Test Bank Chapter 11 The International Monetary System

Student name:__________

1) Define the term logistics. Compare and contrast production and logistics.

2) Discuss the strategic objectives of the production and logistics functions of an international firm.

3) Describe the major arguments put forth by Edward Deming.

4) Briefly describe the Six Sigma methodology.

5) What are the three main factors that affect the decision of where to locate production?

6) Discuss the effect of country factors on the decision of where to locate production.

7) How does the type of technology a firm uses affect its decision of where to locate production?

8) Explain how fixed costs impact the decision to where to locate a plant.

9) Describe the concept of minimum efficient scale of output. What are the implications of minimum efficient scale?

10) Explain how the concept of production efficiency has changed with the rise of flexible manufacturing technologies.

11) How do product factors affect the decision of where to locate production? Where will you locate your firm’s production plant if your firm produces refined sugar?

12) When does concentration of production make sense?

13) Explain how the strategic role of foreign factories evolves over time.

14) Explain make-or-buy decisions by giving an example of an international business that must decide whether to outsource an activity.

15) Define just-in-time inventory. Explain why a firm might adopt the just-in-time system. Why might a firm choose a different inventory system?

16) Logistics is the activity that controls the

A) effective flows of physical materials through the value chain.
B) customer contact points of a business.
C) activities involved in creating a product.
D) information flows between a business and its customers.

17) The Six Sigma methodology

A) is used to compare and benchmark the performances of competing firms.
B) gives more importance to productivity than product quality.
C) is a direct descendant of the total quality management philosophy.
D) says that at six sigmas, there would be only 0.6 defects per million units.

18) Deming argued that to keep pace with changes in the workplace

A) work standards should be defined only as quotas and numbers.
B) supervision is not essential for quality improvements.
C) management should train employees in new skills.
D) products should be certified with standards such as ISO 9000.

19) Before a firm is allowed access to the European marketplace, the European Union requires that the quality of the firm’s manufacturing processes and products be certified under a quality standard known as

A) Six Sigma.
B) ISO 9000.
C) Kaizen.
D) total quality management.

20) At six sigmas, a production process would be highly accurate and create just

A) 3.4 defects per hundred thousand units.
B) 6.8 defects per million units.
C) 3.4 defects per million units.
D) 6.8 defects per hundred thousand units.

21) Which of the following statements is true of Six Sigma?

A) It is a statistically based philosophy to reduce defects and boost productivity.
B) At six sigmas, a production process will have 6.6 defects per million units.
C) At six sigmas, a production process would be 100 percent accurate.
D) A company can achieve Six Sigma perfection by reducing the number of defects to one in 6,000.

22) Which of the following statements is true of the country factors that govern international business?

A) Relative factor costs should be considered when selecting a country for production.
B) Centralized production is the most suitable method of doing international business.
C) Exchange rates are not a significant factor that determines the selection of a country.
D) Decentralized manufacturing is the most suitable method of doing international business.

23) Which of the following is a factor that transforms a low-cost location to a high-cost location?

A) appreciation of local currency
B) use of fixed exchange rates
C) use of pegged exchange rates
D) implementation of free trade regime

24) Which of the following is a characteristic of manufacturing technology that can be pivotal in deciding where to locate an international business?

A) exchange rates that govern the business
B) relative factors cost in the locality
C) availability of a skilled labor pool
D) fixed costs of setting up a production plant

25) Which of the following makes being dependent on one location particularly risky?

A) governmental intervention in exchange rates
B) floating exchange rates
C) fixed exchange rates
D) preferential treatment of domestic industries

26) According to the concept of economies of scale, as plant output expands

A) productivity declines.
B) total costs decrease.
C) unit costs decrease.
D) utilization of capital declines.

27) Identify an advantage of adopting a low minimum efficient scale.

A) It helps companies reduce the level of initial capital required for business.
B) It allows the firm to accommodate demands for local responsiveness.
C) It allows firms to discount political risks and other global capital risks.
D) A minimum efficient scale of a plant allows decentralization of production.

28) Central to the concept of economies of scale is the idea that the best way to achieve high efficiency, and hence low unit costs, is through the

A) customization of products for each individual market.
B) mass production of a standardized output.
C) production of goods that vary from one another.
D) production of small volumes of high-quality products.

29) Flexible manufacturing technology is also known as

A) Six Sigma production.
B) line production.
C) standardization.
D) lean production.

30) Which of the following is a desired outcome of flexible manufacturing technology?

