Chapter 19 Operations and Value Chain Management
TRUE/FALSE QUESTIONS
WHAT IS OPERATIONS MANAGEMENT AND WHY IS IT IMPORTANT?
1. One of the reasons why operations management is so important to organizations and managers is that
it plays a strategic role in an organization’s competitive success.
(True; moderate; p. 564)
2. The transformation process is as evident in service organizations as it is in manufacturing
organizations.
(False; moderate; p. 565)
3. The U.S. economy, and to a large extent the global economy, is dominated by the creation and sale of
physical goods.
(False; moderate; p. 565; AACSB: Globalizations)
4. For individual organizations, increased productivity gives them a more competitive cost structure
and the ability to offer more competitive prices.
(True; moderate; p. 566)
5. High productivity can come solely from good people management.
(False; moderate; p. 566)
6. To improve management’s productivity, managers should concentrate on departmental or divisional
distinctions.
(False; easy; p. 567)
7. By the late 1970s, U.S. manufacturers were able to make better quality goods less expensively than
foreign companies.
(False; moderate; p. 567)
VALUE CHAIN MANAGEMENT
8. Value is provided to customers through transforming raw materials and other resources into some
product or service that end users need or desire when, where, and how they want it.
(True; easy; pp. 568-569)
9. Supply chain management is internally oriented and focuses on efficient flow of incoming materials
to organizations.
(True; moderate; p. 569)
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10. The goal of value chain management is to create a value chain strategy that meets and exceeds
customers’ needs and desires and allows for full and seamless integration among all members of the
chain.
(True; moderate; p. 569)
11. Managing an organization from a value chain perspective is easy.
(False; easy; p. 569)
12. Better demand forecasting is necessary and possible because of closer ties with customers and
suppliers.
(True; moderate; p. 571)
13. Selected functions may need to be done collaboratively with other partners in the value chain.
(True; easy; p. 571)
14. Old measures are adequate for evaluating performance of various activities along the value chain.
(False; moderate; p. 571)
15. It’s important that managers outline expectations for what’s involved in the organization’s pursuit of
value chain management.
(True; moderate; p. 571)
16. The organization’s hiring process must be designed to identify those employees who have the ability
to learn and adapt.
(True; moderate; p. 573)
17. When there’s too much trust, partners in a value chain will be reluctant to share information,
capabilities, and processes.
(False; easy; p. 574)
18. Managers must motivate high levels of effort from employees.
(True; easy; p. 575)
CURRENT ISSUES IN OPERATIONS MANAGEMENT
19. New generations of Internet-compatible equipment contain embedded Web servers that can
communicate proactively.
(True; difficult; p. 576; AACSB: Technology)
20. Quality problems are usually inexpensive.
(False; easy; p. 576)
21. Technology can help focus everyone’s attention toward some objective quality standard.
(False; easy; p. 577; AACSB: Technology)
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22. Courtesy is a service quality dimension that is met when the service is performed cheerfully.
(True; moderate; p. 578)
23. Convenience is a product quality dimension that is met when the product is fully serviced, as
required.
(False; moderate; p. 578)
24. Quality improvement initiatives aren’t possible without having some way to monitor and evaluate
their progress.
(True; moderate; p. 578)
25. The latest survey of ISO 9000 certificates showed the number of registered sites worldwide to be
around 50,000.
(False; easy; p. 579; AACSB: Globalizations)
26. Gaining ISO 9000 certification provides proof that a quality operations system is in place.
(True; easy; p. 579; AACSB: Globalizations)
27. ISO 9000 is a quality standard that establishes a goal of no more than 3.4 defects per million units or
procedures.
(False; moderate; p. 579; AACSB: Globalizations)
28. The Six Sigma standards cover everything from contract review to product design to product
delivery.
(False; moderate; p. 579)
29. General Electric realized billions in savings through ISO 9000 from 1999-2002.
(False; moderate; p. 579; AACSB: Globalizations)
30. Sigma is the Greek letter that statisticians use to define a standard deviation from a bell curve.
(True; moderate; p. 579)
MULTIPLE-CHOICE QUESTIONS
For each of the following choose the answer that most completely answers the question.
WHAT IS OPERATIONS MANAGEMENT AND WHY IS IT IMPORTANT?
31. ______________ 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
(b; moderate; p. 564)
532
32. Which of the following is an example of an input as described by an organization’s operations system?
a. sales
b. innovative products
c. capital
d. accounting reports
(c; moderate; p. 564)
33. Which of the following is an example of an output as described by an organization’s operations system?
a. equipment
b. increased market share
c. materials
d. information
(b; moderate; p. 564)
34. It is easy to see the operations management process at work in ______________.
a. service organizations
b. financial organizations
c. consulting organizations
d. manufacturing organizations
(d; easy; p. 565)
35. Service organizations produce _______________ in the form of services.
a. physical inputs
b. physical outputs
c. nonphysical inputs
d. nonphysical outputs
(d; easy; p. 565)
36. Which of the following is not an example of a service organization?
a. military forces
b. a university
c. a manufacturing plant
d. a hospital
(c; easy; p. 565)
37. It is estimated that in the United States, over ______________ of all economic activity is services.
a. 15 percent
b. 35 percent
c. 71 percent
d. 78 percent
(d; difficult; p. 565)
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38. Productivity includes the overall output of goods and services that is then ______________ the inputs.
