. Associative models.
Judgmental forecasts rely on subjective inputs from various

sources. Time-Series forecasts projects patterns identified in recent
time-series observations. A time-series is a time-ordered sequence of
observations taken at regular time intervals. Associative models are
based on the development of an equation that summarizes the effects of
predictor variables. Predictor variables are used to predict values of the
variable of our interest.
It is important to know how to calculate a forecast error: Error = Actual -

Forecast. There are three ways of measuring the accuracy of forecasts:
MAD, MSE, and MAPE. MAD weighs all errors evenly. MSE weighs
errors according to their squared values. Lastly, MAPE weighs according
to relative error.
Qualitative forecasting is subjective, while quantitative forecasting

involves projecting historical data, or developing associative models.
Judgmental forecasts are qualitative, while time-series forecasts and
associative models are both quantitative. Quantitative forecasting
methods include the Nave forecasting method, the moving average
method, the weighted average method, and the exponential smoothing
method. Forecasts are never 100% accurate; hence, there is always
room for improvement.
Chapter 3 introduced different kinds of forecasting techniques; however

no single technique works best in every situation. Random variation is
always present within forecasts and there will always be a degree of
residual error within forecasts. Forecasts are the basis for an
organization's schedule, and therefore the accuracy of these forecasts
will dictate how many resources must be used, the output production,
and the timing of a production schedule.The higher the accuracy the
higher the cost, therefore the best forecast is generated from some
combination of accuracy and cost. The availability of historical data,
computer software, as well as the time needed to gather and analyze
data must be taken into consideration when selecting a forecast
technique. Computers play an important role in preparing forecasts
based on quantitative data.Because forecast error equals the actual
value minus the forecast value. Positive errors will occur when the
forecast is too low and negative errors will occur when the forecast is too
high.
There are a wide variety of forecasting techniques that can broadly be classified in three main
approach
1. Judgmental Forecasts: Useful when forecasts must by done in a short

period of time, when data is out dated, unavailable, or there's limited
time to collect it.
2. Time Series Forecasts: Most Common, are used to identify specific
patterns in data and use them to project future forecasts
3. Associative models: identify related variables in order to predict
necessary forecasts.
Forecasting is a method used to predict and place all information mainly

in design and operating systems. They both estimate what that
information will look like in the future. In order to do so, one must
determine the purpose, establish a time horizon, select a forecasting
technique, make it, and then monitor the new forecast. The methods
used to decrease error include: Delphi method, naive method, and
weighted average method. A major issue in forecasting is seasonal
variations because it has a repeating movement. This is where the
control chart becomes important mainly because it monitors forecasting
errors.
Chapter Three focuses on forecasting which involves a statement about

the future values of a variable of interest. There are three forecast
techniques - judgmental, time-series and focus. A proper forecast should
meet certain requirements which are timely, accurate, reliable,
expressed in meaningful units, in writing, cost effective and finally simple
to understand and use. After the forecast has been made, it is important
that organizations study them and meet the demands of consumers by
reacting to the forecast. However, there is no way to predict things with
complete accuracy; we can only choose the best forecasting to fit
different situations.
ForecastsForecasting Demands
Forecasting is an important part of a business because a forecast results
in a more accurate inventory. Main uses for forecasts include: Plan the
system (long-range plans) and plan the use of the system (short-range
plans). The four common types of forecasts are naive forecasts, moving
average, weighted moving average and exponential smoothing.
Having an accurate forecast is very important. Chapter 3 also focuses
about forecast error. Error is calculated by subtracting the forecast from
the actual error. Its also important that firms use the most accurate
forecasting method. The three most common ways to measure the
errors in forecasts are the mean deviation, the mean squared error, and
the mean absolute percent error.
Forecasting is a statement pertaining to the future value of a variable of

interest. Its crucial for good forecasting to be reliable, cost effective,
simple and concise. Its very important for a forecast to be correct and
that their be as few errors as possible. Errors greatly effect forecast
accuracy and are calculated as Error = Actual - Forecast. If their are too
many errors in a forecast, then action is required to correct those
errors.There are two main approaches in forecasting. One approach is
quantitative forecasting which relies on past variables and data. The
other is qualitative forecasting which is more about opinions,
fundamental analysis, and intuitions.
SUMMARY - Judgmental Forecasts
This section covers Judgmental forecasts, which are useful when need
to make a quick forecast or if historical data is not available.
Judgmental forecasts include executive opinions, sales-force opinions,

consumer surveys, and the Delphi method. Executive opinions utilizes a
small group of upper-level managers to develop a forecast. Sales-force
opinion method uses the sales staff or the customer service staff to
make forecasts based on information obtained through direct contact
with customers. Consumer surveys are used to gather information
directly from customers to generated a forecast.
In Chapter 3, various methods of forecasting methods are explained in

detail the function of each forecasting methods and how they are used in
everyday situations. These forecast help managers try to predict future
events in hopes of improving company's operations. Forecasts are split
into two different groups, quantitative and qualitative. Qualitative
forecasts are surveys, opinions, and sales-force estimates. The two
major quantitative forecasts are analysis of time-series data and
associative techniques. Depending on the situation not all forecasts work
accurately and some work better than others.
1. Which of the following is NOT a step in the forecasting process? p.g.

74
A. Determining the purpose of the forecast
B. Establishing a time horizon
C. Selecting a forecast technique
D. Creating demand for forecasting
E. Monitoring the forecast
ANSWER D. Create demand for forecasting
2. Forecast accuracy _ as the time period covered by the forecast _ .

p.g. 73
A. increases, decreases
B. decreases, increases
C. is eliminated continues
D. continues is eliminated
E. none of the above
ANSWER B. decreases, increases
3. Good forecasting requires which of the following element(s)? p.g. 74

A. timely
B. accurate
C. reliable
D. cost-effective
E. All of the above
ANSWER E. All of the above
4. The mean absolute deviation (MAD) is the _ way to compute _, as

weighted errors computes _ . p.g. 77
A. hardest, linearly
B. easiest, linearly
C. error, linearly
D. squared error, linearly
ANSWER B. easiest, linearly
5. The Forecast Error equation is: p.g. 75

A. Error=Actual-Forecast
B. Error=Forecast-Actual
C. Error=(Actual-Forecast)^2
D. Error=(Actual-Forecast)/n
E. None of the above
ANSWER A. Error=Actual-Forecast
1- What are forecast values used for?:

a) plan the system
b) plan the use of the system
c) provide future goals
d) all of the above
ANSWER: D page 79
5- A manager is trying to calculate the forecasting error for five periods, he

successfully calculated the sum of the squared errors to be 39. What is the
forecasting error using MSE?
a) 2.6
b) 9.75
c) 7.8
d) 6.85
e) 10
ANSWER B page 76
1. Forecast Error is equal to

a) the forecast value - the actual value
b) the actual value - the forecast value
c) the absolute value - the forecast value
d) the forecast value - the absolute value
e) the absolute value - the value
ANSWER: B page 75
2. When making periodic forecasts, it is important to
a) make sure the the actual value exceeds the forecast value
b) make sure the forecast value exceeds the actual value
c) make sure the the errors are within reasonable bounds
d) make sure the forecast value is outside a reasonable bound
e) take corrective actions.
ANSWER: C found on pg 75
3. Positive Forecast Errors occur when

a) the forecast is too high
b) the forecast is too low
c) the forecast equals the actual value
d) the actual value exceeds the forecast value
ANSWER: B page 75
4. Negative Forecast Errors occur when

a) the forecast equals the actual value
b) the forecast is too low
c) the actual value exceeds the forecast value
d) the forecast is too high
e) the value equals actual value
ANSWER: D page 75
5. Which of the following is a way forecast errors influence decision

making
a) They determine the success or failure of the chosen forecasting
alternative
b) They determine at which level the actual value should exceed the
forecast value
c) They determine at which level the forecast value should exceed the
actual value
d) They do not affect decision making: forecast error is too random a
variation to be accounted for
e) They determine how to summarize forecast error over time
ANSWER: A found on page 75
1. A data series that shows a short-term regular variation related to the
calender or time of day:
a) trend
b) seasonality
c) cycle
d) irregular variation
e) random variation
ANSWER: B
P.79
2. Which forecasting would be best if the forecast horizon was short -

medium, preparation time was short - medium, and personal
background had little sophistication?
a) moving average
b) trend model
c) seasonal
d) simple exponential smoothing
e) all the same
ANSWER: C
P. 104
3. Given the following data, the error is?

Forecasted Sales- 110 & Actual Sales- 130
a) -20
b) 20
c) 240
d) 0
ANSWER: B
P. 75
4. What is the first step in the forecasting process?

a) establish a time horizon
b) select a forecasting technique
c) obtain data
d) determine the purpose of the forecast
ANSWER: D
P. 74
5. The two most important factors when choosing a forecasting method are?
a) cost and accuracy
b) cost and time
c) time and accuracy
d) quality and time
ANSWER: A
P. 103
6.) When are forecasts made?

a.) Weekly
b.) Monthly
c.) Quarterly
d.) Annually
e.) All of the above
ANSWER: E.
P. 99
1. The actual demand was 50 units while the forecast value was 30 units.
What is the error?
A. 15
B. 20
C. 25
D. 10
E. There is no error.
Answer: B, page 75
2. Which one of these is a wave-like variation lasting more than a year?

A. Cycle
B. Seasonal
C. Cycle
D. Irregular
E. Random
Answer: A, page 79
3. Which of these forecasts equals the previous periods actual value?

A. MAD
B. MSE
C. MAPE
D. Naive
Answer: D, page 80
4. Which one of these is a time series forecast?

A. Trend
B. Seasonality
C. Cycle
D. Random Variation
E. All of the above
Answer: E, page 79
5. The previous forecast was 100 units. The actual forecast was 150 units.
There is an alpha of .5. What is the next forecast going to be?
A. 100
B. 150
C. 125
D. 200
E. 175
Answer: C, pages 83-84
Murtaza Valika
mvalik2
1. What type of relationship is there between accuracy and the forecast

horizon.
a) Positive
b) Inverse
c) Zero
d) Exponential
e) Parabolic
Answer: B (pg. 73)
2. Looking at the historical data, there are two peaks and troughs that
can be seen. There is a medium forecast horizon and moderate
preparation time. Which forecasting method should be selected?
a) Moving average
b) Causal regression models
c) Seasonal
d) Exponential smoothing
e) Naive forecasting
Answer: C (pg. 79)
3. A proactive approach to a forecast:

a) Seeks to actively influence demand
b) Requires a subjective assessment of the influence on demand
c) May need two forecasts
d) All of the above
Answer: D (pg. 105)
4. Simple exponential smoothing is appropriate when data:

a) Exhibits a linear trend
b) Varies around an average or has gradual changes
c) Has regularly repeating upward or downward movements
d) Exhibits no clear pattern
e) Exhibits irregular behavior
Answer: B (pg. 83-85 )
5. What is the naive forecast in the stable series using the following
information: Previous Actual Value = 34, Previous Forecast Value = 30.
a) 34
b) 30
c) 4
d) 32
e) 33
Answer: A (pg. 79)
6. Monitoring the forecast is important because:

a) Forecasts errors almost certain- there is always room for improvement
b) It is important to determine whether the forecasts are performing
satisfactorily
c) The model may be outdated
d) All of the above
Answer: D (pg. 99)
Judy Chen
JChen60
1. When period 1 has a sale of 10 units, what is the forecast for the sales
in the next period using the naive methods?
a) 8 units
b) 9 units
c) 10 units
d) 10.5 units
e) 12 units
Answer is c. page 79
2. Which of the following is considered an input for judgmental forecast?

a) Executive opinions
b) Salesforce opinions
c) Consumer surveys
d) Delphi method
e) All of the above
Answer is e. page 77
3. Which of the following is not an element of a good forecast?

a) The forecast should be timely.
b) The forecast should be accurate.
c) The forecast should be oral.
d) The forecast should be reliable
e) All of the above
4. Which of the following are residual variations that remain after all other behaviors have been
accounted for?
a) Seasonality
b) Cycle
c) Random Variation
d) Trend
5. Nave Forecast is best used when:

a) The time series is stable
b) There is a trend
c) There is seasonality
d) All of the above
Answer is d. page 79
Marco Chen
mchen26
Questions:
1. Which forecasting method uses subjective inputs such as opinions

from consumer surveys, sales staff, managers, executives, and experts?
A) Judgmental forecasts
B) Time-series forecasts
C) Associative models
D) All of the Above
Answer: A , pg. 77
2. Which forecasting method has the advantage of bringing together the

knowledge and talent of various managers, but runs the risk that the
view of one person may prevail?
A) Salesforce opinions
B) Consumer surveys
C) Delphi method
D) Executive opinions
E) Associative models
Answer: D, pg 77
3. Which forecasting method is the most useful for assessing changes in

technology and their impact on an organization?
A) Salesforce opinions
B) Executive opinions
C) Delphi method
D) Consumer surveys
E) Time-series forecasts
Answer: C, pg 78
4. In which forecasting method may the persons offering their opinion be

overly optimistic/pessimistic and thus may be unable to distinguish
between what customers would liketo do and what they actually will do?
A) Consumer surveys
B) Salesforce opinions
C) Delphi method
D) Executive opinions
E) Judgmental forecasts
Answer: B, pg 78
5. What forecasting method(s) utilizes qualitative techniques rather than

quantitative techniques?
A) Judgmental forecasts
B) Time-series forecasts
C) Associative models
D) A and B
E) All of the above
Answer: A, pg 77
Rahul Singh
rsingh24
1. What is the forecast for period 4 if period 1 = 65, 2= 54, 3=88.( using naive method)
a) 65
b)88
c)54
d)11
e)23
Answer: B page 79
2. Which one refers to short-term regular variations?
a) Trend
b) Cycles
c) Irregular variations
d) Random variations
e) seasonality
Answer: E page 79
3. Which one of these uses historical data for forecasting?
a) Associative models
b) Time-series forecasts
c) Judgmental forecasts
d) Consumer Surveys
e) Delphi Method
Answer: B page 77-81
this question is a duplicate

4. Which is the element of a good forecast?
a) timely
b) accurate
c) reliable
d) cost-effective
e) all of the above
Answer: E need page number
5. What is the error when the actual is 333 and the forecast is 340?
a) 7
b) -7
c) 14
d) -14
e) 20
Answer: B page 75
Kwok On Leung
kleung7
Need to have five option and page numbers

1. Forecasts based on judgment and opinion include which of the
following:
a) Executive opinions
b) Salesforce opinions
c) Consumer Surveys
d) Opinions of experts
e) All the above
Answer E
p.g. 77
2. The two general approaches to forecasting are:
a) Quantitative and Qualitative

b) Qualitative and data analysis
c) Qualitative and judgmental
d) Associative and Historical
Answer A
p.g. 77
3. Analysis of time-series data uses data to predict future data:
a) Predictable
b) Historical
c) Future
d) Current
e) Random
Answer B
p.g. 77
4. The mean absolute deviation of 1, -2, -3 and 2 is
a) 4
b) 9
c) 2
d) 1
e) 5
Answer C need page number
5. Two factors in deciding which forecast to chose are
a) Cost and accuracy

b) Reliability and accuracy
c) Cost and Reliability
d) Reliability and validity
Answer A
Michael Hare: Mhare2
Chapter 3
Questions NEED FIVE OPTIONS FOR EACH QUESTION

1. (True/False) Forecast accuracy decreases as the time horizon
increases
True! Since short-range forecasts tend to have fewer uncertainties
theyre usually more accurate. p. 73
2. Which method of detecting forecast errors is the most effective?

a) Mean deviation
b) Mean squared error
c) Mean absolute percent error
d) Depends on the situation
d) Depends on the situation p.75-77
3. Compute a three-period moving average.
Period Demand
1 57
2 50
3 54
4 52
5 56
a) 53
b) 54
c) 55
d) 56
e) Cannot be determined
b) 54 p. 81
4. What is a process in which managers and staff complete a series of

questionnaires to achieve a forecast?
a) Seasonal relative
b) Tracking signal
c) Delphi method
d) Qualitative assessment
e) Both c and b
c) Delphi method p. 78
5. What is one way to attempt to detect biases in errors over time?
a) Judgmental forecasts
b) Tracking signal
c) Associative models
d) Predictor variable
e) Error Forcasting
b) Tracking signal p.101
Eden Temple
etempl2
1) Quantitative techniques consist mainly of

a. Hunches of managers
b. hard data
c. opinions of outside consultants
d. both a and b
e. none of the above
Answer: b
p.g. 77
2) What happens when errors go far beyond acceptable limits.

a. corrective action is needed
b. nothing is done because nothing can be done
c. a forecast can not be complete
d. no forecast ever goes beyond acceptable limits
Answer: a
page 75
3) After determining the purpose of a forecast what is the next step in the
forecasting process?
a. Making the forecasting
b. getting opinions of what the forecast should look like
c. looking into past forecasts
d. establishing a time horizon
e. writing a report of what is to be included in the forecast
Answer: d
p.g. 74
4) A good forecast will be

a. reliable
b. accurate
c. simple
d. cost effective
e. all of the above
Answer: e
p.g. 74
5) What does it mean when there is seasonality, a trend, or the time

series is stable?
a. a forecast can not be done
b. a nave forecast can be used
c. accuracy will be very good
d. their will be many errors
e. this means absolutely nothing
Answer: b
p.g. 79
Miguel Guzman
mguzma4
1. What is a forecasting technique that uses explanatory variables to predict

future demand?
A. Time-series forecasts
B. Judgmental forecasts
C. Associative models
D. Delphi method
E. Naive method
C. Associative method. P 77
2. Variables that can be used to predict values of the variables of interest are
A. Random variations
B. Errors
C. Seasonal variations
D. Regression lines
E. Predictor variables
E. Predictor variables. P 94
3. A technique for fitting a line to a set of points is

A. Associative model
B. Correlation
C. Delphi method
D. Regression
E. Exponential smoothing
D. Regression. P 94
4. What minimizes the sum of the squared vertical deviations around the line?
A. Weighted Average
B. Least square line
C. Mean squared error
D. Exponential smoothing
E. Tend-adjusted exponential smoothing
B. Least square line. P 94
5. A measure of the scatter of points around a regression line is

A. Standard error of estimate
B. correlation
C. regression
D. least square line
E. seasonal variation
A. Standard error of estimate. P 96
Klongi2
Krista Longi
5 different answer choices are required

1. Which one of the following is NOT a judgment/opinion forecasting
approach?
A. Delphi technique
B. Direct-contact composites
C. Hull technique
D. Consumer surveys
E. Executive opinions
p.g. 77, 78
2. In the Additive model what does demand equal?

A. Trend + Seasonality
B Trend X Seasonality
C. Seasonality - Trend
D. Seasonality + 2(Trend)
E. (Trend + Seasonality)^2
page 90-91
3. Which one of these techniques for averaging was not discussed in Ch.
3 in your textbook?
A. Moving Average
B. Exponential Smoothing
C. Weighted moving Average
D. Boost Average
E. Naive Method
page 79
4. Once you have established a time horizon in the forecasting process

what would be the next step?
A. Make a forecast
B. Select a forecasting technique
C. Monitor the forecast
D. Obtain data
E. Determine the purpose of the forecast
page 74
5. What are seasonal variations?

A. Regularly repeated movements in series values that can be tied to
recurring events.
B. Regularly repeated movements in series values that cannot be tied to
recurring events.
C. When a season like fall changes into winter.
D. When a season like winter changes into fall.
page 79
Cory J. Renner
crenne3
1) What are the steps in the forecasting process?
A) Make the forecast

B) Determine the purpose of the forecast
C) Establish a time horizon
D) C, B, A
E) B, C, A
Answer: E
Page 70
2) Which of the following is an element of a good forecast?

A) Precise
B) No need to reliable
C) Timely
D) Spoken but not written
Answer: C
Page 70
3) What are the approache(s) to a forecast?
A) Prevention
B) Proactive
C) Banzai
D) Reactive
E) A & B
Answer: E
Page: 99
4) Which of the following is most similar to weighted average?
A) Exponential smoothing
B) Moving Average
C) Time Series
D) A & B
Answer: B
Page 75
5) What does the "b" stand for in the linear trend equation: F = a + bt?
A) Time periods
B) Forecast
C) Value
D) Slope
Answer: D
Page 79
slwin2
The following table is the historical data for Apple Republic's sales in
their clothing up until November, 2009.
Time Period Demand
August,2009 800
September,2009 675
October,2009 700
November,2009 1100
1) What is the forecast for December, 2009 if we use naive approach?
A) 800
B) 675
C) 700
D) 1100
Answer: D (p. 79-83)
2) What is the forecast for December, 2009 if we use a three-year

weighted moving average with .5, .3, and .2 (with .5 for the most recent
month)?
A) 825
B) 895
C) 768
D) 800
E) 900
Answer: B (p. 79-83)
Ch. 4 Product and Service Design

Edit 0 170
Chapter 4 - Product And Service Design

Summary:
When planning on producing a new product and/or service, the key factor is the product and service
design. Successful designs come down to these basic principles:translate customers' wants and needs,
refine existing products and services, develop new products and services, formulate quality goals,
formulate cost targets, construct and test prototypes, document specifications, and translate products and
service specification into process specifications. The process of design has certain steps that include
motivation, ideas for improvement, organizational capabilities, and forecasting. In the product process
innovations, research and development play a significant role. Because of the influence a product and
service design can have on an organization, the design process is encouraged to be tied in with the
organization's strategy and take into account some key considerations.
Technological changes, the competitive market, and economic and demographic changes are some
market opportunities and threats that all organizations must be aware of when planning a product and
service design. Computer-aided design (CAD) and Computer-aided manufacturing (CAM) are important
tools in the design process because they can anticipate what the design will look like, as well as allow for
better manufacturing. Businesses also must take in account environmental and legal concerns when
designing a new product. Most importantly, the manufacturing process must ensure the product's safety.
Product and Service Design
Companies choose various ways to design their products and the type of
services they provide. Which include: standardization, mass
customization, delayed differentiation, modular design, and robust
design. Deciding which method to use is very important along with
deciding the company's target market. Deciding the right method,
establishes good productivity and efficient way fo operations.
Service design is an activity of organizing and planning people,

communication and material components in order to improve service
quality. It is the interaction between the service provider and customers
and the customers' experience. A service is anything that is done to or
for a client and is created and delivered simultaneously. The two most
important issues in service design are the degree of variation in
requirements and the degree of customer contact in which determines
how standardized the service can be. The greater the degree of
customer contact, the greater the opportunity for selling. In addition,
concepts and ideas generated are captured in sketches or in service
prototypes. The strong visual element, combined with the opportunity to
test and rapidly change services and interfaces, delivers real value in
today's competitive markets.
Product Design combines ergonomics with product and business

knowledge to generate ideas and concepts and convert them into
physical and usable objects or services. The discipline covers the entire
range of activities from concept, manufacturing, testing to product
launch. Product Designers conceptualize and evaluate ideas and
themes they find profitable. The designers make these ideas tangible
through products using a systematic approach.
Difference between service design and product design: Service design is

an intangible aspect while product design is tangible. Services are
generally created and delivered at the same time and can not be held in
inventory like actual products. Also, services (especially quality one) are
highly visible to customers.
Product and Service Life Cycle
During their useful life, many services and products go through four
stages. Since the demand can vary for each of these 4 stages, different
strategies should be applied to achieve optimum product/service
performance during each stage.
The Four stages are:
1. Introduction: During the first stage, the product is introduced into the
market. Proper research and forecasting should be done to ensure the
product/service is adequate for a specific market and for a specific time.
It is crucial to have a proper amount of supply that can meet the
expected demand for the product/service.
2. Growth: The second stage involves the increase in demand for the
product/service. Reputation for the product grows and an accurate
forecast of demand is needed to determine the length of time the
product/service will remain in the market. Enhancements and
improvements are common in this stage.
3. Maturity: This third stage deals with the product reaching a steady
demand. Few or no improvements or product changes are needed at
this stage. Forecasting should provide an estimate of how long it will be
before the market dies down, causing the product to die out.
4. Decline: The last stage involves choosing to discontinue the
product/service, replacing the product with a new product, or finding new
uses for the product.
Standardization may be great for a company creating products like mops

because there are not many things you can do to make them unique and
keep the price down.Standardization products have interchangeable
parts, which increases productivity and lowers the costs of production.
Standardization has many important benefits and certain
disadvantages. Some advantages are the design costs for
standardization products are low. The scheduling of work inventory
handling, purchasing, and accounting activities are routine, making the
quality more consistent. The disadvantages with standardization are that
they decrease variety offered to consumers leading to less of an appeal.
Also, the high cost of design change makes it relentless to improve.
Mass customization is a strategy that some companies can use to

incorporate customization while practicing standardization. This strategy
keeps costs low while adding variety to a product. The two tactics that
make mass customization possible is delayed
differentiation and modular design. Some companies may
consider delayed differentiation if the company chooses to not finish a
product due to unknown customer preferences. However, another tactic
of modular design is a form of standardization in which components'
parts are grouped into modules to allow easy replacement or
interchangeability. Producing a computer is an example of modular
design.
Companies will also have to consider what their competitors are doing in
order to be successful. There are 3 ways of idea generation: supply
based, competitor based, and research based. Which ever a company
chooses, they must consider who is competing against them and what
else is going on in the marketplace. Product design is key to the success
of the company.
Customer Satisfaction and Sustainability
Product and service design are very important factors to customer satisfaction. Organizations need to
continually satisfy their customers to be successful in the marketplace. They are able to do this by
improving current products or by designing new ones. The design consists of the following: research,
design, production, life cycle, safety in use, reliability, maintainability, regulatory and legal issues.
Organizations also need to look at "sustainability" when designing their product/service.
The four aspects of Sustainability are:

(1) Life Cycle Assessment
(2) Value Analysis
(3) Remanufacturing
(4) Recycling.
Life cycle assessment focuses on the environmental impact the specific product will have over the course
of its life. Value analysis looks at the parts within a product and seeks to minimize the
cost. Remanufacturing has become more important over the past few years and involves replacing worn-
out and defective products. This is common practice in high price machinery
industries. Recycling involves recovering older materials for future use. This not only saves money, but
satisfies environmental concerns.The
Kano Model includes three aspects: Basic
quality, performance quality, and excitement quality. Basic quality is the
requirements placed on a product that do not lead to customer
satisfaction when present, but can lead to dissatisfaction if
absent. Performance quality is the middle ground and can either lead to
satisfaction or dissatisfaction depending on their usefulness. Excitement
quality is the notion that an unexpected feature can cause customer
excitement.
Reliability
Reliability is a measure of the ability of a product, a part, or service, or
an entire system to perform its intended function under a prescribed set
of conditions. Reliability can have an impact on repeat sales and reflect
positively on a products image. However, if the product is faulty, it can
create legal problems. The term "failure" is used to describe a situation
in which an item does not perform as intended. Reliabilities are always
specified with respect to certain conditions, called normal operating
conditions. These conditions can include load, temperature, and
humidity ranges in addition to operating procedures and maintenance
schedules. To improve reliability, manufacturers should improve the
reliability of individual components or use back up components. A few
other suggestions include improving testing, improving user education,
and improving system design. The optimal level of reliability is the point
where the incremental benefit received equals the incremental cost.
Legal and Ethical Consideration

Many organizations are regulated by governmental agencies and these regulations are responsible for
preventing harmful substances from being used in product design. Harm caused by the product is the
responsibility of the manufacturers. Manufacturers are liable for any injury or damages caused by their
product due to its design or workmanship, also known as product liability. When the product is defective
and potentially causes harm, manufacturers have several options to remedy the situation. They may have
to recall their products or fix the problem in the manufacturing stage. It is also possible that they may face
lawsuits if their products cause injury to consumers. Managers must ask themselves if there is demand
for their organizations product or service. If the company develops its products or services according to
the customers demands, their product will be successful.
Questions:
2.) What is the purpose of a value analysis?

A. To cut down on production time
B. To reduce cost and/or improve product performance
C. To analyze the potential profitability of the product
D. To ensure customer satisfaction and profits
Correct Answer - B) to reduce cost and/or improve product performance.

(Page 138)
3.) What are the four phases of the Product Life Cycle?
A. Introduction, Growth, Maturity, Decline
B. Research, Design, Introduction, Maturity, Decline
C. Design, Introduction, Maturity, Decline
D. Growth, Maturity, Decline, Re-Design
E. Introduction, Maturity, Decline, Re-Design
Correct Answer - A) Introduction, Growth, Maturity, Decline (Page 143)
4.) Which of the following is an advantage of standardization?

A. Design may be frozen with too many imperfections remaining.
B. High cost of design changes increases resistance to improvements.
C. More routine purchasing, handling and inspection of procedures.
D. Decreased variety results in less consumer appeal.
E. All of the above are disadvantages of standardization.
Correct Answer - C) More routine purchasing, handling and inspection of

procedures. (Page 145)
5.) Which of the following is NOT a phase in the service design process?
A. Conceptualize (idea generation, Asses customer needs and demand).
B. Identify service package and components needed.
C. Determine performance specifications.
D. Only a & b are phases in the service design process.
E. All of the following are phases in the service design process.
Correct Answer - E) All of the following are phases in the service design
process. (Page 163)
6.) Which is an important factor that gives rise to market opportunities

and threats for product and service design?
A. Economic
B. Social and demographic
C. Political and Competitive
D. A & B
E. All of the above
(Answer E) Page 132
7.) Which of the following is NOT a key question about product and
service design from an organization's standpoint?
A. Is there demand for it?
B. Can we do it?
C. What level of management is appropriate?
D. What level of quality is appropriate?
(Answer C) Page 135
8.) The assessment of the environmental impact of a product or service

throughout it's useful life is known as?
A. Product liability
B. Uniform commercial code
C. Life cycle assessment
D. Value analysis
E. Recycling
(Answer C) Page 137
9.) Which of the following is NOT a phase in the product and service life
cycle?
A. Introduction
B. Growth
C. Conclusion
D. Research
E. Re-Design
(Answer C) Page 143
10.) Which term refers to a design that results in products or services

that can function over a broad range of conditions?
A. Robust Design
B. Global Product Design
C. Reverse Engineering
D. Concurrent Engineering
E. Research and Development
(Answer A) Page 148
11.) How many stages are there in the product or service useful life
cycle?
A. 2
B. 3
C. 4
D. 5
E. Depends on the type of product/service
(Answer C) Page 143
13.) Which of these are sources used to generate new ideas?

