Chapter 1: 
Operations Management

True/False

1.	Operations management is only concerned with the day-to-day operations of a firm’s productive systems. 
Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

2.	A warehouse operation is an example of a physical transformation process. 
Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

3.	A supply chain is a series of activities from supplier to customer that adds value to a product or service. 
Ans: True, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

4.	Human resources management provides product demand estimates that are used in production decisions.
Ans: False, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

5.	A retail operation is an example of an exchange transformation process.
Ans: True, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

6.	The four primary functional areas of a firm are marketing, finance, operations, and legal. 
Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

7.	Operations management designs, operates, and improves marketing systems. 
Ans: False, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

8.	An operations manager benefits from an integrated view of business organizations.
Ans: True, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

9.	The systematic analysis of work methods is known as operations research.
Ans: False, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

10.	Lean production refers to high-volume production of a standardized product.
Ans: False, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

11.	The adaptation of mass production to emphasize quality and flexibility, rather than efficiency, is known as lean production. 
Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

12.	Because of a global recession in the late 2000s ,companies started focusing on the most critical factors to sustain their business during the downturn.
Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

13.	The most current era in the evolution of operations and supply chain management is sustainability.
Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

14.	The set of activities that creates and delivers products to the customer is known as the supply chain.
Ans: True, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

15.	Globalization requires that firms compete only on cost and not quality, speed or flexibility.
Ans: False, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

16.	Globalization of the supply chain has many pros and few, if any, cons.
Ans: False, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

17.	The European Union requires that strict quality and environmental standards be met before companies can do business with member countries. 
Ans: True, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

18.	A major challenge and opportunity for many firms is the globalization of the supply chain.
Ans: True, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

19.	Globalization has affected manufacturing but not service operations. 
Ans: False, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

20.	  Two-thirds of today’s businesses operate globally. 
Ans: True, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

21.	 In 2010, the US surpassed China as the world’s largest manufacturer.
Ans: False, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

22.	China has reshaped the way firms compete globally. 
Ans: True, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

23.	Increases in productivity enable a nation to raise its standard of living. 
Ans: True, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

24.	Productivity is the most common measure of competitiveness. 
Ans: True, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

25.	Single factor productivity measures compare output to an individual input.
Ans: True, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

26.	Deployment is a step in strategy formulation that evaluates the alignment between core competencies and order winners. 
Ans: False, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

27.	Positioning is a step in strategy formulation that defines how firms will compete in the marketplace.
Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

28.	Order qualifiers are the characteristics of a product that have to be satisfied just to be considered for purchase by a customer.
Ans: True, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

29.	An order qualifier is the characteristic of a product  that wins orders in the marketplace.
Ans: False, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

30.	Core competencies tend to be processes and not products or technologies.
Ans: True, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

31.	The first of five basic steps in strategy formulation is determining a firm’s order winners and order qualifiers.
Ans: False, LO: 5, Bloom: K, Difficulty: Easy,  AACSB: None

32.	Order winners and order qualifiers change over time in response to the dynamics of changing market conditions.
Ans: True, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

33.	Companies that compete on winnovation establish a corporate culture that discourages risk taking.
Ans: False, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

34.	Firms compete in the marketplace based on cost, speed, quality and flexibility.
Ans: True, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

Multiple Choice

35.	Operations management is concerned with the _________ of a firm’s productive systems.
a.	design 
b.	operation 
c.	improvement
d.	All of these answer choices are correct.
Ans: D, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

36.	The transformation process associated with health care is best described as
a.	locational
b.	exchange
c.	physiological
d.	informational
Ans: C, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

37.	Which of the following is not one of the four primary functional areas of a firm?
a.	human resources
b.	legal
c.	marketing
d.	operations
Ans: B, LO: 1, Bloom: K, Difficulty: Easy,  AACSB: None

38.	All of the following are responsibilities of operations managers except
a.	acquiring financial resources
b.	managing inventories
c.	planning production
d.	scheduling production
Ans: A, LO: 1, Bloom: K, Difficulty: Easy, AACSB: None

39.	Which of the following is not an event or concept associated with the quality revolution?
a.	TQM (total quality management)
b.	Internet
c.	Six Sigma
d.	JIT
Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

40.	Linear programming, waiting line, simulation, and PERT/CPM are all elements of which era of operations and supply chain management?
a)	Quality Research
b)	Operations Research
c)	Internet Revolution
d)	Globalization
Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

41.	Dividing a job into a series of small tasks, each performed by a different worker, is known as
a.	craft production
b.	scientific management
c.	division of labor
d.	interchangeable parts
Ans: C, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

42.	The most recent era in the evolution of operations and supply chain management is
a. Internet Revolution
b. Sustainability
c. Globalization
d. Quality Revolution
Ans: B, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