a. multiplied by
b. added to
c. subtracted from
d. divided by
(d; moderate; p. 565)
39. For countries, high productivity can lead to _______________.
a. economic growth and development
b. higher wages
c. a more competitive cost structure
d. the ability to offer more competitive prices
(a; moderate; pp. 565-566; AACSB: Globalizations)
40. Latex Foam International’s investments in information technology enhancements resulted in both its
workforce and technology _______________.
a. increasing retention
b. increasing production capacity
c. increasing sales
d. decreasing sales
(b; difficult; p. 566; AACSB: Technology
41. For organizations to improve productivity, they should focus on which of the following?
a. operations variables only
b. people only
c. people or operations variables, depending on the industry
d. people and operations variables
(d; moderate; p. 566)
42. Deming believed which of the following?
a. High productivity comes from good people management.
b. Managers are the primary source of increased productivity.
c. Employees should learn movement efficiency, not statistical methods.
d. Training is generally wasted time.
(b; moderate; p. 566)
43. Deming outlined _________ points for improving management’s productivity.
a. 10
b. 12
c. 14
d. 15
(c; moderate; p. 566)
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44. Which of the following is one of Deming’s 14 points for improving management’s productivity?
a. Plan for a short-term future.
b. Lower the quality of your line supervisors.
c. Train your employees in new skills as the need arises.
d. Adopt strictly numerical goals.
(c; moderate; p. 567)
45. Which of the following is one of Deming’s 14 points for improving management’s productivity?
a. Plan for the immediate future.
b. Product quality is relative—balance improvements against costs.
c. Establish statistical control over product processes.
d. Reduce cost by dealing with multiple suppliers.
(c; moderate; p. 567)
46. Which of the following is one of Deming’s 14 points for improving management’s productivity?
a. Don’t bother training employees to understand statistical methods.
b. Train your employees in new skills continuously.
c. Make top managers responsible for implementing the 14 principles.
d. Encourage departments to compete.
(c; moderate; p. 567)
47. Where did the modern era of manufacturing primarily begin?
a. the coal industry
b. Detroit automobile factories
c. southern cotton mills
d. northeastern textile mills
(b; moderate; p. 567)
48. After World War II, as U.S. executives neglected production, managers in other countries took the
opportunity to develop modern, computer-based, and technologically advanced facilities that fully
integrated manufacturing operations into _______________.
a. strategic planning decisions
b. productivity decisions
c. Deming’s 14 points
d. value chain management
(a; moderate; p. 567; AACSB: Globalizations)
49. By the late 1970s, U.S. executives responded to their manufacturing crisis by __________________.
a. focusing on improving finance and marketing
b. minimizing corporate authority and visibility of manufacturing executives
c. investing heavily in improving manufacturing technology
d. incorporating former production requirements into the organization’s overall strategic plan
(c; moderate; p. 567; AACSB: Technology)
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VALUE CHAIN MANAGEMENT
50. _____________ is the performance characteristics, features and attributes, and any other aspects of
goods and services for which customers are willing to give up resources.
a. Value
b. Cost
c. Convenience
d. Performance
(a; easy; p. 568)
51. The ______________ is the entire series of organizational work activities that add value at each step
beginning with the processing of raw materials and ending with finished product in the hands of end
users.
a. supply chain
b. value chain
c. ethical chain
d. financial chain
(b; moderate; p. 569)
52. In its entirety, the ______________ can encompass the supplier’s suppliers to the customer’s customers.
a. supply chain
b. ethical chain
c. financial chain
d. value chain
(d; moderate; p. 569)
53. ______________ is the process of managing the entire sequence of integrated activities and
information about product flows along the entire value chain.
a. Supply chain management
b. Value chain management
c. Ethical chain management
d. Financial chain management
(b; easy; p. 569)
54. ______________ is externally oriented and focuses on both incoming materials and outgoing
products and services.
a. Supply chain management
b. Value chain management
c. Ethical chain management
d. Financial chain management
(b; moderate; p. 569)
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55. 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
(c; moderate; p. 569)
56. In value chain management, ultimately the ____________ are the ones with the power.
a. suppliers
b. customers
c. employees
d. buyers
(b; moderate; p. 569)
57. Investment in which of the following types of information technology allows Shell Chemical
Company to better anticipate customer demand?
a. an ERP system
b. a supplier inventory management order network
c. an e-marketplace
d. a corporate intranet
(b; moderate; p. 569; AACSB: Technology)
58. The better the ______________ the various chain participants, the better the _____________.
a. cooperation among; productivity
b. collaboration among; customer solutions
c. attitudes of; customer relations
d. commitment of; employee relations
(b; difficult; p. 569)
59. Which of the following is a main requirement for successful value chain management?
a. coordination
b. competition
c. R&D
d. organizational structure
(a; difficult; p. 570)
60. Which of the following is a main requirement for successful value chain management?
a. power over suppliers
b. technology
c. employees
d. competition
(c; difficult; p. 570)
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61. For the value chain to achieve its goal of exceeding customer needs, ___________ must be
developed.