A. Supply chain,Competitor, Research
B. Distributors, Suppliers, Employees
C. Supply Chain
D. Maintenance Personnel, Surveys, Customers
E. All of the above
Answer: E Page 151
14.) The Kano Model is a theory of product and service that employs
"Excitement, Performance, and what other type of quality"?
A. Long-Term
B. Basic
C. Design
D. Versatile
E. Unique
Answer: B Page 159

15.) Which of these is NOT a potential way of improving reliability?
A. Improve component design
B. Improve testing
C. Improve production and/or assembly techniques
D. Use backups
E. These are all potential ways of improving reliability
Answer: E Page 147
16.) Which approach integrates the "voice of the customer" into both
product and service development?
A. Quality for development
B. Quality function design
C. Quality function deployment
D. Quantity function deployment
Answer: C Page 156
17.) What concept refers to refurbishing used products by replacing

worn-out or defective components?
A. Reduce
B. Re-manufacturing
C. Value Analysis
D. Recycle
Answer: B Page 138
18.) Which of the following is a reason why companies choose to

recycle?
A. Environmental concerns
B. Cost savings
C. Environmental Regulations
D. None of the above
E. All of the above
Answer: E. Page 141

19.) Which of these is NOT involved in research and development?
A. Functional research
B. Basic research
C. Applied research
D. Development
Answer: A. Page 152
20.) What is the term 'DFM' referred to as?

A. Designing for marketability
B. Diverse financial management
C. Design for materials
D. Design for manufacturing
Answer: D. Page 156
21.) Which of the following is NOT included in the overall service

package:
A. Explicit services
B. Implicit services
C. Accompanying goods/services purchased or consumed
D. Physical resources needed
E. All of the Above
Answer: E_Page 153
22.) Which of the following are NOT related to phases in Product Design
and Development
A. Process Specifications
B. Prototype
C. Feasibility Analysis
D. Modular Design
E. Design Review
Answer : D_Page 139

23.) Which is a benefit of research and development:
A. Patents
B. Licensing
C. Royalties
D. both a & b
E. All of the above
Answer : E_Page 152
24.) To achieve a smoother transition from product design to production,

companies are using simultaneous development and ?
A. Computer Aided Design (CAD)
B. Design for Disassembly (DFD)
C. Component Commonality
D. Concurrent Engineering
E. Design for Assembly (DFA)
Answer : D_Page 154
25.) Idea Generation comes from which source/s?

A. Competitor Based
B. Customer Based
C. Supply Chain Based
D. Research Based
E. A, C, & D
Answer : E_Page 139
26.) Which of the following are NOT benefits of Component

Commonality Products or Services?
A. High degree of similarity
B. High degree of components
C. Reduce Inventory Dealers
D. Savings in Design time
E. Ensure Customer Quality
Answer : E_Page 141

28.) Factors that give rise to market opportunities and threats are:
A. Competitive
B. Political, liability, or legal
C. Social and demographic
D. Economic
E. All of the above
Answer: E_Page 132
Which of the following is not an example of of political, liability, or legal

change?
A.) Government changes
B.) Excessive warranty claims
C.) Safety Issues
D.) New regulations
Answer: B_page 132
30.) What is the purpose of Value Analysis?

A. Find the value of every functional area in an organization
B. To determine the benefit of supplying a product or service
C. To decide if supplying a service or product will gain market share
D. To examine the design process and determine its value to the
organization
E. To examine the function of parts and materials in an effort to reduce
cost and/or improve product performance
Answer: E_Page 138
31.) What is a key question of manufacturability and serviceability?

A. Is there demand for it?
B. Can we do it?
C. What level of quality is appropriate?
D. Does it make sense from an economic standpoint?
E. All of the above
Answer: B_Page 135
32.) Which of the following is NOT a way to improve reliability?

A. The use of backup components
B. Preventive maintenance procedures
C. Production or assembly techniques
D. Delayed differentiation
E. User education
Answer: D Page 147
33.) Which is the optimal level of reliability?

A. Point where the incremental benefit received equals the incremental
cost of obtaining it.
B. Point where the incremental benefit received is higher than the
incremental cost of obtaining it.
C. Point where the incremental benefit received is lower than the
D. Point where the incremental benefit received is half than the
E. Point where the incremental benefit received is double than the
Answer: A Page 148
34.) Which code addresses the issue of responsibility of a manufacturer

for any injuries or damages caused by a faulty product because of poor
workmanship or design?
A. Uniform Commercial Code
B. Design for disassembly
C. Product liability
D. Robust design
E. Concurrent engineering
Answer: C Page 136
35.) The three Rs stand for which of the following?

A. Render, Rebuilt, Rearrange
B. Reduce, Renew, Recycle
C. Reduce, Reuse, Rebuild
D. Recycle, Remanufacture, Rebuild
E. Reuse, Recycle, Reduce
Answer: E Page 138
36.) Which of the following is NOT a characteristic of a service?

A. Services are generally intangible.
B. Services cannot be inventoried
C. Some services have high barriers to entry and exit
D. In many instances services are created and delivered at the same
time
E. Services are highly visible to consumers
Answer: C Page 161
37.) Who is generally responsible for product liability for any injuries or
damages caused by a faulty product?
A. The Retail Store
B. The Consumer
C. The Manufacturer
D. The Government
Answer: C Page 136
38.) What of the following products has a robust design?

A. High heels
B. Leather sandal
C. Rubber Boots
D. Gym shoes
E. Slippers
Answer: C Page 148
39.) Who regulates organizations concerning legal and ethical matters?

A. Competitors
B. Designers
C. Government agencies
D. Lawsuits
E. Consumers
Answer: C Page 136
40.) Which of these statements is False in regards to service designs:

A. Are generally intangible
B. Are not visible to consumers
C. Cannot be inventories
D. Have low barriers to entry and exit
E. All are correct
Answer: B Page 161
41.) A method for describing and analyzing a service process is:

A. Service layout
B. Service blueprint
C. Service design
D. Product design
E. Product process
Answer B Page 162
42.) Service refers to a/an:

A. Act pg 153
B. Design
C. Target market
D. Resource
E. Organization
43.) Service packages include(s):

A. Physical resource
B. Accompanying good
C. Explicit services
D. Implicit services
E. ALL THE ABOVE
Answer: Page 153
44.) Which of the following statements is false:

A. Services are highly visible to consumers
B. Some services have low barriers to entry and exit
C. Service can be inventoried pg 154
D. Services are generally intangible
E. Usually Services are created and delivered at the same time
Answer: C pg. 154
46.) Guidelines for a successful service design include all except:

A. Define service package in detail
B. Maximizing profits should be your main concern Page 156
C. Focus on operation from the customer perspective
D. Make sure managers will support the design once it is implemented
E. Define the quality of the intangibles and tangibles.
Answer: B pg.156
47.) The responsibility of a manufacturer for any injuries or damages

caused by a faulty product is:
A. Life cycle assessment
B. Value analysis
C. Re-manufacturing
D. Design for dis-assembly
E. Product liability
Answer: E Page 136
48.) The extent to which a product, service, or process lacks variety is:
A. Standardization
B. Reverse engineering
C. Reliability
D. All of the above
E. serviceability
Answer: A Page 144
50.) Manufacturability is:

A. The ease of fabrication and/or assembly
B. Product design using computer graphics
C. Product standardization
D. A characteristic of services
E. Manufacturer's capacity
Answer: A Page 156
51.) All are ways to improve reliability EXCEPT:

A. Use backups
B. Improve vision
C. Improve testing
D. Improve system
E.none of the above
Answer: B Page 147
52.) Which is not a method of a product design?
A. Mass standardization
B. Mass customization
C. Delayed Differentiation
D. Robust Design
E. Modular design
Answer: E Page 146
53.) Which one is not part of idea generation?
A. Supply-chain based
B. Competitor based
C. Research based
D. All are part of idea generation
Answer: D Page 151
54.) Which of the following is an advantage of standardization?
A. Fewer parts to deal with

B. Reduced training costs
C. Opportunities for automation
D. More routine purchasing
E. All are advantages
Answer: E Page 145
55.) What is meant by the term standardization?
A. Creating a product but not finishing it until customer preferences are

realized.
B. Absence of variety in a product, service or process.
C. Variety in a product, service or process.
D. None of the above.
E. All of the above
Answer: B Page 144
57.) Which term refers to a feature or attribute that was unexpected by the customer and causes
excitement
A. Performance Quality
B. Excitement quality
C. Basic Quality
E. Awesome quality
Answer: B Page 159
58.) What is NOT an advantage of standardization?
A. Fewer parts to deal with in inventory and management

B. More routine purchasing
C. Opportunities for long production runs and automation
D. Decreased variety
E. Reduced training time.
Answer: D Page 145
59.) The Kano Model was developed by
A. Dr. Noriaki Kano

B. Scott Adams
C. Chris Chapman
D. Wayne Cascio
E. Robert L. Englund
Answer: A Page 159
60.) Delayed differentiation is common in which of the following:

A. Pens
B. Men's Suits
C. Screws
D. Cement
E. Books
Answer: B Page 146
61.) What is NOT part of sustainability?

A. Life Cycle Assessment
B. Remanufacturing
C. Recycling
D. Polluting
E. Value Analysis
Answer: C Page 138
62.) Dismantling and inspecting a competitor's product to discover

product improvements (Hint: Ford Co. used this tactic) is
A. Research and Development
B. Employee recommendations
C. Concurrent Engineering
D. Computer Aided Design
E. Reverse Engineering
Answer: E Page 152
63.) The Uniform Commercial Code states that products carry

an implication of:
A. Merchantability and fitness
B. Merchantability and finess
C. Cost and quality
D. Sustainability and reliability
E. None of the Above
ANSWER: A) Merchantability and fitness Page 136
64.) Organizations want designers to adhere to the following

guidelines except:
A. Produce designs that are consistent with goals of the organization
B. Give customers the value they expect
C. Make health a primary concern
D. Make safety a primary concern
E. Reduce costs as much as possible
ANSWER: E Reduce costs as much as possible Page 137
65.) Which of the following is an advantage of Standardization?

A. Reducing training costs and time
B. Orders fillable from inventory
C. Opportunities for long production runs and automation
D. More routine purchasing, handling, and inspection procedures
E. All of the Above
ANSWER: All of the Above Page 145
67.) What are some reasons why companies choose to recycle? Pg 141
A. Cost savings
B. Environment concerns
C. Environmental regulations
D. All of the above
68.) Which best describes a disadvantage of standardization? Pg 145

A. Fewer parts to deal with in inventory
B. Order fillable from inventory
C. High cost of design changes
D. Long production runs and automation
E. Low cost of design changes decrease in resistance to improvements
70.) Ideas for products can come from which of the following sources?
A. Supply-chain based
B. Competitor based
C. Research based
D. All of the above
Ch. 5 Strategic Capacity Planning for

Products and Services
Edit 0 153
Chapter 5
This chapter examines how important strategic capacity planning is for products and services. The overall
objective of strategic capacity planning is to reach an optimal level where production capabilities meet
demand. Capacity needs include equipment, space, and employee skills. If production capabilities are not
meeting demand, high costs, strains on resources, and customer loss may result. It is important to note
that capacity planning has many long term concerns given the long term commitment of resources.
Managers should recognize the broader effects capacity decisions have on the entire organization.
Common strategies include leading capacity, where capacity is increased to meet expected demand,
and following capacity, where companies wait for demand increases before expanding capabilities. A
third approach is tracking capacity which adds incremental capacity over time to meet demand.
Finally, The two most useful functions of capacity planning are design
capacity and effective capacity. Design capacity refers to the maximum
designed service capacity or output rate and the effective capacity is the
design capacity minus personal and other allowances. These two
functions of capacity can be used to find the efficiency and utilization.
These are calculated by the formulas below:
Efficiency = Actual Output/ Effective Capacity x 100%
Utilization = Actual Output/ Design Capacity x 100%

--
Chapter 5 Strategic Capacity Planning for Products and Services
Capacity refers to a system's potential for producing goods or delivering services over a specified time
interval. Capacity planning involves long-term and short term considerations. Long-term considerations
relate to the overall level of capacity; short-term considerations relate to variations in capacity
requirements due to seasonal, random, and irregular fluctuations in demand.
Excess capacity arises when actual production is less than what is achievable or optimal for a firm. This
often means that the demand in the market for the product is below what the firm could potentially supply
to the market. Excess capacity is inefficient and will cause manufacturers to incur extra costs or lose
market share. Capacity can be broken down in two categories: Design Capacity and Effective
Capacity: refers to the maximum designed service capacity or output rate. Effective capacity is design
capacity minus personal and other allowances. Product and service factors effect capacity tremendously.
Chapter 5 focuses on capacity planning for products and services. Capacity is the ability of a systems
potential for producing goods or delivering services over a specific time interval. The capacity decisions
within a company are very important because they help determine the limit of output and provide a major
insight to determining operating costs. Basic decisions about capacity often have long term
consequences and this chapter explains the ramifications of those choices. When considering capacity
planning within a company, three key inputs should be considered. The three inputs are the kind of
capacity to be determined, how much of the products will be needed, and when will the product be
needed.
The most important concept of capacity planning is to find a medium between long term supply and
capabilities of an organization and the predicted level of long term demand. Organizations also have to
plan for actual changes in capacity, changes in consumer wants and demand, technology and even the
environment. When evaluating alternatives in capacity planning, managers have to consider qualitative
and quantitative aspects of the business. These aspects involve economic factors, public opinions,
personal preferences of managers.
This chapter describes capacity planning as a key factor in designing systems. The capacity decision is
strategic and long-term in nature. Capacity planning is described as matching the capabilities of an
organization with the predicted level of future demand. Many organizations become involved with capacity
planning due to changes in demand, technology, the environment, etc. Organizations have capacities or
limits that their system can handle.
Three key inputs to capacity planning:

1. The kind of capacity that will be needed
2. How much capacity will be needed
3. When will it be needed
*Accurate forecasts are critical to the planning process
Defining And Measuring Capacity

When selecting a measure of capacity, it is best to choose one that
doesn't need updating. When dealing with more than one product, it is
best to measure capacity in terms of each product. For example, the
capacity of a firm is to either produce 100 microwaves or 75
refrigerators. This is less confusing than just saying the capacity is 100
or 75. Another method of
measuring capacity is by referring to the availability of inputs. Note that
one specific measure of capacity can't be used in all situations; it needs
to tailored to the specific situation at hand.
Determinants of Effective Capacity

Facilities: The size and provision for expansion are key in the design of
facilities. Other facility factors include locational factors (transportation
costs, distance to market, labor supply, energy sources). The layout of
the work area can determine how smoothly work can be performed.
Product and Service Factors: The more uniform the output, the more
opportunities there are for standardization of methods and materials.
This leads to greater capacity.
Process Factors: Quantity capability is an important determinant of
capacity, but so is output quality. If the quality does not meet standards,
then output rate decreases because of need of inspection and rework
activities. Process improvements that increase quality and productivity
can result in increased capacity. Another process factor to consider is
the time it takes to change over equipment settings for different products
or services.
Human Factors: the tasks that are needed in certain jobs, the array of
activities involved and the training, skill, and experience required to
perform a job all affect the potential and actual output. Employee
motivation, absenteeism, and labor turnover all affect the output rate as
well.
Policy Factors: Management policy can affect capacity by allowing or not
allowing capacity options such as overtime or second or third shifts
Operational Factors: Scheduling problems may occur when an
organization has differences in equipment capabilities among different
pieces of equipment or differences in job requirements. Other areas of
impact on effective capacity include inventory stocking decisions, late
deliveries, purchasing requirements, acceptability of purchased materials
and parts, and quality inspection and control procedures.
Supply Chain Factors: Questions include: What impact will the changes
have on suppliers, warehousing, transportation, and distributors? If
capacity will be increased, will these elements of the supply chain be
able to handle the increase? If capacity is to be decreased, what impact
will the loss of business have on these elements of the supply chain?
External Factors: Minimum quality and performance standards can
restrict management's options for increasing and using capacity.
Inadequate planning can be a major limiting determining of effective
capacity.
The most important parts of effective capacity are process and human
factors. Process factors must be efficient and must operate smoothly, if
not the rate of output will dramatically decrease. Human factors must be
trained well and have experience, they must be motivated and have a
low absenteeism and labor turnover. In resolving constraint issues, all
possible alternative solutions must be evaluated. This is possible by
using CVP analysis and the Break-Even Point formula.
Steps in the Capacity Planning Process

1. Estimate future capacity requirements
2. Evaluate existing capacity and facilities and identify gaps
3. Identify alternatives for meeting requirements
4. Conduct financial analyses of each alternative
5. Assess key qualitative issues for each alternative
6. Select the alternative to pursue that will be best in the long term
7. Implement the selected alternative
8. Monitor results
Questions:
1. All of the following factors are part of determining effective
capacity except:
a. Human
b. External
c. Facility
d. Design
e. all of the above are factors
answer:d design factors...page 181
2. The capacity planning process DOES NOT include which of the

following?
a. Estimate future requirements
b. Implement selected alternative
c. Access key quantitative issues
d. Identify alternatives
e. Both a & d
answer:c page 183
3. All of the following are true of Capacity decisions except:

a. impact the ability of the organization to meet future demands
b. affect operating costs
c. are a major determinant of initial cost
d. are a major determinant of variable cost
e. often involve long term commitment of resources.
answer: d
4. Which of the following industries measure capacity?

a. Farming
b. Theater
c. Retail Sales
d. Hospital
e. All of the above
answer e. page 180
5. Which of the following describes the initial cost of an investment?

a. Internal rate of return
b. proceeds
c. Present value
d. cash flow
e. Both a & d
answer: c. page 196
6) Which statement best describes a constraint of capacity planning?

a. Facilitates the performance of a process or system in achieving its
goal
b. Limits the performance of a process or system in achieving its goal
c. Enhances the performance of a process or system in achieving its
goal
d. Excels the performance of a process or a system in achieving its goal.
e. Maximizes the performance of a process or a system in achieving its
goal
Answer: B answer on page 201 in the margin
7) What are the three primary strategies in capacity planning?

a. growing,leading, tracking
b. leading, moving, tracking
c. leading, following, tracking
d. tracking, analyzing, leading
e. synthesizing, leading, tracking
Answer: C found on page 191
8) Which of the following is NOT a determinant of effective capacity

planning?
a. supply chain
b. external forces
c. human considerations
d. operational factors
e. all the above are determinants of effective capacity planning
Answer: E all the above, answer found on page 189
9) What are the major difference between design capacity and effective
capacity?
a. the size of the facility vs the effectiveness of the facility
b. the design and aesthetics of the facility vs. the size of the facility
c. the design and aesthetics of the facility vs. the effectiveness of the
facility
d. the actual amount of output vs. the potential maximum amount of
output
e. there is no difference
Answer: D actual output vs. potential maximum output
10) Which answer(s) defines why capacity decisions are important?

a. capacity decisions have a real impact on whether or not a company
will meet future demands
b. capacity decisions affect operating costs
c. capacity decisions are generally a major determinant of initial cost
d. capacity decisions affect competitiveness and management
e. all of the above are components of capacity decision importance
Answer: E all of the above
11) When would a company incorporate a capacity cushion?
a. when demand is certain

b. when demand is uncertain
c. when the company has very standard products
d. when the company sales are declining
e. when the company sales are increasing
Answer: B demand is uncertain (192)
12) Which of the following is a reason a company would want to

outsource?
a. The organization does not have the necessary skills
b. The organization has unique quality requirements
c. Demand is high and steady
answer: E none of the above (195)
13) What is the evidence of an unbalanced system?

a. system is flexible
b. stage of life cycle is taken into account
c. capacity requirements are smoothed out
d. a bottleneck operation exists
e. the company is in the growth phase
Answer: E bottleneck operation exists (197)
14) At the break even point

a.TC=TR
b. The firm is obtaining a profit
c. TFC=TVC
d. Volume of output is TC > TR
answer: (A) total cost and total revenue are equal (203)
15) Dis-economies of scale happen when

a. the output rate is less than the optimal level
b. the firm should increase the output rate in order to decrease average
unit costs
c. the output rate is more than the optimal level
d. none of the above
e. both a and b
answer: C the output rate is more than the optimal level (200)
16) Reasons for strategic capacity planning include all of the

following except :
a) Changes in the environment
b) Changes in technology
c) Changes in demand
d) Strengths and weaknesses
e) Opportunities and threats
D. Strengths and weaknesses (pg 185)
17) Strategic capacity planning for services differs from that for goods
due to:
a) The inability to store services in advance
b) Demand volatility
c) Degree of customization
d) The need for customer convenience
e) All of the above
E. All of the above (pg 194)
18) Relevant criteria in determining whether to outsource production

include:
a) Location
b) Quality
c) Current in-house capacity
d) Costs
e) All of the above
E. All of the above (pg 195)
19) In dis-economies of scale, average unit costs after the optimal level
are:
a) Larger
b) Smaller
c) Lowest
d) Constant
A. Larger (pg 200)
20) Which of the following assumptions must be satisfied in order to use

Cost Volume Analysis?
a) Variable cost per unit is greater than revenue per unit
b) Variable cost per unit is constant
c) More than one product in involved
d) Fixed costs change with volume
e) Revenue per unit changes with volume
B. Variable cost per unit is constant (pg 205)
21) Which of the following is NOT a primary capacity strategy?

a) continuous
b) leading
c) following
d) tracking
e) both b and d
Answer: a, page 191
22) Which is an important factor in planning service capacity?

a) availability of capacity
b) the need to be near customers
c) the degree of volatility of demand
d) both b and c
Answer: d, page 194
23)The maximum designed service capacity or output rate is known as?

a) capacity cushion
b) bottleneck operation
c) effective capacity
d) design capacity
e) both c and d
Answer: d, page 188
24) Given the following information, compute the efficiency: Effective

capacity = 40 trucks per day, Actual output = 36 trucks per day
a) 82%
b) 99%
c) 90%
d) 89.7%
e) 54%
Answer: c, page 189
25) Which of the following are steps in the capacity planning process?
a) estimate future capacity requirements
b) conduct financial analysis
c) monitor results
d) implement the selective alternative
e) all of the above
Answer: e, page 192
26) Which of these are NOT determinants of effective capacity?

a) Facilities
b) Process Factors
c) Human Factors
d) Policy Factors
e) All of above are determinants of effective capacity
Answer E (page 190)
27) What is a constraint?
a) Something that allows a system to perform more effectively and
efficiently.
b) Something that hinders performance of a system in achieving its
goals.
c) Something that attempts to smooth out capacity requirements.
d) Something that monitors results
e) Something that can never be overcome.
Answer B (page 201)
28) Which assumptions must be satisfied in order for cost-volume

analysis to be a valuable tool?
a) Variable cost/unit exceeds revenue/unit
b) Everything produced may not be sold
c) Only one product involved
d) Revenue per unit may change depending on volume
e) Variable cost per unit may differ depending on volume
Answer C (page 205)
29) What is the correct formula for the break even point in units?
a) FC / (Revenue per unit - VC per unit)
b) VC/(FC-Revenue)
c) Revenue/(VC - FC)
d) FC/(VC-Revenue)
Answer A (page 204)
30) What is the best way to measure capacity for a steel mill?
a) In dollars
b) In number of workers
c) In the size of the mill
d) In tons of steel produced per day
e) In number of resources used
Answer D (page 188)
31) What is the first step in the capacity planning process?

A. Evaluate existing capacity
B. Estimate future capacity
C. Determine future capacity price
D. Select alternative capacity
E. Find key quality issues
Answer = B. Page 192
32) Which of these is a determinant of effective capacity?

A. Facilities
B. Product factors
C. Human factors
D. Operational factors
E. All of these
Answer = E. Page 190
33) What is the first step in strategy formulation?

A. Determine Product/Service
B. Formulate policy
C. Locate facilities
D. Formulate process
Order operations
Answer = C. Page 191
34) When is it best to use simulation?

A. For short tem goals
B. For long term goals
C. For current goals
D. For customer wants
E. For what if analysis
Answer = E. Page 207
35) Decision theory is best used in which of the following?

A. Finance
B. Inventory
C. Long term analysis
D. Consumer demand
E. Short term analysis
Answer = A. Page 207
36) What is capacity?

I. The upper limit or ceiling on the load that an operating unit can handle.
II. The lower limit or bottom on the load that an operating unit can
handle.
III. A systems potential for producing goods or delivering services over a
specified time interval.
IV. A ceiling on output and a major determinant of operating costs.
a.) I and II
b.) II and III
c.) I, II, and IV
d.) I, III, and IV
e.) I and IV
Answer: D. Found on pages 185, 207
37) What is the difference between efficiency and utilization?
a.) Efficiency is the ratio of actual output to effective capacity, while

capacity utilization is the ratio of actual output to design capacity.
b.) Efficiency is expressed as a percentage, while capacity utilization is
not.
c.) Efficiency is a measure of system effectiveness, while capacity
utilization measures capacity tailored to a situation.
d.) Utilization is the ratio of actual output to effective capacity, while
efficiency is the ratio of actual output to design capacity.
e.) Utilization is expressed as a percentage, while efficiency is not.
Answer: A. Found on page 188
38) Find the design capacity when utilization = 72 and actual output = 36
trucks per day.
a.) 35 trucks per day

b.) 40 trucks per day
c.) 45 trucks per day
d.) 50 trucks per day
e.) 55 trucks per day
Answer: D. Found on page 189 (Utilization = [Actual Output/ Design
Capacity] x 100)
Therefore: [36/x] x 100 = 72
36 x 100x = 72x
36 = .72x
x = 50
39) An operation in a sequence of operations whose capacity is lower

than that of the other operations is known as:
a.) Effective Capacity

b.) Design Capacity
c.) Bottleneck Operation
d.) Capacity Cushion
e.) Effective Operation
Answer: C. Found on page 197
40) Which of the following is NOT one of the five steps used to resolve
constraint issues:
a.) Identify the most pressing constraint.

b.) Change the operation to achieve the maximum benefit, given the
constraint.
c.) Make sure other portions of the process are supportive of the
constraint.
d.) Explore and evaluate ways to overcome the constraint.
e.) Allow the constraint to limit performance when a strategy is
expanding.
Answer: E. Found on page 201 and 202
Possible Future Demand
Alternatives Low Moderate High

Small Facility $10 $11 $11
Medium Facility 7 12 12
Large Facility (3) 2 16
41. Use the information above to answer this question. If the company uses Maxi-min Criterion
to choose the best alternative, what would be the best choice for this company?
a) Small Facility
b) Medium Facility
c) Large Facility
d) Do Nothing
e) They are all incorrect answers.
Answer is A found on page 217 (Supplement to Chapter 5)
42. What is Capacity cushion? If utilization is 38%.

a) 72%
b) 74%
c) 12%
d) 22%
e) 62%
Answer is E found on page The formula is Capacity cushion = 100% -

Utilization
Product Annual Standard Processing Time per Processing Time Needed
Demand Unit (Hr) (Hr)
1 300 5.00 1,500
2 400 8.00 3,200
3 700 2.00 1,400
Total 6,100
43. Use the information in the table to answer this question. Note: department is working one 8-
hour shift 250 days a year. How many machines would be needed to handle the required
volume? (Round your answer to the whole number)
a) 3 machines
b) 1 machines
c) 5 machines
d) 2 machines
e) 4 machines
Answer is A found on page 194.
Based on the information below answer the following Questions 44-47.
The owner of Cookies Inc., Zoya, is contemplating adding a new line of cookies, which require leasing for
a monthly payment of $4,000. Variable costs would be $2 per cookie, and cookies retail price for $6 each.
44. How many cookies must be sold in order to break-even?
a) 1000 cookies/month
b) 1200 cookies/moth
c) 2100 cookies/moth
d) 1100 cookies/moth
e) None of the above.
Answer is A found on page 204. FC=$4,000; VC=$2 per cookie: Rev.=$6 per cookie; Q=FC/(Rev-VC);
Q=$4,000/($6-$2)=1000 cookies/month.
45. What would be the profit (loss) if 900 cookies are made and sold in a month?
a) 400 profit
b) 400 loss
c) 4000 profit
d) 4000 loss
Answer is B found on page 204. P = Q(R - v) - FC
46. How many cookies must be sold to realize a profit of $10,000?
a) 3500 cookies
b) 5300 cookies
c) 3000 cookies
d) 3200 cookies
e) 2300 cookies
Answer is A found on page 204. Q=($10,000+$4,000)/($6-$2)=3,500 cookies
47. If 2,500 cookies can be sold, and a profit is $8,000, what price
should be charged per cookie?
a) $7.00
b) $7.50
c) $6.80
d) $6.50
e) $7.80
Answer is C found on page 204.

Profit = Q(R - v) - FC
$8,000=2,500(R-$2)-$4,000
$8,000+$4,000=2,500R-$5,000
$17,000=2,500R
R=$6.8
Number of Machines Total Annual Fixed Costs Corresponding Range of Output
1 $12,00 0 to 300
2 15,000 301 to 600
3 24,000 601 to 900
Variable Cots is $12 per unit, and revenue is $42 per unit.
Use the table above to answer the following Questions 8-10.
48. Determine the break-even point for range (0 to 300).
a) 400 units
b) 320 units
c) 420 units
d) 380 units
e) 520 units
Answer is A found on page 205. Q=FC/(R-v); 12,000/($42-$12)=400

units.
49. Determine the break even point for range (301 to 600).
a) 500 units
b) 400 units
c) 320 units
d) 420 units
e) 520 units
50. If projected annual demand is between 580 and 650 units, how many
machines should the manager purchase. If break-even point for
One machine: 400 units Range (0 to 300)
Two machines: 500 units Range (301 to 600)
Three machines: 800 units Range (601 to 900)
a) 2 machines
b) 3 machines
c) 1 machine
d) a&b both are correct
e) None of the above; the manager should do nothing.

