TB 14

Fundamentals of Management, 7e (Robbins/DeCenzo/Coulter)
Chapter 14 Operations Management
1) The goal of operations management is to manage the process of turning labor and raw
materials into goods and services of some type.
Answer: TRUE
Explanation: Operations management is the act of controlling and managing the process that
turns inputs, such as raw materials, labor, and equipment into products that customers buy.
Diff: 1 Page Ref: 374
Objective: 14.1
2) Operations management is part of the transformation process.

Answer: FALSE
Explanation: The opposite is true—the transformation process is part of operations management.
Operations management is how you manage, control, and apply the transformation process.
Objective: 14.1
3) The three inputs in the transformation process are people, equipment, and materials.
Answer: FALSE
Explanation: In addition to people, equipment, and materials, the inputs include capital,
technology, and information.
Objective: 14.1
4) Operations management includes service industries but not manufacturing firms.

Answer: FALSE
Explanation: Operations management includes both service and manufacturing industries.
Objective: 14.1
5) When inputs are turned into goods and services, value is created.
Answer: TRUE
Explanation: By definition, the transformation process creates value when it transforms inputs
into goods and services that customers want to buy.
Objective: 14.1
6) Manufacturing organizations produce both physical and nonphysical outputs.

Answer: FALSE
Explanation: Manufacturing organizations produce physical outputs only. A car company, for
example, produces cars.
Objective: 14.1
1
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7) The majority of U.S. companies in 2010 still produce goods rather than services.
Answer: FALSE
Explanation: Currently, 79 percent of U.S. economic activity is directed toward producing
services.
Objective: 14.1
8) For most U.S. companies, high productivity is a matter of survival.

Answer: TRUE
Explanation: Productivity not only increases profits for companies, in most cases it makes the
difference between surviving and not surviving. Highly productive companies thrive; others
usually fall by the wayside.
Objective: 14.1
9) According to W. Edwards Deming, managers should emphasize short-term rather than long-
term planning.
Answer: FALSE
Explanation: Deming prescribed the opposite—all planning should keep the long-term future in
mind.
Objective: 14.1
10) Deming advocated an approach in which managers never get complacent about the quality of
their product.
Answer: TRUE
Explanation: Deming claimed that the effort to attain quality was never-ending. No matter how
good your product is, you always need to be on the lookout for improvements.
Objective: 14.1
11) Productivity goals, according to Deming, should be strictly numerical to avoid ambiguity.
Answer: FALSE
Explanation: Though non-numerical goals can sometimes be subject to misinterpretation,
Deming thought that they were necessary for a productive organization.
Objective: 14.1
12) Deming's 14 points were useful in their time but are now largely considered to be obsolete.
Answer: FALSE
Explanation: Deming's 14 points have withstood the test of time and are still followed by
managers today.
Objective: 14.1
2
13) Beginning in the 1950s U.S. firms began to focus on manufacturing rather than finance and
marketing.
Answer: FALSE
Explanation: The opposite is true—after World War II U.S. managers felt that they had solved
all production problems and began to focus on finance and marketing rather than manufacturing.
Objective: 14.1
14) Companies in Japan and Germany in the 1960s and 1970s began to catch up with U.S. firms
by focusing on quality.
Answer: TRUE
Explanation: Japanese and German firms built modern manufacturing facilities and began
focusing on quality. Their efforts eventually met with great success.
AACSB: Globalizations
Objective: 14.1
15) Operations management is likely to play a key role in American firms regaining their
preeminence among world companies.
Answer: TRUE
Explanation: Operations management, the control of the process that transforms inputs into
goods and services, is key to success in today's competitive business world. So if American
companies regain dominance, operations management is likely to contribute substantially to their
success.
Objective: 14.1
16) Value in a value chain management system is determined by managers.

Answer: FALSE
Explanation: Value is determined by customers, not managers. Any feature of a product that
customers are willing to pay to have is considered value. If customers are willing to pay more for
a red bicycle than an identical blue bicycle then the color red, in this case, has value.
Objective: 14.2
17) Each link in a value chain adds an equal amount of value to a product.
Answer: FALSE
Explanation: Different steps can add different amounts of value. Cutting a diamond adds an
enormous amount of value to the diamond. Mounting the diamond also adds value, but not as
much as cutting. Putting the diamond in a nice box adds even less value.
Objective: 14.2
3
18) Value chain management is externally oriented.
Answer: TRUE
Explanation: Value chain management focuses on both incoming resources to the organization,
but also outgoing products. This contrasts with supply chain management, which focuses on
incoming resources only.
Objective: 14.2
19) Value chain management is efficiency oriented.

Answer: FALSE
Explanation: Value chain management is effectiveness oriented, not efficiency oriented. The
priority in value chain management is to get the right product that customers want, not the most
efficiently made product.
Objective: 14.2
20) Productivity is not important to value chain management.

Answer: FALSE
Explanation: Though value chain management is more effectiveness than efficiency oriented,
productivity is still important. For example, customers may want a great pair of sneakers, but
they also want the sneakers to have a reasonable price. So steps along the value chain that can
increase productivity and therefore keep the price low add value—a selling point—to the
customer.
Objective: 14.2
21) Customers played a role in IKEA's success by being willing to pay higher prices for high
quality furniture.
Answer: FALSE
Explanation: IKEA customers were not willing to pay higher prices. They defrayed some of the
cost of the furniture by transporting it and putting it together themselves.
Objective: 14.3
22) Sharing information is part of the coordination and collaboration requirement for successful
value chain management.
Answer: TRUE
Explanation: Coordination and collaboration requires members of the value chain to be flexible
and share information.
Objective: 14.3
23) The customer is part of the value chain in value chain management.
Answer: TRUE
Explanation: The customer is the most important part of the value chain because it is the
customer who ultimately determines value for every part of the chain.
Objective: 14.3
4
24) Organizational processes in value chain management refer to how work is done.
Answer: TRUE
Explanation: Organizational processes describe the steps that make up the entire value chain,
from the first input to the final product.
Objective: 14.3
25) In value chain management activities are eliminated from the organizational process if they
do not add value to the process.
Answer: TRUE
Explanation: At each step of the organizational process managers ask, "How is value being
added here?" If value is not being added, the step is eliminated.
Objective: 14.3
26) The goal of value chain management is to meet, but never to exceed the needs and desires of
customers.
Answer: FALSE
Explanation: The goal of value chain management is both to meet and to exceed the needs and
desires of customers.
Objective: 14.3
27) Value in value chain management is driven exclusively from the top down.
Answer: FALSE
Explanation: Value is thought to be driven from two directions—from the top down and from
the bottom up.
Objective: 14.3
28) Being rigorous about expectations is a key part of leadership in value chain management.
Answer: TRUE
Explanation: Leaders in value chain management must communicate to all parts of the chain
that expectations are key. For example, managers at American Standard ended up eliminating
many of its suppliers when it found they couldn't meet ambitious expectations.
Objective: 14.3
29) Employees in a value chain management organization must be flexible.

Answer: TRUE
Explanation: Flexibility is the key to job performance in a value chain management system.
Employees need to learn to let go of rigid ideas that define their jobs and learn to do whatever
adds value to the product.
Objective: 14.3
5
30) Trust is so important in value chain management that proponents of the system say you can
never have too much trust.
Answer: FALSE
Explanation: In fact, trusting too much can be a big problem in value chain management when it
allows intellectual property to be appropriated. Employees in a shared environment must learn to
protect their assets.
Objective: 14.3
31) Partners in a value chain management system need to be able to both learn from and educate
other partners in the value chain.
Answer: TRUE
Explanation: Partners in the value chain often switch roles. They may learn from one partner and
turn around and play the role of teacher with a second partner. Those roles could also switch at a
later date in time.
Objective: 14.3
32) One place in which technology has little impact is the fast-food restaurant business.
Answer: FALSE
Explanation: Companies are using technology to do all sorts of things to improve productivity in
fast-food restaurants. For example, one company used computers to count cars in drive-through
lanes and subsequently use the information to anticipate demand from the cars in line.
AACSB: Technology
Objective: 14.4
33) Aesthetics may improve how a product looks but they do not contribute to the actual quality
of the product.
Answer: FALSE
Explanation: Aesthetics are considered one of the eight defining characteristics of product
quality.
Objective: 14.4
34) Product quality and service quality are two different things.
Answer: TRUE
Explanation: The two types of quality are evaluated differently. Product quality has eight
different dimensions. Service quality has six different dimensions.
Objective: 14.4
35) ISO 9000 certification provides proof that a quality operations system is in place in a facility.
Answer: TRUE
Explanation: ISO certification has been awarded in 175 different countries and is recognized the
world over as a measure of quality.
Objective: 14.4
6
36) In the Six Sigma system, the higher the sigma value, the greater number of defects you
would expect from a product.
Answer: FALSE
Explanation: The opposite is true—a high sigma value signifies a low, not a high, number of
defects.
Objective: 14.4
37) To find the planned duration of a project on a Gantt chart, simply look at the width of the bar
that represents actual progress.
Answer: FALSE
Explanation: The width of the bar that represents the goal shows the planned duration of the
project, not the actual progress bar.
AACSB: Analytic Skills
Objective: 14.4
38) A load chart can tell you how many workers are busy at a given point in time.
Answer: TRUE
Explanation: Reading down on the sample load chart on page 391, for example, shows times
when all workers are occupied—at the end of month 4—and when fewest workers are occupied
—during week 3.
Objective: 14.4
39) The critical path in a PERT network is the least time-consuming sequence required to
complete a project in the shortest period of time.
Answer: FALSE
Explanation: The critical path in a PERT network is the most, not least, time-consuming
sequence required to complete a project in the shortest period of time.
Objective: 14.4
40) ________ management oversees the transformation process that converts resources such as
labor and raw materials into finished goods and services.
A) Control
B) Operations
C) Systems
D) Planning
Answer: B
Explanation: B) Operations management is defined as the process that oversees every step of the
transformation process, making operations the correct response and ruling out all other
responses. The transformation process is what turns material and non-material inputs into goods
and services, so operations management is the management of this process that converts raw
inputs into finished product outputs.
Objective: 14.1
7
41) The purpose of operations management is to manage ________.
A) inputs
B) outputs
C) the transformation process
D) the manufacturing process
Answer: C
Explanation: C) Operations management is the management of the transformation process, the
process that turns inputs, such as people and materials, into outputs, such as goods and services.
Since inputs and outputs are part of the transformation process, they are only partial answers for
this question. Similarly, the manufacturing process is part of the the transformation process, so it
is not a correct response for this question.
Objective: 14.1
42) The transformation process transforms ________.