a. collaborative relationships
b. new products and services
c. technology
d. standards
(a; difficult; p. 570)
62. The payoff from _______________ is that it can be used to restructure the value chain to better serve
end users.
a. coordination and collaboration
b. an investment in information technology
c. an organizational process
d. leadership
(b; moderate; p. 570; AACSB: Technology)
63. Value chain management radically changes _______________.
a. ethical issues
b. corporate goals and objectives
c. mission statements
d. organizational processes
(d; moderate; p. 570)
64. The ways in which organizational work is done are described as _________________.
a. organizational processes
b. goals and objectives
c. policies and procedures
d. corporate visions
(a; moderate; p. 570)
65. Which of the following is a question that should be asked for each and every organizational process?
a. “Where can external knowledge be leveraged to improve the flow of material and information?”
b. “How can we better configure our product to satisfy manufacturers?”
c. “How can the cash flow be improved?”
d. “How can we improve customer service?”
(d; difficult; p. 570)
66. When a company makes an effort to make certain that their product is on store shelves when
customers want it, the firm is concerned about _______________.
a. product replenishment rates
b. quality
c. productivity
d. organizational processes
(a; moderate; p. 571)
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67. Wal-Mart and Pfizer collaborated on improving _______________.
a. inventory management
b. joint marketing programs
c. joint product development
d. product demand forecast information
(d; difficult; p. 571)
68. Ideally, when managers outline expectations for what’s involved in the organization’s pursuit of
value chain management, they should start with _______________.
a. a vision or mission statement
b. a plan
c. a goal
d. the requirements
(a; moderate; p. 571)
69. The main human resource requirements for value chain management include _______________.
a. flexible approaches to job design
b. an effective firing process
c. one-time training
d. diversity
(a; difficult; p. 573)
70. ______________ is the key description of job design in a value chain organization.
a. Structure
b. Strategy
c. Flexibility
d. Innovation
(c; moderate; p. 573)
71. Which of the following is a cultural attitude that supports the successful implementation of value
chain management?
a. competition
b. collaborating
c. benchmarking
d. business intelligence
(b; easy; p. 573)
72. According to a survey of manufacturers who have embarked on value chain management initiatives,
______________ was a benefit that companies reported.
a. increased sales
b. cost savings
c. increased market share
d. improved logistics
(d; moderate; p. 574)
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73. Which of the following is an obstacle in managing the value chain?
a. individual barriers
b. managerial attitudes
c. required capabilities
d. systems
(c; moderate; p. 574)
74. Which of the following obstacles to value chain management is among the most difficult for managers to
handle?
a. organizational barriers
b. cultural attitudes
c. required capabilities
d. people
(a; moderate; p. 574)
75. Organizational barriers that are difficult for managers to handle include ____________.
a. refusal to share information
b. incompetent employees
c. reluctance to conform to the status quo
d. privacy issues
(a; moderate; p. 574)
76. Since value chain management relies heavily on substantial information technology infrastructure,
__________ should always be addressed.
a. standardized information exchange protocols
b. software compatibility
c. system security
d. personal identity theft
(c; difficult; p. 574; AACSB: Technology)
77. Unsupportive cultural attitudes—especially trust and ___________—can be obstacles to value chain
management.
a. commitment
b. respect
c. communication
d. control
(d; moderate; p. 574)
78. ____________ can cause a problem because your organization’s valuable assets can be
compromised.
a. Too much control
b. Too little control
c. Too much trust
d. Too little trust
(c; moderate; p. 574)
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79. Proprietary company information that’s critical to a company’s efficient and effective functioning
and competitiveness is called _____________.
a. real property
b. intellectual property
c. tangible property
d. management property
(b; moderate; p. 574)
80. A major human resource problem is _______________.
a. finding flexible employees
b. the lack of experienced managers who are able to lead value chain management initiatives
c. the lack of employees who are knowledgeable of value chain management
d. having to fire uncommitted employees
(b; moderate; p. 575)
CURRENT ISSUES IN OPERATIONS MANAGEMENT
81. Operations managers need systems that can reveal _______________ while products are in the
process of being manufactured, not just after the fact.
a. occupied capacity
b. the status of reports
c. product quality
d. the actual procedures that are taken
(c; moderate; p. 576)
82. __________________ is allowing organizations to control costs particularly in the areas of
predictive maintenance, remote diagnostics, and utility cost savings.
a. Quality initiatives
b. Mass customization
c. Six Sigma
d. Technology
(d; moderate; p. 576; AACSB: Technology)
83. The ability of a product or service to reliably do what it’s supposed to do and to satisfy customer
expectations is called _______________.
a. quantity
b. quality
c. efficiency
d. effectiveness
(b; moderate; p. 577)
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84. Which of the following is a dimension of product quality?