Comparing the projected range of demand to the two ranges for which a
break -even point, you can see that the break-even point is 500 units,
which is in the range 301 to 600. This means that even if demand is at
the low end of the range, it would be above the break even point and
thus yield a profit. That is not true of range 601 to 900. At the top end of
projected demand, the volume would still be less than the break-even
point for that range, so there would be no profit. Thus, the manager
should choose two machines.
51) If the output rate is less than the optimal level, increasing the output
rate results in decreasing average unit costs according to:
a) diseconomies of scale
b) economies of scale
c) capacity cushion
d) efficiency
e) utilization
Answer B (Page 200)
52) If: Design capacity= 60 trucks per day, effective capacity = 40 trucks
per day, actual output = 36 trucks per day, compute the efficiency:
a) 20%
b) 30%
c) 40%
d) 50%
e) 90%
Answer E (Efficiency=Actual output/effective capacity=36trucks per

day/40 trucks per day=90%) (Page 188)
54) What is capacity cushion?
a) Extra amount of capacity intended to offset uncertainty in demand

b) Estimate in future capacity requirement
c) Common demand pattern
d) External service or good
e) All of the above
Answer A (Page 192)
55) What do long term considerations relate to?
a) demand
b) capacity cushion
c) supply
d) overall level of capacity requirements
e) short term events
Answer D (Page 192)
56) What are the three primary strategies of a strategy formulation?

a. leading, following, and concluding
b. start up, following, and tracking
c. leading, following, and tracking
d. start up, leading, and follow up
e. leading, processing, concluding
answer is c. (found on page 191)
Ch. 5s Decision Making

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Summary:
Chapter 5s Decision Theory

Decision theory can be used by management in a company for a variety
of different decisions, including capacity planning, location planning,
production and service design, and equipment selection. There are three
different elements that should be considered in decision making: list of alternatives, known payoff for
There are three
each alternative, and a set of possible future conditions for each alternative.
basic environments in which decisions need to be made: certainty,
uncertainty, and risk. In order to make decisions under uncertainty, the
following four decision criteria are used:
Certainty: Values of parameters and known to users (such as cost,

demand..etc)
Risk: Probabilistic outcomes
Uncertainty: The parameters are unknown, and it is not possible to
assess probabilities of certain outcomes.
1. Maximin (choose the alternative with the best of the worst possible payoffs)
2. Maximax (choose the alternative with the best possible payoffs)
3. Laplace (choose the alternative with the best average payoff of any of the alternative)
4. Minimax Regret (choose the alternative that has the least of the worst regrets)
Tools like Decision Tree, which presents a visual and schematic

representation of the available alternatives and their possible
consequences, can be used for decision making under risk. Other useful
methods for manager to make decisions include Expected Value of
Perfect Information (EVPI), Sensitivity Analysis, and Expected monetary
value criterion (EMV). EVPI considers the possibility of state of nature
that will occur in the future, while Sensitivity Analysis determines the
payoffs and the range of possibility for which a best decision can be
made. EMV finds the expected payoff of all alternatives to reveal the one
with the best payoff. In addition to the different decision making
methods, the decision-making process is also discussed which includes
the following steps:
1. Identifying the problem

2. Specify objectives
3. Develop alternatives
4. Analyze and compare alternatives
5. Select the best alternative
6. Implement the solution
7. Monitor to see if the desired result is achieved
Test Questions
1.) A manager needs to decide the capacity of their facility which will be
used to store company's inventory and the manager has three options
on capacity size: Large, Medium, or Small. Which method should the
manager use in order to determine the best possible payoff?
a) Expected monetary value (EMV) criterion
b) Decision tree
c) Laplace
d) Sensitivity analysis
e) Minimax
Answer: b, page 219
2.) Which type of decision method is defined as a schematic

representation of the available alternatives and their possible outcomes?
a) Bounded rationality
b) Maximin
c) Payoff table
d) Decision tree
Answer: d, page 219
3.) A manager had a choice between two alternatives and wanted to

determine the range of probabilities for which the chosen alternative has
the best expected payoff. Which type of decision method is the MOST
useful?
a) Sensitivity Analysis
b) Decision Tree
c) Risk
d) Minimax Regret
Answer: a, page 222
4.) I: Is the following statement true or false: a decision tree is read from
left to right with circular nodes representing decision points and square
nodes representing chance events.
II: Decision trees are not useful for analyzing sequential decisions.
a) I is False and II is True

b) I is False and II is False
c) I is True and II is False
d) I is True and II is True
e) Cannot be determined
Answer: B, Page 220

(This question should be considered for determining whether one
statement is true/false rather than determining two)
5.) Which decision process involves a graph providing a visual indication

of the range of probability over which the various alternatives are
optimal?
a) Decision Tree
b) Payoff Table
c) Sensitivity Analysis
d) There is no decision process that involves a graph
e) Decision making under risk
Answer: c, page 222-223
6) Using Minimax regret, you would choose the alternative that has:
a) the best of the best possible payoffs
b) the least of the worst regrets
c) the worst of the best possible payoffs
d) the best possible payoff
Answer: b, page 217
7) If the expected payoff under certainty is $15, the expected monetary

value is $12, the expected payoff under risk is $13, and the expected
payoff under uncertainty is $16, then the expected value of perfect
information is:
a) $28
b) $4
c) $2
d) $25
e) $20
Answer: c, page 221
9) What is the type of environment in which relevant parameters such as

costs, capacity, and demand have known values?
a) Suboptimization
b) Certainty
c) Risk
d) Design capacity
e) All of the above
Answer: b, page 216

10. Which of the following is a reason for poor decision making?
a. unforeseeable circumstances
b. bounded rationality
c. mistakes in the decision process
d. suboptimization
e. all of the above
Answer: e, page 215 and 216
11. Determining the average payoff for each alternative and choosing
the alternative with the highest average is the approach called:
a. Weighted factor analysis
b. Laplace
c. Minimin
d. Maximin
e. Maximax
Answer: e, page 217
12. Bounded rationality is a phrase that refers to the limits imposed on

decision-making because of the following factors:
a. costs
b. human abilities
c. technology
d. time
e. all of the above
Answer: e, page 216
13. Which of the following treats the states of nature as equally likely:
a. Maximax
b. Maximin
c. Laplace
d. Minimax regret
e. None of the above
Answer:c, page 217

14. Which of the following approaches is widely used in decision making
under risk?
a. Sensitivity Analysis
b. EMV
c. Laplace
d. EVPI
Answer: b, page 218
15. Sensitivity analysis provides a range of probability over which the

choice of alternatives would remain:
A. above 1
B. equal
C. the same
D. below 1
Answer: c, page 222
16. Decision theory represents an approach to decision making.

A. perfect
B. consistent
C. inconsistent
D. general
Answer: d, page 214
17. The type of illustration that shows the expected payoffs for each
alternative in every possible state of nature is known as a:
A. expectance table
B. profit table
C. decision table
D. certainty table
Answer: e (payoff table), page 215

18. Which of the follwing is not a cause of poor decision making?
A. develop alternatives
B. implement the solution
C. specify objectives
D. all of the above
Answer: d, page 215
19. Which of the following method chooses the best alternative with the
best of the worst possible payoffs?
a) Maximin
b) Laplace
c) Maximax
d) Minimax
Answer: a, page 217
20. True or False? The difference between the expected payoff with
perfect information and expected payoff under risk is expected monetary
value criterion.
A. True
B. False
Answer: b (expected value of perfect information), page 221
21. When various departments each try to reach the best solution for
that department, it is called:
a) Bounded Rationality
b) decision making under certainty
c) Maximax
d) Suboptimization
e) EVPI
Answer: D (pg. 216)

22. Which of the following shows the best expected value out of the
alternatives?
a) Decision trees
b) EMV
c) EVPI
d) Suboptimization
Answer: B (pg. 218)
23. What is the equation for EVPI?

a) Expected payoff under risk - Expected payoff under certainty
b) Expected payoff under risk - Expected payoff under uncertainty
c) Expected payoff under certainty - Expected payoff under risk
d) Expected payoff under uncertainty - Expected payoff under risk
Answer: c (pg. 221)
24. All of the following are categories of decision environments, except:

a) risk
b) bounded rationality
c) uncertainty
d) certainty
Answer: B (pg. 216)
25. Which of the following approaches represent maximax:

a. Determine the best possible payoff
b. Determine the worst possible payoff
c. Determine average payoff
d. Determine the worst regret for each possible alternative
Answer: A p.217
26. The expected monetary value approach is most appropriate when a

decision maker is:
a. risk neutral
b. risk averse
c. risk seeking
d. risk taking
e.none of the above
Answer: A p.219
27. Which or who plays the critical role in total quality management
(TQM):
a. employees
b. CEO
c. management
d. customers
e. technology
Answer: C p. 427
28. Who developed the concept of zero defects?

a. Joseph Juran
b. Philip B. Crosby
c. Genichi Taguchi
d. Armand Feigenbaum
Answer: B p. 411
29. The limitations on decision making caused by cost, human abilities,

time, technology and availability of information is called:
a. suboptimization
b. certainty
c. risk
d. bounded rationality
e. sensitivity analysis
Answer: D p. 216
30. The difference between a given payoff and the best payoff for a state
of nature is called?
a. risk
b. sensitivity analysis
c. maxmin
d. regret
e. maximax
Answer: d, page 209
31. Which the following is not a step of the decision process?

a. develop suitable alternatives
b. identify the problem
c. receive feedback
d. specify objectives
e. implement the solution
Answer: c, page 206
32. means the relevant parameters such as costs, capacity, and demand
have known values.
a. certainty
b. expected value of perfect information
c. decision criterion
d. bounded rationality
e, uncertainty
Answer: a, page 207
Low Moderate High
Small Facility $12 $12 $14
Medium Facility $5 $6 $12
Large Facility $-2 $6 $19

33. Based on the table above, find the Laplace criterion for the medium
facility
a. 12.6
b. 14.6
c. 7.7
d. 9.6
e. 4.6
Answer: c,page 208
34. If the expected payoff under risk is $27.5 and the expected payoff
under certainty is $31.2, what is the expected value of perfect
information?
a. 5.7
b. 1.1
c. 8.4
d. 3.7
e. 9.8
Answer: d, page 212
Ch. 6 Process Selection and Facility

Layout
Edit 0 134
Chapter 6 Process Selection and Facility Layout Summary:

Objective: Teach you about Process Selection and Facility Layout.
Process Selection is basically the way goods or services are made or

delivered, which influences numerous aspects of an organization,
including capacity planning, layout of facilities, equipment and design of
work systems. Process selection is primarily used during the planning of
new products or services that is subject to technological advances and
competition. Process selection is dependent on the company's process
strategy, which has two main components: capital intensity and process
flexibility.
Capital Intensity is simply the combination of equipment and labor that
an organization uses to accomplish some objective.
Process Flexibility is as its name implies: how well a system can be
adjusted to meet changes in processing requirements that are
interdependent on variables such as product or service design, volume
of production, and technology.
Facility Layout is simply the way a facility is arranged in order to
maximize processes that are not only efficient but effective towards the
overall organizational goal. It is also dependent on process selection.
Within those two categories, you will also learn about technology,
operations tour, process strategy, designing product layouts, and
designing process layouts. The main concept between process
selection and facility layout is technology. Technology is a method that
is used to improve and develop various services, operation processes,
and products. While process selection is used in many organizations,
facility layouts signifies the work centers, implementations, and the
configuration of departments by special importance on activity of
work throughout the system. An example of a layout can be seen with
businesses that use automation. Automation is the process of
technology-sensing when one task is completed and then
automatically beginning another task. This layout is very effective in
today's world for mass production. The purpose of layout design is to
increase the efficiency and fluidity of work, data through the system,
and material.
Exam Questions:
1.) An ideal tool to use in line balancing is a/an . (page 264)
A. Balance delay
B. Assembly line
C. Automation
D. Precedence diagram E. Both a and b
E. Cellular production
2.) How do we calculate efficiency of a line? (page 265)
A. 10% -Percent idle time
B. 15% -Percent idle time
C. 50% -percent idle time
D. 75% -percent idle time
E. 100% -percent idle time
3.) What does the acronym CIM stand for? (page 258)
A. Computer integrated manufacturing
B. Consumer integrated manufacture
C. Computer international manufacture
D. Customer integrated manufacturing
E. Computer internal manufacture
4.) Which one is NOT a basic layout type discussed in Chapter 6? (249-260)
A. Product layouts
B. Process layouts
C. Design layouts
D. Fixed position layout
E. Combination layouts
5.) What is the equation of cycle time? (page 263)
A. Operating day per week/desired input rate
B. Operating time per week/desired input hours
C. Operating time per month/desired output rate
D. Operating time per day/desired output rate
E. Operating day per week/desired output rate
*Need to show which one is the correct answers.

Question:
6) Which of the following is not an example of automation: ( p.245)
a). ATMs
b). I-pass
c). automated heating and air conditioning
d). Online banking
e). A buffet restaurant.
7). Which of the following tasks can a robot not handle? ( p.247).
a) welding
b). testing
c). loading and unloading of machines,
d). Painting
e). writing a letter
8). Which of the following is a feature(s) of fixed automation? (p.246)
a). minimal variety of products

b). Low cost, high volume.
c). Specialized equipment for a fixed sequence of operation.
d). a) and b)
e). All of above
9). An organization that adopts automation should consider: ( p.246)
a). What level of automation is appropriate?

b). How changes should be managed?
c). What are the risks of automating?
d). How would automation affect the flexibility of an operation system?
e). All of the above.
10). Which is a disadvantage(s) of automation? ( p.246)
a). Technology is cheap.

b). Automation is more flexible than human labor
c). Very high initial costs
d). Workers fear losing their jobs to machines
e). Both c) and d).
11) The maximum time allowed at each workstation to complete its set of
tasks on a unit is referred to as:
a) cycle time
b) reciprocal time
c) line balancing
d) task time
e) efficiency
The answer is a. (found on page 262)
12) Which of the following is a type of processing?

a) job shop
b) batch
c) repetitive
d) continuous
e) all of the above
The answer is e. (found on page 239)
13) A(n) _ is a standardized layout arranged according to a fixed

sequence of assembly tasks.
a) product layout
b) production line
c) assembly line
d) assembly sequence
e) service layout
The answer is c. (found on page 250)
14) What are the major differences between process layout from product
layout?
a) process layout is used for intermittent processing and product layout
is used for repetitive processing
b) process layout is functional and product layout is sequential
c) process layout is sequential and product layout is funtional
d) both a and b
The answer is d. (found on page 253)
15) What areas of technology have a major influence on today's

business processes?
a) Product and service technology
b) Process technology
c) Information technology
d) Automatic technology
e) Answers a, b, & c
The answer is e. ( found on page 238)
16) What three types of technology is operations management primarily

concerned with?
a. Information, assistive, instructional
b. Product, instructional, service
c. Product and service, process, information
d. Information, product, alternative
e. Assistive, process, information
Answer: C (pg.238)
17) Which of the following will NOT yield competitive advantages for
companies?
a. Lowering costs
b. Increasing productivity
c. Expanding processing capabilities
d. Lowering prices
e. Increasing quality
Answer: D (pg. 239)
18) Which of the following is NOT one of the five basic process type?
a. Batch
b. Strategic
c. Repetitive
d. Continuous
e. Project
Answer: B (pg. 239)
19) Which of these are a disadvantage(s) to the continuous process?
a. Rigidity
b. Lack of variety
c. Costly to change
d. Very high cost of downtime
e. All of the above
Answer: E (pg. 241)
20) Which type of process is sometimes referred to as assembly?
a. Repetitive
b. Job shop
c. Continuous
d. Project
e. Strategic
Answer: A (pg. 240 & 241)
21) An eyeglass repair shop would be best matched with which basic
process type?
a. Continuous
b. Job Shop
c. Repetitive
d. Batch
e. Project
Answer: B. Job Shop (p. 239)
22) Products and services often go through life cycles that begin with:
a. high volume
b. standardized products/services
c. low volume
d. customized products/services
e. moderate volume
Answer: C. low volume (p. 241)
23) Which of the following statements is NOT true regarding process

types?
a. They influence many activities of the organization

b. Job shop, batch, repetitive and continuous are typically ongoing
operations
c. They always exist in their pure forms
d. Manager must know when to shift from one process type to the next
e. Hybrid processes have elements of other process types embedded in
them
Answer: C. They always exist in their pure forms (p. 241-243)
24) Answering which question will guide the process selection?
a. What is the expected volume of output?

b. How much variety in products/services will the system need to
handle?
c. What degree of equipment flexibility will be needed?
d. All of the above
e. None of the above matter in selecting a process
Answer: D. All of the above (p.239)
25) Which process type has the disadvantage of a moderate cost per
unit?
a. Repetitive
b. Continuous
c. Job Shop
d. Project
e. Batch
Answer: E. Batch (p.241)
26) Which of the following types of processing is used for production of

customized goods or services?
a. Batch
b. Repetitive
c. Job Shop
d. Continuous
e. Project
Answer: C: Job Shop p. 241
27) Robot is a machine consisting of a mechanical arm, power supply,

and a(n) _.
a. Controller
b. Computer
c. Assembly Line
d. Product Line
e. Product Layout
Answer: A: Controller p.247
28) Which facility layout utilizes stationary products, move workers, and
materials as needed?
a. Fixed Position
b. Product
c. Process
d. CAD
e. Robot
Answer: A: Fixed Position p.254
29) The management of Tiffanys designs an output rate of 200 units of

silver pendants per 8-hour day. What is the cycle time? (The tasks times
and precedence relationships are shown below)
.1 .4 .2 .1 .4
a. .42
b. 2.4
c. 100
d. 240
e. 8
Answer: B: 2.4 p.263
30) Which diagram shows the elemental tasks and requirements?

a.) Product Layout Diagram
b.) Precedence Diagram
c.) Line Balancing Diagram
d.) Muther Grid Diagram
e.) None of the above
Answer: B. p. 264
31) Machinery that has sensing and control devices that enable operate
automatically is known as:
a. Automation (pg.245)
b. Product Profiling
c. Projects
d. Variety
e. Technology
32) Standardized layout arranged according to a fixed sequence of

assembly tasks refers to a(n):
a. Product line
b. Product Layout
c. Assembly Line (pg.250)
d. Process Layout
e. None of the Above
33) Job Shop, Batch, Repetitive, Continuous, and project are all types of:
a. technologies
b. Process Types (pg. 239)
c. Forms of competitive advantages
d. Process design
34) Which of the following enables an organization to quickly convert a

machine or process to produce a different (but similar) product type:
a. Fixed-position layout
b. Single-minute exchange of die (SMED) (pg. 255)
c. Combination layouts
d. Cellular production
35) A robot consists of which of the following?

a. mechanical arm
b. power supply
c. controller
d. Both a and c are correct.
e. All of the above (pg. 247)
36) What is the efficiency of a line with a balance delay of 20%? (p. 265)
a. 60%
b. 100%
c. 80%
d. 120%
e. 40%
37) What is the cycle time if 500 minutes per day were spent making 25
units? (p. 263)
a. 20 products per minute

b. One product every 20 minutes
c. 25 products per minute
d. One product every 25 minutes
38) What is the output rate if the operating time per day is 500 minutes
and the cycle time is 2.5 minutes per unit? (p. 263)
a. 100 units every minute

b. One unit every 100 minutes
c. 200 units every minute
d. One unit every 200 minutes
39) What is defined as the maximum time allowed at each workstation
to complete its set of tasks on a unit? (p. 262)
a. Line balancing
b. Maximum output rate
c. Cycle time
d. Maximum cycle time
e. Balance delay
40) Line balancing is best used in which type of layout? (p. 261)
a. Process layout
b. Cellular layout
c. Fixed-position layout
d. Product layout
e. Flexible manufacturing systems
41) What factors should be carefully considered before marketing a new

technological innovation?
a. What technology do and will not do.

b. Economic constraints.
c. Integration costs.
d. Human factors.
e. All of the above ( page 239, Technological Acquisition)
42) Which of the following is relevant in the redesign of layouts for

facilities?
a. Inefficient operations.
b. Safety hazards.
c. Very low profits.
d. Customer satisfaction
e. a and b (page 249, Facilities layout)
43) In general, the three kinds of automation is?
a, fixed, programmable, agile.

b. fixed, flexible, programmable (page 246).
c, variable, agile, flexible.
d. adjustable, solid, non-open source.
e. reliable, efficient, favorable.
44) The main advantages for product layout do not include which of the
following?
a. A high rate of output.

b. Preventative maintenance ( page 252).
c. Labor specialization.
d. Low unit cost due to high volumes.
e. A high utilization of labor and equipment.
45) Which of the following information is not required for the design of
process layouts?
a. Employee approval of the new process ( processes) Pages 271-272.

b. projection of future work flows between the various work centers.
c. Cost between locations and the unit cost to move the loads between
locations.
d. The amount of money to be invested in the layout.
e. Location of key utilities, access and exit points, loading docks, etc.
46) Which of the following are NOT associated with product layouts?
A. rapid flow
B. sequential layout
C. repetitive processing
D. highly standardized goods
E. non-repetitive processing (pg 252)
47) Which of the following are true regarding process layouts?
A. routing and scheduling pose continual challenges (pg 253)

B. it is common in service environments
C. utilization rates are high
D. repetitive processing
E. all of the above
48) When is a fixed-position project used?
A. Small projects
B. Large projects (pg 254)
C. Micro projects
D. none of the above
E. A & C
49) Part families is related to:
A. Process layout
B. Product layout
C. Cellular layout (pg 255)
D. Combination layout
50) Which layout is less efficient and has higher unit production costs
than product layouts?
A. Process (254)
B. Fixed-Position
C. They are all the same
D. Cellular
E. Process and Fixed-Position
51) Choose the best process you would need for the following project:
custom-made handbag that requires a lot of detailed work.
A. Repetitive
B. Assembly Line workers
C. Job Shop
D. Batch
E. Projects
(C) Job Shop Page. 239
52) A group of machines that include supervisory computer control,

automatic handling, and robots or other automated processing is_.
A. Job Shop
B. FMS ( flexible manufacturing system)
C. Group Technology
D. CIM ( Computer-Integrated Manufacturing)
E. Mixed Mode
(B) FMS ( flexible manufacturing system) Page 258
53) The equation for cycle time is
A. Output/Labor Hours
B. Output/ Total Cost
C. Cycle time per unit/Output
D. Operating Time/Desired Output Rate
E. Total Hours Worked/ Desired Output Rate
(D) Operating Time/Desired Output Rate Page 263
54) Compute the output rate. Fixed units per hour 500. Operating time
per day 200 mins. Cycle Time is 1.0 per unit. CM per unit is 5. Total
Units is 1000.
A. 5000
B. 700
C. 4500
D. 1000
E. 200
(E).200 Equation found on page 263
55) Operations management is concerned with which of the following

technologies:
A. Product and Service

B. Innovation
C. IT
D. A&C
E. B&C
(D) A&C Page 238
56) The work required to produce a widget can be separated into five
fundamental tasks. With the task times and precedence relationships
shown in the following diagram, what are the minimum and maximum
cycle times for a widget production?
-->0.3 min.-->0.9 min.-->0.1 min.-->0.5 min.-->0.2 min-->
a) 0.3 min.; 0.2 min.

b) 0.1 min.; 2.0 min.
c) 0.9 min.; 2.0 min.
d) 0.3 min.; 0.1 min.
e) 0.1 min.; 0.9 min.
Answer: C),0.9 min.; 2.0 min. pg. 263
57) In one of the assembly lines with 5 stations, the supervisor notices
that the idle time per cycle is 0.5 min in the 1.0 min cycle time. What is
the efficiency of this line?
a) 10%
b) 90%
c) 97.5%
d) 2.5%
e) 85%
Answer: B), 90% pg. 265
58) Which of the following are reasons why businesses utilize line
balancing to improve their business processes?
a) It allows us to use labor and equipment more efficiently.

b) To increase the idle time of each assembly line.
c) To avoid fairness issues that arise when one workstation must work
harder than another.
d) To create issues with morality that arise between workers at slower
and faster stations.
e) Both a) and c) are correct.
Answer: E); Both a) and c) are correct. pg. 262
59) What are the advantages of using a continuous process types?
a) Very efficient
b) Very high volume
c) Able to handle a wide variety of work
d) a) and b) are correct.
e) All of the above are correct.
Answer: D); a) and b) are correct. pg. 241
60) Which of the following are NOT benefits of using a flexible
manufacturing system?
a) Able to handle a relatively narrow range of part variety.

b) Offers reduced labor costs.
c) Offers consistent quality compared to traditional manufacturing
methods.
d) Utilize lower capital investment.
e) Offer higher flexibility than "hard" automation.
Answer: A)Able to handle a relatively narrow range of part variety., pg.
258
61) What is a common goal in design process layout?
A) Minimize workers
B) Minimize transportation cost
C) Increase volume production
D) Increase effectiveness
E) None of the above are correct
Answer: B)Able to handle a relatively narrow range of part variety. page
271
62) Which of the following is not information required in the design

process layout?
A) The amount of money to be invested in the layout

B) The location of key utilities, access and exit points, loading docks,
and so on.
C) A projection of future work flows between various work centers.
D) The number of managers and workers involved.
E) The distance between locations and the cost per unit of distance to
move loads between locations.
Answer: D) The number of managers and workers involved.page 271,
272
63) HoIn closeness ratings how is the information summarized?
A) Diagram
B) Grid
C) Report
D) Flow chart
E) Bar chart
Answer: B) page 273
64) The problems that majority of layouts have involve which of the
following:
A) Single locations
B) Multiple locations
C) Insufficient layout information
D) Size of equipment
E) Dimension of the building
Answer: A) page 270
65) What is a major obstacle when trying to find the most efficient layout
of a department?
A) Amount of space equipment and labor will use.

B) Layout of building
C) Type of equipment being used
D) Location of key utilities
E) Large number of possible assignments
Answer: E) page 27
(66) The process of assigning tasks to workstations in such a way that

the workstations have approximately equal time requirements is called:
A) equal balancing
B) cycle time
C) idle time analysis
D) line balancing
Answer: D) page. 262
(67) Crayola LLC, maker of Crayola products, produces nearly 3 billion

crayons each year. What type of processing does Crayola has?
A) job shop
B) batch
C) repetitive/assembly
D) continuous
Answer: C) page. 240
(68) Which of the following type of processing system is used for highly
standardized products?
A) batch
B) project
C) continuous
D) job shop
Answer: C) p. 240
Ch. 7 Design of Work Systems

Edit 0 37
JOB DESIGN
Specialization
Specialization relates with different work that concentrates on some
aspect of a product or service. Similarly, it emphasizes the ability to
concentrate one's efforts on a type of work and thereby becoming
proficient in it. Examples of specialization include college professors
teaching certain courses, medical doctors working in a specific field, and
bakers who specialize in wedding cakes. The advantages of specialized
assembly line workers are high productivity and relatively low unit costs.
Consequently, these lower-level jobs are often times described as
monotonous which results in turnover and absenteeism. However, some
workers who are not capable of handling jobs with greater scopes prefer
low-level jobs that have limited requirements and responsibility.
Job Design/Specialization
This chapter explains the two basic approaches to job design and the
advantages and disadvantages of specialization. The most important
topic is the purpose of methods analysis and how these methodical
studies are performed. Job Design is the act of specifying the contents
and methods of jobs. Current practices in job design contain elements of
two basic schools of thought, efficiency and satisfaction of wants and
needs. Specialization describes jobs that have a very narrow scope. The
amount of knowledge, or training required of a specialist, and the
complexity of the work, suggest that such individuals choose such work
because they are fully interrogated in the work flow of the product or
service.
QUESTIONS ON CH. 7
1.) Time standards derived from a firm's historical time data is:
A.) Predetermined time standards
B.) Standard elemental times
C.) Post-determined time standards
D.) Time measurement standards
E.) None of the above
Answer: B. page 344
2. Which is NOT a behavioral approach to job design?

a. job enrichment
b. job rotation
c. job enlargement
d. increased use of mechanization
e. job improvement
Answer: e pg.314
3. Which of these are helpful in visualizing the portions of a work cycle

during which an operator and equipment are busy?
a. micromotion study
b. work machine chart
c. flow process chart
d. stopwatch time study
e. work measurement
Answer: b pg.320
4. Which is NOT a technique used in motion study?

a. charts
b. micromotion study
c. decision making
d. analysis of therbligs
e. motion study principles
Answer: c pg. 337
5. What reflects quality and productivity results?

a. depth skills
b. specialized skills
c. horizontal skills
d. vertical skills
e. none of above
Answer: A pg. 342
6. What is NOT an advantage of specialization in management?

a. High productivity
b. High costs
c. Simplified training
d. Low costs
Answer: B pg. 328
7. Concerning labor, what is NOT a disadvantage of specialization?

a. Limited opportunities for advancement
b. Little control over work
c. Little mental effort needed
d. Monotonous work
e. Little opportunity for self-fulfillment
Answer: C pg. 328
8. Which is a general guideline that supervisors use to select a job to

study?
a. Have a high labor content
b. Are done frequently
c. Are unsafe, tiring, unpleasant, and/or noisy
d. Are designated as problems
e. All of the above
Answer: E pg 333
9. Which is NOT a source for method analysis?

a. Changes in tools and equipment
b. Changes in product design or introduction of new products.
c. Environmental factors
d. Changes in materials or procedures
e. Government regulations or contractual agreements
Answer: C pg 332
10. Which of the following are reasons why people choose to work?
a. Self actualization
b. Status
c. Sense of purpose and accomplishment
d. Compensation
e. All of the above
Answer: E pg: 329
Ch. 8 Location Planning and Analysis
Edit 0 156
Summary
Location Planning
Every firm must use location planning techniques. There are many options for location planning.
Corporations choose from expanding an existing location, shutting down one location and moving to
another, adding new locations while retaining existing facilities, or doing nothing. There are a variety of
methods used to decide the best location or alternatives for the corporation. Methods such as identifying
the country, general region, small number of community alternatives, and site alternatives.
Several factors that influence location positioning include the location of raw materials, proximity to the
market, climate, and culture. Models for evaluating whether a location is best for an organization consist
of cost-profit analysis for locations, the center of gravity model, the transportation model, and factor
rating.
This chapter discusses the decision to relocate a facility by considering costs and benefits. If you are
planning on moving or acquiring a new facility, there are many factors to consider: the size, the
geographic area, culture, transportation costs and others. After a location or locations have been chosen
a cost-profit-volume analysis is done.
The main factors that affect location decisions include regional factors, community considerations, and site-related
factors. Community factors consist of quality of life, services, attitudes, taxes, environmental regulations, utilities,
and development support.
EVALUATING LOCATION ALTERNATIVES (Page 385)

There are three specific analytical techniques available to aid in
evaluating location alternatives:
1. Location Cost-Volume-Profit Analysis:

1. The Cost-Volume-Profit (CVP) Analysis can be represented either
mathematically or graphically. It involves three steps: 1) For each
location alternative, determine the fixed and variable costs, 2) For all
locations, plot the total-cost lines on the same graph, and 3) Use the
lines to determine which alternatives will have the highest and lowest
total costs for expected levels of output. Additionally, there are four
assumptions one must keep in mind when using this method:
1.Fixed costs are constant.
2.Variable costs are linear.
3.Required level of output can be closely estimated.
4.There is only one product involved.
5.
2. Total cost = FC = v(Q)
where FC=Fixed Cost, v=Variable Cost per Unit, Q=Number of Units

(Also shown below but not in the same format)
1. Factor Rating
1. This method involves qualitative and quantitative inputs, and evaluates
alternatives based on comparison after establishing a composite value
for each alternative. Factor Rating consists of six steps:
1. Determine relevant and important factors.
2. Assign a weight to each factor, with all weights totaling 1.00.
3. Determine common scale for all factors, usually 0 to 100.
4. Score each alternative.
5. Adjust score using weights (multiply factor weight by score factor); add
up scores for each alternative.
6. The alternative with the highest score is considered the best option.
2. Minimum scores may be established to set a particular standard, though
this is not necessary.
2. Center of Gravity Method:
o This technique is used in determining the location of a facility which will
either reduce travel time or lower shipping costs. Distribution cost is
seen as a linear function of the distance and quantity shipped. The
Center of Gravity Method involves the use of a visual map and a
coordinate system; the coordinate points being treated as the set of
numerical values when calculating averages. If the quantities shipped to
each location are equal , the center of gravity is found by taking the
averages of the x and y coordinates; if the quantities shipped to each
location are different , a weighted average must be applied (the weights
being the quantities shipped).
Company Relocating
There are many factors that contribute to a company relocating. Some of
the reasons include expanding the market and diminishing resources.
For an existing company to relocate, they must weigh their options when
planning to relocate elsewhere. They can expand their existing facility,
add new ones and keep their existing facilities open, move to another
location and shut down one location, or keep things the way they are
and not do anything. Globalization has led many companies to set up
operations in other countries. Two factors that make relocation appealing
are advances in technology and trade agreements. By going global,
companies will expand their markets and be able to cut costs in labor,
transportation, and taxes. They also have gained ideas for new products
and services.
IDENTIFYING A COUNTRY, REGION, COMMUNITY, AND SITE (Page 376)

factors that influence location decisions are:
Manufacturing :
o Availability of energy and water
o Proximity to raw materials
o Transportation cost
Service:
o Traffic patterns
o Proximity to markets
o Location of competitors
important factors have been determined, an organization will narrow
down alternatives to a specific geographic region. These factors that influence
location selection are often different depending on whether the firm is a
manufacturing or service firm. When deciding on a location, mangers must
take into account the culture shock employees might face after a location
move. Culture shock can have a big impact on employees which might affect
workers productivity, so it is important that mangers look at this.
v IDENTIFYING A COUNTRY
o A decision maker must understand the benefits and risks as well as the
probabilities of them occurring
v IDENTIFYING A REGION- 4 major considerations

o Location to Raw Materials: The three most important reasons for a firm
to locate in a particular region includes raw materials, perishability, and
transportation cost. This often depends on what business the firm is in.
o Location to Markets: Profit maximizing firms locate near markets that they
want to serve as part of their competitive strategy. A Geographic information
system(GIS) is a computer based tools for collecting, storing, retrieving, and
displaying demographic data on maps.
o Labor Factors : Primary considerations include labor availability, wage
rates, productivity, attitudes towards work, and the impact unions may have.
o Other : Climate is sometimes a consideration because bad weather can
disrupt operations. Taxes are also an important factor due to the fact that
taxes affect the bottom line in some financial statements.
v IDENTIFYING A COMMUNITY
o There are many important factors for deciding upon the community in
which move a business. They include facilities for education, shopping,
recreation and transportation among many others. From a business standpoint
these factors include utilities, taxes, and environmental regulation.
v IDENTIFYING A SITE
o The main considerations in choosing a site are land, transportation, zoning
and many others. When identifying a site I]it is important to consider to see if
the company plans on growing at this location. If so, the firm must consider
whether or not location is suitable for expansion. There are many decisions
that go into choosing exactly where a firm will establish its operations.
First, a company must determine the driving factors that will influence
which areas are suitable locations. After these factors have been
determined, the company will identify potential countries and examine
the pros and cons of establishing operations in these countries. After
looking at pro and cons of the different countries and deciding on a
country, then decision makers will identify a region within the country.
When identifying a region, decision makers must take the four major
factors explained above into consideration. The last two stages of the
search include choosing a community and a site.
Note: The above part is way too lengthy for this assignment.
Summary below..
Summary : There are several ways that are very helpful in evaluating
location alternatives, such as locational cost-profit-volume analysis,
factor rating, and the center of gravity method. First, let's take a look at
Location Cost-Profit-Volume Analysis.
This analysis can be done numerically or graphically. The procedure for

locational cost-profit-volume analysis involves these steps:
1. Determine the fixed and variable costs associated with each location
alternative.
2. Plot the total-cost lines for all location alternatives on the same graph.
3. Determine which location will have the lowest total cost for the
expected level of output. Alternatively, determine which location will have
the highest profit.
This method assumes the following:

1. Fixed costs are constant for the range of probable output.
2. Variable costs are linear for the range of probable output.
3. The required level of output can be closely estimated.
4. Only one product is involved.
Here're a couple of important formulas to remember:
Total cost = Fixed cost + Variable cost per unit * Quantity or volume of
output
Total profit = Quantity(Revenue per unit - Variable cost per unit) -
Fixed cost
In most situations, other factors besides cost must also be considered.