A) minimizing the utilization of individual machines
B) reducing setup times for complex equipment
C) standardizing the output of a system
D) implementing specialized equipment in production

31) _____ allows the company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.

A) Standardization
B) Kaizen
C) Six Sigma
D) Lean production

32) The term _____ has been coined to describe the ability of companies to use flexible manufacturing technology to reconcile the goals of low cost and product personalization.

A) assembly-line production
B) product standardization
C) mass customization
D) Six Sigma production

33) _____ is a grouping of various types of machinery, a common materials handler, and a centralized cell controller.

A) A flexible machine cell
B) A Six Sigma
C) An assembly line
D) A minimum efficient scale

34) Which of the following statements is true of products with high value-to-weight ratios?

A) Transportation costs usually account for a large percentage of their total costs.
B) They are relatively inexpensive and weigh a lot.
C) They are usually produced in multiple locations close to major markets.
D) Their transportation accounts for a very small percentage of the total costs.

35) Which of the following products will most likely have high value-to-weight ratios?

A) pharmaceuticals
B) refined sugar
C) bulk chemicals
D) petroleum products

36) When a company’s product has a low value-to-weight ratio, the company should

A) acquire a shipping company and manufacture nearby.
B) manufacture products from a centralized location.
C) ignore transportation costs as they would only be a minor part.
D) produce the product in multiple locations close to major markets.

37) Which of the following products will have low value-to-weight ratios?

A) pharmaceuticals
B) refined sugar
C) microprocessor
D) electronic items

38) Concentration of production is appropriate when

A) the product serves universal needs.
B) the product does not serve universal needs.
C) the product’s value-to-weight ratio is low.
D) volatility in important exchange rates is expected.

39) The level of output at which most plant-level scale economies are exhausted is referred to as the

A) minimum efficient scale of output.
B) downstream supply chain.
C) flexible machine.
D) upstream supply chain.

40) An advantage of a _____ allows a firm to hedge against currency risks.

A) low TQM
B) low minimum efficient scale
C) high TQM
D) high minimum efficient scale

41) _____ covers a range of manufacturing technologies designed to reduce setup times for complex equipment.

A) ISO 9000
B) TQM
C) Lean production
D) JIT

42) A flexible machine cell is

A) a component of a source factory.
B) used to perform a standardized operation.
C) a component of a lead factory.
D) a grouping of various types of machinery, a common materials handler, and a centralized cell controller.

43) Products such as refined sugar, certain bulk chemicals, paint, and petroleum products

A) cannot travel through a global supply chain.
B) have low value-to-weight ratios.
C) come from offshore factories.
D) have high value-to-weight ratios.

44) Which of the following is the main concept of economies of scale?

A) Productivity declines when firms attempt to reduce costs.
B) Total costs increase as firms increase production.
C) Unit costs decrease as a plant’s output expands.
D) Utilization of capital declines when firms grow in size.

45) _____ implies that a firm may be able to customize its product range to suit the needs of different customer groups without bearing a significant cost penalty.

A) Assembly-line production
B) Mass customization
C) Six Sigma production
D) Product standardization

46) The typical _____ is dedicated to the production of a family of parts or products through the use of four to six machines capable of performing various operations.

A) minimum efficient scale
B) flexible machine cell
C) just-in-time machine
D) assembly line

47) Decentralization of production is appropriate when

A) a product’s value-to-weight ratio is high.
B) the product serves universal needs.
C) barriers to trade are low.
D) volatility in key exchange rates is expected.

48) Which of the following is a hidden cost associated with basing production in a foreign location?

A) cost of labor within the location
B) high employee turnover
C) transportation costs
D) differences in the value of currency

49) The idea that valuable knowledge does not reside just in a firm’s domestic operations but can also be found in its foreign subsidiaries is called

A) global learning.
B) global production processes.
C) global economics.
D) global factors.

50) _____ makes the most sense when differences among countries in factor costs have a substantial impact on the costs of manufacturing in various countries.

A) Decentralized production
B) Just in time (JIT)
C) Concentration of production
D) Total quality management (TQM)

51) Decentralization of production is appropriate when

A) the product’s value-to-weight ratio is high.
B) location externalities are important.
C) the product serves universal needs.
D) volatility in important exchange rates is expected.

52) This type of factory—often with the same standards as the top factories in the global firm’s system—is set up to overcome intangible and tangible barriers in the global marketplace.

A) contributor factory
B) source factory
C) lead factory
D) server factory

53) _____ is often placed near a competitor’s headquarters or main operations, near the most demanding customers, or near key suppliers of unique and critically important parts.

