Chapter 19 Global Operations and Supply Chain Management

True/False Questions
1. According to the text, outsourcing is hiring others to do noncore
activities.
Answer: T
2. Supply chains are an integral part of global quality and cost
management initiatives, since a typical company's supply chain
costs can represent over 80 percent of assets.
Answer: F
3. Because inventory is carried at each stage in the supply chain, and
because inventory ties up money, it has been argued that the
ultimate goal of effective supply chain management systems is to
reduce inventory.
Answer: T
4. Effective supply chain management can enhance a company's ability
to manage regulatory, social, and other environmental pressures,
both within a nation and globally.
Answer: T
5. An important consideration in design is the extent to which the
international company's products and services will be standardized
across nations or regions.
Answer: T
6. The over-the-wall approach to product design involves an initial
step in which the designers prepare the product's design, followed
by sending the newly created design to the company's
manufacturing engineers.
Answer: T
7. The primary reason for sourcing globally is to obtain lower prices.
Answer: T

31

Chapter 19 Global Operations and Supply Chain Management

8. Companies engage in outsourcing when they make the decision to
source internationally.
Answer: T

32

Chapter 19 Global Operations and Supply Chain Management

9. Outsourcing decisions, except for the decision to use global sources
of supply, are extensions of the make-or-buy decisions of earlier era.
Answer: F
10. The rate at which developing nations shift to more sophisticated
processes is often slower than for the initial emergence of these
processes in a developed country, due to high relative costs and less
developed skills of the workforce.
Answer: T
11. In U.S. industry, the proportion of purchased materials in the overall
cost of goods sold has been rising for several decades.
Answer: T
12. In many companies, the purchasing function has been viewed as
prime candidate for outsourcing to other firms, a trend encouraged
by rapid developments in E-procurement.
Answer: T
13. Industry-based B2B exchanges can help optimize the supply chain
across an entire network of organizations, not merely within a single
company.
Answer: T
14. Global sourcing is a standard procedure for half of U.S. firms with
sales over $10 million.
Answer: T
15. Firms increasingly are using indirect procurement systems to ensure
that all the costs associated with foreign sourcing are fully
recognized when they make purchasing decisions.
Answer: F
16. To achieve effective implementation, E-procurement systems must
be isolated from the company's overall business system.

33

Chapter 19 Global Operations and Supply Chain Management

Answer: T

34

Chapter 19 Global Operations and Supply Chain Management

17. To avoid an increase in price because the home currency has lost
value, an American importer should require exporters to quote in
their currency.
Answer: F
18. Although international firms maintain manufacturing facilities in
countries at various levels of development, manufacturing systems
should not vary significantly within the same company.
Answer: F
19. American engineers taught the Japanese that technology can be
used to analyze what the system is doing and to get it under control
to produce quality products.
Answer: F
20. W. Edwards Deming taught thousands of American industrial
engineers how to use statistics in manufacturing.
Answer: T
21. Japanese manufacturers realized that because of the limited size of
the country's economy, they would have to export to grow.
Answer: T
22. To be competitive in world markets, Japanese managers knew they
would have to provide high-quality products at low prices.
Answer: T
23. Concurrent engineering is a technique where representatives from
production, design, marketing and suppliers work jointly on new
products.
Answer: F
24. For just-in-time to be successful, manufacturers have to have the
cooperation of their suppliers.

35

Chapter 19 Global Operations and Supply Chain Management

Answer: T

36

Chapter 19 Global Operations and Supply Chain Management

25. Total quality management is a company-wide management approach
to ensure quantity products throughout the organization.
Answer: T
26. Many U.S. manufacturers copied parts of the just-in-time system
without realizing it is a total system.
Answer: T
27. Just-in-time is restricted to operations that produce the same parts
repeatedly because it is a balanced system.
Answer: T
28. To operate without inventory all components must be defect free, or
else all successive operations will stop, waiting for usable inputs.
Answer: T
29. Synchronous production is superior to the just-in-time production
system because it is a balanced system in which the capacities of all
operations are equal.
Answer: F
30. Synchronous manufacturing is a production system whose output is
set at the output of the operation (bottleneck) that is working at full
capacity.
Answer: T
31. Mass customization refers to the use of computer-aided
manufacturing systems for production.
Answer: T
32. Mass customization is usually appropriate in situations where there
is the potential for delaying the task of differentiating the product for
a particular customer until the last possible point in the supply
network.