We will now consider another kind of cost often considered in location
decisions: transportation costs.
Transportation costs sometimes play an important role in location

decisions. The company can include the transportation costs in a
locational cost-volume analysis by incorporating the transportation cost
per unit being shipped into the variable cost per unit if a facility will be
the sole source or destination of shipments. When there is a problem
with shipment of goods from multiple sending points to multiple receiving
points, and a new location is to be added to the system, the company
should undertake a separate analysis of transportation. In this case,
transportation model of linear programming is very helpful. The model is
used to analyze each of the configurations considered, and it reveals the
minumum costs each would provide. Then the information can be
included in the evaluation of location alternatives.
Multiple Plant Manufacturing Strategies (page 381-382)

-When comapnies have several manufacturing facilities t here are
several different ways for a company to organize their operations. These
ways include: assigning different product lines to different plants,
assigning different market areas to different plants, or assigning different
processes to different plants. These strategies carry their own cost and
managerial implications, but they also carry a certain competitive
advantage. There are four different types of plant strategies:
1. Product Plant Strategy
Products or product lines are produced in separate plants, and each

plant is usually responsible for supplying the entire domestic market.
It is a decentralized approach as each plant focuses on a narrow set of
requirements that includes specialization of labor, materials, and
equipment along product lines.
Specialization involved in this strategy usually results in economies of
scale and, compared to multipurpose plants, lower operating costs.
The plant locations may either be widely scattered or placed relatively
close to one another.
2. Market Area Plant Strategy
Here, plants are designed to serve a particular geographic segment of a

market.
The individual plants can produce either most, or all of the company's
products and supply a limited geographical area.
The operating costs of this strategy are often times higher than those of
product plants, but savings on shipping costs for comparable products
can be made.
This strategy is useful when shipping costs are high due to volume,
weight, or other factors.
It can also bring the added benefits of faster delivery and response times
to local needs.
It requires a centralized coordination of decisions to add or delete plants,
or to expand or downsize current plants because of changing market
conditions.
3. Process Plant Strategy
Here, different plants concentrate on different aspects of a process.

This strategy is most useful when products have numerous components;
separating the production of components results in less confusion than if
all the production were done in the same location.
A major issue with this strategy is the coordination of production
throughout the system, and it requires a highly informed, centralized
administration in order to be an effective operation.
It can bring about additional shipping costs, but a key benefit is that
individual plants are highly specialized and generate volumes that brings
economies of scale.
4. General-Purpose Plant Strategy
Plants are flexible and have the ability to handle a range of products
It allows for a quick response to products and market changes, but can
be less productive than a more focused approach.
A benefit to this approach is the increase in learning opportunities that
happens when similar operations are being done in different plants.
Solutions to problems as well as improvements made at one plant can
be shared with the other plants
Question 1:
From a company standpoint, which factors determine the desirability of a
community as a place for its workers and managers to live?
A) The amount of parking spaces
B) Retail stores
C) Schools
D) Locals attitudes towards the company.
E) Both C and D.
Answer: E. Page 380.
Question 2:
What is NOT a risk a corporation must consider when planning a
location?
A) Political
B) Exporting
C) Economic
D) Cultural
E) Economic
Answer: B. Pages 373-374.
Question 3:
What do banks, fast-food chains, supermarkets, and retail stores view
locations as?
A) One in many intricate decisions for their organizations
B) A crucial part of the marketing strategy.
C) An easier way to distribute their product or service.
D) New ideas for future investments.
E) A second home.
Answer: B. Page 369
Question 4:
What is the third step when making location decisions?
A) Evaluate the alternatives and make a selection.
B) Identify important factors.
C) Decide on criteria for evaluating alternatives.
D) Develop location alternatives.
E) None of the above.
Answer: D. Page 376.
Question 5:
What is the center of gravity method?
A) A method that determines the location of a facility that will minimize
shipping cost and travel time to various destinations.
B) A method that determines the location of a facility closest to the most
number of consumers.
C) A method that determines the location of a facility closest to the main
supplier
D) A method that determines the location of a facility in the middle-point
of all suppliers.
Answer: A. Page 388

1.) Location analysis assumes that both qualitative and quantitative factors are important in determining
an ideal location when using:
a. The Transportation Model
b. The Center of Gravity Method
c. Factor Rating
d. Cost-Profit Analysis
Page 379 9th Ed.
2.) The transportation model can be applied to solve factors including:

I. Cost
II. Profit
III. Capacity
IV. Management
a. I only
b. I and II only
c. I, II, and III only
d. II, III, and IV only
e. II and IV only
Page 391 9th Edition
3.) The Transportation Model uses the following information to determine costs:
a. A list of shipping origins
b. Demand of destinations
c. Unit costs
d. None of the above
e. All of the above
4.) Which is a TRUE assumption needed to perform Cost-Profit Volume Analysis?

a. Fixed costs are exponential
b. Variable costs are logarithmic
c. All costs are linear
d. At least 2 products are being compared
e. Revenue is NOT included in the analysis
*9th Edition says that variable costs are linear, and fixed costs are constant.*
5.) In the Factor Rating Method of location analysis, which of the following is NOT a managerial choice?
a. Assigning weight to the importance of aspects being compared
b. Adding the applied (weight x value) of various categories to get a composite for a location
c. Determining the ultimate choice for the location
d. Assigning information gathering on a location
e. All of the above are managerial choices
Question 5 needs an answer, also needs page numbers where answers

are found
1) What does GIS stand for?

A. General Information Systems
B. Great Information Systems
C. Geographic Information Systems
D. General Institutions
Answer: C
2)The primary consideration for identifying a site is?

A. Location
B. Zoning
C. Transportation
D. None of the Above
E. All of the above
Answer: E
3) What are the common techniques used to evaluate location

alternatives?
A. Locational cost-profit-volume analysis
B. Factor ratings
C. Center of gravity method
D. Transportation model
E. All of the above
Answer: E
4) What is a general-purpose plant strategy?

A. A general approach to evaluating locations that include qualitative and
quantitative inputs.
B. A way to evaluate rating of geographic area
C. A general approach to evaluating locations that include regional
inputs.
D. A way of being capable of handling a wide range of different products.
Answer: D
5) Method for locating a distribution center that minimizes the distribution

costs.
A.Location cost-pofit-volume analysis
B. Method for finding balance between company culture and geographic
culture.
C. Method that compares costs to benefits
D. All of the above.
Answer: A
1) What is a primary factor in the regional level of location decisions?

A. Location of raw materials or supplies
B. Quality of life
C. Location of markets
D. A and C
Answer: D page 365 (9th edition)
2) In a geographic information system (GIS), which is NOT involved in

the data?
A. Age
B. Incomes
C. Quality of life
D. Type of employment
E. Type of housing
Answer: C page 366 (9th edition)
3) What is a disadvantage of globalization?

A. Transportation costs
B. Security costs
C. Unskilled labor
D. Import restrictions
E. All of the above
Answer: E page 373 (9th edition)
4) Mining operations, farming, forestry, and fishing are all examples of

which primary reason for firms locating near or at the source of raw
materials?
A. Necessity
B. Perishability
C. Transportation costs
D. Processing
Answer: A page 365 (9th edition)
5) Which of the following would you establish a composite value for?

A. The transportation model
B. Factor rating
C. The center of gravity method
D. Locational Cost-Profit-Volume Analysis
E. Geographic information system
Answer: B page 379 (9th edition)
1. Which of these is a computer-based tool for collecting, storing,

retrieving, and displaying demographic data on maps?
A. Geographic Data System
B. Geographic Information System
C. Demographic Data System
D. CAM
Answer: B page 379
2. Which is a major consideration when choosing to operate in a region?

A. the minimum wage rate
B. identifying a community
C. location to raw materials
D. possible sites available
Answer: C page 378
3. Considering global expansion, decision makers need to be absolutely

clear on the benefits and risks and the likelihood of their occurrences
when deciding upon identifying:
A. a continent
B. a site
C. a community
D. a country
Answer: D page 378
4. A dominant factor that influences the location decision of a

manufacturing firm is:
A. Climate changes
B. Location to competitors
C. Proximity to markets
D. Transportation cost
Answer: D page 376
5. Which of the following is Not a primary consideration when identifying

a site for operations?
A. Land
B. Transportation
C. Zoning
D. Future expansion
E. All of the Above
Answer: E page 381
1 . When using the Center of Gravity Method, what are the two differing
variables for equal and unequal quantities shipped, respectively?
a. n 1 ; n 2
b. n;Q
c. n; n i
d. e; u e
e. n; Q i
Answer: e ( pages 388-89 )
2. Which location alternative technique involves viewing the problem in

economic terms?
a. Factor Rating
b. CVP
c. GIS
d. Center of Gravity
e. Transportation Model
Answer: b ( page 385 )
3. When considering foreign locations, crime, and the threat of terrorism

fall under which category?
a. Safety
b. Cultural Differences
c. Market
d. Financial
e. Customer Preferences
Answer: a ( page 378 )
4. When using the factor rating method of location alternative evaluation,

which of the following could be considered relevant factors?
a. Location of market
b. Water supply
c. Parking facilities
d. Revenue potential
e. All of the above
Answer: e ( page 387 )
5. Which of the following is not a step in the general procedure for

making location decisions?
a. Develop location alternatives
b. Evaluate the alternatives and make a selection
c. Gain government approval of location alternatives
d. Decide on criteria for evaluating alternatives
e. Identify important factors (e.g., location of markets)
Answer: c ( page 376 )
Chapter 8
Summary:
The location of a business is crucial to its growth. There are many

factors that come into play when choosing a suitable location. Usually it
is one or a few factors that dominate the decision making process. For
example, a change in market supply and/or demand, perhaps even if
inputs used by the business have run out. A business can suffer greatly
if the right location is not chosen. Therefore a business should evaluate
all their options very carefully before making a final conclusion.
There are generally four options a manager has with regard to location
planning. The first option would be to take the current facility and make it
bigger. The second would be to keep the current facility and just create a
(or many) new one(s). The third would be to close down the current
facility entirely and build a new one. The last option would be to keep
things the way they are.
Questions: Questions need to be multiple choice format.
1. What is the name of the computer-based tool used for collecting,

storing, retrieving, and displaying demographic data on maps?
A: Geographic Information System (GIS)
2. True or False: Most organizations try to find the one best location.
A: False
3. What are the three primary regional factors involved in location

decision making?
A: raw materials, markets, and labor considerations
4. Name three trade agreements mentioned in this chapter.
A: North American Free Trade Agreement (NAFTA), the General

Agreement on Tariffs and Trade
(GATT), and the U.S. China Trade Relations Act

5. What are five disadvantages to having global operations?
A: Transportation costs, security costs, unskilled labor, import

restrictions, and criticisms.
6. Suppose that the operating costs of a company has a weight of .20.

There are three possible location choices. The first location has a score
of 60/100. The second location has a score of 50/100. The third location
has a score of 80/100. What are the weighted scores of each location
possibility?
A:
Location 1: .20(60) = 12
Location 2: .20(50) = 10
Location 3: .20(80) = 16
7. What are some benefits associated with a company moving it's

operation's globally?
A: Market expansion, financial savings, legal, etc.
8. What is the center of gravity method used for?
A: Locating a distribution center that minimizes distribution costs.
9. Find the center of gravity with the information provided below.
Destination x y
L1 85
L2 62
L3 43
L4 35
A:
x = 21/4 = 5.25
y = 15/4 = 3.75
The center of gravity is located at (5.25, 3.75)
10. Determine the center of gravity based on the following information:
Destination x y Weekly Quantity
L1 7 6 700
L2 5 3 500
L3 8 6 800
L4 6 4 600
L5 2 2 200
Total 28 21 2,800
A:
x = [7(700) + 5(500) + 8(800) + 6(600) + 2(200)] / 2,800 = 6.36
y = [6(700) + 3(500) + 6(800) + 4(600) + 2(200)] / 2,800 = 4.75
11. Use the table below and the cost-profit-volume analysis to determine
the B Superior range approximation.
Location Fixed Costs per Year Variable Costs per Unit
1 $250,000 $20
2 $150,000 $50
3 $350,000 $25
4 $225,000 $40
A:
Total Cost of C = Total Cost of B
350,000 + 25Q = 150,000 + 50Q
200,000 = 25Q
Q = 8,000
12. Use the table from Question 12 and the cost-profit-volume analysis
to find the C Superior range approximation.
A:
Total Cost of A = Total Cost of C
250,000 + 20Q = 350,000 + 25Q
5Q = 100,000
Q = 20,000
Use the following information to answer question 1-3.

A firm paid $2000 for rent, $300 for maintenance fee in January. They sold 2000 units in the month and
the cost per unit was $5. The price for the product is $10 per unit.
1. What is their total costs for the month?
a. $2300
b. $10000
c. $12300
d. $2000
Answer: c. page 376
2. What is the firms total revenue for the month?
a. $20000
b. $10000
c. $2300
d. $2000
Answer: a. page 378
3. What is the firms profit for the month ?
a. $20000
b. $10000
c. $12300
d. $7700
Answer: d. page 378
4. If two alternatives yield comparable annual costs, management would be indifferent in choosing
between the two in terms of _.
a. total revenue
b. total costs
c. total profit
d. total variable costs
e. total fixed costs
Answer b. page 378
5. The transportation cost must be converted into cost per unit of in order to correspond to other variable
costs if raw materials are involved.
a. input
b. output
c. initial input
d. both a& b
Answer: b. page 378
6. Which of the following is NOT a governmental factor when locating in a

foreign region?
a) Import restrictions
b) Currency restrictions
c) Liability laws
d) Local product standards
e) all of the above
Answer: E, pg. 378
Ch. 8s Transportation Model

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Supplement 8
Summary:
Transportation model
The transportation model uses the principle of 'transplanting' something,
like taking a hole from one place and inserting it in another without
change. First it assumes that to disturb or change the idea being
transported in any way will damage and reduce it somehow. It also
assumes that it is possible to take an idea from one person's mind into
another person's so that the two people will then understand in exactly
the same way.
The transportation model is a valuable tool in analyzing and modifying
existing transportation systems or the implementation of new ones. In
addition, the model is effective in determining resource allocation in
existing business structures.
The model requires a few keys pieces of information, which include the
following:
Origin of the supply
Destination of the supply
Unit cost to ship
The transportation model can also be used as a comparative tool

providing business decision makers with the information they need to
properly balance cost and supply. The use of this model for capacity
planning is similar to the models used by engineers in the planning of
waterways and highways.
This model will help decide what the optimal shipping plan is by
determining a minimum cost for shipping from numerous sources to
numerous destinations.This will help for comparison when identifying
alternatives in terms of their impact on the final cost for a system. The
main applications of the transportation model mention in the chapter are
location decisions, production planning, capacity planning and
transshipment. Nonetheless,the major assumptions of the transportation
model are the following :
1. Items are homogeneous

2. Shipping cost per unit is the same no matter how many units are
shipped
3. Only one route is used from place of shipment to the destination
The transportation problem involves determining a minimum-cost plan

for shipping from multiple sources to multiple destinations. A
transportation model is used to determine how to distribute supplies to
various destinations while minimizing total shipping cost. In this case, a
shipping plan is produced and is not changed unless factors such as
supply, demand, or unit shipping costs change. The variables in this
model have a linear relationship and therefore, can be put into a
transportation table. The table will have a list of origins and each one's
capacity or supply quantity period. It will also show a list of destinations
and their respective demands per period. Also, it will show the unit cost
of shipping goods from each origin to each destination.
Transportation costs play an important role in location decision. The

transportation problem involves finding the lowest-cost plan for
distributing stocks of goods or supplies from multiple origins to multiple
destinations that demand the goods. The transportation model can be used
to compare location alternatives in terms of their impact on the total
distribution costs for a system. It is subject to demand satisfaction at
markets supply constraints. It also determines how to allocate the supplies
available form the various factories to the warehouses that stock or demand
those goods, in such a way that total shipping cost is minimized.
Exam Questions:
1. The transportation model relies on certain assumptions. They include
all of the following except
a) the items must be homogeneous
b) there is only one route being used between each origin and
destination
c) the shipping cost per unit is the same
d) the items must be large scale
Correct answer: D (pg. 398-399)
2. Which of the following are supply points that a transportation model

can analyze?
a) factories
b) warehouses
c) departments
d) all of the above
Correct answer: D (pg. 398)
3. The basis for the transportation model is

a) a way to provide a map for people to see results
b) a method to arrive at the lowest total shipping cost
c) so delivery drivers know where to go
d) a form of accounting
e) to provide data for use in other areas
Correct answer: B (pg. 397)
4. The following transportation model is a programming model:

a) analytical
b) non-linear
c) linear
d) rotating
e) variable
Correct answer: C (pg. 400)
5. Before the analyst of the transportation model can begin, what data
would they need to collect?
a) A list of destinations
b) Unit cost to ship
c) A list of origins
d) All of the above
6. What does the transportation problem involve finding:

a) highest cost-plan
b) lowest cost-plan
c) closest destinations
d) farthest destinations
e) none if the above
7. Transportation problems be solved
a) manually
b) with a table
c) with excel
d) with software packages
e) all of the above
Correct answer: E (pg. 392-393)
8. The objective function of the transportation model is to

a) reduce shipping costs
b) decrease shipping distance
c) maximize costs
d) minimize costs
9. Goods are not sent from

a) warehouses
b) factories
c) grocery stores
d) department stores
e) goods are sent from all of these locations
Correct answer: C (pg. 391)
10. Goods are received at all of the following except

a) docks
b) departments
c) factories
d) warehouses
e) all of the above
Correct answer: A
11. The method for finding the lowest-cost plan for distributing stocks of
goods or supplies from multiple origins to multiple destinations that
demand the goods is
a) cost-volume analysis
b) transportation model analysis
c) factor rating analysis
d) linear regression analysis
e) MODI analysis
12. Except to be used to minimized the costs associated with distributing

good, transportation model can also be used in
a) production planning
b) capacity planning
c) transshipment problem
d) comparison of location alternative
e) all of the above
Correct answer: E (pg. 400)
13. Which one of the following is a linear programming model ?

a) Cost-volume analysis
b) Transportation model analysis
c) Factor rating analysis
d) Linear regression analysis
e) MODI analysis
14. Destination points are

a) points that receive goods from factories, warehouses, and
departments
b) points where goods are sent from factories, warehouses, and
departments
c) supply points
d) selling points
Correct answer: A (pg. 389)
15. Transportation problems can be solved manually in a
straightforward manner except for
a) medium problems
b) very small, but time consuming problems
c) large problems
d) all of the above
16. The transportation model is a
a) linear model
b) quadratic model
c) model with two variables
d) both a and c
Correct answer: D
17. The transportation model is used to determine

a) what type of transportation to use (boat, truck, train or plane) to
transport goods, while minimizing costs
b) what day of the week goods should be transportation on to minimize
costs
c) how to distribute goods from multiple origins to multiple destinations to
minimize total shipping costs
d) how to best package goods so that they wouldn't break while
transporting them
Correct answer: C
18. What assumption is used in the transportation model?:

a) The items to be shipped are heterogeneous.
b) Shipping cost per unit is the different regardless of the number of units
shipped.
c) There is more than one route or mode of transportation being used
between each origin and each destination.
d) The items to be shipped are the same regardless of their source or
destination.
Correct answer: D (pg. 378: 9th edition)
19. Which of the following is needed for a transportation model?

a) a list of origins and each one's capacity or supply quantity per period
b) a list of destinations and each one's demand per period
c) the unit cost of shipping items from each origin to each destination
d) all of the above
e) only A and B
Correct answer: D (pg. 378: 9th edition)
20. The transportation model is a linear __ model.

a) solution
b) programming
c) data
d) shipping
e) distribution
Correct answer: B (pg. 390: 9th edition)
Ch. 9 Management of Quality

Edit 0 155
Chapter 9: Management of Quality

Chapter 9 focuses on the importance of quality. It discusses various concepts and tools that can be used
to achieve high quality and continuous improvement. Broadly defined, quality refers to the ability of a
product or service to consistently meet or exceed customer requirements or expectations. Different
customers will have different expectations, so a working definition of quality is customer-dependent.
When discussing quality one must consider design, production, and service. In a culmination of efforts, it
begins with careful assessment of what the customers want, then translating this information into
technical specifications to which goods or services must conform. The specifications guide product and
service design, process design, production of goods and delivery of services, and service after the sale or
delivery.
Some of these consequences of poor quality include loss of business, liability, decreased productivity,
and increased costs. However, good quality has its own costs, including prevention, appraisal, and
failure. A recent and more effective approach is discovering ways to prevent problems, instead of trying to
fix them once they occur.This will ultimately decrease the cost of good quality in the long run.
There are several costs associated with quality:

Appraisal costs - costs of activities designed to ensure quality or uncover defects
Prevention costs - costs of prevention defects from occurring
Failure costs - Costs caused by defective parts or products or by faulty services
Internal failures - failures discovered during production
External failures - failures discovered after delivery to the customer
Return on quality (ROQ) - an approach that evaluates the financial return of investments in quality
Chapter 9 discusses key contributors of quality management and several awards for companies who
possess traits of excellent quality management. This chapter defines total quality management (TQM) as
a philosophy that involves everyone in the organization in a continual effort to improve quality and
achieve customer satisfaction. This philosophy concentrates on continuous improvement and quality at
the source. Six sigma is a concept that stresses improving quality, reducing costs, and increasing
customer satisfaction. Lastly, this chapter gives several examples of quality tools, which include
flowcharts, check sheets, histograms, pareto analysis, scatter diagrams, controls charts, and cause-and-
effect diagrams.
Successful management of quality requires that managers have insights on

various aspects of quality. These include defining quality in operational terms,
understanding the costs and benefits of quality, recognizing the
consequences of poor quality and recognizing the need for ethical behavior.
Understanding dimensions that customers use to judge the quality of a
product or service helps organizations meet customer expectations.
Dimensions of Product Quality

Performance main characteristics of the product
Aesthetics appearance, feel, smell, taste
Special features extra characteristics
Conformance how well the product conforms to design specifications
Reliability consistency of performance
Durability the useful life of the product
Perceived quality indirect evaluation of quality
Service-ability handling of complaints or repairs
Dimensions of Service Quality

Convenience the availability and accessibility of the service
Reliability ability to perform a service dependably, consistently, and
accurately
Responsiveness willingness to help customers in unusual situations and to
deal with problems
Time the speed with which the service is delivered
Assurance knowledge exhibited by personnel and their ability to convey
trust and confidence
Courtesy the way customers are treated by employees
Tangibles the physical appearance of facilities, equipment, personnel, and
communication materials
Consistency the ability to provide the same level of good quality repeatedly
The Determinants of Quality

Quality of Design intention of designers to include or exclude features in a
product or service. The starting point of producing quality in products begins in
the design phase. Designing decisions may involve product or service size,
shape and location. When making designs, designers must keep in mind
customer wants, production or service capabilities, safety and liability, costs,
and other similar considerations.
Quality of conformance- refers to the degree to which goods and services
conform to the intent of the designer. Quality of conformance can easily be
affected by factors like: capability of equipment used, skills, training, and
motivation of workers, extent to which the design lends itself to production, the
monitoring process to assess conformance, and the taking of corrective
action.
Ease of use - refers to the ease of usage of the product or services for the
customers. The term ease of use refers to user instructions. Designing a
product with ease of use increases the chances that the product will be used
in its intended design and it will continue to function properly and safely.
Without ease of use, companies may lose customers, face sales returns, or
legal problems from product injuries. Ease of use also applies to services.
Manufacturers must make sure that directions for unpacking, assembling,
using, maintaining, and adjusting the product are included. Directions for
What to do when something goes wrong should also be included. Ease of
use makes a consumer very happy and can help retain customers.
Services offered to the customer after delivery. There will be times when
products may fail or problems with usage may occur. This is when Service
after delivery is important through recall and repairs of the product,
adjustment, replacement or buys back, or reevaluation of a service.
Having good quality is a competitive advantage against others who offer

similar products or services in the marketplace.
In addition, good quality can:
Raise Company's Reputation
Rationalize Premium Prices
Decrease Liability Costs
Increase Productivity
Increase Customer Loyalty
Increase Customer Satisfaction
Consequence's include:
loss of business and existing market share

legal liability
lack of productivity
increased costs
Failure to meet quality standards can damage a company's image,

reputation or lead to external criticism. In the manufacturing field, the
quality of raw materials or equipment can affect the whole manufacturing
process. If defects or poor quality are not detected on time, companies may
face various costs to solve problems. Discovering and fixing problems on
time reduces costs. Quality costs include prevention (prevent defects from
occurring by planning system, training and control
procedures), appraisal (ensure quality or uncover defects by inspections,
testings and audits), and failure (caused by defective parts, products or by
faulty services discovered during the production process - internal or after
delivery to the customer - external).
Three well- known awards given annually to recognize quality are:
1. Baldrige Award (given by the U.S. government)
2. European Quality Award
3. Deming Prize (established by the Japanese).
There are also worldwide known quality certifications like ISO 9000 (which is a
set of international standards on quality management and quality assurance,
critical to international business) and ISO 14000 (a set of international
standards for assessing a company's environmental performance).
Total quality management (TQM) is a constant pursuit of quality that
involves everyone in an organization. The driving force is customer
satisfaction; a key philosophy is continuous improvement. The Japanese
use the term kaizen to refer to continuous improvement. Training of
managers and workers in quality concepts, tools, and procedures is an
important aspect of TQM. Teams are an integral part of TQM. Two major
aspects of the TQM approach are problem solving and process
improvement. Six-sigma programs are a form of TQM. A six-
sigma improvement project typically has one or more objectives such as:
reducing delivery time, increasing productivity, or improving customer
satisfaction. They emphasize the use of statistical and management
science tools on selected projects to achieve business results. There
are seven basic quality tools that an organization can use for problem
solving and process improvements. A flowchart is a visual representation of
a process. As a problem-solving tool, a flowchart can help investigators in
identifying possible points in a process where problems occur. The
diamond shapes in the flowchart represent decision points in the process,
and the rectangular shapes represent procedures. They show the direction
of flow of the steps in the
process.arrows
A check sheet is a simple tool frequently used for problem identification.
Check sheets provide a format that enables users to record and organize
data in a way that facilitates collection and
analysis.
A histogram can be useful in getting a sense of the distribution of observed

values. It is a chart of an empirical frequency distribution.
Pareto analysis is a technique for focusing attention on the most important
problem areas. The idea is to classify the cases according to degree of
importance, and focus on resolving the most important, leaving the less
important.
A scatter diagramcan be useful in deciding if there is a correlation between
the values of two variables. It is a graph that shows the degree and
direction of relationship between two variables. A correlation may point to a
cause of a
problem.
A control chart can be used to monitor a process to see if the process
output is random. It can help detect the presence of correctable causes of
variation. It is a statistical chart of time-ordered values of sample
statistic.
A cause-and-effect diagram offers a structured approach to the search for
the possible cause(s) of a problem. It is also known as a fishbone
diagram because of its shape, or an Ishikawa diagram, after the Japanese
professor who developed the approach to aid workers overwhelmed by the
number of possible sources of problems when problem solving. This helps
to organize problem-solving efforts by identifying categories of factors that
might be causing
problems.
A run chart can be used to track the values of a variable over time. This
can aid in identifying trends or other patterns that may be
occurring.
Important People in Quality