a. features
b. intuitiveness
c. convenience
d. accuracy
(a; moderate; p. 578)
85. The product quality dimension described as “meeting operating specifications over some period of
time” is called ______________.
a. performance
b. features
c. flexibility
d. durability
(c; moderate; p. 578)
86. Which of the following product quality dimensions is described as “matching with preestablished
standards”?
a. performance
b. features
c. flexibility
d. conformance
(d; moderate; p. 578)
87. “How a product looks and feels” is a description of which of the following product quality
dimensions?
a. conformance
b. durability
c. serviceability
d. aesthetics
(d; moderate; p. 578)
88. The product quality dimension described as “subjective assessment of characteristics” is called
_____________.
a. conformance
b. durability
c. serviceability
d. perceived quality
(d; moderate; p. 578)
89. Which of the following is a dimension of service quality?
a. performance
b. features
c. flexibility
d. timeliness
(d; moderate; p. 578)
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90. The service quality dimension described as “giving all customers similar experiences each time” is
called _______________.
a. accuracy
b. completeness
c. consistency
d. courtesy
(c; moderate; p. 578)
91. The service quality dimension described as “performed correctly each time” is called ____________.
a. accuracy
b. completeness
c. consistency
d. courtesy
(a; moderate; p. 578)
92. Organizations with extensive and successful quality improvement programs tend to rely on two
important people approaches: ______________ and ______________.
a. cross-functional work teams; closely supervised work teams
b. closely supervised work teams; empowered work teams
c. empowered work teams; cross-functional work teams
d. self-directed work teams; transgenerational work teams
(c; difficult; p. 578)
93. The two best-known quality goals are ______________ and ______________.
a. ISO 250; Six Sigma
b. Six Sigma; Seven Beta
c. ISO 9000; Six Sigma
d. ISO 250; Seven Beta
(c; moderate; p. 579)
94. _______________ is a series of international quality management standards established by the
International Organization for Standardization, which sets uniform guidelines for processes to ensure
that products conform to customer requirements.
a. ISO 250
b. ISO 9000
c. Six Sigma
d. Three Theta
(b; moderate; p. 579; AACSB: Globalizations)
543
95. The ______________ standards have become the internationally recognized standard for evaluating
and comparing companies in the global marketplace.
a. ISO 250
b. ISO 9000
c. Six Sigma
d. Seven Beta
(b; moderate; p. 579; AACSB: Globalizations)
96. Which of the following companies popularized the use of stringent quality standards more than 30
years ago through a trademarked quality improvement program called Six Sigma?
a. IBM
b. General Electric
c. Motorola
d. Wal-Mart
(c; easy; p. 579)
97. Six Sigma is a quality standard that establishes a goal of no more than ________ defects per million
units or procedures.
a. 2.3
b. 2.7
c. 3.4
d. 4.3
(c; easy; p. 579)
98. The _______________, the fewer the deviations from the norm.
a. more the defects
b. lower the ISO 9000 standards
c. lower the Sigma
d. higher the Sigma
(d; moderate; p. 579)
99. At _______________, two-thirds of whatever is being measured falls within the curve.
a. One Sigma
b. Two Sigma
c. Three Sigma
d. Six Sigma
(a; moderate; p. 579)
100. At _______________, you’re about as close to defect-free as you can get.
a. One Sigma
b. Two Sigma
c. Three Sigma
d. Six Sigma
(d; moderate; p. 579)
544
101. __________________ provides consumers with a product when, where, and how they want it.
a. Individual customization
b. Individually specified production
c. Mass customization
d. Mass production
(c; easy; p. 579)
102. Mass customization requires flexible manufacturing techniques and ______________.
a. managerial flexibility
b. continual dialogue with customers
c. a Web presence
d. a recognizable brand name
(b; moderate; p. 580; AACSB: Communication)
103. With flexible manufacturing, companies have the ability to quickly readjust assembly lines to
______________.
a. communicate better with external partners
b. make products to order
c. use different technology
d. perform their jobs in a consistently high-quality way
(b; moderate; p. 580)
104. ____________ is a good example of a company that uses flexible manufacturing techniques to
make their products to customer specifications.
a. Motorola
b. Gateway
c. HP
d. Dell Computer
(d; easy; p. 580)
105. Using _______________, companies can keep track of customers’ likes and dislikes.
a. extensive databases
b. Six Sigma
c. ISO 9000
d. mass customization
(a; difficult; p. 581; AACSB: Technology)
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SCENARIOS AND QUESTIONS
For each of the following choose the answer that most completely answers the question.
WHAT IS OPERATIONS MANAGEMENT AND WHY IS IT IMPORTANT?
Celeste had been asked to attend training in operations management. Her background and training had
previously been in accounting, but with the reorganization looming, it was either learn a new skill or be
decruited. She was actually looking forward to the training. She felt her background with numbers
should prove valuable in operations management, but she admitted that she knew little about the field.
Until now, she had been in a support staff function and had little feel for how their product went from
raw materials to finished product. Celeste’s first class would be tonight at Central University, and she
was excited about the opportunity.