37

Chapter 19 Global Operations and Supply Chain Management

Answer: T

38

Chapter 19 Global Operations and Supply Chain Management

33. Six Sigma is a business management process that combines a welldefined infrastructure with leadership from the top in order to solve
problems and optimize processes.
Answer: F
34. The production manager is usually the driving force for
implementing Six Sigma.
Answer: F
35. The main advantage of a Six Sigma program is increased quality.
Answer: F
36. The effectiveness of supply chain management efforts is strongly
influenced by how a company manages the interface of logistics with
sourcing and manufacturing.
Answer: T
37. Standards are documented agreements containing general
guidelines, rules, or definitions of the characteristics of a product,
process, or service.
Answer: F
38. Unless a product or service is purchased from a company that is
registered to the appropriate ISO 9000 standard, a buyer cannot be
assured that the quality of what was received will be what was
expected.
Answer: F
39. The intention of the ISO 14000 series is to surpass the ISO 9000
series through providing a more comprehensive set of standards for
the design, development, manufacturing, installation, and servicing
of products and services.
Answer:
40. Manufacturing rationalization is a division of production among a

39

Chapter 19 Global Operations and Supply Chain Management

number of production units, thus enabling each to produce only a
limited number of components for all of a firm's final product.
Answer: T

40

Chapter 19 Global Operations and Supply Chain Management

41. Generally, it is easier for international firms to standardize the
concepts of total quality control and synchronous production in their
foreign plants than it is to standardize the actual production
facilities.
Answer: T
42. Although engineers are required for the maintenance of specialized
machinery, only highly-skilled people are needed to attend the
machines.
Answer: F
43. When a country needs new job creation, it follows that government
officials will insist on the use of labor-intensive processes.
Answer: F
44. Intermediate technology will create more jobs and require less
capital than will capital-intensive processes.
Answer: T
45. A good technology for developing countries is intermediate
technology.
Answer: F
46. The production organization in an overseas subsidiary is commonly a
scaled down version of that found in the parent company.
Answer: T
47. Once the manufacturing system has been put into operation, two
general classes of activities, manufacturing, and inspection, must be
performed.
Answer: F
48. It is the responsibility of the marketers, not the production
managers, to choose the price-quality combination that will satisfy
the market.

41

Chapter 19 Global Operations and Supply Chain Management

Answer: T

42

Chapter 19 Global Operations and Supply Chain Management

49. Because of the importance of local conditions, product quality is
under exclusive control of the local subsidiary.
Answer: F
50. The finance department in the home office knows that in a country
afflicted by hyperinflation, good profits can be made by being short
in cash and long in inventory.
Answer: T
51. Nearly every international firm follows the practice of bringing a
person from the home office to be the purchasing agent.
Answer: F
52. International companies try to place people from the home office as
technical managers in their overseas affiliates to help keep the
affiliates as captive customers.
T
Answer:
53. The concept of preventive maintenance is not widely accepted in
developing countries.
Answer:
Multiple Choice Questions
54. Reasons for sourcing globally include:
A) a lower price.
B) products not available locally.
C) a firm's worldwide operation and attitude.
D) all of the above.
E) A and B.
Answer:

43

Chapter 19 Global Operations and Supply Chain Management

55. Investigation of export and import data shows:
A) there is a strong relationship between global sourcing and
ownership of the foreign sources.
B) there is no relationship between global sourcing and ownership of
the foreign sources.
C) that American firms, but not Japanese firms, buy from their U. S.
subsidiaries.
D) American firms import twice as much from their overseas
subsidiaries than foreign firms import from their U. S. affiliates.
Answer:
56. According to the text, including such items as maintenance, repair,
operating supplies, office equipment, and other services and
supplies, indirect procurement can account for as much as what
percent of the total purchasing expenditures in companies?
A) 15 percent
B) 30 percent
C) 50 percent
D) 70 percent
E) 80 percent
Answer:
57. According to the text, the cost of importing a foreign sourced
product:
A) is insignificant.
B) may range from 26% to 110% of the cost of the product.
C) may range from 5% to 20% of the cost of the product.
D) may not be charged if the terms of sale are CIF, port of entry.
Answer:
58. Problems associated with e-procurement include:
A) it cannot be isolated from the company's overall business
system.
B) it must be completed before the firm can engage in other
purchasing functions, such as supplier determination and
analysis.
C) It can expose the company to a wide range of potential security
issues.
D) all of the above