Walter Shewart
father of statistical quality control
Control charts
Variance reduction
W. Edwards Deming
Special vs. common cause variation
The 14 points
-- Deming Prize- Prize estabolished by the Japanese and awarded annually to firms
that distinguish themselves with quality management programs.
Joseph Juran
Quality Control Handbook, 1951
Viewed quality as fitness-for-use
Quality trilogy quality planning, quality control, quality improvement
Armand Feigenbaum
Quality is a total field
The customer defines quality
Philip B. Crosby
Zero defects
Quality is Free, 1979
Kaoru Ishikawa
Cause-and-effect diagram
Quality circles
Recognized the internal customer
Genichi Taguchi
Taguchi loss function
Taiichi Ohno and Shigeo Shingo
Developed philosophy and methods of kaizen
Contributor Key Contributions
Shewhart Control Charts; variance reduction
Deming 14 points; special versus common causes of variation
Juran Quality is fitness-for-use;quality trilogy
Feigenbaum Quality is a total field; the customer defines quality
Crosby Quality is free; zero defects
Ishikawa Cause-and-effect diagrams; quality circles
Taguchi Taguchi loss function
Ohno and Shingo Continuous improvement
DIMENSIONS OF QUALITY
Dimension Example
Performance Everything works: fit and finish, ride, handling, acceleration

Aesthetics Exterior and interior design
Features Convenience: placement of gauges

High tech: GPS system
Safety: anti-skid, airbags
Conformance Car Matches manufacturer's specifications
Reliability Infrequent need for repairs
Durability Useful life in miles, resistance to rust
Perceived quality Top-rated
Serviceability Ease of repair
An emphasis on quality control heightened during WWII. Quality control then evolved to quality
assurance and is now better known as a Strategic Approach, a tool for improving not only products but
also processes and services. Quality can be thought of as the degree to which performance of a product
or service meets or exceeds expectations. Quality should be measured differently for products and
services, and therefore product and service quality are judged on their own set of dimensions.
Responsibility for overall quality lies with top management. Top management must establish strategies,
institute programs for quality, and motivate managers and workers. Most times managers are on a
quest for the quality of an organization as a whole; this is referred to as Total Quality Management
(TQM). TQM involves a continual effort for quality improvement by everyone in an organization. So in
essence, for an organization to meet and exceed goals of quality control the entire supply chain needs to
be involved.
Consequences of poor quality

There are numerous consequences with poor quality products which can affect a business and a
ways. Whether it is a small or large problem, the
customer in many different
magnitude of the problem always affects someone at some point. When a
product is designed poorly or lacks in quality, customers recognize that very
quickly, and it can quickly lead to a problem for the business. It does not
matter whether the company is a product or a service oriented company
because poor quality will always, most likely, create negative affects for the
firm. Eventaully, the low cost input in the R&D department and the using
cheaper materials will lead to loss of business . Therefore, due to the cost
associated with satisfying the customer, it is best to fix problems in the design
phase rather than dealing with it after it's in the hands of a customer. The
sooner the problem with a product or service is identified and remedied, the
better!
Methods for Generating Ideas

Additional tools that are useful for problem solving and process control
include:
Brainstorming
Affinity diagram
Quality circles
Interviewing
Benchmarking
5W2H approach
o Who
o What
o When
o Where
o Why
o How
o How much
Brainstorming is used to communicate thoughts and ideas without any

criticism. Everyone has equal input and ideas are shared in order to facilitate
problem solving.
Affinity Diagram is used to arrange data into categories that may be analyzed.
One of its uses is to group many responses to similar ideas. It uses the right
side of the brain (generates ideas) and the left side of brain (analyze and
organize).
Quality Circles are usually informal meetings between employees to exchange
ideas and concerns about processes.
Interviewing is a tool used by managers to find information from employees
through Q & A sessions.
Benchmarking is tool for companies to set standards. It attempts to compare
itself to the best in the industry in order to meet or exceed the standard set.
Usually uses these steps: 1. Identify process for improvement. 2. Identify
organization that is the best at that process. 3. Study that organization. 4.
Analyze data. 5. Improve process at your organization.
5W2H approach asks the questions what, why, where, when, who, how, and
how much (5 W words and 2 H words). Its purpose is to ask the questions that
will lead to improving processes.
Responsibility for Quality
Top Management- has the ultimate responsibility for quality. While they
establish strategies for quality, they also institute programs to improve quality;
guide, direct, and motivate managers and workers; and set an example by
being involved in quality initiatives.
Design- Quality products and services begin with design.
Sales can be lost when the products are not designed well and do not function
correctly. Customers get turned off when that happens and may not want to
risk buying the same brand again. Liability is an important area because there
is the potential for damages or injures that could reflect badly on the company
and then damage control will need to be done to repair the company image
and reputation. Productivity can be slowed when there are defects and poor
quality because time must be spent to redo and fix these issues. Costs can be
reduced by up to five times if problems are caught early on in the process,
compared to later in the production stages.
Questions to the chapter

1.Which quality certification pertains to set of international standard on quality
management and quality assurance?
a) ISO 14000
b) ISO 24700
c) ISO 9000
d). ISO 27000
Answer: C (pg.424)
2. Whose key contribution included the cause-and-effect diagram (fishbone

diagram)?
a) Joseph M. Juran
b) Kaoru Ishikawa
c) Armand Feigenbaum
d) Walter Shewhart
e) Genichi Taguchi
Answer: B (pg.411)
3. Which cost of quality involves the cost of preventing a defect from occurring?
a) Appraisal Costs
b) Failure Costs
c) Fixing Costs
d) Prevention Costs
e) Internal Costs
Answer: D (pg.420)
4. Which failures are discovered after delivery to customer?

a) External
b) Internal
c) Prevention
d) Quality
Answer: A (pg.420-421)
5. Which method for generating ideas is a tool used to organize data into logical
categories?
a)Brainstorming
b) Affinity Diagram
c) Quality Circles
d) Interviewing
e) Benchmarking
Answer: B (pg.444)
6. Which of the following is a consequence of poor quality?

a) loss of business
b) liability
c) productivity
d) costs
e) all of the above are correct
Answer: e) all of the above are correct PG. 418
7. Which of the following is true of the benefits of good quality?

a) enhanced reputation for quality
b) reduced productivity
c) lower liability cost
d) higher liability cots
e) both a & c are correct
Answer: e) both a & c are correct pg. 418
8. The cost to fix a problem at the design or production stage, compared to at

an earlier stage costs how many times more?
a) one time
b) two times
c) three times
d) four times
e) five times
Answer e) five times PG 419
10. Productivity is closely related to which of the following?:

a) liability
b) costs
c) quality
d) express written warranties
e) defective products
Answer c) quality PG 418
11. What are the three costs that are associated with quality?
a) Appraisal costs, Prevention costs, Labor costs.
b) Appraisal costs, Prevention costs, Failure costs.
c) Appraisal costs, Prevention costs, Internal Failures costs.
d) Appraisal costs, Prevention costs, Total Costs.
e) Appraisal costs, Prevention costs, Overhead cost.
Answer is B found on page 420.
12. Which of the following are two major aspects of the TQM approach?
a) Continuous improvement and process improvement.
b) Six-sigma and continuous improvement.
c) Problem solving and process improvement.
d) Problem solving and continuous improvement.
e) All of the above.
Answer is C found on pages 432-434.
13. What is the Japanese term for continuous improvement?

a) kaizen
b) Ishikawa
c) fishbone
d) a. and c. are correct answers,
14. What are the four basic steps in the PDSA cycle?
a) Problem, Decision, Solution, Award.
b) Design, Study, Plan, Do, Act.
c) Plan, Design, Check, Act.
d) Plan, Do, Study, Act.
Answer is D found on page 433.
15. Which basic quality tool is focused on resolving the most important
problem?
a) Scatter diagram
b) Control chart
c) Pareto analysis
d) Cause-and-effect diagram
e) Fishbone diagram
Answer is C found on page 438.
16. Which of the following is a Determinant of Product Quality?

a) Design
b) Product/Service conformity to design
c) Ease of Use
d) Service after delivery
e) All of the Above
Answer: E page 416
17. Which of the following doesnt refer to the term Ease of Use?
a) Increases the chances that product will be used for intended design
b) Product conforms to the intended designs
c) Instructions are included in the product
d) Product continues to function safely and properly
e) All of the above refers to Ease of Use
Answer: B page 417
18. Which is NOT a Consequence of Poor Quality

a) Productivity
b) Loss of Business
c) Costs
d) Legal Liability
Answer: E page 406
19. The consequences of poor quality products or services may result in:
a) Less Liability
b) Baldrige
c) Injuries and defective output
d) Lower costs
e) Faster Productivity
Answer: C page 419
20. One of the things Designers should consider when making a product is
a) Customer preference
b) Company Costs
c) Production capabilities
d) A and C
e) All of the Above
Answer E page 419
21. Although closely associated with quality, this name is not on the list of
quality gurus:
a) W. Edwards Deming
b) Philip Crosby
c) Malcolm Baldrige
d) J. M. Juran
e) Kaoru Ishikawa
Answer: Malcolm Baldrige (pg 409)
22. Which name is associated with management responsibility?

a) Deming
b) Crosby
c) Juran
d) Feigenbaum
e) Ishikawa
Answer: D. Feigenbaum (pg 411)
23. Which quality pioneer compiled a list of 14 points that he believed were
imperative to achieve quality in an organization?
a) Deming
b) Crosby
c) Baldrige
d) Juran
e) Ishiikawa
Answer: A. Deming (pg 409)
24. Which one of these is a tool for gathering data?

a) Control chart
b) Fishbone diagram
c) Scatter diagram
d) Flowchart
e) Checksheet
Answer: E. Checksheet (pg 435)
25. Which one of these is a tool for problem solving?

a) Benchmarking
b) Cause-and-effect diagram
c) Histograms
d) Scatter diagrams
e) Control charts
Answer: Cause & Effect Diagram (pg 439)
26. Which of these people are not considered one of the gurus who mapped out
some of the foundations of modern quality management?
a) Walter Shewhart
b) W. Edwards Deming
c) Joseph M Juran
d) Philip B. Crosby
e) Charles P. Bonini
Answer is E (pg 409)
27. What is Six Sigma best defined as:

a) A Japanese term for continuous improvement
b) A business process for improving quality, reducing costs and increasing customer
satisfaction
c) Framework for problem solving and improvement activities
d) A diagram of the steps in a process
Answer is: B, pg.429
28. Which of the following is not a dimension of product quality?

a) Performance
b) Special features
c) Consistency
d) Conformance
e) Reliability
Answer: C, pg. 414- Consistency deals with the dimensions of service quality
29. Philip B. Crosby identified key points in his concept of zero defects, which of the
below is one of his key points?
a) Management must be persistent in efforts to achieve good quality
b) Institute modern methods of training on the job
c) Quality products and services begin with design
d) Cost to remedy a problem is a major concern in quality management
e) All the above.
Answer: A, pg.411
30. Reducing one or more steps in a supply chain by cutting out one or more
intermediaries is known as:
a) Delayed differentiation
b) Cross-docking
c) Avoidance
d) Disintermediation
e) Reverse logistics
Answer: D, pg. 541
31. What are the key elements of Deming's 14 points?

a) Constancy of purpose
b) Continual improvement
c) Profound knowledge
d) Decreasing labor costs
e) Only a, b, and c
Answer: E (pg 409)
32. By how many times is it more costly to fix a problem at the customer end
compared to the design stage?
a) 1x
b) 5x
c) 3x
d) 2x
e) 4x
Answer: B (pg.407)
33.Costs of activities designed to ensure quality or uncover defects are costs

associated with?
a) external failures
b) failure costs
c) appraisal costs
d) prevention costs
e) internal failures
Answer: C (pg. 409)
35. What is known as performance, aesthetics, special features, conformance,

reliability, durability, perceived quality, and serviceability?
a) quality of design
b) quality of conformance
c) return on quality
d) dimensions of quality
e) Deming prize
Answer: D (pg. 403)
36.Which technique uses groups of people to share thoughts and ideas without any
criticism?
a) Process Improvement
b) Benchmarking
c) Brainstorming
d) Interviewing
e) 5WH2
Answer: C (pg. 444)
37. Benchmarking uses which of the following to improve standards?

a) Larger companies
b) Smaller companies
c) Competitors
d) Suppliers
e) Industry Leaders
Answer: E (pg. 445)
38.Which methods asks 7 questions to improve processes?

a) 5W2H
b) Affinity Diagram
c) Quality circles
d) Benchmarking
e) Brainstorming
Answer: A (pg. 446)
39. Control charts have which of the following features?

a) Tabulated categories
b) Diagrams
c) Lower control limits
d) Upper control limits
e) Both C and D
Answer: E (pg. 436)

40. A Scatter diagram is useful when there is
a) One variable
b) Correlation between variables
c) Multiple variables
d) NO Correlation between variables
e) Variation
Answer: B (pg. 438)
41.What is NOT the primary determinants of qualiy, which a product or a service

successfully satisfies its intended purpose?
a) Ease of use
b) Cost
c) Design
d) Service after delivery
e) Design Conformity
Answer: b) Cost (Pg 416)
42.What is the correct definition of an appraisal cost?

a) cost of preventing defects from occurring
b) cost caused by defective parts or products or by faulty services
c) An approach that evaluates the financial return of investments in quality
d) cost of activities designed to ensure quality or uncover defects
e) all of the above
Answer: d) cost of activities designed to ensure quality or uncover defects. (Pg 420)
43.Which quality tool can be useful in getting a sense of the distribution of observed
values?
a) histogram
b) check sheet
c) scatter diagram
d) control chart
e) flow chart
Answer: a) Histogram (Pg 435)
44. What step comes after "develop performance measures and collect data" and
before "generate potential solutions" in the TQM problem-solving process?
a) define the problem and establish an improvement goal
b) analyze the problem
c) choose a solution
d) implement the solution
e) monitor the solution to see if it accomplishes the goal
Answer: b) analyze the problem. (Pg433)
46. Who is known as the "father of statistical quality control?"

a) W. Edwards Deming
b) Walter Shewhart
c) Philip B. Crosby
d) Joseph M. Juran
e) Genichi Taguchi
Answer is B. (Pg 409)
47. Which of the following is NOT a dimension of quality?

a) Performance
b) Durability
c) Aesthetics
d) Investment
e) Conformance
Answer is D. (Pages:412-413)
49. A statistical chart of time-ordered values of a sample statistic is a:

a) Flowchart
b) Check sheet
c) Scatter Diagram
d) Cause-and-effect diagram
e) Control chart
Answer is E (Page:439)
50. What question is not included in the 5W2H approach?
a) Which
b) What
c) Why
d) Where
e) When
Answer is A (Page:446)
51. Which are included in the product quality?

a) Reliability
b) Durability
c) Convenience
d) a and b
e) All of the above
Answer is D, pg.415
52. What are the determinants of quality?

a) Design
b) Ease of use
c)Service after delivery
d) The wellness of product to design
e) All of the above
Answer is E, pg.416
53.Which of the following is not a consequence of poor quality?
a) productivity
b) liability
c) costs
d) speed
e) All of the above
Answer is D, pg.419
54. The appraisal costs means:

a) costs of preventing defects from occurring
b) costs caused by defective parts or products or by faulty services
c) costs of activities designed to ensure quality or uncover defects
d) costs related to defective products
e) neither one is correct.
Answer is C, pg.420
55. A set of international standards for assessing a company's environmental

performance is
a) ISO 14000
b) ISO 24700
c) IEC 24700
d) ISO 9000
Answer is A, pg.424
56. Which tool uses a diagram of the steps as a visual representation of a process?
a) PDSA Cycle
b) Flow Chart
c) Check Sheet
d) Histogram
e) Scatter diagram
Answer is B, pg.435
57. A run chart shows performance over

a) speed
b) quantity
c) productivity
d) time
e) quality
59. All of the following are affected by poor quality EXCEPT -- One more
choice needed.
a. Loss of Business
b. Increased Liability
c. Decreased Costs
d. Increased Productivity
e. Customer loyalty
Answer C (P418)
60. The Baldrige Award is an award given out for doing what?
a. Stimulate Efforts to improve quality
b. Recognize quality achievements
c. Publicize successful programs
d. All of the above (ABC)
Answer D (Page 422)
61. Dimensions of quality include: Performance, Special Features, Reliability,

Durability, Perceived quality, and ___.
a. Tested Quality, Usefulness
b. Ease of use, Aesthetics,
c. Conformance, Price
d. Aesthetics, Conformance
Answer D (p412 definition)
62. Which quality tool uses a technique for classifying problem areas
according to degree of importance, and focusing on the most important.
a. Pareto Analysis
b. Scatter Diagram
c. Control Chart
d. Histogram
Answer A (p438)
Answer is D, pg.442
63.) Which quality management principle(s) form the basis of the latest version of
ISO 9000:
A.) A customer focus

B.) Leadership
C.) A process approach
D.) Continual improvement
E.) All of the above
Answer is E (p.425)
64.) Which is the annual award given by the US government to recognize quality
achievements of US companies?
A.) European Quality Award

B.) Deming Prize
C.) Baldrige Award
D.) Carlton Award
E.) Cadillac Award
Answer is C (p.422)
65) Problem solving, material and product losses, scrap, and downtime are
examples of:
A) Appraisal costs
B) Prevention costs
C) Internal failure costs
D) External failure costs
Answer is C (p. 421)
66. One of the quality dimentions is this same for product and service. Which
one?
a) special features
b) serviceability
c) reliability
d) courtesy
e)convenience
answer c (p.403)
67. Six sigma is a process to :

a) improve quality
b) increase customer satisfaction
c) reduce costs
d) all of the above
answer d (p.418)
68.
Who contributed the continuous improvement aspect of quality?
a) Juran
b) Crosby
c) Ohno and Shingo
d) Ishikawa
e) Feigenbaum
answer c (p. 412)
69.
All of the following are consequences of Poor Quality EXCEPT
a) Liability
b) Loss of business
c) Cost
d) Direct feedback
e) a and d
answer d (p. 418)
70.
PDSA stands for
a) Plan Direct Study Act

b) Plan Direct Simplify Act
c) Plan Do Study Act
d) Participate Do Satisfy Act
answer c (p. 433)
71.
Which annual award is given by the U.S. government to recognize quality
achievements of U.S. companies?
a) Deming Prize
b) Baldrige Award
c) Juran Award
d) Taguchi Award
answer b (p.422)
72.
Which type of cost relates to attempts to prevent defects from occurring?
a) Prevention Costs
b) Foreseeable Costs
c) Appraisal Costs
d) Failure Costs
answer a (p. 420)
Ch.10 Quality Control

Edit 0 139
Summary for Chapter 10: Quality Control

This chapter is about the inspection process and how it is important to
businesses. This includes how quality control helps companies keep certain
aspects of their business up to speed with consumers' standards. Also, this
chapter covers the topic of inspections and where and how inspections need
to be implemented in order to check on businesses as well as be cost-
effective. Moreover that it tells us that it is variability during the process and
how it is. According to variation, The used of different ways (also shows in this
chapter) to get results. During the process, we are controlling and improving
the subject by variety charts.
Quality control is a process that evaluates output relative to a standard and
takes corrective action when output doesn't meet these predetermined
standards. Therefore, quality control in relation to customers would be the
continuous act of making sure products, designed and manufactured, are
produced to meet and exceed the needs of customers. The purpose of quality
control is to make sure that certain processes are performing up to a
company's set standards. The statistical process control tries to correct
processes that are not in line with the predetermined limits. Lastly, process
capability studies the output standards to make sure they are up to
specifications.
Some key issues are where to inspect and how to inspect.
Inspections can be considered an appraisal technique that compares goods or

services to a standard. Inspection should not be eliminated because it is a
vital aspect of quality control and service operations.
Inspection can occur at 3 points:

1. Before production - to make sure inputs are acceptable (involves
acceptance sampling procedures)
2. During production - to make sure conversion of inputs into outputs is
proceeding in acceptable manner (involves process control)
3. After production - to make final verification of goods (involves acceptance
sampling procedures)
Inspection involves the following decisions when it comes to production,

including:
- How much to inspect?
- How often to inspect?
- When to inspect?
- What to inspect (either a centralized or on-site location)?
- Whether to inspect attributes or variables?
How much to inspect and how often:

- Low-cost, high-volume items require little inspection because the cost
associated with passing a defect is low and the processes that produce the
items are normally very reliable.
- High-cost, low-volume items require more inspection because defects are
more costly, automated inspection is often implemented.
- Most inspection processes lie somewhere between these two
There are three phases of quality assurance, ranking from least to most
progressive:
1) Acceptance sampling- Inspection before & after production.
2) Process control - Inspection & corrective action during production.
3) Continuous improvement. Quality is built into the process. Most progressive
phase of quality assurance.
Inspection Process:
Inspection increases production/service costs, so it is important to be efficient
in your inspection efforts and only allocate inspection at points that maximize
effectiveness. Some of these points include:
1. Raw materials & Purchased Parts

2. Finished Products
3. Prior to Large Investments
4. Prior to Irreversible Changes
5. Before a covering process
Sampling and corrective action are only part of the control process. Effective
control requires the following steps: define, measure, compare, evaluate,
correct, and monitor. You must define in detail what it is that is to be
controlled and decide what can and cannot be measured. There must be a
level of comparison to use for the different measurements. This should relate
to the level of quality being sought. The company also must establish a
definition of what is out of control. The main task of quality control is to
distinguish random from nonrandom variability, in which nonrandom
variability means that a process is out of control. When a process is
determined to be out of control, corrective action must take place; which
includes uncovering the cause of nonrandom variability. Once corrected, one
must monitor the results to confirm that the process has been fixed. A
sufficient amount of time must be put into this in order to have solid
confirmation. Basically, control is achieved by checking a portion of the goods
or services, comparing the results to a predetermined standard, evaluating
departures from the standard, taking corrective actions when necessary, and
following up to ensure that problems have been corrected.
Quality Control, discusses the processes that businesses use for controlling
the quality of their products. Many companies rely on inspection and process
control to achieve a quality product. Inspection is the examination of outputs
of a process to determine whether it is acceptable amongst their standards.
This chapter also discusses when and where in the process companies
should inspect. In most cases, the key issues in the inspection process
include where to inspect in the process, how often to inspect, and whether to
inspect on-site or in a laboratory. The statistical process is also used to
evaluate the output of a process and to determine if it is statistically
acceptable. The main tool of the statistical process are control charts and run
tests. Process capability studies are also used to determine if the output of the
process will satisfy specifications. Process capability can provide valuable
information to managers in terms of reducing costs and avoiding problems
created by generating output that is not within specifications or even needed.
The section of Inspection deals with the process of deciding at which point in
time in production should inspection occur and how much time and money
should be spent. There are several times inspection can occur such as, before
production, during production, or after production. The most important factor is
deciding at which point/points inspection is economically better for the
company. Also, the main focus of inspection is to satisfy the end users of the
item by keeping inspections high but maintaining inspection costs low.
This chapter highlights the process of quality control, which is used to assure
that processes are performing in an acceptable manner, in a operational
management environment. The quality control process takes corrective action
when output doesn't meet standards. The three key phases of quality
assurance are listed below:
Inputs - acceptance sampling

Transformation - process control
Outputs - acceptance sampling
Quality control also takes a close look into statistical process control.
The Statistical Process control is part of the quality control process that
discovers departures from randomness and variation in the process. This is
measured generally by a control chart or a run test. There are two types of
attribute control charts, the p-chart and the c-chart. The p-chart is a control
chart for attributes, used to monitor the proportion of defective items in a
process. The c-chart is a control chart for attributes, used to monitor the
number of defects per unit.
A Run Test is a test for patterns in a sequence. Different patterns can be

accredited as a trend, cycle, bias, mean shift, or too much dispersion. A run
can be noted as a sequence of observations with a certain characteristic.
There are two determined run tests which include the up/down test and the
median test.
Process Capability is also highlighted in Chapter 10. Process capability

determines whether or not the process put forth is capable of producing output
that is within an acceptable range. There are three commonly used terms that
refer to the variability of process output:
Specifications/tolerance - established by engineering design or customer
requirements. They indicate a range of values in which individual units of
output must fall in order to be acceptable
Control limits - statistical limits that neglect the extent to which sample
statistics such as means and ranges can vary due to randomness alone
Process variability - reflects the natural or inherent variability in a process. It
is measured in terms of the process standard deviation
There are also many statistical measures of quality control including Statistical
Process Control (Helps us decide if a process is in control or if corrective
action is needed), Sampling (Periodically taking samples of process output
and computing sample statistics), Control Charts (A time ordered plot of
representative sample statistics obtained from an ongoing process, used to
distinguish between random and nonrandom variability), Run Tests (A test for
patterns in a sequence), and Process Capability (Determining if the process is
capable of producing output that is within an acceptable range). These
measures help detect variations in the manufacturing process, and whether
the variation is random (common cause) or assignable (special cause).
Inspection is an appraisal activity that compares goods or services. In this

chapter, it talks about four basic issues of inspection:
How much to inspect and how often

At what points in the process inspection should occur
Whether to inspect in a centralized or on-site location
Whether to inspect attributes
Inspection can occur at three points: before production, during production, and
after production. The logic of checking before the production is to make user
that inputs are acceptable. The logic behind checking during production is to
make use that the conversion of inputs into outputs is proceeding in an
acceptable manner. Finally, the logic of checking after production is to verify
the output before passing it on to customers.
Low cost, high volume items usually have large cost but little inspection, and
high cost low volume items usually have low cost but high inspection.
Inspection also occurs at three part: before production, during production, and
after production.
Statistical process control, which is used to evaluate process output to decide
if a process is in control or acceptable.
The two basic tools are used in quality control are control charts and run tests:
1. Control charts is used for time-ordered and it's between random samples and
nonrandom samples.
2. Run tests is a test for patterns in a sequence; the book talked about some
nonrandom patterns, like trend, cycles, bias, mean shift, and too much
dispersion.
1) Items such as paper clips, roofing nails, and wooden pencils are examples
of:
A. Low-cost, High-volume Products
B. High-cost, Low volume Products
C. Low-cost, Low volume Products
D. High-cost, High volume Products
Answer A, pg 459
2) Which of the following determines the amount of inspection that will be

needed?
A. Costs of inspection
B. Expected costs of passing defective items
C. Cost of materials
D. Time needed to complete product
E. A and B
Answer E, pg 459
3) At what point in the process should inspection not occur?

A. After production
B. Before production
C. During production
D. At the retailer
Answer D, pg 458
4) Which of the following is NOT a typical point of inspection?