A) An outpost factory
B) A source factory
C) A contributor factory
D) A lead factory

54) This is where cutting-edge production should take place, or at least be tested for implementation in other parts of the firm’s production network.

A) source factory
B) lead factory
C) contributor factory
D) outpost factory

55) Which of the following would lead a firm to choose a concentration of production?

A) Trade barriers are high.
B) Location externalities are not important.
C) Important exchange rates are expected to remain relatively stable.
D) The product’s value-to-weight ratio is low.

56) Which of the following situations would lead a firm to choose to decentralize production?

A) The product serves universal needs.
B) The production technology has high fixed costs and high minimum efficient scale relative to global demand or flexible manufacturing technology exists.
C) Trade barriers are low.
D) The production technology has low fixed costs and low minimum efficient scale, and flexible manufacturing technology is not available.

57) RSA is a bicycle manufacturing company. Which of the following is a make-or-buy decision that the company will have to make?

A) Should the company increase its responsiveness toward the retailers?
B) What are the products that the company should manufacture?
C) Should the company outsource production to a low-cost vendor?
D) What should be the pricing strategy for the company’s product?

58) Make-or-buy decisions are decisions about

A) the components to be used in the manufacturing process.
B) procuring raw materials for a production process.
C) procuring the capital equipment for production.
D) whether or not to outsource value creation activities.

59) An advantage of engaging in in-house production of products and components is that

A) the firm will have fewer subunits to control by making products in-house.
B) it will help the firm capture more orders from other countries.
C) it enables a firm to protect the proprietary technologies that it has.
D) firms can make better use of the location advantages of certain countries.

60) An advantage of buying component parts, or even an entire product, from independent suppliers is that

A) it can make planning, coordination, and scheduling of adjacent processes easier for the firm.
B) the firm can strategically manage inventory.
C) the firm will be able to maintain strict control over its proprietary technology.
D) the firm will have access to superior quality raw materials and will deliver high quality products.

61) Cost and _____ are the two main drivers behind make-or-buy choices made by global companies when they engage in global supply chains.

A) production capacity
B) assurance of continual supply
C) quality control
D) control

62) _____ can be viewed as the decision-making process regarding the raw materials, work-in-process (component parts), and finished goods inventory for a multinational corporation.

A) Global supply chain management
B) Global inventory management
C) Global corporate management
D) Global sourcing arrangements

63) This type of facility positions and allows customization of products for delivery to worldwide wholesalers or retailers or directly to consumers anywhere in the world.

A) logistics center
B) lead factory
C) global distribution center
D) source factory

64) _____ is the outer packaging envelope that allows for easier handling or product transfer among international suppliers, manufacturers, distribution centers, retailers, and any other intermediaries in the global supply chain.

A) Primary packaging
B) Performance packaging
C) Secondary packaging
D) Unit-load packaging

65) Packaging, which comes in all shapes, sizes, forms, and uses, can be divided into three different types

A) primary, secondary, and transit.
B) customer, retailer, and distributor.
C) primary, secondary, and tertiary.
D) first level, second level, and third level.

66) _____ refers to the movement of raw material, component parts, and finished goods throughout the global supply chain.

A) Distribution
B) Transportation
C) Sourcing
D) Logistics

67) The process of planning, implementing, and controlling the efficient, cost-effective flow of raw materials, in-process inventory, finished goods, and related information from the point of consumption to the point of origin for the purpose of recapturing value or proper disposalis called

A) transportation.
B) distribution.
C) reverse logistics.
D) global sourcing.

68) Packaging is intended to achieve a set of multilayered functions, which can be grouped into (1) perform, (2) protect, and (3) inform. Which of the following is one of the functions of the “perform” group?

A) the package’s ability to preserve the products to maintain their freshness or newness
B) the package’s ability to provide the necessary security and safety to ensure that the products reach their end destination in their intended shape
C) the package’s ability to contain the products properly
D) the ability of the product in the package to handle being transported between nodes in the global supply chain

69) There are five strategic levels for global purchasing that can be undertaken by a global company. At which level do companies engage in international purchasing activities as part of the firm’s overall supply chain management strategy?

A) Level I
B) Level II
C) Level III
D) Level IV

70) There are five strategic levels for global purchasing that can be undertaken by a global company. At which level do companies engage in global purchasing activities that are integrated across worldwide locations and functional groups?