44

Chapter 19 Global Operations and Supply Chain Management

E) A and C
Answer:

45

Chapter 19 Global Operations and Supply Chain Management

59. According to the text, when Japanese manufacturers examined their
production costs, they realized that:
A) inventory costs are a major factor.
B) bad debts are a major factor.
C) competitors' price-cutting is a major factor.
D) too short process times cause machinery breakdowns.
Answer:
60. To lower manufacturing costs, the principal goal of Japanese firms is
to:
A) reduce workers wages.
B) eliminate inventories.
C) speed up production lines.
D) increase the use of robots.
Answer:
61. To operate without inventory, Japanese firms required
A) that components, purchased or made in the factory, had to be
defect free.
B) that the parts and components had to be delivered to each point
in the production process when they were needed.
C) their suppliers to maintain inventories of finished components.
D) A and B.
E) A, B, and C.
Answer:
62. Just-in-time:
A) is a patented Japanese process for quality control.
B) requires materials and parts arrive at each point in the
production process when they are needed.
C) requires parts and materials arrive at a manufacturing plant at
least one month in advance to avoid "stockouts."
D) permits greater flexibility in Toyota's production schedule.
Answer:

46

Chapter 19 Global Operations and Supply Chain Management

63. Quality circles meet to discuss ways to improve:
A) production control.
B) their functional areas.
C) quality of the product.
D) B and C.
Answer:
64. Total quality management:
A) is the control of quality in all areas of production, not just
inspection.
B) refers to quality control in not only the production of the firm's
products, but also to quality control of all suppliers.
C) refers to the control of quality in all functional areas of the firm.
D) A and B.
Answer:
65. __________ contradicts the principles of quality circles.
A) JIT
B) TQM
C) Taylor's scientific management system
D) The Deming process
Answer:
66. Many American manufacturers made the mistake of rushing to copy
parts of Japan's just-in-time production system without considering:
A) the impact of attitudinal differences between Japanese and
Westerners on the system.
B) A and C.
C) that it is a total system covering management of people, material
and relations with suppliers.
D) that it was patented by Japan.
E) All of the above.
Answer:

47

Chapter 19 Global Operations and Supply Chain Management

67. The output of a synchronized manufacturing system is set:
A) at the capacity of the operation with the highest output.
B) at the output of the operation that is working at full capacity.
C) at the level which permits the system to be balanced.
D) so that all production operations can produce the same amount
to eliminate stockpiling.
Answer:
68. Synchronous production has an advantage over just-in-time in that:
A) the product flow through the system is balanced without the work
of balancing the output of each operation.
B) it is a balanced system.
C) it works better because it uses trial and error to put the system
into effect.
D) it is a total system, whereas just-in-time is not.
Answer:
69. Synchronous manufacturing systems:
A) is a balanced system while a JIT system is unbalanced.
B) takes longer to install than a JIT system, but production capacities
are larger.
C) is faster than a JIT system because no allowances is made for
contingencies.
D) is also called the theory of constraints.
Answer:
70. A ___________ is the name given to an operation in a synchronous
manufacturing system whose output sets the limit for the entire
system's output.
A) limiting point
B) strangle point
C) bottleneck
D) critical operation
Answer:

48

Chapter 19 Global Operations and Supply Chain Management

71. As firms adopt new manufacturing techniques such as synchronous
production they are:
A) turning to activity-based costing.
B) finding traditional accounting methods adequate to measure
overhead costs.
C) allocating the overhead burden in fixed ratios.
D) B and C.
E) A, B, and C.
Answer:
72. Mass customization:
A) refers to a company's use of computer-aided manufacturing
systems to produce and deliver products and services.
B) is usually appropriate in situations where there is the potential for
differentiating a product for a particular customer.
C) typically requires the company to reconceptualize the design of
its products as well as the design and integration of the
processes used for producing and delivering the product to
customers.
D) all of the above
E) A and C
Answer:
73. Reasons for global standardization of manufacturing systems
include:
A) simpler organization at headquarters.
B) less design time required for a new plant.
C) standardization of processes and machinery permits
manufacturing rationalization.
D) A, B, and C.
E) A and B.
Answer:
74. Manufacturing rationalization is:
A) the allocation of scarce resources.
B) the division of production among several subsidiaries so that
each produces only a limited number of components for all
subsidiaries.
C) the concentration of production at one site to get economies of