43.	 Sustainability, in its broadest sense, include(s)
a. using resources wisely.
b. treating workers with respect.
c. establishing a business model of shared values.
d. All of these answer choices are correct.
Ans: D, LO: 2, Bloom: K, Difficulty: Moderate, AACSB: None

44.	Mass production is well suited to all of the following except
a.	producing large volumes of goods quickly.
b.	adapting quickly to changes in market demand.
c.	producing standardized products for a large market.
d.	All of these answer choices are correct.
Ans: B, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

45.	The major factors impacting globalization of the supply chain include all the following except
a.	falling trade barriers.
b.	 the Internet.
c.	declining union membership.
d.	All these answer choices are correct.
Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

46.	Companies go global to
a.	take advantage of favorable costs.
b.	keep abreast of trends and access new technologies.
c.	build reliable sources of supply.
d.	All of these answer choices are correct.
Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

47.	A manager of a global supply chain is concerned with all the following except
a.	timeliness.
b.	quality.
c.	social issues.
d.	All of these answer choices are correct.
Ans: D, LO: 3, Bloom: K, Difficulty: Moderate, AACSB: None

48.	The ratio of a firm’s monthly output to the number of labor hours used in the same month would be a measure of
a.	labor productivity.
b.	capital productivity.
c.	machine productivity.
d.	multifactor productivity.
Ans: A, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

49.	The production system that prizes flexibility and quality over efficiency and quantity is known as
a.	mass production.
b.	craft production.
c.	lean production.
d.	electronic commerce.
Ans: C, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

50.	Telco Inc., a manufacturing firm, is calculating its monthly productivity report. From the following data calculate the labor productivity.
Labor rate		$20
Machine rate		$15
Units produced	50,000
Labor hours		4,000
Machine hours		2,000
Cost of materials	$20,000
Cost of energy		$5,000
a.	0.370
b.	0.625
c.	1.500
d.	1.667
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None
Solution: Labor productivity=50,000/80,000=0.625

51.	Telco Inc., a manufacturing firm, is calculating its monthly productivity report. From the following data calculate the machine productivity.
Labor rate		$20
Machine rate		$15
Units produced	50,000
Labor hours		4,000
Machine hours		2,000
Cost of materials	$20,000
Cost of energy		$5,000
a.	0..370
b.	0.625
c.	1.500
d.	1.667
Ans: D, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None
Solution: Machine productivity=50,000/30000=1.667

52.	Telco Inc., a manufacturing firm, is calculating its monthly productivity report. From the following raw data calculate the multifactor productivity.
Labor rate		$20
Machine rate		$15
Units produced	50,000
Labor hours		4,000
Machine hours		2,000
Cost of materials	$20,000
Cost of energy		$5,000
a.	0.370
b.	0.625
c.	1.500
d.	1.667
Ans: A, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None
Multi-factor productivity=50,000/135,000=0.370

53.	Snacknow, a food service firm, is calculating its monthly productivity report. From the following raw data calculate the labor productivity.
Labor rate		$10
Units produced	10,000
Labor hours		1,000
Cost of materials	$2000
Cost of energy		$500
a.	0.220
b.	0.476
c.	0.800
d.	1.000
Ans: D, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None
Solution: Labor productivity=10,000/10,000=1.000

54.	Snacknow, a food service firm, is calculating its monthly productivity report. From the following data calculate the energy productivity.
Labor rate		$10
Units produced	10,000
Labor hours		1,000
Cost of materials	$2000
Cost of energy		$500
a.	0.220
b.	2
c.	10
d.	20
Ans: D, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None
Energy productivity=10,000/500=20

55.	Snacknow, a food service firm, is calculating its monthly productivity report. From the following data calculate the multifactor productivity.
Labor rate		$20
Units produced	10,000
Labor hours		1,000
Cost of materials	$2000
Cost of energy		$500
a.	0.220
b.	0.476
c.	0.800
d.	1.000
Ans: C, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None
Multi-factor productivity=10,000/12,500=0.800

56.	_____________ is how the mission of a firm is accomplished.
a.	Strategy
b.	Design
c.	An operational decision
d.	None of these answer choices is correct.
Ans: A, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

57.	_____________ represents what the firm is in the business of doing.
a.	Primary task
b.	Core competency
c.	Positioning 
d.	Deploying
Ans: A, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

58.	_____________ is what the firm does better than anyone else.
a.	Primary task
b.	Core competency
c.	Positioning 
d.	Deploying
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

59.	_____________ are the characteristics of a product that qualify it to be considered for purchase by a customer.
a.	Order winners
b.	Order qualifiers
c.	Core competency
d.	Positioning 
Ans: B, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

60.	_____________ is the characteristic of a product that wins the order in the marketplace.
a.	Order winners
b.	Order qualifiers
c.	Core competency
d.	Positioning
Ans: A, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