A) goods and services into products
B) inputs into services only
C) materials into goods only
D) inputs into goods and services
Answer: D
Explanation: D) The transformation process takes inputs of various types, including materials,
equipment, people, technology, capital, and information and turns them into products, that is,
goods and services, making "inputs into goods and services" the correct response for this
question. The process clearly ends rather than begins with goods and services, making "goods
and services into products" an incorrect choice. The remaining two choices are both incorrect
because the transformation process includes both goods and services and is not limited to either
output.
Objective: 14.1
43) Value is created during the process of ________.

A) inputs being converted into outputs
B) inputs being stored
C) outputs being measured
D) operations being controlled
Answer: A
Explanation: A) During the transformation process, value is created when inputs—such things as
knowledge, capital, and raw materials—are turned into finished products, or outputs, making
"inputs being converted into outputs" the correct response for this question and ruling out all
other choices. A raw material such as petroleum, for example, gains value after it has been
transformed into gasoline. Value itself is defined as something that customers will pay for, or
give up some other resource for.
Objective: 14.1
8
44) Inputs in the transformation process include ________.
A) physical, material substances only
B) both material and non-material items
C) non-material items only
D) equipment and materials only
Answer: B
Explanation: B) Inputs can include any material or non-material item that contributes to the
transformation process, making "both material and non-material items" the correct response for
this question. "Physical substances only" and "equipment and materials only" are wrong because
they are limited to material items, while "non-material items only" makes the opposite mistake,
failing to include any material items.
Objective: 14.1
45) All organizations produce goods or services through the ________ process.
A) transformation
B) service
C) manufacturing
D) operations
Answer: A
Explanation: A) The transformation process includes sequences that produce both material
goods and non-material services, making transformation the correct response. Service and
manufacturing are limited to either one or the other, the manufacturing or service process, so
they are not correct responses since they don't include all organizations. Operations is incorrect
because the operations process is not a recognized process in this context.
Objective: 14.1
46) As a product, piano lessons are ________.

A) a good because you can purchase them
B) a service because they are non-material
C) a good because they can be divided into discrete lessons
D) a service because someone needs to give them
Answer: B
Explanation: B) Goods are physical, material objects and services are non-material, nonphysical
objects. Being able to purchase or subdivide piano instruction into individual lessons does not
make them physical, material objects. Being "given" also does not make piano lessons a service
because plenty of non-material things are given. The correct response for this question is "a
service because they are non-material" because it identifies piano lessons as being a non-material
service.
Objective: 14.1
9
47) In a transformation process people are inputs because they ________.
A) are material beings
B) are costly
C) perform tasks that are needed to create outputs
D) have knowledge and information
Answer: C
Explanation: C) What makes people qualify as inputs in the transformation process is not that
they are costly or are material beings. Some inputs, such as information, for example, are non-
material, so being material is not a necessary characteristic of an input. The fact that people have
knowledge and information also does not qualify them as inputs. People are inputs only because
they use that knowledge and information to perform tasks that turn goods and services into
outputs, making "performing tasks needed to create outputs" the correct response. People are
inputs because they help the transformation process transform raw inputs into finished products.
Objective: 14.1
48) It is easier to see the transformation process at work in manufacturing organizations than in
service organizations because manufacturing organizations ________.
A) produce goods and services
B) turn inputs into outputs
C) turn inputs into physical and nonphysical products
D) produce physical goods
Answer: D
Explanation: D) Producing goods and services and turning inputs into physical and nonphysical
products are both untrue because manufacturing organizations produce tangible, physical goods
only, not services or nonphysical products. All organizations that carry out transformation
processes turn inputs into outputs, so turning inputs into outputs is not a correct response.
Producing physical goods is the correct response because it identifies the key characteristic of
manufacturing organizations—they produce material, physical products that are easy to identify
as outputs.
Objective: 14.1
49) Service organizations ________.

A) produce physical and nonphysical outputs
B) produce physical outputs only
C) require nonphysical inputs only
D) produce nonphysical outputs only
Answer: D
Explanation: D) Service organizations produce service, a nonphysical product or output, making
"producing nonphysical outputs only" the correct response. Manufacturing organizations are the
organizations that produce physical, material products, which rules out "producing both physical
and nonphysical outputs" as well as "producing physical outputs only." While service
organizations produce nonphysical products, they do not necessarily require nonphysical inputs.
Such things as information and effort are inputs that are routinely used to create service as an
output, for example.
Objective: 14.1
10
50) Manufacturing organizations ________.
A) produce physical outputs only
B) produce nonphysical outputs only
C) require nonphysical inputs only
D) require physical inputs only
Answer: A
Explanation: A) Manufacturing organizations produce recognizable, physical products as
outputs, making "producing physical outputs only" the correct response. Service organizations,
on the other hand, produce nonphysical services as products, which rules out "producing
nonphysical outputs only." While manufacturing organizations produce physical products, they
use both physical or nonphysical items as inputs. For example, a manufacturing organization that
makes toys uses both physical materials (plastic, metal) and nonphysical things (ideas, designs,
effort) to make its physical products.
Objective: 14.1
51) Which of the following is NOT an example of a service organization?

A) military forces
B) a university
C) a lens maker
D) a hospital
Answer: C
Explanation: C) The products or outputs of a hospital (care), a military force (protection), and a
university (knowledge) are all nonphysical entities, making these organizations service
organizations. A manufacturer of lenses, on the other hand, is creating tangible, physical objects
as output, so it is not a service organization, making a lens maker the correct response for this
question.
Objective: 14.1
52) It is estimated that in the United States, about ________ of all economic output is toward
making tangible, physical objects.
A) 10 percent
B) 20 percent
C) 40 percent
D) 80 percent
Answer: B
Explanation: B) Almost 80 percent of economic activity is service related, which leaves about
20 percent of companies that are creating tangible goods of some type, making 20 percent the
correct response and ruling out all other responses.
Objective: 14.1
11
53) A bus company is a ________ organization because its product is ________.
A) service; buses
B) manufacturing; transportation
C) service; transportation
D) manufacturing; buses
Answer: C
Explanation: C) A bus company does not make a physical product, so it is not a manufacturing
organization, eliminating the two manufacturing choices as correct responses. The product of a
bus company is not buses but transportation for people, so "service; transportation" is the correct
response and "service; buses" is incorrect.
Objective: 14.1
54) You would expect a highly developed country like ________ to have a predominantly
________ economy
A) France; manufacturing
B) France; service
C) Bolivia; manufacturing
D) Bolivia; service
Answer: B
Explanation: B) In general, highly developed countries such as France and the United States
have service economies, making "France; service" the correct response and eliminating "France;
manufacturing." Bolivia has a largely undeveloped economy so the remaining two choices
should both be eliminated.
Objective: 14.1
55) A laptop computer company is a ________ organization because its product is ________.
A) service; electronic
B) manufacturing; electronic
C) service; a computer
D) manufacturing; a computer
Answer: D
Explanation: D) A computer company takes raw materials and makes a physical product, a
computer, so it is a manufacturing organization, making "manufacturing; a computer" the correct
response. "Service; electronic" and "service; a computer" can be ruled out because they identify
the company as a service organization, which is not true since it makes a physical product.
"Manufacturing; electronic" is incorrect because the company's product is a computer, not an
electronic product.
Objective: 14.1
12
56) You would expect an undeveloped country like ________ predominantly to have a ________
economy.
A) Laos; non-service
B) Laos; service
C) Australia; manufacturing
D) Belgium; non-service
Answer: A
Explanation: A) In general, undeveloped countries like Laos and Vietnam have non-service,
manufacturing economies, making "Laos; non-service" the correct response and eliminating
"Laos; service." Australia and Belgium both have highly developed economies so the remaining
two choices should both be eliminated.
Objective: 14.1
57) In the ever more difficult struggle to survive in a competitive world, Evans Findings
Company has a work shift with ________.
A) extra employees to increase productivity
B) no employees to allow workers to rest
C) no employees to punish unproductive workers
D) no employees to increase productivity
Answer: D
Explanation: D) Paying employees is an expensive part of doing business for a manufacturing
organization, so Evans operates a workerless shift to lower labor costs and increase productivity,
making "no employees to increase productivity" the correct response and ruling out the other
three choices.
Objective: 14.1
58) Most countries in today's global business climate see ________ as the key to success.
A) maintaining productivity
B) increasing productivity
C) higher wages
D) shorter working hours
Answer: B
Explanation: B) Though companies in most nations would love to give out high wages and
shorten working hours, they can only do this if they are able not just to maintain current
productivity levels, but actually keep increasing productivity as time passes. Increased
productivity is seen as the key to all good things—higher profits, higher wages, lower inflation,
and ultimately more employee satisfaction.
Objective: 14.1
13
59) McDonald's recently made productivity gains by cutting the ________.
A) wages of workers
B) weight of an order of French fries
C) time workers were trained
D) time it takes to make French fries
Answer: D
Explanation: D) Cutting training time for workers might actually decrease, rather than increase
productivity, so "time workers were trained" is an incorrect response. Cutting wages or portion
size of French fries might increase productivity, but there is no evidence that McDonald's did
this. There is evidence to show that McDonald's cut the time it takes to make French fries,
making this choice the correct response.
Objective: 14.1
60) Which of the following is NOT a way to increase productivity?