106. On the first night of class, Celeste learned that the central focus of operations management was
___________.
a. people
b. capital
c. the transformation process
d. goods
(c; moderate; p. 564)
107. Celeste realized that inputs include which of the following?
a. motivated employees
b. capital
c. accounting reports
d. sales
(b; easy; p. 564)
108. Celeste had to keep straight what factors were considered inputs versus those considered outputs.
Outputs included which of the following?
a. materials
b. information
c. technology
d. motivated employees
(d; difficult; p. 564)
109. Until now, Celeste had thought more about “profitability” than “productivity.” She found it hard to
remember that the formula for productivity was “the overall output of goods and services produced
______________ the inputs needed to generate that output.”
a. squared with
b. added to
c. subtracted from
d. divided by
(d; moderate; p. 565)
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110. Celeste must remember that productivity is a composite of ______________ variables.
a. people and operations
b. task and relationship
c. structural and procedural
d. unpredictable
(a; moderate; p. 566)
Non-Deming (Scenario)
On Monday, the big news arrived. Bob’s company announced they would be implementing a total
quality management system in their company. Their goals, they said, were to “plan for the now, impress
stockholders, and take advantage of this system for increasing short-term profits. Those who don’t agree
can begin looking for a new job.” Bob, along with everyone else, grumbled under his breath. What in the
world was top management thinking? Their “zero quality defects” program had failed, and now they
were jumping on this new bandwagon. Training was nonexistent in the company, and managers were
fond of pushing responsibility for these programs down to the lowest level. Top management was happy
with the quality of the product, and now they wanted total quality concerning the employees. At lunch,
he read the note board, which said, “Statistical process control classes will begin immediately. See your
supervisor for a training date.” Bob sighed and wondered what fad was next.
111. Which of the following Deming points was Bob’s company violating concerning their view of
planning?
a. Planning for the long-term.
b. Never being complacent concerning product quality.
c. Dealing with the fewest number of good suppliers.
d. Raising the quality of your supervisors.
(a; moderate; p. 567)
112. Another of Deming’s points that Bob’s company was violating was _______________.
a. encourage stressful management
b. push employees to their greatest level
c. drive out fear
d. encourage fear in supervisors
(c; moderate; p. 567)
113. Deming, unlike Bob’s company, suggested that a company should ______________ concerning
the quality of their product.
a. always be complacent
b. never be complacent
c. strive for zero defects
d. strive for 5 percent defects
(b; easy; p. 567)
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114. Instead of following the newest fads, the _______________ in Bob’s company should be
responsible for implementing Deming’s principles.
a. top managers
b. middle managers
c. supervisors
d. team leaders
(a; moderate; p. 567)
115. Which of the following is true concerning Deming’s view about training?
a. Workers should be trained for future jobs, rather than current jobs.
b. Supervisors should be trained in statistical methods.
c. Training is a second-tier concern.
d. Employees should be trained in new skills as the need arises.
(d; moderate; p. 567)
VALUE CHAIN MANAGEMENT
Solutions
Randy is the new strategic manager for Solutions Tech, Inc., a management consulting firm dedicated to
assisting small businesses in the pursuit of success. He is currently in a meeting with Rob, who is the
owner of a successful small business that creates computer displays for Fortune 500 companies. Randy
is reviewing the business strategy at Rob’s business and has some recommendations.
116. Before making any recommendations, Randy informed Rob that a _______________ is the entire
series of organizational work activities that add value at each step, beginning with the processing of
raw materials and ending with finished product in the hands of end users.
a. supply chain
b. value chain
c. ethical chain
d. financial chain
(b; moderate; p. 568)
117. Noticing that Rob seemed a bit confused, Randy informed Rob that ______________ is the
process of managing the entire sequence of integrated activities and information about product flows
along the entire value chain.
a. supply chain management
b. value chain management
c. ethical chain management
d. financial chain management
(b; moderate; p. 568)
548
118. Randy told Rob that the value chain management approach radically changes organizational
processes. Rob asked Randy if he could elaborate on this point a bit more. Randy said, “When
managers decide to manage operations using value chain management, old processes are no longer
appropriate. Managers must critically evaluate all organizational processes to determine _________.”
a. the organization’s core competencies
b. where value is being added
c. where there are gaps in the value chain
d. the needed critical skills
(b; difficult; p. 570)
119. Rob seemed to understand the theory behind value chain management, but was curious about the
requirements for a successful value chain. Randy informed Rob that the main requirements for
successful value chain management include all of the following except ________________.
a. collaboration
b. leadership
c. employees
d. competition
(d; difficult; pp. 571-573)
120. Rob asked Randy about the role of human resources in the value chain management process.
Randy replied, “Employees are the most important resource of any organization, so not surprisingly,
employees play a vital role in value chain management. The three main human resource requirements
for value chain management are flexible job design, an effective hiring process, and ___________.”
a. an effective firing process
b. goal compatible compensation plans
c. a commitment to management by objectives (MBO)
d. ongoing training
(d; difficult; p. 573)
121. Randy told Rob that flexibility in job design means that jobs should be redesigned around work
processes that ______________________.