61.	______________ focus(es) the organization on common goals that can be translated into measurable objectives.
a.	Order winners
b.	Core competency
c.	Positioning 
d.	Deploying the strategy 
Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

62.	Companies that compete on ______________ are able to produce a wide variety of products in response to customer needs.
a.	cost
b.	speed
c.	flexibility
d.	quality
Ans: C, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

63.	Companies that compete on ______________ pursue the elimination of all waste.
a.	cost
b.	speed
c.	flexibility
d.	quality
Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

64.	Companies that compete on ______________ recognize the advantages of time-based competition.
a.	cost
b.	speed
c.	flexibility
d.	quality
Ans: B, LO: 4, Bloom: K, Difficulty: Easy, AACSB: None

65.	Companies that compete on ______________ focus on pleasing customers and satisfying their expectations.
a.	cost
b.	speed
c.	flexibility
d.	quality
Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

66.	The balanced scorecard examines a firm’s performance in all the following critical areas except
a.	finances
b.	customers
c.	processes
d.	All of these answer choices are correct.
Ans: D, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

67.	The ____________ function helps strategy evolve by creating new ways of delivering a firm’s competitive priorities.
a.	finance
b.	marketing
c.	operations
d.	None of the answer choices is correct.
Ans: C, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

68.	Companies that compete on _________________ establish a corporate culture that encourages risk.
a. Innovation
b. Quality
c. Flexibility
d. Cost
Ans: A, LO: 5, Bloom: K, Difficulty: Moderate, AACSB: None

69.	A(n) ____________ strategy involves a series of integrated decisions on processes, facilities, technology, quality, capacity, etc.  
a.	finance
b.	marketing
c.	operations
d.	None of these answer choices is correct.
Ans: C, LO: 5, Bloom: K, Difficulty: Easy, AACSB: None

Short Answer

70.	Briefly describe how operations can be viewed as a transformation process.

Operations is often defined as a transformation process.  Inputs such as raw materials, labor, equipment, and capital are transformed into outputs (goods and services). Customer feedback is used to adjust the transformation process. An objective of the operations manager is to ensure that the transformation process operates efficiently and the outputs of the process have greater value than the sum of the inputs.  In this way the transformation process creates value, making it possible to view the transformation process as a value chain extending from supplier to customer.
Ans: Essay, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

71.	Briefly describe the four primary functional areas of a firm.  How is operations related to them?

The four primary functional areas of a firm are marketing, finance, operations, and human resources.  For most firms, operations is the technical core or “hub” of the organization, interacting with the other functional areas and suppliers to produce goods and services for customers.  For example, marketing provides sales forecasts to operations and operations provides marketing with product availability information, lead time estimates and delivery schedules.  Operations provides finance with inventory and production data, capital budgeting and equipment requests, and technology plans.  Finance provides the capital resources for financing inventory and securing more capital equipment.  Operations relies on human resources to meet its personnel needs—hiring, training, and evaluating workers.  
Ans: Essay, LO: 1, Bloom: K, Difficulty: Moderate, AACSB: None

72.	
What is productivity and how is it measured?
Productivity is the ratio of output to input.  Output can be expressed in units or dollars. Single factor productivity compares output to individual inputs, such as labor hours, investment in equipment, or material usage. Multifactor productivity relates output to a combination of inputs, such as labor and capital.  Total factor productivity compares the quantity of goods and services produced with all the inputs used to produce them.
Ans: Essay, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

73.	What can lead to increases in productivity?
Productivity increases when firms become more efficient, expand, achieve breakthroughs that enable output increases to occur with reduced inputs, downsize while maintaining output with fewer inputs, and retrench with output and inputs decreasing, but inputs decreasing at a faster rate than output. 
Ans: Essay, LO: 4, Bloom: K, Difficulty: Moderate, AACSB: None

Additional M/C questions:

74.	Scientific management is __________.
a.	the management of scientists working in a company
b.	the management of scientific experiments so that they will align with the company’s strategy
c.	the use of observation, measurement, and analysis to identify the best method to perform a job
d.	another name for the division of labor
Ans: C, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

75.	Henry Ford famously applied __________.
a.	interchangeable parts
b.	linear programing
c.	theories of motivation
d.	mass production
Ans: D, LO: 2, Bloom: K, Difficulty: Easy, AACSB: None

76.	Supply chain management is aimed at managing the flow of __________.
a.	information
b.	products
c.	services
d.	All of these answer choices are correct
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

77.	Globalization has__________ the risk of disruptions in operations and supply chain activities; it has also provided __________ flexibility in responding to disruptions.
a.	decreased; less
b.	increased; less
c.	decreased; more
d.	increased; more
Ans: D, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

78.	Today, approximately ____% of businesses operate globally through global markets, global operations, global financing
a.	67
b.	75
c.	85
d.	90
Ans: A, LO: 3, Bloom: K, Difficulty: Easy, AACSB: None