A) increase inputs
B) decrease costs
C) increase outputs
D) increase efficiency
Answer: A
Explanation: A) Increasing efficiency is an effective way to increase productivity. Decreasing
costs and increasing outputs are both ways to increase efficiency, so both also increase
productivity. Increasing inputs usually decreases efficiency, since efficiency is defined as the
ratio of outputs to inputs, so increasing inputs is the correct response for this question.
Objective: 14.1
61) W. Edwards Deming thought that ________ were the key to productivity.
A) workers
B) controlling costs
C) managers
D) both managers and workers
Answer: C
Explanation: C) Deming's thinking on productivity was clear. Though workers and such things
as controlling costs were important, the real key to productivity were managers, because they
were the ones who could do such things as control costs and get workers to function more
efficiently and effectively. This makes managers the correct response and eliminates both
managers and workers as a correct response.
Objective: 14.1
14
62) With respect to planning, Deming believed that ________ was most important for
productivity.
A) short-term planning
B) long-term planning
C) medium-term planning
D) flexible planning
Answer: B
Explanation: B) Deming felt that looking way ahead to the long-term future was one of the 14
keys to productivity. Though other forms of planning were important, the long view was critical
to Deming, making long-term planning the correct answer and eliminating the other choices.
Objective: 14.1
63) With respect to product quality, Deming believed that a company should never ________.
A) pay more attention to quality than to price
B) be satisfied with its current level of quality
C) try to fix a product if it "ain't broke"
D) put quality ahead of profits
Answer: B
Explanation: B) Deming's most compelling thoughts on product quality warned companies
about getting complacent with respect to quality, making being satisfied with its current level of
quality the correct response for this question. This effectively rules out the other three choices as
all three diminish the primacy of quality and fail to warn about complacency.
Objective: 14.1
64) Deming was a strong believer in keeping accurate statistics and advocated ________ goals.
A) strictly non-numerical
B) strictly numerical
C) both numerical and non-numerical
D) both numerical and statistical
Answer: C
Explanation: C) Deming felt that numerical goals were important, but they should be combined
with non-numerical goals, making "both numerical and non-numerical" the correct response.
"Strictly non-numerical" can be ruled out because it does not include numerical goals, while
"strictly numerical" fails to include non-numerical goals. "Both numerical and statistical" is not
correct because numerical and statistical goals are largely the same thing.
Objective: 14.1
15
65) Of all the emotions that affect a workplace, Deming felt that ________ was most important
for increasing productivity.
A) making workers fear failure
B) eliminating fear
C) making employees happy
D) eliminating anger
Answer: B
Explanation: B) Though getting rid of anger and promoting happiness most likely have an effect
on productivity, Deming felt that eliminating fear was a key to productivity, making this choice
the correct response. Making workers fear failure can be ruled out as a correct answer because
instead of getting rid of fear it essentially advocates fear.
Objective: 14.1
66) Deming felt that ________ with statistics.

A) employees should be capable of dealing
B) employees should not be asked to deal
C) managers only should deal
D) employees only should deal
Answer: A
Explanation: A) Deming felt that employees should not shy away from statistics and that they
should be able to handle the statistics that their jobs entailed, making "employees being capable
of dealing" the correct response and ruling out "not being asked to deal." Though Deming felt
that employees needed to deal with statistics, he did not think that employees alone or managers
alone should exclusively handle statistical matters.
Objective: 14.1
67) Deming felt that doing quality work was this.

A) a job requirement
B) a goal
C) a standard to strive toward
D) optional for most jobs
Answer: A
Explanation: A) Deming did not consider doing quality work to be optional or a goal or standard
that employees would seek but may or may not attain. Instead, Deming felt that quality work was
an essential requirement that employers should demand of their employees, making "a job
requirement" the correct response for this question.
Objective: 14.1
16
68) Deming felt that any new skills that employees needed should be acquired ________.
A) when they are hired and trained
B) by the employees on their own
C) when the job required it
D) years ahead of time
Answer: C
Explanation: C) Rather than have employees pick up new skills ahead of time, during training,
or on their own, Deming felt that skills should be taught as the need arose, so the training would
be fresh in the employee's mind and could be put into practice immediately. This makes "when
the job required it" the correct response for this question.
Objective: 14.1
69) Since Deming first proposed his 14 points for improving productivity, his prescriptions have
________.
A) been largely discredited
B) fallen into disuse
C) been confirmed repeatedly
D) been confirmed for U.S. workers only
Answer: C
Explanation: C) Rather than be discredited or fall into disuse, Deming's 14 points have
withstood the test of time and are now thought to be the standard method for improving
productivity, making "being confirmed repeatedly" the correct response. Deming's work began in
Japan and its success is not limited to the United States, so "being confirmed for U.S. workers
only" is not a correct response.
Objective: 14.1
70) Where did the modern era of manufacturing primarily begin?