a. help organizations learn more about their customers
b. link functions charged with creating value to customers
c. solidify the commitment of members to the goals of their respective work unit
d. reveal customers’ flexibility
(b; difficult; p. 573)
122. Randy told Rob that an effective hiring process is important to value chain management because
______________.
a. value chain management requires highly experienced and knowledgeable employees
b. flexible job designs require flexible people to fill them
c. value chain management requires a diverse group of highly specialized employees
d. employees need to have the knowledge and tools they need to do their jobs efficiently
(b; moderate; p. 573)
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123. Randy told Rob, “Organizational culture is also a very important component of value chain
management. Those cultural attitudes include sharing, openness, respect, and trust, and these
attitudes must encompass not only employees, but _______________ as well.”
a. extend to management
b. extend to customers
c. extend to external partners
d. their families
(c; moderate; p. 573)
124. Randy wanted to convince Rob that the value chain was very important and practical. Randy
briefly reviewed the results of a survey of manufacturers that had embarked on value chain
management. Sharing the results of the survey with Rob, Randy indicated that ______________ was
a benefit that companies reported on this survey.
a. increased sales
b. cost savings
c. increased market share
d. enhanced customer service order management
(d; difficult; p. 574)
125. Rob asked Randy about the barriers commonly faced by organizations looking to implement value
chain management. Randy replied that organizational barriers are among the most difficult for
managers to reconcile. An example of such a barrier might include ______________.
a. reluctance to share information
b. mutual trust
c. the belief that when an organization collaborates, it no longer controls its own destiny
d. employees’ refusal to be flexible
(a; moderate; p. 574)
550
CURRENT ISSUES IN OPERATIONS MANAGEMENT
Upon graduating from college, Steve Jungman began his career as a management trainee at Felcher &
Sons, Inc., a manufacturer of mid-priced office furniture. The firm has recently decided to expand
overseas with manufacturing plants in Singapore and Thailand and sales offices in the Far East, Europe,
and Australia. In conjunction with this investment in new plants and technologies, the firm plans to
develop an online presence that will enable customers to individually tailor the products they order from
Felcher & Sons. Terry Tate, VP of operations for Felcher & Sons, has been tasked with overseeing the
development of these plants and new capabilities. Mr. Tate has asked that Steve be assigned to him to
help him in this process.
126. Steve tells Mr. Tate that he is excited to be working with him on this project. While he was in
school, he did a research project on ___________, which provides consumers with manufactured
products that are tailored to their individual specifications.
a. mass personalization
b. mass customization
c. design-to-order manufacturing
d. one-to-one marketing
(c; easy; p. 580)
127. Mr. Tate and Steve have scheduled a site visit to a nearby Dell Computer’s assembly facility in
order to see firsthand many of the technologies available to Felcher & Sons. Dell Computer uses
technologies such as computer controlled factory equipment, industrial robots, bar code scanners,
and logistics software that enable them to manufacture, assemble, and ship custom-designed
computers in a very short time. Such technologies characterize _________, which give companies
the ability to quickly readjust their assembly lines to make products to order.
a. design-to-order manufacturing techniques
b. new technological techniques
c. flexible manufacturing techniques
d. intellectual property techniques
(c; moderate; p. 580; AACSB: Technology
128. Mr. Tate has been tasked with bringing these new plants into compliance with ISO 9000 standards.
Mr. Tate asks Steve if he is familiar with ISO 9000. Steve admits that while he remembers hearing
about it in school, he’s not 100 percent sure. Mr. Tate tells him that ISO 9000 is a
_______________.
a. quality standard that establishes a goal of no more than 3.4 defects per 10,000 units
b. quality standard that establishes a goal of no more than 3.4 defects per 100,000 units
c. quality standard that establishes a goal of no more than 3.4 defects per 1,000,000 units
d. series of international quality management standards
(d; moderate; p. 579; AACSB: Globalizations)
551
129. Having been assigned to help Mr. Tate bring new plants into compliance with ISO 9000 standards,
Steve asks Mr. Tate why obtaining ISO 9000 is so important to Felcher & Sons, Inc. Mr. Tate
responds that ______________.
a. this type of certification is a prerequisite for doing business internationally
b. quality is often a big problem for overseas plants because labor is less highly skilled
c. U.S. law requires manufacturers bring their operations into compliance by 2007
d. this quality goal establishes a goal of no more than 3.4 defects per million units or procedures
(a; moderate; p. 579; AACSB: Globalizations)
130. Having been assigned to help Mr. Tate bring new plants into compliance with ISO 9000 standards,
Steve asks Mr. Tate whether there are many firms that have achieved ISO 9000 certification. Mr.