A. Raw materials and purchased parts
B. After a costly operation
C. Before a covering process
D. Before an irreversible process
E. All of the above are inspection points.
Answer B, pg 460
5) The main purpose of an inspection is to

A. Increase Production
B. Improve marketability
C. Reduce costs of production
D. Compare Goods or services to a standard
Answer D, pg 458
6) Typical inspection points in manufacturing:

A) Raw materials and purchased parts
B) Finished Products
C) Before a costly operation
D) Before a covering process
E). All of the above
Answer : E pg 460
8) Control Limits are :

A) established by engineering design or customer requirements
B) the natural or inherent variability in a process measured in terms of the
process standard deviation
C) statistical limits that reflect that extent to which sample statistics such as
means and ranges can vary due to randomness alone.
D) Direct links between specifications and process variability
Answer; C pg 480
9) Which of the following statements is true regarding limitations of capability

indexes :
A) The process is stable every time
B) The process output may not be normally distributed, in which case
inferences about the fraction of output that isn't acceptable will be incorrect.
C) The process is centered and the Cp is used, giving a correct result.
D) none of the above
E). All of the above
Answer : B pg 485
10) You use a c-chart when :

A) observations can be placed into one of two categories. Examples include
times that can be classified as good or bad
B) only the number of occurrences per unit of measure can be counted, non
occurrences cannot be counted
C) the data consist of multiple sampling of n observations each
d. occurrences per unit pass or fail
E) All of the above
Answer: B pg 472
11) Which of the following businesses require inspections?

a. Hotels
b. Grocery stores
c. Doctor's offices
d. Fast food restaurants
e. All of the above
Answer: e. All of the above - All businesses have inspection points, some may
vary in the type and amount of inspections
12) Which type of inspection involves acceptance sampling procedures?

a. Before production
b. During production
c. After production
d. a and b
e. a and c
Answer: e. a and c - During production requires process control
13) What is the central limit theorem?

a. points out variation that can not be identified
b. says when a process is not controlled
c. says that distribution of sample averages tends to be normal
d. helps us measure error
e. Both a and d
Answer: c. says that distribution of sample averages tends to be normal (pg.
464)
14) Which of the following is not required as a step to be effective in the

control process?
a. Define
b. Draw
c. Compare
d. Evaluate
e. Confirm
Answer: b. Draw - (pg. 465 displays the steps in the process)
15) What helps distinguish between random and nonrandom variation?

a. Pie Charts
b. Control charts
c. Variable chart
d. Random and nonrandom chart
Answer: b. Control charts - (pg. 465) plot of sample statistics, used to
distinguish between random and nonrandom variation.
16) There is a measure in terms of the process standard deviation. What

reflects the natural or inherent variability in a process?
a. specifications
b. control limits
c. process variability
d. process capability
e. quality control
Answer: c. Process variability (pg. 480)
17) Which is NOT an example of nonrandom patterns in control chart plots?

a. Trend
b. Run
c. Too much dispersion
d. Bias
e. Mean Shift
Answer: b. Run (pg. 476) figure 10.11
18) When nonrandom variations are not present, this is like concluding that a
process is in control when it is not. this is an example of what?
a. Type I error
b. Type II error
c. Control limits
d. Mean control chart
e. Attributes
Answer: b. Type II error (pg. 467)
19) In a process output, what is a variation which cause can be identified?

a. Sampling distribution
b. central limit theorem
c. control process
d. assignable variation
e. none of these
Answer: d. Assignable variation (pg. 464)
20) Which of the following is not a Centralized Inspection?

a. Performing medical tests
b. Analyzing food samples
c. Testing metals for hardness
d. Running viscosity tests on lubricants
e. Inspecting a ship for cracks
Answer: e. Inspecting the hull of a ship for cracks (pg. 462)
21) What is the Random telling us :
a) Natural variation in the output of a process, created by countless minor
factors.
b) Statistical evaluation of the output process.
c) A variation whose cause can be identified.
d) A theoretical distribution of sample statistics
Answer: A Pg 463
22) Too many observations on one side of the center in a control chart plot
are called:
a) a trend
b) a cycle
c) bias
d) mean shift
e) lob sided
Answer C pg 476
23) Which of the following refer to Genichi Taguchi:
a) Is a Japanese quality expert.
b) Holds a nontraditional view of what constitutes poor quality
c) Created the Taguchi Cost Function
d) All of the above
Answer D Pg 484
24) Which one is NOT involved in improving process capability?
a) simplify
b) standardize
c) make mistake-proof
d) downgrade equipment
e) automate
Answer D pg 484
25) Managers use statistical process control

a) To evaluate the inputs of a process.
b) To evaluate the output of a process.
c) To evaluates the quality of a process.
d) To evaluate the significance of a process.
e) To evaluate the defects of a process.
Answer: b ( pg. 463)
26) What is a control chart?

a) It is a random variable of a sample statistic.
b) Used to monitor central tendency
c) is used to determine if a process is performing adequately.
d) It is a time-ordered plot of a sample statistic.
e) It is a nonrandom variable of a sample statistic.
Answer: d (pg. 465)
17) The c-chart and p-chart are counted of attributes generate data, so what is
a p-chart used for?
a) Used to monitor process disruption.
b) Used to monitor the central tendency of a process.
c) Used to distinguish between random and nonrandom variability.
d) Used to monitor the proportion of defective items generated by a process.
e) Used to monitor the number of defects per unit
Answer: d (pg. 472)
28) How can you improve process capability?

a) Simplify the process.
b) Standardize the process.
c) Upgrade the equipment.
d) All of the above.
Answer: d (pg. 473)
29) Low-cost, high volume items require:

a) Low inspection because the cost associated with passing defective items is
quite low.
b) High inspection because of the high volume of production.
c) Low inspection because the production is usually highly reliable.
d) High inspection because passing defective products require extensive
inspections later on.
e) Only A and C
(answer is d pg 449)
30)100 percent Inspection outweighs:

a). Manner of testing
b). Interruptions of a process
c) Cost of inspection
d). Delaying inspection
(Answer e, page 449)
31) Typical Inspection points are:

a) After covering process.
b) After a costly operation
c) After irreversible operation
d) After purchasing raw materials
(Answer e, page 450)
32) Favoring On site inspections include:

a) avoidance of introduction to extraneous factors
b) Quicker choice
c) favorable environment
d)Never Favor on site inspections
e) Only A & B
(answer D, page 252)
33) What does SPC stands for?
a. Statistical process control
b. Sampling Process Chart
c. Structured process control
d. Standard Process Control
(pg 463)
34) What is quality control?

a. Appraisal of goods or services
b. Process that evaluates output relative to a standard and takes corrective action when output doesnt meet
standards c. Statistical evaluation of the output of a process
d. A time-ordered plot of sample statistics, used to distinguished between random and nonrandom variability
e. When a product or service conforms to specifications
(pg. 457)
35) Which of the following formulas are used when computing control limits?
a. UCL
b. LCL
c. Both a and b
d. Neither a and b
pg 466
35) A range of acceptable values established by engineering design or customer requirements are called:
a. Control limits
b. Process capability
c. Variables
d. Attributes
e. Specifications
pg. 480
Questions
36) All of the following are characteristics of on-site inspection EXCEPT: p.g.
463
A) Quicker decisions are rendered
B) Quality at the Source
C) More specialized testing equipment
D) Avoid introduction of extraneous factors
E) Quality of conformance
Answer - C
37) A Control Chart contains: p.g. 465-466

A) Upper and lower control limits that define the range of acceptable variation
B) Used to distinguish between random and nonrandom variability
C) A time ordered plot of representative sample statistics obtained from an
ongoing process
D) Less appropriate for "lumpy demand" items because inventory remnants
often result
E) All of the above except D
Answer - E
38) Type II error can is associated with: p.g. 467
A) Manufacturers Risk
B) Consumers Risk
C) Quality built into the process
D) Costly Operation
E) Quality Risk
Answer - B
39) In the phases of quality assurance, during which phase does Inspection
and Corrective Action take place? p.g. 458
A) Acceptance Sampling
B) Continuous Improvement
C) Process Control
D) Operate or Don't Operate
E) Control limits
Answer - C
40) There are several risks of using capability measures which include all
EXCEPT: p.g. 485
A) The process may not be stable
B) The process output may not be normally distributed
C) The process not centered but Cp is used
D) The process is automated
E) None of above
Answer - D
41) Which of the following is not an issue covered by inspection? p.g. 458
A. How much to inspect and how often
B. At what points in the process to inspect
C. Whether to inspect in a centralized or on-site location
D. Helps us to decide if a process is in control or if corrective action is
needed
E. All of above is an issue covered by inspection
Answer: D An issue addressed by Statistical Process Control
42) What is the Central Limit Theorem? p.g. 464

A. The distribution of sample averages tends to be normal regardless of the
shape of the process distribution (Revise)
B. A theoretical distribution that describes the random variability of sample
statistics
C. Upper and lower control limits
D. Establish preliminary control limits
E. Monitor the proportion of defective items in a process
Answer: A
43) What type of error concludes that there is a manufactures risk?

A. Process Variability
B. Non-random Patters
C. Type I Error
D. Type II Error
E. Type III Error
Answer: C - Pg 466-467
44) What is Acceptance Sampling?

A. Inspection and corrective action during production
B. Inspection before/after production
C. Quality built into the process
D. Effects on cost and level of disruption
E. The quality of sampling
Answer: B - Pg 458-463
45) What is not an advantage of On-Site Inspection? p.g. 462-463

A. Quicker decisions are rendered
B. Avoid introduction of extraneous factors
C. Quality at the source
D. Specialized tests that may best be completed in a lab
E. All of above
Answer: D
1. Regarding run tests, which of the following are non-random patterns? (page
476)
a. Trend, cycles
b. bias
c. mean shift
d. too much dispersion
e. all of the above
2. Inspection can occur at what points?

(page 458)
a. before production
b.during production
c.after production
d. only before and after production
e. a, b, c, changed question
3. In the control process, effective control requires several steps, which steps
comes after "evaluate"? (page 465)
a. Define
b. measure
c. compare
d. correct
e. monitor results
4. What is a c-chart used for? (page 474)

a. is used to monitor the central tendency of a process
b. is used to monitor the proportion of defectives in a process
c. is used to monitor the number of defects per units
d. is used to monitor probability within defects per unit
e. both c and d
5. What are some typical inspection points? (page 460)

a. during raw material and parts purchasing
b. after products are finished
c. before a costly operation
d. before an irreversible and covering process
e. all of the above
There are three phases of quality assurance. They rank from the least
progressive to the most progressive.
1) The first is "acceptance sampling." This is when there is inspection before
and after production. It is ranked as the least progressive.
2) The second is process control. It is when there is inspection and corrective
action during production. Most companies fall under this as it is in the middle.
3) The third is continuous improvement. It is when quality is built into the
process. It is the most progressive phase of quality assurance.
Inspection is when you appraise a good or service and compare it to a

standard.
Companies decide what to inspect. Some inspect raw materials, finished
products, or before certain processes.
There are two types on variability(degree of change):

Random: no specific causes, usually a combination of random small factors.
Assignable: cause can be identified, also known as special cause variation.
Random variability can be plotted on a graph. Related to this is normal

distribution, or the bell curve in which you have the mean, or average at the
peak of the curve. The amount a value strays from the mean is known as the
standard deviation.
Control Charts, or c-charts, plot the values in a control range, and show
values as under control or out of control.
Range Charts, or r-charts. are used to monitor process dispersion.
When the number of occurrences per unit of measure can be counted; non-
occurences cannot be counted, only in these case you can use the c-chart.
And when observations can be placed into two categories, and, the data
consists of multiple samples of several obsercations each you can use p-chart
5 Questions
1. What was considered the least progressive phase of quality assurance?
A. Acceptance Sampling
B. Process Control
C. Continuous Improvement
E. Both A and C
page 456 (need answer---not on page 456)
2. Inspection is:
A. When you write a report on logistics
B. When you compare different options
C. When you sell all of your inventory
D. When you compare a good or service to a standard
E. Both A and C
page 458, answer is D
3. Random variation has:

A. None predictable factors
B. A combination of small factors.
C. No specific causes
D. Predictable Factors
E. Both C and D
The answer is C. (found on page 463)
4. What shape is associated with the normal distribution:

A. A bell curve
B. A circle
C. An "S" curve
D. A straight line
E. Both C and D
The answer is D. (found on page 465)
5. A Control Chart plots which of the following?

A. Random dispersion
B. Controlled dispersion
C. Values within a range of values
D. Both A and B
answer C, 468
6. Which is not one of the four commonly used control charts?

a. mean control chart
b. range control chart
c. p-chart
d. c-chart
e. all are commonly used control charts.
The answer is D. ( found on page 468) Im pretty sure this answer is wrong. (c
charts can be found on 474)
Need at least 5 answers to pick from
7. SPC is short for:
a. statical periodic congruency
b statistical process control
c statistical progmatic control
d. stimulance process control
e. structural process control
The answer is b. (found on page 463)
There are three phases of quality assurance. They rank from the least
progressive to the most progressive.
1) The first is "acceptance sampling." This is when there is inspection before
and after production. It is ranked as the least progressive.
2) The second is process control. It is when there is inspection and corrective
action during production. Most companies fall under this as it is in the middle.
3) The third is continuous improvement. It is when quality is built into the
process. It is the most progressive phase of quality assurance.
Inspection is when you appraise a good or service and compare it to a

standard. Inspection is essential to quality control.
Companies decide what to inspect. Some inspect raw materials, finished
products, or before certain processes.
There are two types on variability(degree of change):

Random: no specific causes, usually a combination of random small factors.
Assignable: cause can be identified, also known as special cause variation.
Random variability can be plotted on a graph. Related to this is normal

distribution, or the bell curve in which you have the mean, or average at the
peak of the curve. The amount a value strays from the mean is known as the
standard deviation.
Control Charts, or c-charts, plot the values in a control range, and show
values as under control or out of control.
Range Charts, or r-charts. are used to monitor process dispersion.
5 Questions
1. What was considered the least progressive phase of quality assurance?
A.Continuous Improvement
B. Process Control
C. Acceptance Sampling
D. Periodic Improvement
Correct Answer is C, page 463
2. Inspection is to:
A. Write a report on logistics
B. Compare different options
C. Sell all of your inventory
D. Compare a good or service to a standard
E. Track items in stock
Answer is D Page 464
3. Random variation has:
A. Predictable Factors
B. No specific causes
C. A combination of small factors.
D. Both B and C
E. Both A and D
Answer is D Page 465
4. The shape associated with the normal distribution is:

A. A straight line
B. A circle
C. An "S" curve
D. A bell curve
E. 45-degree line
Answer is D, page 455(9th edition)
5. Control Charts plot which of the following?

A. Random dispersion
B. Controlled dispersion
C. Values within a range of values
D. Correlated dispersion
Answer is C, page 467 (repeat question)
6. Where to inspect in the process?

A. raw materials and purchased parts
B. finished products
C. before a costly operation
D. before a covering process
E.All of the above
Needs an answer and page number.
5 questions
1. Which is not including in the fellowing select about improving process
capability:
A. C-chart
B. Simplify
C. Standerize
D. Automate
E. Mistake-proof
(A)
2. Which is one of the attributes generate data that are counted by fellowing
select:
A.P-chart
B.R-chart
C.Rrange chart
D.Controal chart
E.X-bar chart
(A)
3. What is using mean about Range Chart:

A. Gaining 20-25 samples
B. Resume the process and collect another set of observation on which to
base control limits
C. Setting up and Starting the control limits
D. Computing appropriate sample statistics
E. All above
(E)
4. When can we use the C-chart:

A. When observations can be placed into two categories.
B. When the data consists of multiple samples of several observations each
C. When a process is not centered at its target, or nominal value
D. When the number of occurrences per unit of measure can be counted; non-
occurrences cannot be counted, only in these case.
E. None of above
(D)
5. What is including in the steps required for effective control by the following
select:
A. Define
B. Monitor
C. Compare
D. Evaluate
E. All above
(E)
Process Capability (480)
Once the stability of a process has been established, it is necessary to determine if

the process is capable of producing output that is within an acceptable range. Three
commonly used terms are:
Specification: Established by engineering design or customer requirements. They
indicate a range of values in which individual units of output must fall in order to be
acceptable.
Control limits: Statistical limits that reflect the extent to which sample statistics, such
as means and ranges, can vary due to randomness alone.
Process variability: Reflects the natural or inherent variability in a process. It is
measured in terms of the process standard deviation.
Control limits: Based on sampling variability, and sampling variability is function or
process variability. However, there is no link between specifications and either
control limits and process variability.
Process Capability: The inherent variability of process output relative to the variation
allowed by the design specification.
In any business industry, quality control is an important function. It assures

that processes are working in an acceptable manner. If an output does not
meet a certain standard, then corrective action is taken. Quality control is
often monitored through acceptance sampling, which involves inspecting
previously produced items. Quality control is measured through statistical
process control (SPC). Statistical process control (SPC), which involves
control charts for variables and attributes. For variables, a mean control chart
(x-bar) and range control charts (r-charts) are used. For attributes, a p-chart or
c-chart are used to monitor defective items. Run tests are also conducted in
quality control to test for patterns in a sequence.
1. Type II error is also known as:
a. Producers risk
b. Consumers risk
c. Manufacturers risk
d. None of the above
Answer: b) consumers risk (pg. 467)
2. A c-chart is only used when observations can be placed in 2 categories

(T/F). False, Pg. 472
3. Which of the following is NOT a run test?

a. Cycles
b. Trend
c. Bias
d. No dispersion
Answer: d) no dispersion, pg. 476
4. Which of the following is NOT a benefit of improving process capability:

a. Higher warranty costs
b. Fewer inspection
c. Fewer service complaints
d. Higher productivity
Answer: a) higher warranty costs (pg. 484)
5. Which of these people created a theory that states the consequences of

poor quality lead to higher costs?
a. Deming
b. Shewhart
c. Taguchi
d. Ohno and Shingo
Answer: c) Taguchi (pg. 484)
Ch.11 Supply Chain Management

Edit 0 161
Summary of Chapter 11 Supply Chain Management

The goal of Supply Chain Management is to match supply to demand in the most efficient manner.
Companies devote large amounts of resources to effectively manage a supply chain. The resources are
as follows:
1: Product and service flow
2: Information flow
3: Financial flow
Financial flow refers to terms, payments, credits, ownership rights between suppliers, manufacturers,
retailers, and customers.
Summary of Management Responsibilities & Procurement (pg. 516-521)

Management responsibilities have legal, economic, and ethical aspects. Procurement involves the
purchasing of materials, parts, and supplies in order to produce products or provide services. Purchasing
departments function through interfaces that connect them to the company's other departments and its
suppliers. Purchasing can be handled by one special department (centralized), individual departments, or
separate locations that do their own purchasing (decentralized). An important fact to keep in mind is that
global supply chains are increasing. With this factor, additional complexities have arisen as to the
communication and cultural differences to name a couple however, information technology has advanced
from this very change. As to purchasing with the increasing globalization web-based auctions and
managed inventory relationship will grow.
Strategic Responsibilities
The strategies include the following: supply chain strategy alignment, network configuration, information
technology, product and services, capacity planning, strategic partnerships, distribution strategy, and
uncertainty and risk reduction. Measuring the effectiveness of the organizational strategy, it's extremely
important to conduct a "SWOT analysis" to figure out the strengths, weaknesses, opportunities and
threats (both internal and external) of the entity in question.
Ethics in Purchasing (pg. 521)

Ethical behavior is important in all aspects of business. Businesses have more power than consumers
when there is less competition, which can cause them to abuse the market for their sole gain. A set of
guidelines for ethical behavior has been established by The National Association of Purchasing
Management. Some examples of these guidelines include confidential and
proprietary information, following applicable laws and trade agreements,
professional competence, and responsibilities to your employer.
Summary of Supplier Management (pg. 525-527)

Supply management deals with the important aspect of operations
management that relates to the reliability and effectiveness of a supply chain.
An organization must make vital decisions in regards to choosing suppliers,
auditing, certification, and continuing relationships/partnerships.
Inventory Management (pg. 529-530)

Inventory is the key component of supply chains. The elements of inventory
management relate to the location of the supply chain, the speed at which inventory
moves through the supply chain, and the effects of demand variability . Inventory
velocity is defined as the rate at which goods move through a supply chain. The
greater the velocity, the lower the holding costs. Without careful management,
demand variations can cause inventory fluctuations. This leads to the concept called
the bullwhip effect which is another part of inventory management that has to be
paid great attention to. It means that when a customer initially has increased
demand than as that demand is related up the supply chain, it turns into more and
more demand, which in turn causes higher inventories that aren't really needed. The
last important component is Vendor-managed inventory (VMI), which is when the
actual supplier keeps control of the inventories for businesses and does the
replenishing for them.
Summary: Creating an Effective Supply Chain (512-539)

An important part of supply chain is logistics which handles the maneuvering of the flow of goods,
services, cash, and information. The vital components of having a successful supply chain are trust
among partners, effective communication, supply chain visibility, performance metrics and the effective
and efficient matching of supply to demand . To obtain effective communication and supply chain viability,
supply chain managers are investing in Radio Frequency Identification (RFID) and Collaborative Planning
Forecasting and Replenishment (CPFR). RFID uses radio wave technology to gather and share
information. RFID is a tag-like device attached to material in the supply chain; it allows the tracking,
identifying, monitoring or locating of the material through the chain. CPFR is an agreement among
partners in the supply chain to develop a market plan. RFID's main goal is to share information among
supply chain partners in planning, forecasting, and inventory replenishment. When supply chain
managers develop a supply chain, they must make sure that they incorporate quality, cost, flexibility,
velocity, and customer service. The use of RFID tags ( Radio Frequency identification) is becoming an
essential part of Supply Chains.
Supply Chain Management (pg. 512)

Supply chains are often called value chains. Supply chain management is the strategic coordination of
the supply chain for the purpose of integrating supply and demand management. Those trends are re-
evaluation of sourcing, risk management, inventory management, lean supply chain and sustainability. To
reduce those impacts, the organization needs to reconfigure their supply chain.
Management Responsibilities have legal, economic, and ethical aspects.

These aspects relate to the organization's strategy, tactics, and operations.
Procurement is related to the purchasing of materials, services etc. to produce
goods or provide services. The costs, quality and delivery time are very
important in purchasing of goods or services. Purchasing department
functions through interfaces that connect them with other departments in the
company and its suppliers. Purchasing cycle starts with request to purchase
and ends with receiving that purchase. Purchasing can be handled by one
department (centralized) or individual departments that do their own
purchasing (decentralized).
Creating an Effective Supply Chain (p. 539~540)

SUMMARY: To achieve an effective supply chain, we must accomplish the
following:
1. Trust Trust, confidence, and similar goals need to be established between
the trading partners.
2. Information velocity (the speed at which information is communicated in a
supply chain) the faster, the better.
3. Effective Communication - using standardized forms of communication
between partners
4. Supply chain visibility (a major trading partner can connect to its supply
chain to access data in real time) data sharing.
5. Event management (the ability to detect and respond to unplanned events)
capability monitoring, notifying, simulating, measuring.
6. Performance metrics to confirm that the supply chain is functioning as
expected and the problems are being addressed. Fill rate (the percentage of
demand filled from stock on hand) is also very important. Refer Table 11.7 for
the key performance measures.
Strategic sourcing analyzing the procurement process to lower costs by
reducing waste and non-value-added activities, increase profits, reduce risks,
and improve supplier performance.
Two key factors that are required by suppliers are timely deliveries and high
quality products. An organization relies on the supplier's operations meeting
business needs, and most importantly, consumer needs. Each organization
must examine the reputation, past experience, price, and quality before
choosing and purchasing from a supplier. When chosen, periodic audits must
be made to analyze performance and production capabilities. A certified
supplier has met or exceeded the demands of a buyer, which can be critical in
establishing long-term relationships. Maintaining good relationships with
suppliers is increasingly recognized as an important factor in maintaining a
competitive edge.
1. Which of the following is not a capability of event management?

a. monitoring
b. fill rate
c. notifying
d. simulation
e. measuring
Answer: B pg. 517
2. Which of the following options is considered a tactical responsibility?

a) Collaborating
b) Scheduling
c) Order Fulfilling
d) Controlling
e) Information Sharing
Answer: A pg.518
3. RFID can aid a business in which of the following?

a. increase supply chain visibility
b. improve inventory management
c. improve quality control
d. enhance relationship with suppliers or customers
e. all of the above
Answer: E pg. 518
4. Which one of these is not one of the Management Strategic

Responsibilities?
a) Capacity Planning
b) Information Technology
c) Uncertainty and Risk reduction
d) Shipping
e) Distribution strategy
Answer: d) Shipping is a tactical responsibility pg.518-519
5. What is the proper order of the Purchasing cycle?

a) Purchasing receives the requisition, purchasing places the order with a
vendor, receiving orders
b) Receiving orders,purchasing receives the requisition, purchasing places the
order with a vendor
c) Purchasing receives the requisition, purchasing selects a supplier,
purchasing places the order with a vendor, monitoring orders, receiving orders
d) Purchasing receives the requisition, purchasing selects a supplier,
purchasing places the order with a vendor, receiving orders
e) Purchasing selects a supplier, purchasing places the order with a vendor,
monitoring orders, receiving orders
Answer: C pg. 520
6. Which of the following is (are) standard(s) for ethical behavior in

purchasing?
A) Promote positive supplier and customer relationships
B) Avoid improper reciprocal agreements
C) Protect confidential and proprietary information
D) Champion social responsibility and sustainability practices
E) All of the above
Answer: E pg.521
7. Which ethical standard avoids improper reciprocal agreements?

A) Perceived Impropriety
B) Issues of Influence
C) Responsibilities to your employer
D) Reciprocity
Answer: D pg.521
8. Which of the following is NOT a Principle of ethics in business?
A) Integrity in Your Decisions
B) Integrity in Your Actions
C) Value for Your Employer
D) Value for Your Time
E) Loyalty to Your Profession
Answer: D pg.521
9. A supplier agrees to hold inventory for a customer in exchange for the

customer agreeing to long-term commitment.
This is an example of.
a. strategic partnering
b. customer aid development (CAD)
c. strategic planning
d. partner relationship modeling
Answer: A pg.529
10. Cross-docking is best used to

a.increase time between quality inseparable to get best results
b. decrease the amount of ships at a loading dock during delivery
c. change transportation methods during delivery
d. avoid storage at a warehouse
Answer: D pg.525
11. Which of the following is NOT taken into account when choosing a
supplier?
a.) Supplier's Past experience
b.) Supplier's Reputation
c.) Supplier's Accounting Method
d.) Supplier's Price
e.) Supplier's Service
Answer: C pg.525
12. Which of the following is used in evaluating the sources of supply in terms
of price, quality, reputation, and service?
a.) Management Selection
b.) Vendor Analysis
c.) Supplier Auditing
d.) Selection Analysis
e.) Supplier Marketing Analysis
Answer: B pg. 526
13. Certified suppliers are sometimes referred to as

a.) World-class suppliers
b.) Superior-class suppliers
c.) High-class suppliers
d.) High-rated performers
e.) Standard-class suppliers
Answer: A pg. 532
14. Short-term contracts involve:

a.) market bidding
b.) first-class bidding
c.) high-end bidding
d.) specification-bidding
e.) Competitive bidding
Answer: E pg.527
15.Some business organizations use BLANK to educate possible suppliers

about the organization's policies, requirements and to enhance opportunities
for receiving contracts.
a.) Supplier forums
b.) Supplier marketing meetings
c.) Business forums
d.) Business Management forums
e.) Company-need forums
Answer: A pg.527
16. What does the acronym CPFR in the supply chain management stand for?
a) Cost Planning, Forecasting, and Requirement
b) Cost Planning, Forecasting, and Replenishment
c) Cost Planning, Forecasting, and Receiving
d) Collaborative Planning, Forecasting, and Requirement
e) Collaborative Planning, Forecasting, and Replenishment
Answer: E pg.528
17. Term used to describe products being assembled based on customer

specifications?
a) Engineer-to-Order (ETO)
b) Make-to-Order (MTO)
c) Assemble-to-Order (ATO)
d) Make-to-Stock (MTS)
Answer: C pg. 531
18. When inventory oscillations become progressively larger looking back

through the supply chain describes?
a) Bullwhip Effect
b) Inventory Velocity
c) Economic Order Quantity
d) Type 1 Error
Answer: A pg. 530
19) Logistics are referred to as the: (pg. 531)

a) movement of materials, services, cash and information in a supply chain
b) movement of materials, services, and information in a supply chain
c) movement of materials, services, cash and information between
competitors
d) movement of materials, cash and information between the company and
customers
e)movement of services, and information in a supply chain
Answer: A pg.531
20 _ is a technology that uses radio waves to identify objects, such as goods

in supply chain.
a) CPFB
b) RFID
c) PLID
d) VMI
Answer: B pg.531
21. RFID technology can do all of the following except:

a) reduce theft of inventory
b) improve inventory management
c) eliminate the need for checkout personnel at registers
d) reduce manual errors
e) provides more information than a barcode
Answer: C pg.534
22. What term describes screening returned goods to prevent incorrect

acceptance of goods?
a. Cross-checking
b. Gateseeking
c. Intermediation
d. Gatekeeping
e. Cross-docking
Answer: d pg.538
23. Two key elements of managing returns are:
A) gatekeeping and avoidance
B) gatekeeping and acceptance
C) Logistics and reverse logistics
D) Logistics and sourcing
Answer: A pg.538
24. Which of the following is not a managing return:

A) Defective products
B) Recalled products
C) Unsold products returned from retailers
D) Non-recycle items
E) Waste
Answer: D pg.539
26. Strategic sourcing analyzes the procurement process to:

a) Lower costs
b) Reduce value-added activities
c) Reduce waste
d) All of the above
e) A & C
Answer: E pg.539
27. Strategic sourcing differs from more traditional sourcing in that:

a) It emphasizes purchase price rather than total costs
b) It seeks to consolidate purchasing power to achieve lower prices
c) Relies on fewer suppliers and collaborative relationships
d) All of the above
e) B & C only
Answer: E pg.539
28. Which one of the following options is not necessary in creating an effective
supply chain?
a) Trust
b) Effective Communication
c) Information velocity
d) None of the above
e) All of the above are necessary
Answer: E pg.539
29. Which of the followings is NOT one of the supply chain financial
measurements?
a) Return on assets
b) Cost
c) Average Value
d) Cash flow
e) Profits
Answer: C pg.540
30. Which one below is not a performance measure?

a. Financial
b. Suppliers
c. Competitive
d. Customer
e. Inventory
Answer: C pg.540
31. Which of the followings is NOT one of the challenges of supply chain management?
a) Barriers to integration of separate organization
b) Getting CEOs, board of directors, managers, and employees on the same page
c) Dealing with trade-offs
d) Other competitors
e) Variability and uncertainty
Answer: E pg.540-541
32. Delayed differentiation is one of the methods in what trade-offs?

a) Lot size-inventory trade-off
b) Product variety-inventory trade-off
c) Lead time-transportation cost trade-off
d) Cost-customer service trade-off
e) Inventory-transportation cost trade-off
Answer: B pg.540-541
33. What Trade-offs must be taken into account in structuring a supply chain?
a. Cost-customer service trade-offs
b. Inventory transportation cost trade-offs
c. Lot size-inventory trade-offs
d. Lead time-transportation cost trade offs
e. All of the above
Answer: E pg.541
34. Which of the following can be used to eliminate long lead times in the
supply chain?
a) Disintermediation
b) Outsource
c) Cross-docking
d) Modular Construction
e) Intermediation
Answer: A pg.542
35: What is the goal of supply chain management?

A: To maximize profit
B: To minimize loss
C: To minimize fixed cost
D: To match supply to demand as effectively and efficiently as possible
E: To match demand to supply as effectively and efficiently as possible
Answer: D pg.513
36: What is the abbreviation of the tracking chips which allow products to be
tracked in real time?
A: RFIA
B: RFIB
C: RFIC
D: RFID
E: RFIE
Answer: D pg. 531
37: What is the main function of traffic management? - One more choice
needed.
A: To oversee the shipment of incoming and outgoing goods
B: To oversee the time it takes to deliver the good to the buyer
C: To determine the expected time and the amount of traffic on the given day
D: To determine the expected cost to make daily deliveries
E:
Answer: A pg. 511
38: How can a manager best improve their supply chain?

A: Hire a consultant who specializes in this
B: Read a book about the subject
C: Read Chapter 11 of the textbook
D: A&B
E: All of the above
Answer: E pg.529
39: What is procurement?

A: Acquisition
B: Disposition
C: Exposition
D: Sales
E: Profits
Answer: A pg.523
40. Which of the following is NOT a tactical responsibility?