A) the coal industry
B) Detroit automobile factories
C) southern cotton plantations
D) northeastern textile mills
Answer: B
Explanation: B) Though the textile mills of New England helped usher in the Industrial
Revolution, they are not thought to be as important to manufacturing as Detroit's auto factories,
making "Detroit automobile factories" the correct response for this question. Southern
plantations and coal mines were not actually manufacturing facilities so they do not qualify as
watershed industries.
Objective: 14.1
17
71) After World War II, U.S. managers made the mistake of thinking that ________.
A) production problems were solved
B) marketing problems were solved
C) finance problems were solved
D) marketing problems were not solved
Answer: A
Explanation: A) The mistake that U.S. managers made was to think that production didn't matter
—assembly lines and other innovations from previous decades would take care of productivity,
so managers should focus on marketing and finance. This explains why the three incorrect
choices are incorrect, because they all deal with marketing or finance, and the real mistake that
managers made was to ignore production, making "production problems being solved" the
correct response for this question.
AACSB: Technology
Objective: 14.1
72) In the 1960s and 1970s, many U.S. manufacturers fell behind because they ignored
production issues and focused on ________.
A) quality and efficiency
B) marketing and finance
C) efficiency and marketing
D) finance and quality
Answer: B
Explanation: B) While U.S. firms focused on marketing and finance, foreign companies,
especially the Japanese, focused on quality and efficiency, making "marketing and finance" the
correct response and ruling out "quality and efficiency" as the correct response. The remaining
two choices are both incorrect because they fail to identify both marketing and finance.
Objective: 14.1
73) Managers in the United States today see this as the path to establishing and maintaining
global leadership.
A) reducing costs
B) increasing production
C) operations management
D) scientific management
Answer: C
Explanation: C) Operations management—managing the transformation process from inputs to
outputs every step of the way—is where managers of successful companies are investing their
efforts in today's business climate, making operations management the correct response.
Reducing costs and increasing production are just parts of the story that operations management
encompasses, so they are not correct responses for this question. Scientific management is not a
term that is in common use with today's managers.
Objective: 14.1
18
74) Value is any aspect of a product that customers ________ in the product.
A) like or admire
B) want to see
C) will pay for
D) notice
Answer: C
Explanation: C) The key to value is that it is not simply something that customers notice,
admire, or would like to have in a product. Value is something that customers are willing to pay
for in one way or another, either with money or some other resource. This makes "will pay for"
the correct response for this question.
Objective: 14.2
75) The extra warmth that Ugg sheepskin boots provide has value since ________ are willing to
________ it.
A) suppliers; provide
B) customers; pay for
C) manufacturers; make
D) managers; plan for
Answer: B
Explanation: B) The views of suppliers, manufacturers, or managers are not important when it
comes to value. Value is entirely customer-defined. If customers are willing to pay for a feature,
then that feature has value. This makes "customers; pay for" the correct response for this
question.
Objective: 14.2
76) On eBay, brand-new red espresso machines from Francis Francis routinely sell for $50 more
than identical white machines. What can you conclude?
A) The color white has no value.
B) The color red has value.
C) Color has no value since it does not add to the function of the machine.
D) There is something different about the red machines.
Answer: B
Explanation: B) The fact that customers are willing to pay more for the color red, even though
the two machines are otherwise identical, shows that the color red has value, making that choice
the correct response. The color white may also have value; for example, it may sell for more than
a black machine—making the color white having no value an incorrect response. Color having
no value is incorrect because the actual function of a feature doesn't matter. The only thing that
matters is that people will pay more for that feature. There being something different about red
machines is wrong because there is no evidence provided that it is true.
Objective: 14.2
19
77) When the New York Times experimented with charging money for its online news source, its
popularity on the Internet plummeted. This shows that online news has ________.
A) enormous value
B) no value
C) no appeal
D) little value
Answer: D
Explanation: D) The experiment with charging for Internet news showed that though millions of
customers were eager to read the Times for free, few were willing to pay for that service—
meaning that the news as presented had little value. This makes "little value" the correct response
and rules out all other responses. Note that the value of the news must be taken in context—
people were unwilling to pay for the news not, according to the Times, because they didn't
appreciate it but because there were so many free options, it didn't seem worth it for customers to
pay for what they could get for nothing.
Objective: 14.2
78) The ________ is the series of work actions that add value to a product as it is being
transformed from inputs to finished product.
A) supply chain
B) value chain
C) output chain
D) input chain
Answer: B
Explanation: B) A value chain is defined as the series of steps that each adds value to a product
as it is being made. For example, choosing fine wood adds value to furniture as it is being made
and so does the workmanship of the people who build the item. A supply chain is concerned
primarily with manufacturers having the proper flow of materials and equipment when they
make a product, not adding value to the product. Output and input chains are not recognized
terms.
Objective: 14.2
79) In its entirety, the value chain can encompass the supplier's ________ to the customer's
________.
A) customers; suppliers
B) customers; customers
C) suppliers; suppliers
D) suppliers; customers
Answer: D
Explanation: D) This statement takes the value chain for a given company beyond the limits of
the company itself. For example, the tractors used by Starbucks coffee growers in Guatemala are
suppliers of suppliers. Clients of a design firm who enjoy Starbucks coffee during a meeting are
customers of customers. This situation clearly describes "suppliers; customers" as the only
answer that makes sense for this question.
Objective: 14.2
20
80) ________ is the process of managing the sequence of activities and information along the
entire value chain for a product.
A) Supply chain management
B) Value chain management
C) Supply management
D) Customer management
Answer: B
Explanation: B) Value chain management is the control of the entire value chain (both inputs
and outputs), adding value as defined by customers during each step of the process. For example,
the snowplow operator who salts and scrapes the road is adding value to a ski resort by allowing
customers to reach the resort after a heavy snowstorm. Therefore, managing the value chain for
the ski resort requires taking care of not just the snow plow operator, but also the mechanic who
services the plow operator's truck. Both individuals are key parts of a value chain management
system for the resort. This makes value chain management the correct response and rules out all
other responses.
Objective: 14.2
81) ________ focuses on providing an efficient flow of resources to an organization.

A) Supply chain management
B) Value chain management
C) Value
D) Supply
Answer: A
Explanation: A) Value chain management is an externally oriented process that focuses on
anything that provides value for a value chain, both inputs and outputs. Supply chain
management, on the other hand, focuses entirely on incoming resources, not outputs, making this
choice the correct response for this question. Value or supply themselves are what guides each
management process, not the management processes themselves.
Objective: 14.2
82) Value chain management is ________ oriented.

A) supplier
B) internally
C) manager
D) externally
Answer: D
Explanation: D) Value chain management is an externally oriented process that focuses on
anything that provides value along the transformation process, both inputs and outputs, making
externally the correct response. Supply chain management, on the other hand, is internally
focused and supplier focused, making internally and supplier both incorrect responses. Neither
value chain or supply chain management is especially manager oriented, making manager an
incorrect response.
Objective: 14.2
21
83) All of the following are characteristics of value chain management EXCEPT ________.
A) it is externally oriented
B) it focuses on both incoming materials and outgoing products and services
C) it is efficiency oriented
D) it is effectiveness oriented
Answer: C
Explanation: C) Key characteristics of value chain management include being externally
oriented on both inputs and outputs and having effectiveness rather than efficiency as its priority.
This makes being efficiency oriented the correct response for this question.
Objective: 14.2
84) In value chain management, ultimately the ________ have power to make changes.
A) suppliers
B) customers
C) employees
D) managers
Answer: B
Explanation: B) Instead of suppliers, employees, or managers, customers hold all power in a
value chain management system because they are the ones who decide whether actions and
features have value, making customers the correct response. For example, a supplier for a
chocolate company may have what they think is the world's best cocoa beans. However, unless
customers are willing to pay extra for those beans, they will not be incorporated into the value
chain. So customers make the decision about how the chain will be configured.
Objective: 14.2
85) When value is created by incorporating a new step in a value chain ________ benefits.
A) everyone downstream from that step in the chain
B) only the party that initiated the step
C) everyone in the chain
D) only the customers
Answer: C
Explanation: C) Every increase in value along a value chain benefits not just the initiator of the
improvement, downstream partners in the chain, or customers, but all members of the chain,
making everyone in the chain the correct response. An increase in value means more customer
sales and more profits and other benefits for all partners in the chain.
Objective: 14.2
22
86) A new cell phone battery doubles battery life but also increases the cost of the phone. This
battery adds ________.
A) no value to the phone since it increases the cost
B) value to the phone only if the cost can be cut
C) value to the phone if more customers buy the phone
D) no value to the phone if more customers buy the phone
Answer: C
Explanation: C) The new battery can add value if and only if it increases sales for the phone,
making "value if more customers by the phone" the correct response for this question. Increasing
the cost is negative only if it decreases sales, so the two choices indicating no value are incorrect
responses. The cost of the phone may not need to be cut if customers judge that the extra battery
life is worth the higher price.
Objective: 14.2
87) Since all partners in a value chain benefit when value is added, partners ideally should
________.
A) collaborate closely
B) work independently of one another
C) be dependent only on its narrow local part of the chain
D) collaborate with every other part of the chain
Answer: A
Explanation: A) Value chains should aim to work as a unit, meaning they should collaborate
closely, making that choice the correct response. Both working independently and dependently
are incorrect responses because they limit the amount of collaboration that takes place. That
being said, trying to collaborate with every other part of the chain is probably unrealistic and
unproductive, so this choice is not a correct response.
Objective: 14.2
88) A business model is ________.