Tate tells Steve that according to most recent figures he’d seen, the number of registered sites is
about _____________.
a. 100,000
b. 250,000
c. 670,000
d. 1,000,000
(c; difficult; p. 579; AACSB: Globalizations)
131. Mr. Tate and Steve attend a seminar put on by a Big 5 consulting firm with vast experience with
ISO 9000 and an excellent reputation in implementing various quality-based initiatives. The speaker,
John Dillon, begins by asking a question: “When you consider a product or service to have quality,
what does that mean?” Quality is the ability of a product or service to _______________.
a. reliably do what it is supposed to do
b. exceed customer expectations
c. provide value
d. be flexible
(a; difficult; p. 577)
132. Mr. Dillon tells the audience that firms, such as their client Rockwell Collins, have found that
successful quality management programs tend to rely on two important approaches, cross-functional
work teams and _________.
a. managerial flexibility
b. self-directed work teams
c. ongoing employee education and training
d. an overall learning orientation within the firm
(b; moderate; p. 578)
552
133. After the presentation, Mr. Tate approaches John Dillon and asks him about his company’s
experience with quality improvement efforts in overseas operations. Mr. Dillon tells Mr. Tate about
the experience of one of his customers Delphi Automotive Systems Corporation. Mr. Dillon just
returned from visiting their plant in Matamoros, Mexico, where Delphi had implemented a quality
initiative. The Delphi plant was able to reduce their customer reject rate by almost
________________.
a. 50 percent
b. 100 percent
c. 200 percent
d. 300 percent
(d; difficult; p. 579; AACSB: Globalizations)
134. Mr. Tate tells John Dillon about Felcher & Sons, Inc.’s efforts to achieve ISO 9000 certification.
He explains that the firm is pretty far along with this effort; quality control is an ongoing concern for
Felcher & Sons, and he asks Mr. Dillon if there might be other quality management issues or trends
that the consultant might be able to help them with. John Dillon tells them a little about Six Sigma.
After the show, Steve asks Mr. Tate what Six Sigma stands for, and Mr. Tate replies that
_________________.
a. Sigma is the Greek letter statisticians use to define a standard deviation
b. Six Sigma covers everything from contract review to product design to product delivery
c. Six Sigma is a series of international quality management standards established by the
International Organization for Standardization
d. Six Sigma has become the internationally recognized standard for evaluating and comparing
companies in the global marketplace
(a; easy; p. 579)
ESSAY QUESTIONS
WHAT IS OPERATIONS MANAGEMENT AND WHY IS IT IMPORTANT?
135. In a short essay, define operations management and briefly discuss the importance of this management
process.
Answer
The term operations management refers to the design, operation, and control of the transformation
process that converts such resources as labor and raw materials into goods and services that are sold to
customers. The system takes in inputs—people, technology, capital, equipment, materials, and
information—and transforms them through various processes, procedures, and work activities into
finished goods and services. Marketing, finance, research and development, human resources, and
accounting convert inputs into outputs such as sales, increased market share, high rates of return on
capital, new and innovative products, motivated and committed employees, and accounting reports.
Operations management is important because it encompasses both services and manufacturing, it’s
important in effectively and efficiently managing productivity, and it plays a strategic role in an
organization’s competitive success.
(easy; p. 564)
553
136.
In a short essay, identify seven of Deming’s 14 points for improving management’s productivity.
Answer
a. Plan for the long-term future.
b. Never be complacent concerning the quality of your product.
c. Establish statistical control over your production processes and require your suppliers to do so as
well.
d. Deal with the best and fewest number of suppliers.
e. Find out whether your problems are confined to particular parts of the production process or stem
from the overall process itself.
f. Train workers for the job that you are asking them to perform.
g. Raise the quality of your line supervisors.
h. Drive out fear.
i. Encourage departments to work closely together rather than to concentrate on departmental or
divisional distinctions.
j. Do not adopt strictly numerical goals.
k. Require your workers to do quality work.
l. Train your employees to understand statistical methods.
m. Train your employees in new skills as the need arises.
n. Make top managers responsible for implementing these principles.
(easy; p. 567)
VALUE CHAIN MANAGEMENT
137.
In a short essay, describe the goal of value chain management.
Answer
The goal of value chain management is to create a value chain strategy that meets and exceeds
customers’ needs and desires and allows for full and seamless integration among all members of the
chain. A good value chain is one in which a sequence of participants work together as a team, each
adding some component of value—such as faster assembly, more accurate information, better customer
response and service, and so forth—to the overall process. The better the collaboration among the
various chain participants, the better the customer solutions. When value is created for customers and
their needs and desires are satisfied, everyone along the chain benefits. For example, at automotive
interior supplier Johnson Controls Inc., managing the value chain started first with improved
relationships with internal suppliers, then expanded out to external suppliers and customers. As the
company’s experience with value chain management intensified and improved, so did its connection
with its customers, which ultimately will pay off for all its value chain partners.
(easy; p. 569)
554
138. 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. But it
takes more than flexible jobs; flexible employees are needed as well. 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 where customer value is best
delivered through collaborative relationships that may change as customer needs change and where there
are no standardized processes or job descriptions, 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 how to use
information technology software, how to improve the flow of materials throughout the chain, how to
identify activities that add value, how to make better decisions faster, or how to improve any other
number of potential work activities, managers must see to it that employees have the knowledge and
tools they need to do their jobs efficiently and effectively.
(moderate; p. 573)
555
139. In a short essay, list and discuss four obstacles that managers must deal with in managing the value
chain.