A.) Sourcing
B.) Forecasting
C.) Collaborating
D.) Shipping
E.) Operations Planning
ANSWER: D. Shipping (p.518)
41. Purchasing has interfaces with all of the functional areas except: (p.g.
519)
a. Accounting
b. Data processing
c. Design
d. Engineering
e. Statistics
Answer: E pg.519-520
42. If the incremental holding cost of an item is $2.50 for holding an item 2
extra days, what is the holding cost of the item per year?
a. $912.5
b. $750.25
c. $365
d. $456.25
e. $135.75
answer: D pg. 536-7
Question 1
1) Which one of the following is not one of the management strategic
responsibilities?
a) Capacity planning
b) Information technology
c) Uncertainty and risk reduction
d) Shipping
e) Distribution strategy
Question 2
What is the normal purchasing cycle?
a) Purchasing receives the requisition, purchasing places the order with a
vendor, receiving orders.
b) Receiving orders, purchasing receives the requisition, purchasing places
the order with a vendor
c) Purchasing receives the requisition, purchasing selects a supply,
purchasing places the order with a vendor, monitoring orders, receiving orders
d) Purchasing receives the requisition, purchasing selects a supplier,
purchasing places the order with a vendor, receiving orders.
e) Purchasing selects a supplier, purchasing places the order with a vendor,
monitoring orders, receiving orders.
Question 3
What does the acronym CPFR in the chain management stand for? (pg 538)
a) Cost panning, forecasting and requirement
b) Cost planning, forecasting and replenishment
c) Cost planning, forecasting and receiving
d) Collaborative planning, forecasting and requirement
e) Collaborative planning, forecasting and replenishment
Question 4
Which of the following is not part of order fulfillment(pg:530)
a) Build-to-order(BTO)
b) Make-to-stock(MTS)
c) Make-to-order(MTO)
d) Engineer-to-order(ETO)
e) Assemble-to-order(ATO)
Question 5
Which one of the following options is not necessary in creating an effective
supply chain? (pg 539)
a) Trust
b) Effective communication
c) Information velocity
d) None of the above
e) All of the above are necessary
Question 6
Which one of the following duties is not associated with purchasing?
a) Identify sources of supply
b) Monitoring orders
c) Negotiate contracts
d) Managing inventories
e) All of the above are duties
(Page 520-521)
Supply chain management involves a strategic coordination of all business

functions within an organization and throughout its supply chain. It involves
vendor analysis, supplier audits, supplier certification, and supplier
partnerships. Various organizations implement a supply chain when producing
and delivering a product or services. Today, the internet boom has caused
many companies to conducting business online, these companies are known
as e-businesses. The biggest issue with companies is conducting in an ethical
manner when purchasing from a supplier.
1. Many challenges with Internet selling are supply related (T/F)
Answer: True (pg. 522)
2. Which of these is true regarding CPFR?

a. Develop a joint market plan
b. Outlines the selling, promotion, and time frame of a product
c. Is a key input to forecasting
d. All of the above
Answer: d) All of the above (pg. 528)
3. Which is a key element of managing returns:
a. Avoidance
b. Event management
c. Gatekeeping
d. A & C
Answer: d) A&C (pg. 538)
4. In manufacturing, upwards of _ percent of the costs of finished goods come

from purchased parts and materials.
a. 60
b. 75
c. 55
d. 90
Answer: a. 60 (pg. 518)
5. Which of these is not true regarding centralized purchasing?
a. Can obtain lower prices due to quantity discounts
b. Is handled by many departments
c. Enables companies to assign certain categories of items
d. Are more efficient due to fewer items
Answer: b. (pg. 520)
Ch.12 Inventory Management

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Chapter Summary
Chapter 12: Inventory Management.
Inventory is a stock or storage of goods.
Different types of Inventory:
Raw materials and purchased parts

work in process (WIP)
finished goods inventories or merchandise
maintenance and repairs (MRO) inventory
goods-in-transit to warehouses or customers (pipeline inventory)
Nature and Importance of Inventory

Inventories are necessary for a firm to operate efficiently and almost all
business transactions involve the delivery of a product or service in exchange
for currency. For this reason, inventory management is a very important part
of core operations activities. Most retail businesses and wholesale
organizations acquire most of their revenue through the sale of merchandise
(inventory). In order for business and supply chains to run effectively, and
efficiently they must meet all the listed requirements for effective inventory
management. Some of the main concerns are the level of customer service
and the cost of ordering, storing, and carrying inventory. Therefore, in order to
be a successful and profitable company, inventory management must be
managed wisely.
There are certain requirements that must be taken into consideration during
the inventory management process. These requirements are: keep track of
the inventory, have a reliable forecast of demand, knowledge of lead times
and lead time variability, reliable estimates of inventory holding costs, ordering
costs, and shortage costs, and have a classification system for inventory
items.
Some important Functions of inventories include -

1. to meet anticipated customer demand (to meet the anticipation stocks,
average demand)
2. to smooth production requirements (create seasonal inventories to meet
seasonal demand)
3. to decouple operations (eliminate sources of disruptions)
4. to protect against stock-outs (hold safety stocks to prevent the risk of
shortages)
5. to take advantage of order cycles (buys more quantities than immediate
requirements - cycle stock, periodic orders, or order cycles)
6. to hedge against price increases (purchase large order to hedge future
price increase or implement volumn discount)
7. to permit operations (Little's Law: the average amount of inventory in a
system is equal to the product of the average demand rate and the average
time a unit is in the system)
8. to take advantage of quantity discounts (supplies may give discount on
large orders)
For company's management, the most important reasons for having an

inventory management system is to:
1. track existing inventory
2. know what quantity will be needed
3. know when these items will be needed
4. know how much items will cost
There are two types of inventory control used- Perpetual and Periodic. In a
perpetual inventory system (usually used in supermarkets or department
stores), a continuousflow of inventory count is tracked using a point of sale
(POS) check out system. This system is perfect for companies to manage
what is sold and reorder when a reorder point is reached. Another advantage
of this system is its ability to account for shrinkage (theft) and inventory
turnover. The periodic system (used in smaller retailers) is used to take a
physical count of inventory at periodic intervals to replenish the inventory. This
system would be most beneficial for companies that do not have products with
UPC or bar codes, such as nuts and bolts and are purchased in large
quantities at a time. In this case, someone on a line would monitor the level of
the bin and notify a manager when an order would need to be placed.
Economic Order Quantity Models - the order size that minimizes annual
costs ( 3 types)
1)Basic economic order quantity model (EOQ)
used to identify a fixed order size that will minimize the sum of the annual costs of
holding inventory and ordering inventory
Assumptions:
1. Only one product involved
2. Annual demand requirements are known
3. Demand is spread evenly throughout the year so that the demand rate is
reasonably constant
4. Lead time does not vary
5. Each order is received in a single delivery
6. There are no quantity discounts
2)Economic production quantity model (EPQ)
the batch mode of production is widely used in production; the reason for this is that
capacity to produce a part exceeds the parts usage or demand rate ( the larger the
run size, the fewer the number of runs needed and, hence, the lower the annual
setup cost; as long as production continues, inventory will continue to grow; (see
formulas below)
Assumptions:
1. Only one item is involved
2. Annual demand is known

3. Has a constant usage rate
4. Usage occurs continually, but production occurs periodically
5. The production rate is constant
6. Lead time does not vary
7. There are no quantity discounts
3) Quantity discount model
Price reductions for large orders offered to customers to induce them to buy in
large quantities; If quantity discounts are offered, the buyer must weigh the
potential benefits of reduced purchase price and fewer orders that will result
from buying in large quantities against the increase in carrying costs caused by
higher average inventories; The buyers goal is to select the order quantity that
will minimize total cost (see total cost formula below);
Equations to know:
Annual carrying cost = (Q/2)*H [Q = Order quantity in units, H = Holding
(carrying) cost per unit]
Annual ordering cost = (D/Q)*S [ D = Demand, S = Ordering cost]
Total cost (TC) =(Q/2)*H + (D/Q)*S
Total cost curve is U-Shape
Length of order cycle = Q/D
EPQ= square root[(2DS)/H]*square root[p/(p-u)]

p=production or delivery rate
u=usage rate
Reorder Point: ROP=d*LT
d=demand rate(units per period/day/week)
LT=lead time(same units as d)
EOQ=square root of (2DS)/H
Inventory point-of-sale (POS) systems, which record items at time of sale

electronically, can help make forecasting more accurate. Knowing the lead
time of a product, which is the time interval between ordering and receiving
the order, is crucial to the success of a business. Long lead times impair the
ability of a supply chain to quickly respond to changing conditions, such as
changes in the quantity demanded, product or service design, and logistics.
1. Which one is NOT a function of inventory? (pg. 543)

a. meet anticipated customer demands
b. smooth production requirements
c. decouple operations
d. protect against stock outs
e. they are all functions of inventory
(answer e.)
2. When dealing with inventory, the Little's Law is used for? (pg. 544)
a. counting inventory
b. quantifying pipeline inventory
c. preventing shortages in inventory
d. all of the above
(answer b.)
3. Which of the following are functions of inventory that management is

concerned with? (P.544)
a. Make sure you never run out of inventory
b. Make decisions about how much to order
c. Make sure there is enough space available for all the inventory
d. Make decisions about when to order
e. both b and d
(answer e)
4. Which of the following best describes lead time? (pg. 547)

a. The time that sales are at a profit
b. The time that the company is ahead of it's competitors
c. The time interval between submitting and receiving the order
d. The time it takes to record items at time of sale
(answer c)
5. Which costs is associated with keeping items in inventory? (pg. 547)

a. Holding costs
b. Ordering costs
c. Shortage costs
d. A and B
e. All the above
(answer A)
6) Which is the most commonly used measure of managerial performance. Pg. 542
a. Capital structure
b. ROI(return on investment)
c. Demand
d. Inventory costs
e. Forecasting
Answer: b
7) What are independent-demand items? Pg. 542

a. Items that are ready to be sold and used
b. Components of products rather than finished products
c. Special order items
d. Products that appeal to a certain demographic of customers
e. Seasonal demand items
Answer: a
8) Which of the following is not a function of inventory? Pg. 543

a. To meet anticipated customer demand
b. To smooth production requirements
c. To protect against stock-outs
d. To know lead times and lead time variability
e. To hedge against price increases
Answer: d
9) Which inventory counting system keeps track of removals from inventory on a continuous basis? Pg.
545
a. Two-bin system
b. Periodic system
c. Perpetual system
d. Online system
e. Operations system
Answer: c
10) The economic order quantity model (EOQ), identifies: Pg 550

a. Production of batch items or lots
b. A constant usage rate
c. Units received incrementally during production
d. Fixed order size by minimizing the sum of annual costs of holding and ordering inventory.
e. Total cost of all orders produced annually
Answer: d
11. Which of the following (is/are) types of inventory?

a. Tools and Supplies
b. Maintenance and Repair (MRO)
c. Pipeline
d. Finished Goods
e. all of the above are inventories
answer e. Pg551
12. A perpetual Inventory system takes a physical count of inventory on which

of the following intervals?
a. Fixed intervals
b. Annual intervals
c. Periodic intervals
d. A and B
e. A and C
answer a Pg 554
13. When the amount on hand reaches a predetermined minimum, which

inventory system orders a fixed quantity?
a. Good organization
b. Perpetual inventory
c. Organized inventory
d. Periodic inventory
e. A and C
answer b Pg 554
14. Effective inventory management estimates all of the following costs

except:
a. Transaction cost
b. Shortage cost
c. Secretary cost
d. Holding cost
e. all of the above
answer c Pg556
15. The risk of stock-out increases as?

A. The amount of safety stock increases
B. The amount of safety stock decreases
C. The amount of safety stock remains constant
D. Safety stock has no effect on stock-out
Answer: B pg 572
16. Which of the following are NOT part of the basic functions of inventory
systems that management should be concerned with (p 553) ?
a. what quantity will be ordered
b. tracking existing inventory
c. how inventory will be delivered
d. when to order additional inventory
Answer: c
17. Which inventory system is the best method to prevent inventory theft/loss?
a. Perpetual Inventory System
b. Periodic Inventory System
c. Both are equally good
E. Studies are inconclusive regarding which is the best method
Answer: a pg554
18. Which of the following listed is/are function(s) of POS(point-of-sale)
system?
a. record actual sales electronically
b. provide forecast of what items will most likely to attract customers and
increase sales
c. calculate sum of total sales
d. a&b
e. all of above
Answer: d, pg. 555
19. Which one of these assumptions do NOT qualify to create an ideal

situation to use the Basic EOQ Model?
a. there are no quantity discount
b. there is only one product involved
c. demand requirements are unknown
d. lead time does not vary
Answer: c, pg. 559
20. Which one of these factors are NOT a determinant of the reorder point?
a. rate of demand
b. acceptable stock-out risk level to management
c. lead time variability
d. All of above are determinants of reorder point.
e. None of the above are determinants of reorder point
Answer: d, pg. 571
21. "A physical count of items in inventory made at periodic intervals", refers
to _?
a. periodic system
b. perpetual inventory system
c. two bin system
d. universal product code
e. point of sale
Answer: a, pg. 553
22. Which of the following is NOT a function of inventories?
a) to meet anticipated customer demand

b) to smooth production requirement
c) to work more closer with suppliers to coordinate shipments
d) to take advantage of order cycles
e) all of the above
Answer: c, pg. 549
23. What is an inventory a stock or store of ?
a) ideas
b) goods
c) shipments
d) networks
e) a and b
Answer: b, pg. 549
24. Which of the following is NOT an order size model?
a) basic economic order quantity model

b) economic production model
c) quantity discount model
d) single period model
Answer: d, pg. 559
25. Which is not an requirement for effective inventory management?
a) a system to keep track of the inventory

b) A reliable forecast of demand
c) effective transportation analysis
d) knowledge of lead times
e) a classification system
Answer: C, pg. 553
26. Which of the following is a function of inventory?

a) To smooth production requirements
b) To meet anticipated customer demand
c) Decouple operations
d) both a and b
e) all of the above
Answer: E, pg. 551-552
27. Which of the following (is/are) a result of a company's failure to manage

their inventory properly?
a) Decline in Level of customer service
b) Increase in Ordering,carrying, and storage costs
c) Stock-outs or overstock
d) both a and c
e) all of the above are results of improperly managing inventory
Answer: E, pg. 553
28. Little's Law states:

a) The average amount of inventory in a system is constant.
b) The average amount of inventory in a system is equal to the product
demand rate and time in the system.
c) The average amount of inventory in a system is equal to last year's
forecast.
d) The average amount of inventory cannot be predicted.
e) All the above
Answer: B, pg. 552

29. Which of the following is/are acceptable inventory counting systems?
a) Perpetual
b) Normal
c) Periodic
d) both a and b
e) both a and c
Answer: E, pg. 553-554
30. Which of the following is NOT a requirement for manager to effectively

managing inventories?
a) Income from operations must equal income from financing activities
b) Have a reliable forecast of demand that include an indication of past
forecast orders
c) Know lead times and lead time variability
d) Have a classification system for inventory items
e) all of the above
Answer: A, pg. 553
Ch.13 Aggregate Planning

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Summary : Chapter 13: Aggregate Planning

Aggregate planning is an "intermediate-range capacity planning technique, usually covering a time frame
of 2-12 months for a production process, in order to keep the costs of operations at a minimum."
Companies use aggregate planning to help make decisions about their capacity because seasonal
variations in demand are difficult to predict accurately. The main goal of the company is to match
resources with the expected demand. This goal is achieved by taking into account a diverse amount of
factors such as: decisions on output rates, overtime, employment levels and changes, inventory levels
and changes, back orders, and subcontracting work.
A more extensive form of aggregate planning is sales and operations planning. Sales and operations
planning are "intermediate-range decisions to balance supply and demand, integrating financial and
operations planning". Sales and operations planning decisions are made using demand forecasts,
financial limits, and organization's capacity constraints. The sales and operations plan carries information
that impacts the supply chain.
Questions
1) Which of the following is a computerized model that can be tested under
different scenarios to identify acceptable solutions?
a. test model
b. difference model
c. simulation model
d. changing model
e. growth model
The answer is C. ( page 627)
2) Which of the following is not included in a planning sequence for aggregate

planning?
a. business plan
b. aggregate plan
c. master schedule
d. master plan
e. all of the above are included
The answer is E. (page 613)
3) What are the three most significant factors an organization has to consider
when choosing a strategy for aggregate planning?
a. labor, demand, and time
b. company policy, flexibility, and costs
c. labor, time, and costs
d. company policy, flexibility, and demand
e. flexibility, time, and costs
The answer is B. ( page 619) (pg. 609: 9th edition)
4) What are the key issue(s) in aggregate planning?

a. how to handle variations in demand
b. how to handle changes
c. how to manage cost
d. both a & b
The answer is C. (page 614)
Question 5
5) What are the three types of aggregate planning?
a. long-range plans, intermediate plans, and short-range plans.
b. Long term demand, short term demand, economies of scale
c. minimization curves, inflections points in cost schedules, profit maximization
d. pricing models, statistical evaluation, tax shelters
e. freight costs, J-I-T delivery, logistics
The answer is A. (page 612)
6) Which of the following are examples of service organizations that use

aggregate planning?
a. airlines
b. hospitals
c. restaurants
d. A & B
e. all of the above
ANSWER: E. (found on page 629) (pg. 618 &619: 9th edition)
7) What are the three duties of master scheduling?

A) Provide delivery dates for orders, deal with problems, and schedule
aggregate plans.
B) Evaluate the impact of new orders, provide delivery dates for orders, and
deal with problems.
C) Schedule aggregate plans, evaluate impact of new orders, deal with
problems of previous orders.
D) Evaluate the impact of old orders, provide delivery dates for new orders,
and disaggregate plans.
E) Deal with new and old problems, evaluate the impact of production, provide
delivery dates for new orders.
Answer: B (pg. 620: 9th edition)
8) What are the differences between manufacturing and services for

aggregate planning?
a. Demand for service can be difficult to predict

b. Capacity availability
c. Labor flexibility
d. Services occur when they are rendered
e. All of above
Answer is E. (page 629-630)
9) Which of the following are Demand Options?

a) Pricing
b) Promotion
c) Using back orders
d) Creating new demand
e) all of the above
Answer: E P616
10) Which of the following is NOT a supply option?

a) Hire and lay off workers
b) Overtime/slack time
c) Subcontractors
d) Promotion
e) All of the above ARE supply options
Answer: D P616
11) Which of the following describes the general procedure steps for
aggregate planning?
a) determine demand, determine capacities, identify important policies,
determine costs, develop plans
b) determine capacities, determine demand, determine costs, develop plans,
identify important policies
c) identify important policies, determine costs, determine demand, determine
capacities, develop plans
d) determine demand, identify important policies, determine costs, develop
plans, determine capacities
Answer: A p. 621
Ch.14 MRP and ERP

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Chapter 14: MRP & ERP
MRP
Items with dependent demand are items in which demand is derived from
plans to make certain products (things like raw materials, parts, and
assemblies). Example: The parts and materials that go into the making a car.
Dependent demand tends to be "lumpy" whereas independent demand is
fairly stable. MRP is a computer program that translates finished product
requirements into time-phased requirements for each dependent demand
items. The Bill of Materials, one of the three primary inputs of MRP, is useful
because it is a list of all the assemblies, sub-assemblies, parts, and raw
materials that are needed to produce one unit of a finished product.
In addition to MRP, this chapter provides information about ERP, which has
an MRP core. ERP, which stands for "Enterprise Resource Planning" provides
an expanded effort to integrate standardized record keeping that will permit
information sharing among numerous dimensions of a business in order to
direct the system more effectively. An ERP system typically has modular
hardware and software units and "services" that communicate on a local area
network.
An important issue in inventory management is determining a lot size to order

or produce in independent and independent demand items. Lot sizing refers to
choosing a lot size for ordering or production. For independent demand items
managers use economic order sizes and economic production quantities. For
dependent demand systems managers can choose larger variety plans to
determine the lot sizes. Dependent demand tends to be sporadic or "lumpy".
The goal of independent demand and dependent demand systems is to
minimize the sum of ordering cost and holding cost.
MRP Input
MRP uses three primary sources for information: master schedule, bill-of-
materials file, and an inventory records file. Master schedule relates to product
demand and timeline. It states what end items need to be produced, when
they are needed and how much are needed. Bill of materials relates to
product composition. It lists all of the raw materials, parts, sub-assemblies and
assemblies required to manufacture one item. Inventory records relate to
inventory. They consist of status information on an item sorted by time period.
Status information consists of gross requirements, scheduled receipts and
expected amount on hand.
MRP Output
MRP systems have capabilities of providing management with a wide range of
outputs. These typically include primary reports and secondary reports.
Primary Reports - production and inventory planning and control are part of
primary reports. They usually include: Planned orders - a schedule indicating
the amount and timing of future orders
Order releases - authorizing the execution of planned orders
Changes to planned orders - revisions of due dates or order quantities/
cancellation of orders.
Secondary Reports - performance control, planning, and exceptions belong to
secondary reports
Performance-control reports - measure deviations from plans such as
deliveries and stockouts, as well as providing info that can be used to assess
cost performance.
Planning reports - predict future inventories, procurement contracts and data
for future assessment of material requirements.
Exception reports - recognizes inconsistencies within the report such as errors
in overdue or late orders, etc. pg 661
BENEFITS AND REQUIREMENTS OF MRP
Benefits
MRP enables managers to: determine the quantities for a given order size,
know when to release orders for each component, and to be alerted when
items need attention. Other benefits of MRP include:
1) Low levels of in process inventories
2) The Ability to keep track of material requirements
3) The ability to evaluate capacity requirements generated by a given master
schedule
4) A means of allocating production time
5) The ability to easily determine inventory usage by backflushing.
Backflushing is a procedure in which an end item's bill of materials (BOM) is
periodically exploded to determine the quantities of the various components
that were used to make the item. The people who are typical users of a MRP
system in a typical manufacturing company are production managers,
purchasing managers, inventory managers, and customer
representatives.The benefits of MRP depend primarily on the use of computer
to maintain up-to-date information on material requirement.
Requirements
The benefits of MRP primarily depend on the ability to maintain up-to-date and
accurate information. In order to implement and operate an effective MRP
system, it is necessary to have:
1) a computer and the necessary software programs to handle computations
and maintain records
2) Accurate and up-to date master schedules, Bills of materials, Inventory
records
3) Integrity of file data.
MRP II
Manufacturing Resources Planning II developed in the 1980s after
manufacturers realized MRP had additional needs. MRP II expanded the use
of MRP by adding features essential to the use of other functional areas,
marketing and finance to enable the use of short-range capacity requirements.
Material requirements are essential for the use of MRP II. MRP II systems are
good at simulation and help answer "what if" questions i.e., to foresee the
consequences of their options and other alternatives. With the new function
areas added, the manufacturing company is able to develop a master
production schedule. MRP generates the materials needed and schedules the
requirements, where managers can obtain a more detailed capacity
requirements. Capacity requirements is the process of determining short-
range capacity requirements.
MRP Considerations
MRP Inputs: The master schedule should cover a period that is at least
equivalent to the cumulative lead time (the sum of the lead times that
sequential phases of a process require, from ordering of parts or raw
materials to completion of final assembly.)
Safety Stock: Needed in case there is variability due to bottleneck processes
causing shortages, shortages caused by late orders and/or fabrications, or
assembly lines are longer than expected.
Safety Time: Used when lead times vary to allow tasks to be completed well
ahead of schedule to eliminate the probability of shortage.
Lot-for-Lot (L4L) ordering: The order or run size is set equal to the demand for
that period.
Economic Order Quantity (EOQ): Can lead to minimum costs if usage of item
is fairly uniform.
Fixed Period Ordering: Provides coverage for some predetermined number of
periods.
System Stability: Without stability, changes in order quantity and/or timing can
render material requirements plans virtually useless.
System Nervousness: How a system reacts to changes.
This chapter goes into detail about the advantages and nature of MRP
processing, as well as describing the applications of MRP in different
industries. The chapter then describes the evolution of MRP to MRPII, which
expanded the scale of materials planning. MRPII gave managers the ability to
ask what if questions, and provided them with a more precise decision
making tool. In addition to MRP, enterprise resource planning (ERP) or the
third generation, is also described. ERP gave companies the ability to
incorporate all departments and functions company-wide on a single system.
The benefits of ERP are substantial; however, it must be noted that high
training, maintenance, and initial start up costs are too high.
QUESTIONS:
1. The choosing of a lot size for ordering or __ is considered lot sizing. p.g.
662
a. production
b. delivery
c. cost
d. inventory
ANSWER: a. production
2. The model that leads to minimum costs,when the usage is fairly uniform is:
p.g. 662
a. economic order quantity model
b. fixed-period ordering
c. lot-for-lot ordering
d. independent demand
e. dependent demand
ANSWER: a. Economic order quantity model
3. The primary goal of management is to minimize cost of ? p.g. 662

a. production
b. delivery
c. good
d. inventory
e. All of the Above
ANSWER: d. inventory
4. What is the simplest method of lot sizing? p.g. 662

a. Lot for lot ordering
b. economic order quantity model
c. fixed-period ordering
e. dependent demand
ANSWER: a. lot for lot ordering

5. Which type of ordering provides coverage for some predetermined number
of periods? p.g. 662
a. lot for lot ordering
b. economic order quantity model
c. fixed period ordering
e. dependent demand
ANSWER: c. fixed period ordering
6. MPR is designed to answer all of the questions except: p.g. 649

a. How much is needed?
b. What is the time constraint?
c. When is it needed?
d. What is needed?
ANSWER: b. what is the time constraint?
7. A Master Schedule contains which of the following?:

A. Which end items are to be produced
B. When end items will be needed
C. What quality of end items will be needed
D. All of the above
E. A and B only
Answer: E (pg 650) quantity, not quality.
8. Restructuring the bill of materials, so that multiple occurrences of a

component will coincide with the lowest level at which the component occurs
is known as:
A. one-level coding
B. component minimizing
C. low-level coding
D. MRP minimization
Answer: C (pg 653)
9. All of the following are Primary Reports except:

A. Planning Reports
B. Planned Orders
C. Changes
D. Order Releases
Answer: A (pg 661)
10. What is the expanded approach to production resource planning that

involves other areas of a firm in the planning process and enables capacity
requirements planning?
A. ERP
B. MRP II
C. DRP II
D. MRP Extended
Answer: B (pg 664)
11. ERP software provides:

A. A system to capture and make data available in real time
B. A capability to assess the feasibility of a proposed plan
C. A set of tools for planning and monitoring business processes to achieve
goals of the organization
D. A and C
Answer: D (pg 669)
12. Which of the following is NOT included in the billing of materials?

A. raw materials
B. labor hours
C. parts
D. subassemblies
E. assemblies processes
Answer: B, 638
13. What is a product structure tree?

A. visual depiction of the requirements in a bill of materials where all
components are listed by levels
B. visual depiction of the requirements in a master schedule where all
products are listed by demand.
C. visual depiction of the requirements in inventory records where all
components are listed by status.
D. all of the above
Answer: A, 638
14. Which of the following is NOT a primary source of information for MRP?
A. master schedule
B. inventory records
C. bill of materials
D. planned orders
E. all of the above are not primary sources of information for MRP
Answer: D, 637
15. The sum of the lead times required by sequential phases of a process is
known as:
A. LTSP
B. critical path
C. cumulative lead time
D. master schedule
E. horizon plan
Answer: C, 638
16. What is an advantage of a regenerative system?

A. reflecting changes as they occur
B. less processing costs
C. up-to-date information for planning purposes
E. B and C
Answer: B, 663
17. What are classified as the main reports used by management?
A. Planning Reports
B. Performance-Control Reports
C. Exception Reports
D. Primary Reports
E. Secondary Reports
Answer: D p.661
18. Primary Reports include which of the following?
A. Planned Orders
B. Order releases
C. Changes to planned orders
D. All the above
E. Only A and C
Answer: D p.661
19. Secondary Reports include which of the following?
A. Performance-control reports
B. Planning Reports
C. Exception Reports
D. All the above
E. Only A & B
Answer: D p.661
20. What major function is involved with Planning Reports?
A. Evaluating system operations

B. Calling attention to major discrepancies in orders
C. Forecasting Future Inventory Requirement Decisions
D. All of the Above
Answer: C p.661
21. Which report contains production and inventory planning and control?
A. Primary Report
B. Secondary Report
C. Planning Report
D. Exception Report
E. Performance-Control Report
Answer: A p.661
22. What is the most expensive of the following processes?
A. MRP
B. MRPII
C. ERP
D. They all cost the same
E. A & B only
Answer: C p.661
23. What recognizes inconsistencies within the report such as errors in

overdue or late orders, etc?
A. Performance-control reports
B. Planning reports
C. Planned orders
D. Exception Reports
E. B & C only
Answer: D p.661
Answer: D (Page 663)
24. Which of the following is not a benefit of an MRP system?
A. The ability to keep track of material requirements
B. A means of allocating production time
C. The ability to easily determine inventory usage by backflushing
D. High Levels of in process inventory
E. All of the above are benefits of an MRP system
25. is a procedure in which an end item's bill of material is periodically

exploded to determine the quantities of the various components that were
used to make the items.
A. Backloading
B. Backflushing
C. Backwashing
D. Backflowing
Answer: B (Page 663)
26. The benefit of an MRP system depends on the ability to have large
amounts of unorganized information readily accessible.
A. True
B. False
Answer: False (Page 663)
27. Which of the following is one of the requirements for an MRP system?
A. A computer
B. Accurate and up to date information
C. Integrity of data
D. None of the Above
E. All of the Above
Answer: E (Page 664)
28. Which of the following is/are (a) factor(s) that causes problems in an MRP
system?
A. assumption of constant lead times
B. products being produced differently from the bill of materials
C. failure to alter a bill of materials when customizing a product
D. Inaccurate forecast
E. All of the above
29. In addition to manufacturing resources needed for the master production

plan, what else is the financial department in charge of?
A. Amount of resources
B. Timing
C.Work Time
D. A & B
E. B & C
Answer: D. (Page 638)
30. MRP II has restrictions and times where they can make changes to the
orders/production. What is this called?
A. Time Series
B. Time Fences
C. Time Based System
D. Time Based Strategy
Answer: B. (Page 666)
31. Manufacturing Company generates the Master Schedule according to
A.What is possible
B. What is Demanded
C. What is Given
D. What is Needed
32.What is the percentage of capacity requirement for the machine, if 150

units of Product A are scheduled, when the machines standard time is 1.9
hours and labor standard time of 2.3 hours?
A. 72.4%
B. 82.6%
C.12.10%
D.10.6%
Answer B. (Page 656)
33. MRP is essential in establishing requirements for capacity, but it also has
a downfall. What is it?
A. Cannot aggregate demand from all sources

B. Cannot plan for amount of requirements and timing
C. Cannot distinguish between a feasible Master Schedule and a nonfeasible
schedule.
D Cannot make changes to the Master Schedule once it is in process.
Answer: C (Page 654)
34 . _ is the sum of the lead times that sequential phases of a process require,
from ordering of parts or raw materials to completion of final assembly.
a. Overall lead time
b. Safety time
c. Cumulative lead time
d. Completion time
e. Slack
Answer: C.(p.g 650)
35. Which ordering method would you use if the use of the item is fairly
uniform?
a. Economic order quantity model
b. L4L
c. Fixed Period Ordering
d. BOM
e. Automated Ordering
Answer: A..(p.g. 662)

b. False
question must have 5 choices
36. System sensitivity is how a system reacts to changes.

a. True
Answer: B.(need number page of answer)

Answer: B.(need number page of answer)
37. The concept of safety time is often used when
a. There is variability due to bottleneck processes causing shortages
b. Used when lead times vary
c. Shortages caused by late orders and/or fabrications
d. Assembly lines are longer than expected
e. All of the above
38. The master schedule should cover a period that is at least equivalent to
the
a. CRP
b. Closed loop MRP
c. Time buckets
d. Cumulative lead time
e. Cumulative lead time subtracted by time buckets
Answer: D.(p.g. 650)
39. What is considered the third generation of manufacturing software.

a. Y2K
b. MRP
c. MRPII
d. ERP
Answer: D (P.668)
40. Which of the following is NOT a feature of MRP?

a. Planned-order releases
b. Calculating component requirements
c. Master scheduling
d. Time-phasing of requirements
e. All choices are a feature of MRP
Answer: C (P.654)
41. Which of the following is true of ERP?

a. Low start up cost
b. Requires intensive employee training
c. Low maintenance cost
d. Non time consuming
e. All choice are false
Answer: B (P.670)
42. Which of the following is NOT true of MRP?

a. Requires a computer and the necessary software programs to handle
computations and maintain records
b. Requires at least one hundred working computers
c. Requires accurate and up to date inventory records
d. Requires accurate and up to date master schedules and records
e. Integrity of file data
Answer: B (P.650)
43. What is ERP?

a. Entry Resource Pricing systems
b. The second generation manufacturing program
c. enterprise Resource Planning
d. Enterprise Report Planning
e. All the Above
Answer: C (P.668)
Ch.15 Lean Operations

Edit 0 96
Summary - Chapter 15: Lean Operations

This chapter focuses on this idea of using different approaches and systems. The overall philosophy of
Lean/JIT is to pursue a system that functions efficiently with minimal levels of inventories, space, and
transactions. The main benefits of lean operations systems are:
1. Reduced cost through reduced inventory levels