A) a competitor that a company seeks to emulate
B) a strategic design for how a company intends to make profit
C) a theoretical ideal that a company seeks to emulate
D) an unrelated organization whose practices a company seeks to emulate
Answer: B
Explanation: B) A business model is not a model that an organization tries to emulate whether it
is a competitor, a theoretical ideal, or an unrelated company, making all of these choices
incorrect. A business model is instead a plan that reveals the edge that a company has that will
allow it to profit from a situation. For example, one company might feature an efficiency
business model, in which it can control costs better than its competitors, while a second company
may feature some unique product that gives it an edge over the competition.
AACSB: Technology
Objective: 14.3
23
89) The requirement for value chain management that involves being flexible and sharing
information is ________.
A) employees/human resources
B) technology investment
C) coordination and collaboration
D) organizational processes
Answer: C
Explanation: C) Coordination and collaboration involves partners being flexible, open, and
sharing information, making this choice the correct response for this question. Technology
investment involves intelligently applying computer and other forms of technology toward
increasing efficiency, communication, or some other value-adding element to the value chain.
Organizational processes involve how work is actually done in a value chain. Employees/human
resources involve finding and training people who can learn, adapt, and are flexible enough to
function in a successful value chain.
Diff: 2 Page Ref: 380-384
Objective: 14.3
90) The requirement for value chain management that involves better product demand
forecasting information is ________.
A) leadership
B) organizational culture and attitudes
Answer: D
Explanation: D) Organizational processes involve how work is actually done in a value chain.
This often entails restructuring how suppliers link to customers to learn how much demand there
is for their product. This makes organizational processes the correct response for this question.
Coordination and collaboration involves partners being flexible, open, and sharing information.
Leadership involves effectively communicating expectations and values to motivate and
coordinate not just some but all partners along a value chain. Organizational culture and attitudes
require all members of a value chain to share ideas about such things as collaboration, trust,
mutual respect, and flexibility.
Objective: 14.3
24
91) The requirement for value chain management that is most closely associated with defining
and communicating expectations is ________.
A) coordination and collaboration
C) organizational culture and attitudes
D) leadership
Answer: D
Explanation: D) Leadership involves effectively communicating expectations and values to
motivate and coordinate not just some but all partners along a value chain, making leadership the
correct response for this question. Organizational culture and attitudes require all members of a
value chain to share ideas about such things as collaboration, trust, mutual respect, and
flexibility. Coordination and collaboration involve partners being flexible, open, and sharing
information. Technology investment involves intelligently applying computer and other forms of
technology toward increasing efficiency, communication, or some other value-adding element to
the value chain.
Objective: 14.3
92) The requirement for value chain management that is most closely associated with trust is
________.
A) organizational culture and attitudes
C) organizational processes
D) employees/human resources
Answer: A
Explanation: A) Organizational culture and attitudes require all members of a value chain to
share ideas about such things as collaboration, trust, mutual respect, and flexibility. Since trust is
highlighted in this category, it is the correct response for this question. Organizational processes
involve how work is actually done in a value chain. Employees/human resources involve finding
and training people who can learn, adapt, and are flexible enough to function in a successful
value chain. Technology investment involves intelligently applying computer and other forms of
technology toward increasing efficiency, communication, or some other value-adding element to
the value chain.
Objective: 14.3
25
93) The requirement for value chain management that includes an enterprise resource planning
(ERP) system to link all of an organization's activities is ________.
D) leadership
Answer: B
Explanation: B) Technology investment involves intelligently applying computer and other
forms of technology toward increasing efficiency, communication, or some other value-adding
element to the value chain. An ERP system is a computer software system so technology
investment is the correct response for this question. Employees/human resources involve finding
and training people who can learn, adapt, and are flexible enough to function in a successful
value chain. Leadership involves effectively communicating expectations and values to motivate
and coordinate not just some but all partners along a value chain. Coordination and collaboration
involve partners being flexible, open, and sharing information.
Objective: 14.3
94) The requirement for value chain management that is most closely associated with learning on
the job is ________.
Answer: A
Explanation: A) Employees/human resources involve finding and training people who are
flexible, can adapt, and especially can learn new skills and tasks in a value chain, making this
choice the correct response for this question. Coordination and collaboration involve partners
being flexible, open, and sharing information. Technology investment involves intelligently
applying computer and other forms of technology toward increasing efficiency, communication,
or some other value-adding element to the value chain. Organizational processes involve how
work is actually done in a value chain.
Objective: 14.3
95) An especially difficult part of the coordination and collaboration requirement for successful
value chain management is identifying things that ________.
A) you value but customers do not value
B) customers value but you do not value
C) both you and customers value
D) you value but do not add value to the value chain
Answer: B
Explanation: B) A key to a good value chain management system is for a manager to recognize
what customers value even if it means nothing to him- or herself. For example, a wine maker
may think the label of a wine bottle is utterly unimportant, but if customers find value in an
attractive label, the wine maker must recognize that value. This makes "customers value but you
do not value" the correct response for this question and rules out other responses.
Objective: 14.3
26
96) Dell uses ________ to coordinate suppliers, customers, and its own employees to stay on top
of orders that come in.
A) frequent telephone calls
B) an enterprise resource planning system
C) email
D) Facebook and Twitter
Answer: B
Explanation: B) Telephones, email, and social networking sites are not enough to keep
production and scheduling of PCs rolling in Dell's facilities. Instead, Dell turns to an ERP which
coordinates its own employees with customers and suppliers, constantly updating information, to
keep things running smoothly.
AACSB: Technology
Objective: 14.3
97) Organizational processes in value chain management organizations need to eliminate

________.
A) nonvalue-adding activities
B) demand forecasting
C) ties between customers and suppliers
D) organizational core competencies
Answer: A
Explanation: A) Organizational processes require that such things as demand forecasting and
customer-supplier ties be increased rather than decreased. Core competencies are exploited by an
organization in this situation, not eliminated. What managers must do is get rid of any activities
that are not adding value to the value chain, making nonvalue-adding activities the correct
response for this question.
Objective: 14.3
98) In organizations such as Saint-Gobain Performance Plastics, ________ are brought together
to work on the company's premises.
A) customers and company employees
B) current and retired employees
C) competitors and customers
D) customers and suppliers
Answer: D
Explanation: D) Saint-Gobain Performance Plastics brings customers and suppliers to work
together in their facility so they can find out exactly what each party needs, making customers
and suppliers the correct response for this question, and ruling out all other responses.
Objective: 14.3
27
99) Value in a value chain management organization should be driven ________.
A) from the top down only
B) from the bottom up only
C) from the middle up
D) from the top and and the bottom up
Answer: D
Explanation: D) The CEO of the Furon Company explains that value needs to come from the
top, that is, from top management looking for ways to find value in the value chain, and also
from the bottom, from customers whose preferences direct and shape products, meaning that
from the top and the bottom up is the correct response for this question. Top down or bottom up
only approaches are too limited. A "middle up" approach was not suggested by the Furon CEO
so middle up is an incorrect response.
Objective: 14.3
100) One key measurement that managers in value chain management companies strive to make
is an accurate ________.
A) supply forecast
B) weather forecast
C) demand forecast
D) production forecast
Answer: C
Explanation: C) An accurate demand forecast from customers gives suppliers and producers a
way to gauge their level of production for the near future. If the demand forecast is high,
suppliers and producers step up production. If demand is low, they step production down. This
makes demand forecast the correct response. A supply or production forecast would not be useful
since it would not match demand. A weather forecast would be important only in industries that
depend on specific types of weather.
Objective: 14.3
101) One of the most important things a leader can do in a value chain management company is
________.
A) provide a good role model
B) show a positive attitude
C) be friendly with employees
D) clearly express expectations
Answer: D
Explanation: D) Though positive attitudes, friendliness, and providing a good role model can all
be pluses for a leader, making sure that partners throughout the value chain understand exactly
what is expected of them is a critical function of a leader. This makes "clearly expressing
expectations" the correct response for this question. When value chain partners don't understand
what is expected of them, they can fail to perform optimally and drag down an an entire value
chain. That is why clearly identifying and expressing expectations is such an important function
for leaders of value chain management companies.
Objective: 14.3
28
102) American Standard improved the quality of its value chain by getting rid of partners who
________.
A) could not work on holidays
B) could not meet expectations
C) were not in the bath and kitchen business
D) were not suppliers
Answer: B
Explanation: B) By having high expectations and laying those expectations out clearly,
American Standard avoided trouble in its value chain by eliminating supplier partners who could
not perform up to company expectations, making that choice the correct response. These partners
were suppliers in the kitchen and bath business, which rules out the choices indicating not being
in the bath and kitchen business and not being suppliers. Not working holidays can be ruled out
because working on holidays was not recognized as an important issue in this situation.
Objective: 14.3
103) This is the most important resource in any value chain.