49

Chapter 19 Global Operations and Supply Chain Management

scale.
D) the production by a subsidiary for its own national market.
Answer:

50

Chapter 19 Global Operations and Supply Chain Management

75. Quality control in foreign affiliates from the home office is less
difficult when:
A) the quality inspectors are trained in the home office.
B) separate standards are used in each plant.
C) production equipment is similar.
D) the quality reports are sent to the home office at the same time.
Answer:
76. Backward vertical integration refers to:
A) the purchase of competitive firms.
B) the installation of production facilities to produce inputs for the
production of final products
C) the placing of minorities in charge of production processes.
D) the installation of production facilities to consume the outputs of
the production system.
Answer:
77. Intermediate technology is:
A) technology between the capital- and labor-intensive processes.
B) synonymous with necessary technology.
C) older technology previously used by multinationals.
D) A and C.
Answer:
78. The level of technology chosen may be:
A) B, C, and D.
B) intermediate technology.
C) capital-intensive.
D) labor-technology.
E) C and D.
Answer:

51

Chapter 19 Global Operations and Supply Chain Management

79. Technology:
A) for developing nations is intermediate technology.
B) can range from the most advanced technology available to the
most primitive technology.
C) for developing nations is labor-intensive technology.
D) for developing nations is capital-intensive technology because of
the lack of trained workers.
Answer:
80. In choosing a plant site, management will:
A) seek the least-cost location.
B) choose the location where the senior management team desires
to live.
C) seek the site for which the sum of production and transfer costs
is minimized.
D) A and C.
E) A, B, and C.
Answer:
81. Plant location is significant because of its effect on both production
and distribution costs which frequently are:
A) in conflict.
B) high.
C) low.
D) almost equal.
Answer:
82. Once the production system is in operation, two general classes of
activities, ____________ and _____________ must be performed.
A) productive, maintenance
B) productive, technical
C) productive, supportive
D) productive, control
Answer:

52

Chapter 19 Global Operations and Supply Chain Management

83. Absenteeism in developing nations:
A) is a significant problem in meeting production standards.
B) lowers labor costs.
C) is necessary so that workers can help with the harvest.
D) may result if managers fail to adopt a participative management
style.
Answer:
84. One obstacle to meeting production standards is:
A) excessive back orders of output.
B) excessive sales price.
C) excessive manufacturing costs.
D) A and B.
Answer:
85. To be effective, quality control ____________ left in the hands of the
subsidiary.
A) may or may not be
B) must be
C) cannot be
D) is partially
Answer:
86. Good quality
A) is what a buyer considers a product to have if it satisfies the
purpose for which it is purchased.
B) for products in industrialized nations may be poor quality in
developing nations.
C) costs more than poor quality.
D) A, B, and C.
E) A and B.
Answer:
87. The scheduled shutdown of production machinery for overhaul is
referred to as:
A) scheduled machinery shutdown.
B) planned breakdown.
C) preventive breakdown.

53

Chapter 19 Global Operations and Supply Chain Management

D) preventive maintenance.
Answer:

54

Chapter 19 Global Operations and Supply Chain Management

88. The affiliate's ___________ manager is a key figure in the maintenance
of product quality.
A) maintenance
B) technical
C) control
D) research and design
Answer:
Essay Questions
89. What is supply chain management and why is it an important issue
for a company's international competitiveness?
Page: 505 ff Difficulty: Medium Answer: Answers may vary.
90. Why is the design of products and services important to global
supply chain management and what are the main design
alternatives that are available?
Page: 506 ff Difficulty: Easy Answer: Answers may vary.
91. What are the reasons for sourcing globally, what options are
available to a firm that wishes to engage in global sourcing, and
what are the primary strengths and weaknesses associated with
each option?
Page: 505 ff Difficulty: Medium Answer: Answers may vary.
92. Discuss the relationship between the manufacturer's insistence on
receiving components with zero defects from suppliers and the justin-time production system.
Page: 515 ff Difficulty: Easy Answer: Answers may vary.
93. Discuss the problems with Just-in-Time system that the American
synchronous manufacturing system was designed to overcome.
Page: 515 ff Difficulty: Medium Answer: Answers may vary.
94. What are some of the points a plant designer will consider when

55

Chapter 19 Global Operations and Supply Chain Management

deciding between installing labor-intensive and capital-intensive
production methods?
Page: 529 ff Difficulty: Medium Answer: Answers may vary.