2. Higher quality
3. Reduced lead time
4. Increased productivity
5. Reduced amounts of waste
Inventories should never be used as the solution to fix machine malfunctions. One method that JIT
systems uses to minimize inventory is to have suppliers deliver goods directly to the production floor.
Overall, carrying low inventories offers many benefits such as less carrying cost, less space needed, and
less rework to complete in case of a product recall. Lean systems can also be referred to as "just-in-time"
(JIT) systems. The object of a lean system is to create a system that is demand driven, and provides
supply based on demand at any given point. Lean systems tend to concentrate on waste reduction and
have continuous improvement. There are four building blocks that contribute to the building of a lean
system. They are:
1. Product design
2. Process design
3. Personnel/organizational elements
4. Manufacturing planning and control
Each process is crucial and contributes to an effective lean system. Product design consists of standard
parts (workers have fewer parts to deal with), modular design (an extension of standard parts, they are
separate parts clustered together and treated as one unit), highly capable production systems with quality
built in ( JIT requires highly capable production systems), and concurrent engineering (keeping
engineering practices shouldn't change to avoid disruptions). Process Design consists of small lot sizes
(optimal one unit), setup time reductions, manufacturing cells (specialized and effecient production
centers, quality improvement, production flexibility, a balanced system (distributing workload evenly
among the workstations), little inventory storage, and fail safe methods (incorporate ways to reduce or
eliminate the potential for errors during the process). Lean systems have an extremely effective
production method. Personnel/organizational elements includes workers as assets ( A JIT philosophy),
Cross-trained workers (perform several parts of the process and operate several machines), cost
accounting, and leadership/project management( a two-way communication process between managers
and workers). The last building block is manufacturing planning and control. It includes level
loading,(achieving stable, level daily mix schedules) pull systems (work moves on in response to demand
from the next stage in the process), visual systems (A kanban card used as authorization to move or work
on parts), limited work-in-process, close vendor relationships, reduced transaction processing(logistical,
balancing, quality, or change transactions), preventive maintenance and housekeeping(keeping the
workplace clean and free of unneeded material. .
Summary 4:
Lean operations began as lean manufacturing in the 1900's, and was
developed by the Japanese automobile manufacturer, Toyota. The Japanese
were sensitive to waste and inefficiency issues. The goal was to eliminate all
waste from the process. Waste was identified by them as anything that
interfered with the process or simply did not add value. Companies began
adopting the lean approach and to do so realized that they had to do major
changes in their organization and with their culture in the organization. Lean
methods have demand-based operations, flexible operations with rapid
changeover capability, effective worker behaviors, and continuous
improvement efforts. The terms used in the lean approach are the following:
Muda: Waste and inefficiency. The philosophy that waste and inefficiency can
be minimized using the follwing tactics
Kanban: Manual system used to control the movement of parts and materials
responding to the need to deliver them
Pull System: To produce only what is needed
Heijunka: Volume and variety must be leveled
Kaizen: Continuous improvement
Jidoka: Quality at the source
Poka-yoke: Safeguards built into the process to reduce error
Team concept: Use small team workers for process improvements
Summary 5:
JIT system stands for a Just-In-Time system. It represents the philosophy that includes every aspect of
the process from the design to after the sale. JIT is a highly coordinated processing system in which
goods move through the system, and services are performed just as they are needed. First, management
should decide if JIT is a compatible method for the company. JIT is best used with companies that have
repetitive operations and a stable demand. The first step is planning the conversion to JIT. Managers
need to be involved in the process and understand the commitment needed. The next step is to begin
working only with suppliers who support the JIT system. The biggest obstacles faced are management,
worker or supplier disapproval, and also changing the culture of the company.
1. Lean operations tend to achieve all of the following except: p.g. 693
a. greater productivity
b. shorter cycle times
c. longer cycle times
d. lower costs
e. higher costs
ANSWER: c. longer cycle times
2. Many lean operation methods used today were derived from which
Japanese car makers approach to manufacturing? p.g. 694
a. Hondai
b. Kia
c. Toyota
d. Honda
ANSWER: c. Toyota
3. Replacing material or parts based on demand is an example of: p.g. 694

a. Heijunka
b. Kaizen
c. Pull system
d. kanban
e. Jidoka
ANSWER: c. Pull system
4. The Kaizen philosophy for eliminating waste is based on which of the

following ideas? p.g. 697
a. It is process oriented
b. It focuses attention where value is created
c. The essence of organizational learning is to learn while doing
d. Everybody should be involved
e. All of the Above
ANSWER: e. All of the Above
5. Workers who perform several parts of a process and operate a variety of

machines are...? p.g. 707
a. cross-trained
b. team-based
c. problem-solvers
d. temporarily
e. cooperating
ANSWER: a. cross-trained
6. Which type of workers make up the main component of a lean system? p.g.
706
a. motivated
b. considerate
c. well-trained
d. A & B
e. A& c
ANSWER: E. motivated and well-trained workers
7.What term(s) summarize the concept of muda?

a. waste
b. inefficiency
c. efficient
d. timely
e. both a & b
Correct Answer: E. p. 681
8.Which of the following is not one of the seven aspects of process design for
JIT systems?
a. small lot sizes
b. setup time reduction
c. manufacturing cells
d. lots of inventory storage
e. all of the above are aspects
Correct Answer: D. p. 684-685
9.Which of the following systems is used to reduce changeover time?

a. SMED (single minute exchange of die)
b. CLM
c. take time
d. kanban
e. push system
Correct Answer : A. p. 686
10.Takt time is computed using the equation (net time available per day
divided by )?
a. task time
b. work in process
c. daily demand
d. rest break
e. number of shifts
Correct Answer C. p. 688
11.This type of transaction includes forecasting, production planning,

scheduling, and order processing.
a. logistical
b. balancing
c. quality
d. change
e. demand
Correct Answer: B. p. 700
12. Which of the following systems will help standardize, lower cost, and
eliminate non-value added activities in manufacturing and service operations?
a. lean operation/JIT
b. automation
c.product design
d. andon
Correct answer: A. p. 693-694
13.The ultimate goal of lean operations is?

a. activity-based costing
b. balanced and flexible system
c. Kaizen philosophy
d. Modular design
e. group technology
Correct Answer: B. p. 696 and 702
14.What are some benefits of WIP:

a. lower carrying cost and cycle-time variability
b. increased flexibility
c. aids scheduling
d. saves costs of scrap and rework if there are design
e. all of the above
15.Which of the following is NOT a part of the seven types of waste?

a. inventory
b. processing
c. transportation
d. lot sizes
e. All the above are parts of the seven types of waste
Correct Answer: D. p. 717
16. What are the building blocks of lean operations?

a. Product design
b. Process design
c. Personnel/organizational elements
d. Manufacturing planning and control
e. All of the above
17. Which one of the following best describes the concept of housekeeping?
a. A visual tool to systematically examine the flow of materials and information
b. Maintaining equipment in good operating condition and replacing parts that have a tendency to
fail before they actually do fail
c. Maintaining a workplace that is clean and free of unnecessary materials
d. Work is pushed to the next station as it is completed
e. Card or other device that communicates demand for work or materials from the preceding
station
Correct Answer: C. p. 716
18. Terms like Muda, Kanban, Pull system, Heijunka, Kaizen, Jidoka, Poka-
Yoke, are commonly associated with:
a. Lean operations
b. Supporting goals
c.Modular design
d. Product design
e. Process design
Correct Answer: A. p. 694-695
19. What are the four elements of production design?

a. Product design, process design, modular design, standard design
b. Standard design, modular design, highly capable production systems with
quality built in, concurrent engineering
c. Concurrent engineering, modular design, standard design, setup time
reduction
d. Small lot size, setup time, standard parts, modular design
20. What is andon?

a. A fundamental aspect of the lean philosophy
b. A central theme of a true lean approach
c. An element of manufacturing and planning
d. Nickname for continuous improvement
e. System of lights used at each workstation to signal problems or slowdown

21. What is/are the basic element(s) of a lean system?
A.) Focused on waste reduction
B.) Demand Driven
C.) A Culture that is dedicated to excellence and continuous improvement.
D.) A & C
E.) All the above.
Correct Answer : E. p. 694
22. What is an alternative method of allocating overhead?

A.) Automation
B.) Single-minute exchange of die (SMED)
C.) Activity-based costing
D.) Push System
E). Pull system ( E. Wiszowata)
23. A kanban is used in which type of system?
A.) Push System

B.) Pull System
C.) Automation
D.) lean operations
E.) None of the above
24. Which of the five S's is used to decide which items are needed to
accomplish work?
A.) Standardize
B.) Self-discipline
C.) Sort
D.) Straighten
E.) Sweep
25. What is the difference between traditional philosophies and lean

production philosophies?
A.) Traditional production have large lots sizes, while lean production have
small lot sizes.
B.) Traditional production have many, small deliveries, while lean production
have few, large deliveries.
C.) Lean production has few, long runs, while traditional production has many,
short runs.
D.) In traditional production workers are unnecessary to do work, while lean
production has no assets. (added Q-5 E. Wiszowata)
e. None of the above are true.
Correct Answer: A. p. 716
Needs to be a multiple choice question and have five answer choices.

26. Employee cooperation is not important in the JIT conversion.
A) True
B) False
Correct Answer: False p. 702
27. Which is not one of the three main components of the lean system?
A) Process design
B) Ultimate goal
C) Building blocks
D) Supporting goals
Correct Answer: A. p. 702
28. What does SMED stand for?

A) Single monitored emergency demand
B) systematic minute exchange demand
c) single-minute exchange of die
d) systematic minute exchange of demand
e) single minute exchange of demand
29. JIT sometimes minimizes defects through the use of

A) TAKT time
B) automation
c) building blocks
d) product flexibility
e) activity-based costing
30. Which of the following are ways to achieve JIT in services

A) Eliminate disruptions
B) Make the system flexible
C) Reduce set-up times
d) eliminate waste
e) All of the above
31) I. Value stream mapping examines the flows of materials and information.
II. Unfortunately, it doesn't help identify waste and opportunities for
improvement.
A. I is True and II is True
B. I is True and II is False
C. I is False and II is True
D. I is False and II is False
Answer: B
See Ch15 powerpoint slide 36
33) Which Toyota approach is about safeguard built into a process to reduce
the possibility of error?
A. Heijunka
B. Poka-yoke
C. Jidoka
D. Kaizen
E. Muda
Answer is B (p.695)
34) which is not part of the personnel/organizational elements?

A. Workers as assets
B. Cross-trained workers
C. Cost accounting
D. Continuous improvement
E. None of above
Answer is E (p.706)
35) What is the main approach to controlling WIP?

A) Kanban
B) CONWIP
C) Visual aids
D) allocating overhead
e) A and B
Answer E pg 698
36) what is the difference between WIP and CONWIP

A) nothing
B) Wip is more expensive
C) WIP focuses on individual work stations
d) CONWIP focuses on the system as a whole
e) C and D
Answer E page 698
37) Which is true about Kanban?

A) It gives authorization
B) it works best ina stable and predictable environment
C) It means signal or visible record
D) It is term associated with lean operations
E) all of the above
Answer e: pg 680, 695, 698
38) What is a key feature of the lean system?

A) inefficiency
B) small amount of suppliers
C) huge amount of suppliers
D) Unproductivity
E) All of the above
Answer B page 699

39)What is preventive maintenance?
A) housekeeping
B) fixing the manufacturing process
C) keeping the the equipment in good operating condition
D) Replacing vulnerable parts before failure occurs
E) C and D
Answer E: page 701
40) What are the benefits of a manufacturing cell?

A) reduce changover time
B) high utilization of equipment
C) ease of cross-training operators
D) All of the above
Answer D page 686
41) What is a benefit of the S's?

A) increased productivity
B) improved employee morale
C) decreased risk of accidents
D) improved appearrance for visitors
E) ALl of the above
Answer E page 701
Ch.17 Project Management

Edit 0 137
Chapter 17: Project Management

Project Management is a Team-Based Approach for managing projects. Project managers have various
responsibilities that include:
Organizing workload : making sure that work is done in the appropriate sequence, and goals are met
Human resources : providing motivation and direction to people working on the project
Communications : making sure that people on the project have the information and communciation
needed to complete the project
Time : Scheduling and making sure projects are being completed as scheduled
Costs : Staying within the budget
Quality of work: meeting the objectives of the project
There are a number of tools used, such as work breakdown structure, network diagrams, and Gantt
charts. Slack is the allowable amount of slippage for a path and is found by taking the difference of the
particular path and the critical path (late start MINUS early start or late finish MINUS early finish).
To crash a project means to shorten it and managers should do this one period at a time. Two similar
and commonly used techniques--PERT and CPM depict the sequential relationship among the activities.
Project Life Cycle

The size, length, and scope of the projects vary widely according to the nature and
the purpose of the project. However, all projects have one common aspect, a life
cycle which consists of four phases:
1. Definition has two parts:
(a) concept, at which point the organization recognizes the need for a project or responds to a request
for a proposal from a customer or client.
(b) feasibility analysis, examines the expected costs, benefits and risks of carrying out the project.
2. Planning outlines the details of the work and estimates the necessary HR, time and cost required.
3. Execution Time during which the project itself is done. Often accounts for the majority of time and
resources used in the project.
4. Termination Phase during which closure is achieved. It can involve reassigning personnel and dealing
with any leftover materials, equipment, or any other resources associated with the project.
One phase does not have to be fully completed before the next phase can begin. This can reduce the
time needed to move through the life cycle and perhaps even generate a competitive advantage and
save cost.
Projects are single operations designed to accomplish a specific set of instructions under a limited
period. Members of different projects will vary in skill and knowledge, therefore organization and
functionality as a unit are important to the success of the project. Projects undergo different stages of a
life cycle. Software is implemented to help design prototypes, organize information, decrease costs and
estimate time.
Project Management
Managers are usually confronted with making unique decisions based on a specific environment and
business operation. Project management is a unique, one- time operation designed to accomplish a
specific set of objectives in a limited time. With limited time and a variety of activities involved, unique
problems arise for the project manager. Projects go through a series of stages known as a life cycle:
Definition, planning, execution, and delivery. To coordinate and plan large scale projects, PERT and CPM
are two techniques most commonly used.
Decisions need to be prioritized in order to accomplish a task. Logically, the book states the decisions
systematically: deciding what project to implement, selecting the project manager, selecting the project
team, planning and designing the project, managing and controlling project resources, and deciding if
and when the project should be terminated. Full responsibility lays on the selected project manager, so
they must be diligent. Diligence does not just apply to just his/her actions, but also the work delegated
to the project team. Constantly, every aspect of the project must be accounted for; this includes the
work, workers, team communication, performance
ed three certain times of the activity as variables: the optimistic time (time it would take under ideal
conditions, to), pessimistic time (time it would take under worst conditions, tp), and most likely
time (time it would take under probable conditions). Managers use statistical analysis to further
examine activity times. They use the like of beta distribution to graphically look at the variability of time
estimates (see figure 17.8, pg 782). By adding the weighted averages (te) of different activities in a
certain path one may find the critical path. Then by finding its variance one may find out the uncertainty
of an activity's time. When computing probabilistic time estimates, one can find the probability that the
project will be done by a deadline or longer.
Projects are usually composed of a unique set of activities established to realize a given set of objectives
in a limited time span. Projects go through a life cycle that involves definition, planning, execution, and
deliver. Project Evaluation and Review Technique (PERT) and the Critical Path Method (CPM) are two
normally used techniques for developing and monitoring projects. CPM models the activities and events
of a project as a network. It is currently little difference between the two of them. For constructing a
network diagram you can use two slightly different conventions. One designates the arrows as activities,
the other designates the nodes as activities.
Project Management Software

Technology has played a key role in project management. The use
of computer-aided design (CAD ) to produce updated prototypes
.One of the software programs discussed in this chapter to help
manage projects is Microsoft Project. As many of us have used
Microsoft Project in our homework assignments as well as in lab,
one has learned that it can be customized to accommodate specific
needs. Microsoft Project can be use to successfully estimate cost,
track progress and create schedules. Nonetheless, Microsoft
Project makes communication easier among organizations by
enabling its users to share a project plan with others, format & print
custom reports and easily present project status. Some of the
advantages in using Project management software packages are
that it provides logical planning structure, enhances communication
among team members, flags the occurrence of constant violations,
automatically formats reports, and generates various chart types
such as the Gantt chart used in lab.
A Recap Summary
Project management is a team-based approach for managing project. The
nature of the project may vary in different situations. That is why it is the
managements responsibility to make key decision on deciding which projects
to implement, selecting the project managers, selecting the project team,
planning and designing the project, managing and controlling project
resources, and deciding if and when a project should be terminated. Risk
management and budgeting are some of the factors that play an important
role for managers when deciding if a project is worth selecting and proceeding
with. A typical project life cycle can be broken down into four phases:
Definition, planning, execution, and termination. PERT (program evaluation
and review technique) and CPM (critical path method) are two methods that
managers often use for planning and coordinating large-scale projects. These
methods can either be probabilistic or deterministic.
Project Champions
These project champions are people who usually work within the company
who promote and support the project for the company. They will "talk up" the
project to other managers who will need to be resources to the project, or
might be asked to work on the project. The work project champions put in is
essential for the success of the project, thats why team members need to
support the project champions.
1. All of the following are tools used in project management EXCEPT?

a) Network diagram
b) Gantt charts
c) Control charts
d) Risk management
e) Work breakdown structure
Answer: C (Pg.783-785)
2.Which of the following best describes the critical path?

a) The most used
b) The shortest path
c) The longest path
d) The least liked
e) The most efficient
Answer: C (Pg. 786)
3.Which of the following is NOT a phase of the project life cycle?

a) Planning
b) Implementing
c) Definition
d) Execution
e) Termination
Answer: B (Pg.783)
4.Managers should crash projects:

a) By grouping related activities
b) One period at a time
c) By choosing the most important activity on the path
d) By choosing the most expensive activity on the path
e) With the approval of the crash specialist
Answer: B (Pg.803)
5. Which of the following information is NOT provided by the PERT

technique?
a) An estimate of how long the project will take
b) An estimate of how much each activity will cost if delayed
c) Graphical display of project activities
d) An indication of which activities are most critical to timely project completion
e) An indication of how long any activity can be delayed without delaying the
project
Answer: B (Pg. 784-785)

6). The phases of project life cycle are :
a. Enter, growth, maturity, decline
b. Beginning, middle, and end.
c. Definition, planning, execution, termination.
d. Definition, execution, termination
e.None of the above
Answer: C (pg. 783)
7). The pros of working on projects are:

a. Disrupts friendships and daily routines
b. Increases morale and motivation
c. Opportunities to meet new people
d. b and c
Answer: D (pg. 782)
8). A Project manager is responsible for:

a. Designing prototypes.
b. Organizing information.
c. Time, costs, communications
d. Human resources
e. Both C & D
Answer: E (pg. 780)
9)What is used to estimate the cost and time to complete the various
elements of the project?
a. The four life cycle phases of the project.
b. Hiring someone to figure it out for them.
c. Developing the (WBS).
d. PERT
e. CPM
Answer: C (pg. 783)
10). Given the information of activity 3-4: ES = 5, EF = 10, LS = 15 and LF =

20, we can determine that the amount of slack associated with the activity is :
a. 20
b. 50
c. 10
d. 30
e. 15
Answer: C (pg. 795)
11) What is the term used to describe when time estimates are fairly certain?.
a) Concrete
b) Definite
c) Probabilistic
d) Deterministic
e) Actual
Answer: D Pg(781)
12) Slack can be determined by:

a) Late Start minus Early Finish
b) Late Start minus Early Start
c) Early Start plus Late Start
d) Late Finish minus Early Finish
e) Both B and D
ANSWER: E (Pg. 795)
13) When there is zero slack indicated by activities then the path is:
a) Operational path
b) Optimal path
c) Active Path
d) Critical path
e) Deterministic
Answer: D (Pg. 772)
14) To determine crashing requires information about (d)

a) Regular time and crash time estimates for each activity
b) Regular cost and crash cost estimates for each activity
c) a list of activities that are on the critical path
d) all of the above
ANSWER: D (Pg. 788)
15) PERT's features allows:

a) a graphic display of the project and its major activities
b) identification of activities that should be closely watched and activities with slack time
c) organization of available information and identify additional information needed.
d) all of the above
Answer: D (Pg.784)
16.) The two most widely used techniques for planning and coordinating large scale projects are:
a. AOA and AON
b. PERT and AOA
c. PERT and CPM
d. CPM and AOA
e. PERT and AON
Answer: C (Pg. 784)
17.) Which of the following are the 4 stages in the project life-cycle?
a. definition, planning, execution, delivery
b. definition, coordination, delivery, termination
c. definition, growth, maturity, decline
d. planning, definition, delivery, execution
e. Planning, coordination, execution, termination
Answer: A (Pg. 783)
18.) What method establishes a logical framework for identifying the required activities for a project?
a. Net work diagram
b. Work breakdown structure (WBS)
c. CPM
d. PERT
e. Activity method
Answer: B (Pg. 783)
19.) A person who promotes and supports a project is called a:

a. Project manager
b. Project champion
c. Project supporter
d. Project leader
e. Project coordinator
Answer: B (Pg. 781)
20.) The _ is the main person in charge of a project. The success or failure is contributed from this
person. They are in charge of effectively managing the work, human resources, communications, quality
of products, time and budget costs.
a. Project manager
b. Project champion
c. Project supporter
d. Project leader
e. Project investor
Answer: A (Pg.779-780)
21) Which is not__ a key decision in project management? (page 778)

a. Deciding which projects to implement
b. Selecting the project team
c. Managing and controlling project resources
d. Eliminating current projects.
22) The project manager is responsible for managing which of the following?
a. Time, so that the project is completed on schedule
b. Control, so that one can control the whole group
c. Costs, so that the project is complete within budget
d. A and C
23) Which the following is excluded in Project Life Cycle?

a. Definition
b. Planning
c. Execution
d. Termination
e. Growth
24) Probabilistic time estimates include all but which of the following?
a. Optimistic Time
b. Sure time
c. Pessimistic time
d. Most Likely time
Answer: B (Pg.773)
25. Which of the following contain 3 of the 6 project manager's responsibilities?

a) work, human resources, communication
b) costs, time, materials
c) quality, punishment, costs
d) communication, rewards, time
e) costs, human resources, materials.
Answer: A (Page 778)
26. To effectively manage a project:

a) a project manager must bring food to every meeting.
b) a project manager must reward the team for high quality work.
c) a project manager must plan for daily meetings until the tasks are fulfilled.
d) a project manager must employ a certain set of skills.
e) a project manager must make the team criticize each other.

27. The position of project manager has:
a) low visibility
b) some visibility
c) no visibility
d) varying visibility
e) high visibility
28) The Project Management Triangle:

a) says schedule in the middle
b) says cost in the middle
c) says quality in the middle
d) says quality on the side
e) says performance objectives in the middle
Answer: C (Page 780)
29) In project management, selecting a project manager:

a) is the final step.
b) is the first and most important decision.
c) is less of a priority than forming the project team.
d) is unnecessary considering someone will naturally take the position.
e) is unnecessary because project teams work better without a leader.
----Answer: B (Page 779)
30)If a manager doesn't know what the activity time for a certain situation would s/he use ?
a) Microsoft Excel
b) Crash Time Approach
c) Probabilistic Time Approach
d) Conditioning Approach
e) both a and b
Answer: C (Pg.781)
31) Which of the following times is not the time estimates needed is the probabilistic time approach
a) Probable Time
b) Optimistic Time
c) Most Likely Time
d) Pessimistic Time
e) None of these times are needed in the approach
Answer: A (Pg.781)
32) Which distribution describes the inherent variability of time estimates for activities?
a) Alpha Distribution
b) Time Distribution
c) Deadline Distribution
d) Activity Distribution
e) None of these distributions describe the variability of time estimates
Answer: E (Pg.782)
33) Slack time can be computed as

a. ES LS
b. ES EF
c. LS ES
d. LF LS
Answer: C (Pg. 795)
34) The expected time of a path is equal to the sum of what? (pg 782)
a) Optimistic Times
b) Path Variance
c) Time Estimates of activities
d) a and c
e) b and c
Answer: C (Pg.782)
35) The length of time required under optimal conditions is:

a) Optimistic time
b) Pessimistic time
c) Beta distribution
d) Most likely time
Answer: A (Pg.796)
36) The most probable length of time to be required is:
a) Optimistic time
b) Pessimistic time
c) Beta distribution
d) Most likely time
Answer: D (Pg.796)
37) The definition of Crash is:

a) Shortening activity duration
b) Extending activity duration
c) A budget control activity
d) a and c
Answer: A (Pg.803)
38) Budget control is a aspect of a

a) not critical project
b) critical project
c) good budget
d) not goo budget
Answer: B (Pg.802)
39) What is a sequence of activities that leads from the starting node to the finishing node?
a) Slack
b) Path
c) PERT
d) CPM
e) Events
Answer: B (Pg.786)
40) Which of the following is NOT an advantage of using a Project Management Software Package?
A) Automatically format reports
B) Enables "what-if" scenarios
C) Generates various chart types
D) Provides illogical planning structures
E) Imposes a common project management terminology
Answer: D (Pg.794)
41) The probability of occurrence of risk events is:

A) highest near the beginning of a project
B) lowest near the beginning of a project
C) highest near the beginning of a project & lowest near the end
D) lowest near the beginning of a project & highest near the end
ANSWER: C (Pg.793)
42) What do project planners use when dependent cases occur?

A) Simulation
B) Crashing
C) Slack
D)Probability
E) PERT
ANSWER: A (pg.787)
43) What are some typical factors to take into account when deciding which projects to implement?
A) Cost-Benefit
B) Skill Personnel
C) Budget
D) C and B (This type of questions are confusing, can you provide 1 option, instead of 2?)
E) All of the above
ANSWER: E (pg. 765)
44) The Beta distribution is:

A) symmetrical or skewed only to the right
B) used to describe the inherent variability in activity time estimates
C) mean and variance can be readily obtained from optimistic time, most likely time and pessimistic time
D) A and C
E) B and C
ANSWER: E (pg. 782)
45) All of the following are stages of the project life cycle, except
a)Termination
b)Planning
c) Maturity
d)Execution
e)Termination
Answer: C (pg.783)
46) Which is the first step in developing a workdown breakdown structure (WBS)?
a)Identifying list of activities that need to be accomplished
b)Identifying major elements
c)Identifying amount of time needed to complete each activity
d)Identifying supporting activities
e)Identifying work force needed to identify elements
Answer: B (pg. 783)
47) The longest path that determines expected project duration is

a. Critical dummy activity
b. Critical Slack
c. Critical event
d. CPM
e. Critical path
Answer: E (pg.786)
48) Early Finish (EF) can be defined as the

a)The latest time the activity can start and not delay the project
b)Expected project duration
c)The earliest time activity can start, assuming all preceding activities start as early as possible
d)The earliest time the activity can finish
e)The latest time the activity can finish and not delay the project
Answer: D pg.789
49) What is the correct formula for path probabilities

A. Specified time-path mean
B. Specified time/path mean
C. (Specified time-path mean)/path standard deviation
D. Specific time/path standard deviation
E. (Specified time-path mean)*path standard deviation
Answer is C: (Pg. 799)
50) Which of the followings is not the forecast based on judgment and
opinion?
A) Consumer surveys
B) Sales force opinions
C) Time series
D) Delphi method
E) Executive opinions
Answer is C (p. 77-78)
51) Shortening activity durations is called:
A) Speeding
B) Expediting
C) Crashing
D) All of the above
Answer is C (p. 803)
52) Project Champions are people who:
A) Create the project

B) Select team members
C) Promotes and supports the project
D) Critiques the team members
Answer: C
53) Work Breakdown Structure (WBS) is a/an:
A) Hierarchical listing of what must be done during a project

B) Assignment of who does what
C) Map of employees positions
D) How to breakdown work
E) Both b and c
Answer: A

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Ch.

Other Important Trends Companies have switched from ignoring

1) Which of the following functional areas are part of a business

3) Which of the following activities is important in achieving effective use

4) Which of the following is NOT part of a Simple Product Supply Chain?

5) Which of the following would NOT be considered a model used by

7) Which of the following would be considered an input when converting

8) Which of the following is considered an output during the

9) Measurements taken at various points in the transformation process

10) Which type of variation is the result of a deliberate choice of a

11) Who is considered the "father of scientific management": p.g. 22

14) The Industrial Revolution led to which of the following methods?

15) Accounting, human resources, and IT are considered: (Page 10)

16) High goods percentages such as houses, automobiles, clothing,

17) What originator contributed to the concept of "interchangeable

20) As outsourcing _ , organizations are spending _ amounts on various

22) Which of the following models is most abstract? p.g. 18

23) What is the main goal of a company?

25) All of these result from lean production except: p.g. 28

27) Which one of the following is a major trend in business? (p26)

29)Which one of the following statements is FALSE?(p26)

30) Why are models beneficial to managers? (P19)

31) What is craft production? (P22)

34) What is the importance of provision of funds? ( Pg 19)

35) Which country influenced US manufacturing? p.g. 25 .

37) What are the three functions of business organizations?

39) An oil change is an example of a _ .

43)Which is not a basic function of a business organization? (9th ed. page 4)

44) What is E-Commerce? (9th ed. page 25)

45) What is Agility? (9th ed. page 27)

47) Which of the following would not generally be considered an aspect of

Answer: Secure Financial Resources (Pg.9)

48) Which of the following is not a typical question asked by an operations

49) Which of the following is not generally considered to be an

Answer: Providing an exact representation of reality. (pg. 15)

50) Which comes last in the development of manufacturing techniques?

Answer: Lean Production pg. 28

51) Which one of these is specifically related to the globalization of business?

54) Which of the following incorporates advantages in both mass

56) The father of "motion science" was: (p.26)

Ch. 2 Strategy and Productivity

Summary: Goal, Mission, Strategies and Tactics (page 42-43)

The three important characteristics of any business are competitiveness,

Competitiveness is important to a company because it determines an

Many organizations are driven by competition. To be successful in

1) Which is NOT an example of an external factor:

Answer: d (Page 46)

2) Which of the following is an example of an organizational strategy:

Answer: e (Page 44)

3) Which of the following is NOT an example of a key internal factors:

Answer: e (Page 46-47)

4) Which factors affect the productivity of a company:

Answer: e (Page 57)

5) Which productivity factor is included in a balanced scorecard:

Answer: e (Page 53)

6) Which strategy focuses on reducing the time needed to accomplish a

Answer: a (Page 50)

7) Which answer describes a reason why some organizations fail?

a) Neglecting operation strategy

Answer: e (Page 41-42)

8) Coordinating internal and external operations applies to which of the

Answer: c (page 41)

9) This concept is defined as the consideration of events and trends that

Answer: d (page 46)

Operations Management Handbook With Questions & Answers

Operations Management Handbook With Questions & Answers