A) employees
B) raw materials
C) capital
D) technology
Answer: A
Explanation: A) While materials, capital, and technology can be important parts of a value
chain, the chain will only perform as well as the people who make it up allow, making
employees the correct response for this question. Ultimately, all value refers back to people in
the chain that include suppliers, employees, managers, and customers.
Objective: 14.3
104) Above all, jobs and job design in a value chain management company must be ________.
A) flexible
B) high paying
C) strictly defined and not likely to change
D) completely undefined
Answer: A
Explanation: A) Flexibility is the key to jobs in a successful value chain, making flexible the
correct response for this question. Flexibility is likely to lead to success which can result in high
pay, but high pay is not a requirement for value chain jobs. Being strictly defined can be ruled
out because it describes an inflexible, rather than a flexible job, while an undefined job is not
likely to be successful in any kind of an organization.
Objective: 14.3
29
105) The key to any job in a successful value chain is that it ________.
A) is well defined and easy to carry out
B) best helps the chain create customer value
C) is maximally efficient
D) saves time and money
Answer: B
Explanation: B) Whether a job is efficient, well-defined, or saves time and money is secondary
in a value chain. The only thing that matters in the chain is that the job creates value, making
"best helping the chain create customer value" the correct response. Of course, more efficient
creation of customer value is better than less efficient creation of customer value, but it is
important to recognize that it is the value and not efficiency that comes first.
Objective: 14.3
106) Workers in a value chain management company need to be ready to ________ at any time.
A) work in dangerous conditions
B) learn new job skills
C) compete with coworkers
D) lose their jobs
Answer: B
Explanation: B) Since feedback from some part of the value chain can cause the job that a
worker does to change, workers need to be able to learn new skills at any time, making "learning
new job skills" the correct response. Working in dangerous conditions, competing with
coworkers, or constantly fearing for their jobs are things that value chain jobs typically do not
ask of workers.
Objective: 14.3
107) Because the nature of jobs can change quickly, value chain management companies often
need to make a significant investment in ________.
A) heavy equipment
B) market research
C) light equipment
D) job training
Answer: D
Explanation: D) When jobs change quickly, investing in heavy or light equipment can be risky,
making these two choices incorrect responses. Market research would not help a company cope
with changing jobs, so that choice is an incorrect response. What does help companies cope with
rapidly changing jobs is job training, making job training the correct response for this question.
Objective: 14.3
30
108) Organizational culture and attitudes are shared by ________ value chain partners.
A) external
B) internal
C) both internal and external
D) customers and external
Answer: C
Explanation: C) Organizational attitudes and culture are not just for internal value chain
partners. They should also be shared by external partners, making both internal and external the
correct response and ruling out the two choices that only indicate one of these. Customers can't
really be expected to share company values, so customers and external is an incorrect response.
Objective: 14.3
109) In order for a value chain to function successfully, different partners in the chain must
________.
A) have trust in one another
B) compete with one another
C) distrust one another
D) like one another
Answer: A
Explanation: A) Competition or distrust among value chain partners would be
counterproductive, so both of those choices are incorrect. Partners do not need to like one
another, but mutual respect and trust is essential for any successful value chain management
organization.
Objective: 14.3
110) Attitudes that value collaborating, openness, and mutual respect are requirements for
________.
A) all value chain management companies
B) all companies
C) all value chain management companies that use a "sharing" style
D) some, but not all value chain management companies
Answer: A
Explanation: A) Part of being a value chain management company is to adopt organizational
culture and attitudes that prize collaboration, openness, and mutual respect for partners in the
organization, making "all value chain management companies" the correct response for this
question and ruling out all other responses. "All companies" is not a correct response for this
question because traditional mechanistic companies, for example, do not value such things as
openness and collaboration highly. The remaining two choices are incorrect because they do not
include all value chain management companies.
Objective: 14.3
31
111) One of the biggest obstacles to successful value chain management on the organizational
level is an organization that ________.
A) shares information
B) refuses to share information
C) insists on shaking up the status quo
D) collaborates
Answer: B
Explanation: B) To be successful, value chain management organizations must learn to share, so
when companies refuse to share it can be a real obstacle to success, making refusing to share
information the correct response for this question. Shaking up the status quo and collaboration
improve, rather than act as obstacles to value chains, so both of those choices are incorrect.
Objective: 14.3
112) Value chains that ________ information technology infrastructure often have problems
coordinating and collaborating.
A) share the same
B) fail to share compatible
C) purchase up-to-date
D) provide their own
Answer: B
Explanation: B) Just as having a smooth-running IT system can greatly benefit a value chain,
when partners in the chain fail to share compatible systems big problems arise, making this
choice the correct response for this question and ruling out "sharing the same." Up-to-date
systems and companies that provide their own in-house systems can actually benefit, rather than
experience trouble, from their systems.
AACSB: Technology
Objective: 14.3
113) When ________ exist(s) in a value chain, partners will be extremely reluctant to share
information.
A) sophisticated technological infrastructure doesn't
B) sophisticated technological infrastructure
C) trust doesn't
D) trust
Answer: C
Explanation: C) Sophisticated technological infrastructure has little effect one way or another on
whether or not value chain partners will share information, making both choices regarding
sophisticated technological infrastructure incorrect responses. Trust does affect information
sharing—lack of trust prevents sharing, making "no trust" the correct response and eliminating
trust.
Objective: 14.3
32
114) ________ can lead to a value chain management company suffering losses of intellectual
property.
A) Not enough trust
B) Too much trust
C) Not enough diversity
D) Too much diversity
Answer: B
Explanation: B) Trust is a necessary requirement for successful value chain function. However,
too much trust can tempt partners to appropriate proprietary intellectual property from one
another, so partners should always guard their knowledge systems, making "too much trust" the
correct response and eliminating "not enough trust" as a correct response. Diversity has little or
no effect on loss of intellectual property, so the two remaining choices are both incorrect.
Objective: 14.3
115) Some organizations erroneously feel that they ________ when they collaborate with a
variety of value chain partners.
A) lose control of their destiny
B) gain control of their destiny
C) change their destiny
D) control the destiny of other partners
Answer: A
Explanation: A) When organizations that are used to "going it alone" get involved in a value
chain, they sometimes feel that they lose control of their own decision-making power, making
"losing control of their destiny" the correct response for this question and ruling out all other
choices. In most cases, this feeling is mistaken as taking part in a value chain does not cause a
company to lose control of its decision-making ability or destiny.
Objective: 14.3
116) In many value chains, an organization must have the ability to educate ________.
A) internal partners only
B) external partners only
C) only its own employees
D) both internal and external partners
Answer: D
Explanation: D) Successful partners in value chains need to educate not just internal, external, or
their own partners. Education must take place both internally and externally, making this choice
the correct response. Internal education occurs when partners show their own people or related
companies how to perform a task. External education occurs when an organization must reach
beyond its organizational boundaries to teach or become informed about some process or skill
that will add value to the transformation process.
Objective: 14.3
33
117) Managers who are carrying out value chain management invest ________ than managers of
conventional organizations.
A) less time and energy
B) more time and energy
C) more of their own money
D) more of the company's money
Answer: B
Explanation: B) Value chain management is incredibly time-consuming and labor intensive for
managers. Motivating and coordinating not just one's own organization, but members of other
organizations takes a great deal of effort on the part of managers, making "more time and
energy" the correct response for this question and "less time and energy" incorrect. Value chain
management has little or no effect on how much managers invest monetarily in organizations, so
both choices regarding money are incorrect responses.
Objective: 14.3
118) A device with e-enabled maintenance control saves money by doing this when it
malfunctions or needs maintenance.
A) fixing itself
B) alerting others with e-messages
C) self-destructing
D) sounding an alarm
Answer: B
Explanation: B) An e-enabled device doesn't sound an alarm, self-destruct, or fix itself when it
needs attention. Instead, the device senses when it needs attention and sends out an electronic
message—in the form of an email or some other message—that informs the receiver what the
problem is and what should be done to fix the problem. This makes "alerting others with e-
messages" the correct response for this question.
Objective: 14.4
119) In today's manufacturing operations, managers often monitor capacity, order status, and
product quality ________ made.
A) before the product is
B) while the product is being
C) after the product is
D) both before and after the product is
Answer: B
Explanation: B) Traditionally, managers would monitor things like order status after, but not
while a product was being made. This makes "while the product is being made" the correct
response and rules out after. Monitoring before or both before and after a product is made would
not be as useful as monitoring during the manufacturing process, since concurrent monitoring
provides instant status information of all operations that relate to the product.
AACSB: Technology
Objective: 14.4
34
120) Apple's problems with the battery of the highly successful iPod show how important
________ is for a product.
A) efficiency
B) design
C) quality
D) productivity
Answer: C
Explanation: C) The battery problem that Apple had with their iPod battery had nothing to do
with design of the product, or the efficiency or productivity of the manufacture of a product.
Instead, what cost Apple over $100 million was a quality breakdown in the battery. Not only did
a quality failure cause Apple to lose money in the case, it also caused Apple to lose prestige and
some trust of its customers.
Objective: 14.4
121) In evaluating quality, the performance of a product is measured in ________.

A) how the product looks and feels
B) how well the product operates
C) how long it takes the product's operation to deteriorate
D) what special characteristics a product has
Answer: B
Explanation: B) The performance of a product is measured in its operating characteristics,
making "how well the product operates" the correct response for this question. How a product
looks and feels reflects the aesthetics of the product. How long it takes for a product's normal
operation to break down or fail in some way shows the durability of the product. Special
characteristics of a product are its features.
Objective: 14.4
122) Courtesy and timeliness are measures of ________.

A) product quality
B) service quality
C) product appeal
D) service cost
Answer: B
Explanation: B) Service quality measures such dimensions as courtesy, timeliness, and
consistency, making service quality the correct response for this question. Product quality
measures dimensions such as performance, features, and flexibility, so this choice is not correct.
Product appeal and service cost are not measured in terms of such categories as courtesy and
timeliness.
Objective: 14.4
35
123) A high quality product that doesn't break down and doesn't suffer from significant
performance deterioration over a long period of time is said to have ________.
A) conformance
B) aesthetics
C) features
D) durability
Answer: D
Explanation: D) The durability of a product measures how long it takes for the product's
performance to break down or fail in some way, making durability the correct response for this
question. How a product looks and feels reflects the aesthetics of the product. How well the
product meets standards is a measure of its conformance. The functional characteristics that a
product has are its features.
Objective: 14.4
124) Durability and features are measures of ________.