A) Level II
B) Level III
C) Level IV
D) Level V

71) When a multinational corporation buys products or services from one of its suppliers that produces them somewhere else, whether domestically or globally, it is referred to as

A) offshoring.
B) insourcing.
C) outsourcing.
D) co-sourcing.

72) A multinational corporation uses both its own employees from inside the firm and an external supplier to perform certain tasks, often in concert with each other.

A) insourcing
B) offshore outsourcing
C) nearshoring
D) co-sourcing

73) The major cost saving associated with JIT systems comes from

A) early delivery of raw materials to production.
B) decentralization of manufacturing.
C) speeding up inventory turnover.
D) reduced spending on CRM activities.

74) Just-in-time inventory systems

A) are used when procurement is not organized.
B) require large warehouses for storage.
C) economize on inventory holding costs.
D) maintain large buffer for inventory.

75) What is a drawback of a just-in-time system?

A) Transport costs are high when using a just-in-time system.
B) It leaves a firm without a buffer stock of inventory.
C) It increases the warranty costs associated with products.
D) It leaves a firm with high scrap costs associated with defective products.

76) With _____ system, suppliers, shippers, and the purchasing firm can communicate with each other with no time delay.

A) a CAD
B) a JIT
C) a CAM
D) an EDI

77) Just-in-time systems

A) leave a firm without a buffer stock of inventory.
B) ensure that product is always available.
C) help a firm respond quickly to increases in demand.
D) allow for stockpiling of key components of production.

78) _____ refers to shared decision-making opportunities and operational collaboration of key global supply chain activities.

A) Global supply chain coordination
B) Make-or-buy decision
C) Reverse logistics
D) Global sourcing

79) Production is also sometimes referred to as operations as part of a global supply chain.

⊚ true
⊚ false

80) Logistics includes the buying of raw materials and component parts.

⊚ true
⊚ false

81) The upstream portion of the global supply chain includes all of the organizations and resources in the supply chain.

⊚ true
⊚ false

82) Six Sigma is a qualitative alternative to total quality management that focuses primarily on managing human resources to improve profitability.

⊚ true
⊚ false

83) Other things being equal, a firm should locate its various manufacturing activities where the relative factor costs are conducive to the performance of those activities.

⊚ true
⊚ false

84) The argument for centralizing production will be greater if the minimum efficient scale of a plant relative to total global demand is low.

⊚ true
⊚ false

85) Mass customization facilitates product customization at low costs.

⊚ true
⊚ false

86) Flexible manufacturing technologies enable companies to customize products to the demands of small consumer groups.

⊚ true
⊚ false

87) Products such as electronic components and pharmaceuticals have low value-to-weight ratios.

⊚ true
⊚ false

88) Organizations are under pressure to produce products in the optimal location and to serve the world market from there if their products have low value-to-weight ratios.

⊚ true
⊚ false

89) Modern consumer products such as personal computers serve universal needs.

⊚ true
⊚ false

90) Poor product quality and low productivity are hidden costs associated with basing production in a foreign location.

⊚ true
⊚ false

91) Concentration of production should be avoided when important exchange rates are expected to remain relatively stable.

⊚ true
⊚ false

92) Decentralization of production is appropriate when the product does not serve universal needs.

⊚ true
⊚ false

93) Managers in a source factory operate in essentially the same way that managers in an offshore factory operate. They have very little say in purchasing or logistics decisions.

⊚ true
⊚ false

94) Global learning refers to the idea that valuable knowledge does not reside just in a firm’s domestic operations.

⊚ true
⊚ false

95) Make-or-buy decisions are decisions that concern the components to be used in a production process.

⊚ true
⊚ false

96) Firms would prefer buying component parts, or an entire product, from independent suppliers to protect proprietary product technologies.

⊚ true
⊚ false

97) The firm that sources from independent suppliers has less inventory to manage.

⊚ true
⊚ false

98) Buying a product from external vendors is highly appropriate when a firm intends to protect proprietary technology.

⊚ true
⊚ false

99) The term distribution center is rarely used today in a global context.

⊚ true
⊚ false

100) In the context of a tube of toothpaste, the box in which the toothpaste is shipped to the store from the warehouse is the primary packaging.

⊚ true
⊚ false

101) In global purchasing, Level I involves domestic purchasing activities only.

⊚ true
⊚ false

102) Just-in-time systems are used to economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process and not before.

⊚ true
⊚ false

103) Just-in-time systems reduce product quality although it brings about huge cost savings.

⊚ true
⊚ false

104) One way to reduce risks associated with a JIT global supply chain is to source inputs from several suppliers located in different countries.

⊚ true
⊚ false