79.	If the units produced by a factory increased by 10% and the labor hours decreased by 10%, then the labor productivity __________.
a.	decreased by 20%
b.	increased by 20%
c.	increased by 21%
d.	increased by 22%
Ans: D, LO: 3, Bloom: K, Difficulty: Medium, AACSB: None

80.	If the units produced by a factory increased by 10% and the labor productivity increased by 25%, then the labor hours __________.
a.	decreased by 15%
b.	decreased by 13%
c.	decreased by 12%
d.	decreased by 11%
Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

81.	If the units produced by a factory decreased by 10% and the labor productivity increased by 25%, then the labor hours __________.
a.	decreased by 15%
b.	decreased by 26%
c.	decreased by 28%
d.	decreased by 35%
Ans: C, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

82.	If the units produced by a factory decreased by 10% and the labor productivity decreased by 25%, then the labor hours __________.
a.	decreased by 15%
b.	increased by 15%
c.	increased by 17%
d.	increased by 20%
Ans: D, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

83.	The labor productivity of a factory fell by 5% during each of three consecutive quarters. The labor hours didn’t show any significant change during this period. A new COO is committed to recover the existing level before the loss of productivity, and her goal is to achieve this by the end of next quarter, even though the labor hours will be 5% less. The COO’s goal is to increase the number of units produced by ____%.
a.	15.0
b.	14.3
c.	10.0
d.	9.75
Ans: D, LO: 3, Bloom: K, Difficulty: Hard, AACSB: None

Concept Check Questions for Learning Objectives
Chapter 1 – Introduction to Operations and Supply Chain Management

The Operations Function
1.	The operations function interacts with 
a.	Marketing
b.	Suppliers
c.	Human resources
d.	Finance
e.	All of the above
Difficulty: Easy
Answer: d

2.	Operations is often described as 
a.	the creative core of an organization
b.	a transformation process
c.	the source of firm profitability
d.	all of the above
Difficulty: Easy
Answer: b

The Evolution of Operations and Supply Chain Management
1.	 _____ helped to enable the Industrial Revolution. 
a.	Linear programming
b.	Quality circles
c.	Interchangeable parts
d.	The Internet

Difficulty: Easy
Answer: c

2.	The Principles of Scientific Management were proposed by
a.	Adam Smith
b.	Henry Ford
c.	Frederick Taylor
d.	Elton Mayo
Difficulty: Easy
Answer: c

3.	Supply chain management emerged as
a.	companies started to outsource production
b.	the number of suppliers for each company grew
c.	globalization expanded the reach of suppliers and customers 
d.	all of the above
Difficulty: Easy
Answer: d

4.	The quality revolution was brought to us by 
a.	Germany
b.	Japan
c.	China
d.	Mexico
Difficulty: Easy
Answer: b

Globalization
1.	 Globalization has grown rapidly due to
a.	World trade agreements
b.	The Internet
c.	Outsourcing 
d.	All of the above

Difficulty: Easy
Answer: d

2.	Which of the following countries has the highest hourly wage rate?
a.	Norway
b.	U.S.
c.	Germany
d.	South Korea
Difficulty: Moderate
Answer: a

3.	Companies go global to 
a.	take advantage of favorable costs
b.	gain access to international markets 
c.	build reliable sources of supply
d.	all of the above

Difficulty: Easy
Answer: d

4.	 Which of the following countries has the highest trade in goods as a percent of GDP?
a.	U.S.
b.	Germany
c.	Japan
d.	China
Difficulty: moderate 
Answer: b

Productivity and Competitiveness 
1.	The most common measure of productivity is 
a.	Labor productivity
b.	Multifactor productivity
c.	Material productivity
d.	Technological productivity
Difficulty: Easy
Answer: a

2.	Productivity is defined as
a.	output over input
b.	input over output
c.	process yield
d.	exports minus imports

Difficulty: Easy
Answer: a

Strategy and Operations

1.	A company's ____________ is what they do better than anyone else.
a.	primary task
b.	core competence
c.	order qualifier
d.	positioning strategy

Difficulty: Easy
Answer: b

2.	The balanced scorecard keeps strategy on track by measuring  
a.	Finance, marketing, operations, and human resources 
b.	Finance, customers, processes, and learning and growing
c.	Shareholder value, customer satisfaction, production efficiency, and worker satisfaction
d.	Inputs and outputs to each critical process

Difficulty: Moderate
Answer: b

3.	________ converts strategy into measurable objectives down through the organization.
a.	Strategic positioning
b.	Policy deployment
c.	Production planning
d.	Vertical integration
Difficulty: easy
Answer: b  

4.  The last factor considered in a purchasing decision is the 
a.	order qualifier
b.	order winner
c.	quality factor
d.	core competency

Difficulty: Easy
Answer: b