A) product quality
B) service quality
C) product value
D) service value
Answer: A
Explanation: A) Product quality measures such dimensions as durability, performance, and
features, making this choice the correct response for this question. Service quality measures
dimensions such as timeliness, courtesy, and consistency, so this choice is not correct. Product
and service value are not quantifiable measurements that managers make in assessing quality.
Objective: 14.4
125) High quality service that gives customers an experience that doesn't vary from time to time
is called ________.
A) convenience
B) accuracy
C) completeness
D) consistency
Answer: D
Explanation: D) Consistency is providing the same customer experience from time to time,
making this choice the correct response for this question. Convenience measures how accessible
service is. Completeness measures whether or not all aspects of service were delivered. Accuracy
measures whether or not service tasks were performed correctly each time.
Objective: 14.4
36
126) A product such as an iPod that has a design that is appealing to customers is said to have
good ________.
A) durability
B) aesthetics
C) features
D) conformance
Answer: B
Explanation: B) The design of a product and how it looks and feels to the customer is a measure
of the product's aesthetics, making this choice the correct response for this question. How well
the product meets standards is a measure of its conformance. The functional characteristics that a
product has are its features. The durability of a product measures how long it takes for the
product's performance to break down or fail in some way.
Objective: 14.4
127) High quality service that gives customers a cheerful and helpful experience is called
________.
A) consistency
B) accuracy
C) courtesy
D) convenience
Answer: C
Explanation: C) Courtesy is providing a helpful, polite, cheerful customer experience making
this choice the correct response for this question. Convenience measures how accessible service
is. Consistency is providing the same customer experience from time to time. Accuracy measures
whether or not service tasks were performed correctly each time.
Objective: 14.4
128) When a customer service customer gets frustrated from being put on hold during a service
call for 30 minutes, the company is having problems with which service quality dimension?
A) timeliness
B) consistency
C) convenience
D) courtesy
Answer: A
Explanation: A) How long it takes for service to occur and whether or not the service task gets
completed in its designated time period is a measure of timeliness, making this choice the correct
response for this question. Consistency is providing the same customer experience from time to
time. Courtesy is providing a helpful, polite, cheerful customer experience. Convenience
measures how accessible service is.
Objective: 14.4
37
129) Northrup Grumman Corporation empowers employees to ________ about products
throughout the manufacturing process as a means of monitoring quality.
A) accept decisions
B) reject decisions
C) make accept/reject decisions
D) obey decisions
Answer: C
Explanation: C) Northrup Grumman's employees do something different than simply accept,
reject, or obey decisions made by others. The company's employees get to determine product
acceptability in the form of an accept/reject decision, making this choice the correct response. If
for any reason the employees judge that the product is not satisfactory, they can reject it on the
spot rather than wait for management to make the decision.
Objective: 14.4
130) ISO 9000 is a series of standards that ensure that products ________.
A) are of minimal quality
B) conform to customer requirements
C) conform to industry rules
D) exceed government requirements
Answer: B
Explanation: B) Though operations that receive ISO 9000 certification almost certainly have
minimal quality, conform to industry rules, and exceed government rules, the main purpose of
the program is to make sure that products meet requirements that are set by customers. This
makes "conforming to customer requirements" the correct response for this question.
Objective: 14.4
131) In the Six Sigma system, this is the highest level of quality.
A) Zero Sigma
B) One Sigma
C) Four Sigma
D) Six Sigma
Answer: D
Explanation: D) In the Six Sigma system, the higher the Sigma level, the fewer defects a product
has. At level One Sigma, only two thirds of the items being measured fall within the bell curve of
having an acceptably low number of defects. At Two Sigma, 95 percent lie within the curve. At
Six Sigma, the highest level, there are no more than 3.4 defects per million units, making Six
Sigma the correct response and ruling out all other responses.
Objective: 14.4
38
132) Each work activity in a Gantt chart is represented by two horizontal bars that identify the
________.
A) goal and the date
B) the date and the manager's name
C) goal and actual progress
D) actual progress and manager's name
Answer: C
Explanation: C) A Gantt chart shows the goal with one bar and the actual progress being made
for the activity with a second, adjacent bar, making this choice the correct response for this
question. The date and manager's name are used for the other three choices, making them all
incorrect responses.
Objective: 14.4
133) To find out how many activities are taking place at a given time in a Gantt chart, ________.
A) read across a single row
B) read down a single column
C) count the total number of bars
D) count the total number of actual progress bars
Answer: B
Explanation: B) A strength of a Gantt chart is that it allows users to read down a single column
and get an instant assessment of how many activities are taking place at a given time, making
reading down a single column the correct response for this question. The more bars that the line
goes through, the more activities that are taking place at that point in time. Reading across or
counting bars do not provide simultaneous activity information so they are incorrect responses.
AACSB: Technology
Objective: 14.4
134) A load chart is a ________ that schedules capacity by ________.

A) graph; activity
B) PERT; workstation
C) modified Gantt chart; workstation
D) modified Gantt chart; activity
Answer: C
Explanation: C) The major difference between a load chart and a Gantt chart is that a load chart
schedules by workstation while a Gantt chart schedules by activity. A load chart is actually a
modified Gantt chart making "modified Gantt chart; workstation" the correct response. Load
charts measure by workstation, not activity, ruling out the two choices indicating activity. Load
charts have nothing to do with PERT analysis, eliminating "PERT; workstation" as a possible
correct response.
Objective: 14.4
39
135) The critical path in a PERT is the ________ sequence of events that is required to complete
the project in the ________ period of time.
A) longest; longest
B) shortest; shortest
C) longest; shortest
D) shortest; longest
Answer: C
Explanation: C) In a PERT, the critical path is a measure of how long the project will take if all
possible steps in the process are taken with no shortcuts or skipped steps. In other words, the
critical path is the shortest amount of time it takes to complete the entire sequence of events with
all possible steps taken. This makes "longest; shortest" the correct response and rules out all
other responses.
Objective: 14.4
136) In PERT, the time difference between the critical path and any other path is called
________.
A) slack time
B) critical time
C) network time
D) lost time
Answer: A
Explanation: A) Rather than measure lost time, the difference between the critical path and other
paths in PERT makes up slack time, which is extra time that can be used if things fall behind
schedule. This makes slack time the correct response. Critical time, network time, and lost time
all are terms that are not officially recognized in PERT.
Objective: 14.4
137) In a short essay, define and describe operations management.

Answer: The term operations management refers to managing and controlling the
transformation process that converts such resources as labor and raw materials into goods and
services that are sold to customers. The process takes in inputs—people, technology, capital,
equipment, materials, and information—and transforms them into finished goods and services.
Operations management encompasses both services and manufacturing sectors of the economy.
Operations management is a way to control and manage productivity—the key to almost every
organization's success.
Objective: 14.1
40
138) In a short essay, define value and explain how it is obtained.
Answer: Value is any part of a good or service that customers are willing to pay for in terms of
money or some other resource. For example, a laptop computer has value because customers are
willing to pay money for it. The RAM memory inside of the computer also has value because
customers are willing to pay more for a computer with more RAM memory. The color of the
computer's case is an important feature of the computer, but it does not add value because
customers are not willing to pay more for a black computer (for example) than a white computer.
Objective: 14.2
139) In a short essay, explain what a value chain is.

Answer: When inputs go through the transformation process to produce outputs, value is added
to the original inputs at each step of the way creating a value chain. For example, when you bake
a cake you start with original ingredients—inputs—and during each step of the process you add
value to the cake. Mixing the flour, sugar, and butter adds value. Folding in chocolate adds value.
Pouring the batter into a greased pan adds value. Baking at the right temperature adds value.
Each step of the process adds value because it contributes to making a better cake. A better cake
has more value because customers are willing to pay for it.
Objective: 14.2
140) In a short essay, explain what value chain management is.