Answer
a. Organizational barriers—these 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 are
impossible. And, the reluctance or refusal of employees to shake up the status quo 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.
b. Cultural attitudes—unsupportive cultural attitudes also can be obstacles to value chain
management. The trust issue is a critical one, both lack of trust and too much trust. To be
effective, partners in a value chain must trust each other. There must be a mutual respect for, and
honesty about, each partner’s activities all along the chain. When that trust doesn’t exist, the
partners will be reluctant to share information, capabilities, and processes. But, too much trust
also can be a problem. A study by the American Society for Industrial Security found that those
cultivating a trusting relationship with a company pose the most serious threat for intellectual
property loss.
c. Required capabilities—there are a number of capabilities that value chain partners must have.
Several of these, including extreme coordination and collaboration, the ability to configure
products to satisfy customers and suppliers, and the ability to educate internal and external
partners, aren’t easy to develop. But they’re essential to capturing and exploiting the value chain.
d. People—the final obstacles to successful value chain management can be an organization’s
members. Without their unwavering commitment and willingness to do whatever it takes, value
chain management isn’t going to be successful. If employees refuse or are reluctant to be flexible,
it’s going to be difficult to make the necessary changes to meet changing situational demands. In
addition, value chain management takes an incredible amount of time and energy by an
organization’s employees. Managers must motivate those high levels of effort from employees.
(difficult; pp. 574-575)
556
CURRENT ISSUES IN OPERATIONS MANAGEMENT
140.
In a short essay, discuss technology’s role in manufacturing.
Answer
Although an organization’s production activities are being driven by the recognition that the customer is
king, managers still need to be more responsive. For instance, operations managers need systems that
can reveal available capacity, status of orders, and product quality while products are in the process of
being manufactured, not just after the fact. To connect more closely with customers, production must be
synchronized across the enterprise. To avoid bottlenecks and slowdowns, the production function must
be a full partner in the entire business system. What’s making this type of extensive collaboration
possible is technology. Technology is also allowing organizations to control costs particularly in the
areas of predictive maintenance, remote diagnostics, and utility cost savings. For instance, how is
technology affecting the equipment maintenance function—an important operations management
activity? New generations of Internet-compatible equipment contain embedded Web servers that can
communicate proactively—that is, if a piece of equipment breaks or reaches certain preset parameters
indicating that it’s about to break, it can ask for help. But technology can do more than sound an alarm
or light up an indicator button. For instance, some devices have the ability to initiate e-mail or signal a
pager at a supplier, the maintenance department, or contractor describing the specific problem and
requesting parts and service. How much is such e-enabled maintenance control worth? It can be worth
quite a lot if it prevents equipment breakdowns and subsequent production downtime. Managers who
understand the power of technology to contribute to more effective and efficient performance know that
managing operations is more than the traditional view of simply producing the product. Instead, the
emphasis is on working together with all the organization’s business functions to find solutions to
customers’ business problems.
(moderate; p. 576; AACSB: Technology)
557
141. In a short essay, list and discuss the two best-known quality goals that many organizations
worldwide have pursued.
Answer
a. ISO 9000—this is a series of international quality management standards established by the
International Organization for Standardization, which set uniform guidelines for processes to
ensure that products conform to customer requirements. These standards cover everything from
contract review to product design to product delivery. The ISO 9000 standards have become the
internationally recognized standard for evaluating and comparing companies in the global
marketplace. In fact, this type of certification is becoming a prerequisite for doing business
globally. Gaining ISO 9000 certification provides proof that a quality operations system is in
place.
b. Six Sigma—Motorola popularized the use of stringent quality standards more than 30 years ago
through a trademarked quality improvement program called Six Sigma. Six Sigma is a quality
standard that establishes a goal of no more than 3.4 defects per million units or procedures. Sigma is a
Greek letter that statisticians use to define a standard deviation from a bell curve. The higher the
sigma, the fewer the deviations from the norm—that is, the fewer the defects. At One Sigma, twothirds of whatever is being measured falls within the curve. Two Sigma covers about 95 percent. Six
Sigma is about as close to defect free as anyone can get.
(moderate; p. 579; AACSB: Globalizations)
142. Define the concept of mass customization and provide several relevant examples. Briefly discuss
how technology is vital to the success of mass customization efforts.
Answer
Mass customization is an emerging business trend that utilizes advanced information technology and
flexible manufacturing processes to provide consumers with a product, when, where and how they prefer
it. For instance, Levi Strauss’s Web site allows customers to create their own virtual model to get a
custom fitted pair of jeans. Proctor & Gamble uses its Reflect.com site to customize beauty products for
customers. Mass customization requires flexible manufacturing techniques and continual dialogue with
customers to be successful. Using technology such as computer controlled factory equipment, intranets,
and logistics software, companies can manufacture, assemble, and ship customized products in
incredibly short timeframes. Dell Computer uses flexible manufacturing techniques and technology to
custom-build computers to customer’s specifications. Technology also plays an important part in
maintaining an ongoing dialogue with companies’ customers, enabling organizations to establish,
maintain, and strengthen relationships with customers.
(easy; p. 580; AACSB: Technology)
558