56

Chapter 19 Global Operations and Supply Chain Management

95. Explain what Six Sigma is and how such an approach works.
Page: 520 ff Difficulty: Medium Answer: Answers may vary
96. Because of the intervention of the foreign environmental forces,
generally it is easier to standardize the concepts of TQM and
synchronous manufacturing than it is to standardize the actual
production facilities. Discuss some of the examples given in the
text.
Page: 526 ff Difficulty: Hard Answer: Answers may vary.
97. Discuss the obstacles to meeting production standards.
Page: 531 Difficulty: Easy Answer: Answers may vary.
Fill in the Blank Questions
98. Hiring others to perform some of the noncore activities and decision
making in a company's value chain, rather than having the company
and its employees continue to perform these activities, is called
____________.
Answer: outsourcing

Page: 505 Difficulty: Easy

99. The process of coordinating and integrating the flow of materials,

information, finances, and services within and among companies in
the value chain is called _________ __________ __________.
Answer: supply chain management

Page: 505 Difficulty: Medium

100. The primary reason for sourcing globally is to obtain __________

__________.
Answer: lower prices

Page: 507 Difficulty: Easy

101. ____________ is the relocation of some or all of a business's activities

or processes to a foreign location.
Answer: Offshoring

Page: 507 Difficulty: Easy

102. A balanced system in which there is little or no delay time and idle

57

Chapter 19 Global Operations and Supply Chain Management

in-process and finished inventory is called _________.
Answer: just-in-time

Page: 515 Difficulty: Medium

58

Chapter 19 Global Operations and Supply Chain Management

103. Total quality management is the process by which the entire
organization excels on all dimensions of product and services that
are important to the __________.
Answer: customer

Page: 516 Difficulty: Medium

104. __________ __________ is a small work group that meet periodically to

discuss ways to improve their functional areas and the quality of the
product.
Answer: Quality circle

Page: 516 Difficulty: Medium

105. Under Taylor's scientific management system planning is done by

__________.
Answer: managers.

Page: 517 Difficulty: Medium

106. Preventive maintenance is __________ maintenance.

Answer: planned

Page: 518 Difficulty: Medium

107. __________ manufacturing is an entire manufacturing process with

unbalanced operations that emphasizes total system performance.
Answer: Synchronous

Page: 518 Difficulty: Medium

108. A __________ sets the limit for the entire synchronous production
system's output.
Answer: bottleneck

Page: 518 Difficulty: Medium

109. The use of flexible, usually computer-aided manufacturing systems

to produce and deliver customized products and services for
different customers worldwide is known as ________ ___________.
Answer: mass customization

Page: 519 Difficulty: Medium

110. ________ __________ is a business management process that combines

rigorous analytical tools with a well-defined infrastructure and
leadership from the top in order to solve problems and optimize
processes.

59

Chapter 19 Global Operations and Supply Chain Management

Answer: Six Sigma

Page: 520 Difficulty: Easy

60

Chapter 19 Global Operations and Supply Chain Management

111. ____________ are documented agreements containing technical
specifications or other precise criteria that will be used consistently
as guidelines, rules, or definitions of the characteristics of a product,
process, or service.
Answer: Standards

Page: 524 Difficulty: Easy

112. Manufacturing __________ is the division of production among a

number of production units.
Answer: rationalization

Page: 525 Difficulty: Hard

113. _______ vertical integration establishes facilities to manufacture

inputs used in the production of a firm's final product.
Answer: Backward

Page: 528 Difficulty: Medium

114. Production methods between capital- and labor-intensive methods

are classified as __________ __________.
Answer: intermediate technology

61

Page: 529 Difficulty: Medium