Answer: Value chain management is the control and management of a value chain. A value chain
is a series of steps that add value to a product. If the product is a car then all of the steps in
design, planning, supplying materials, making, and marketing the car add to the car's value chain.
This value chain must be managed, and according to value chain management theory it must be
managed with value in mind at every step.
For example, if customers state that they require a GPS in every car model, then the value chain
must be modified so it includes this value-adding feature. That might entail new suppliers, new
design plans, new assembly procedures, and so on. The management of these changes is what
takes place in value chain management.
Note that the process is driven by customer value. If the customers—typically expressing
themselves through sales totals—indicate that a specific feature of the car, such as a GPS or a
cupholder, has value, then it is the responsibility of the managers of the value chain to make sure
that these features are included in the product.
Objective: 14.2
41
141) In a short essay, describe the coordination and collaboration that is necessary for successful
value chain management.
Answer: For the value chain to achieve its goal of meeting and exceeding customers' needs and
desires, integration among all members of the chain is necessary. All partners in the value chain
must participate in identifying features of the product that have value.
For example, if marketers of an electronic book learn that customers really want to be able to
write notes and mark pages in their electronic books, it is the responsibility of those marketers to
share that information with people in other parts of the value chain who can implement those
changes into the product.
Sharing information and being flexible as far as who in the value chain does what are important
steps in building coordination and collaboration. There must be a constant back and forth
between different parts of the chain. Marketers must listen to customers. Engineers must listen to
marketers. Designers must listen to engineers, and so on.
Objective: 14.3
142) In a short essay, identify and discuss the leadership requirements for successful value chain
management.
Answer: Successful value chain management isn't possible without strong and committed
leadership. At all levels, managers must support, facilitate, and promote the implementation and
ongoing practice of value chain management. Managers must make a serious commitment to
identifying what value is, how that value can best be provided, and how successful those efforts
have been.
Leaders should outline expectations for what is involved in the organization's pursuit of value in
its products. Ideally, this should start with a vision or mission statement that expresses the
organization's commitment to identifying, capturing, and providing the highest possible value to
customers. Throughout the organization, managers should clarify expectations regarding each
employee's role in the value chain. Being clear about expectations also extends to partners
outside of the organization.
Objective: 14.3
42
143) In a short essay, identify and explain the three main human resource requirements for value
chain management.
Answer: The three main human resource requirements for value chain management are flexible
approaches to: job design, an effective hiring process, and ongoing training.
Flexibility is the key to job design in a value chain management organization. Traditional
functional job roles—such as marketing, sales, accounts payable, customer service, and so forth
—are inadequate in a value chain management environment. Instead, jobs must be designed
around work processes that create and provide value to customers.
To carry out flexible jobs successfully, organizations need flexible employees. In a value chain
organization, employees may be assigned to work teams that tackle a given process and may be
asked to do different things on different days depending on need. In such an environment, an
employee's ability to be flexible is critical. Therefore, the organization's hiring process must be
designed to identify those employees who have the ability to learn and adapt.
Finally, the need for flexibility also requires that there be a significant investment in continual
and ongoing employee training. Whether training involves learning basic information or how to
perform some specific task, managers must see to it that employees have the knowledge and
tools they need to do their jobs efficiently and effectively.
Objective: 14.3
144) In a short essay, explain how organizational barriers can be an obstacle to effective
management of a value chain.
Answer: Organizational barriers are among the most difficult obstacles that managers handle.
These barriers include refusal or reluctance to share information, reluctance to shake up the
status quo, and security issues. Without shared information, close coordination and collaboration
in a value chain are impossible. The reluctance or refusal of employees to change the way they
do things can impede efforts toward value chain management and prevent its successful
implementation. Finally, because value chain management relies heavily on a substantial
information technology infrastructure, system security and Internet security breaches are issues
that need to be addressed.
Objective: 14.3
43
145) In a short essay, explain how cultural attitudes can be an obstacle to effective management
of a value chain.
Answer: Unsupportive cultural attitudes can be major obstacles to successful value chain
management. Trust can work against a value chain management system in two different ways—
both lack of trust and too much trust can be a problem. To be effective, partners in a value chain
must trust one another to perform their duties along the chain. When trust and mutual respect
don't exist, partners will be reluctant to share information, capabilities, and processes.
Too much trust also can be a problem for a value chain. Since partners in a chain must work
together and share all kinds of proprietary information, they must take care that important
organizational information does not end up being appropriated or disseminated on the Internet.
To guard against loss of intellectual property value, chain partners should always share only what
needs to be shared and make sure that firewalls and other security measures are in place.
Objective: 14.3
146) In a short essay, explain how required capabilities can be an obstacle to effective
management of a value chain.
Answer: Required capabilities are the special abilities that value chain partners must have.
Several of these, including effective coordination and collaboration, the ability to learn new skills
and tasks, the ability to adapt to new situations and adopt new procedures are capabilities that are
difficult to acquire. Nevertheless, these skills and abilities are essential for a successful value
chain, so managers must constantly press to make sure that all members of the chain have the
qualities that are needed.
Objective: 14.3
147) In a short essay, explain how people can be an obstacle to effective management of a value
chain.
Answer: People can be obstacles to successful value chain management by failing to commit
fully to the idea of meeting customer needs and desires. Without their unwavering commitment
and willingness to do whatever it takes, a value chain can suffer. If employees decide to just "do
their job" rather than to focus on adding value to the value chain, productivity will suffer and
products will not be successful. To make sure that employees are committed to value chain
management practices, managers need to do a lot of urging, coaching, encouraging, and
motivating.
Objective: 14.3
44
148) In a short essay, define and discuss quality control in an organization.
Answer: Controlling for quality is the responsibility of every member of the organization.
Quality control refers to monitoring quality—weight, strength, consistency, color, taste,
reliability, finish, or any one of many characteristics—to ensure that the product, whatever it is,
meets some pre-established standard.
Quality control is typically needed at one or more points in the transformation process, beginning
with the receipt of inputs. It will continue with work in process and all steps up to the final
product. Assessments at intermediate stages of the transformation process typically are part of a
quality control program. Early detection of a defective part or process can save the cost of further
work on the item.
Objective: 14.4
149) In a short essay, define the practice of project management and explain why many
organizations are turning to this approach.
Answer: A project is a one-time-only set of activities with a definite beginning and ending point;
project management is the task of accomplishing the set of activities on time, within budget, and
according to specifications. More and more organizations are turning to project management
because the approach fits well with their need for increased managerial flexibility and rapid
response. Organizations are increasingly undertaking projects that are somewhat unusual or
unique, have specific deadlines, contain complex interrelated tasks requiring specialized skills,
and are temporary in nature. These sets of activities don't lend themselves well to the traditional
operating procedures that guide routine and continuous organizational activities, but they are a
good fit for the project management approach.
Objective: 14.4
150) In a short essay, explain the difference between a Gantt chart and a load chart, identifying
possible uses for each tool.
Answer: The Gantt chart is a planning tool that is essentially a double bar graph, with time on
the horizontal axis and the activities to be scheduled on the vertical axis. The bars show output,
both planned and actual, over a period of time. The Gantt chart visually shows when tasks are
supposed to be done and compares the assigned date with the actual progress on each. Managers
can easily see what has yet to be done to complete a job or project and to assess whether it is
ahead of, behind, or on schedule.
A modified version of the Gantt chart that organizes by workstation is called a load chart. Instead
of listing activities on the vertical axis, load charts list either whole departments or specific
resources. This information allows managers to plan and control for capacity utilization by
workstation rather than by activity.
Objective: 14.4
45
151) In a short essay, identify and explain the first three steps in developing a PERT network.
Answer: The first step in developing a PERT network is to identify every significant activity that
must be achieved for a project to be completed. The accomplishment of each activity results in a
set of events or outcomes.
The second step is to determine the order in which these events must be completed.
The third step in developing a PERT network is to diagram the flow of activities from start to
finish, identifying each activity and its relationship to all other activities. Use circles to indicate
events and arrows to represent activities. This results in a flowchart diagram called a PERT
network.
Objective: 14.4
152) In a short essay, identify and explain the final two steps in developing a PERT network.
Answer: The fourth step in developing a PERT network is to compute a time estimate for
completing each activity. This is done with a weighted average that uses an optimistic time
estimate (to) of how long the activity would take under ideal conditions, a most likely estimate
(tm) of the time the activity normally should take, and a pessimistic estimate (tp) that represents
the time that an activity should take under the worst possible conditions.
Using the network diagram that contains time estimates for each activity, the final step is to
determine a schedule for the start and finish dates of each activity and for the entire project. Any
delays that occur along the critical path require the most attention because they can delay the
whole project.
Objective: 14.4
153) In a short essay, discuss technology's role in manufacturing.

Answer: To connect more closely with customers, and to avoid bottlenecks and slowdowns,
production in any organization must be synchronized and coordinated across the enterprise. What
makes this kind of coordination possible is technology. For example, enterprise resource
planning (ERP) software is a system that links all parts of an organization and its partners to the
same database, allowing people across the organization to have access to sales, production,
scheduling, budgets, and other forms of data.
Technology is also allowing organizations to control costs, particularly in the areas of predictive
maintenance, remote diagnostics, and utility cost savings. For instance, new types of Internet-
compatible equipment contain embedded Web servers that can communicate proactively to
inform users that a device needs maintenance or servicing. These devices can do more than
simply beep or light up an indicator button. For example, some devices have the ability to initiate
email or signal a pager at a supplier, the maintenance department, or contractor describing the
specific problem and requesting parts and service.
AACSB: Technology
Objective: 14.4
46

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Fundamentals of Management, 7e (Robbins/DeCenzo/Coulter)

Chapter 14 Operations Management

2) Operations management is part of the transformation process.

4) Operations management includes service industries but not manufacturing firms.

6) Manufacturing organizations produce both physical and nonphysical outputs.

8) For most U.S. companies, high productivity is a matter of survival.

16) Value in a value chain management system is determined by managers.

19) Value chain management is efficiency oriented.

20) Productivity is not important to value chain management.

29) Employees in a value chain management organization must be flexible.

42) The transformation process transforms ________.

43) Value is created during the process of ________.

46) As a product, piano lessons are ________.

49) Service organizations ________.

51) Which of the following is NOT an example of a service organization?

60) Which of the following is NOT a way to increase productivity?

66) Deming felt that ________ with statistics.

67) Deming felt that doing quality work was this.

70) Where did the modern era of manufacturing primarily begin?

81) ________ focuses on providing an efficient flow of resources to an organization.

82) Value chain management is ________ oriented.

88) A business model is ________.

97) Organizational processes in value chain management organizations need to eliminate

103) This is the most important resource in any value chain.

121) In evaluating quality, the performance of a product is measured in ________.

122) Courtesy and timeliness are measures of ________.

124) Durability and features are measures of ________.

134) A load chart is a ________ that schedules capacity by ________.

137) In a short essay, define and describe operations management.

139) In a short essay, explain what a value chain is.

140) In a short essay, explain what value chain management is.

153) In a short essay, discuss technology's role in manufacturing.

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134) A load chart is a that schedules capacity by .