Download MBL912-L JANUARY/FEBRUARY 2010 SECTION A MULTIPLE

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MBL912-L
JANUARY/FEBRUARY 2010
SECTION A
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MULTIPLE CHOICE QUESTIONS
[25 Marks]
Use the attached mark reading sheet to answer the following questions.
Choose the one alternative that best answers the question or completes the question.
1. The role of quality in limiting a firm's product liability is illustrated by
1) Ensuring that contaminated products such as impure foods do not reach customers
2) Ensuring that products meet standards such as those of the Consumer Product Safety Act
3) Designing safe products to limit possible harm to consumers
4) Using processes that make products as safe or as durable as their design specifications call for
5) All of the above are valid.
2) Which of the following statements is not true?
1) Self-promotion is not a substitute for quality products.
2) Inferior products harm a firm’s profitability and a nation’s balance of payments.
3) Product liability transfers from the manufacturer to the retailer once the retailer accepts delivery of the
product.
4) Quality—be it good or bad—will show up in perceptions about a firm’s new products, employment
practices, and supplier relations.
5) Legislation such as the Consumer Product Safety Act sets and enforces product standards by banning
products that do not reach those standards.
3. The causes of variation in statistical process control are
1) Cycles, trends, seasonality, and random variations
2) Producer's causes and consumer's causes
3) Mean and range
4) Natural causes and assignable causes
5) Type I and Type II
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4. Three types of processes are
1) Goods, services, and hybrids
2) Manual, automated, and service
3) Process focus, repetitive focus, and product focus
4) Modular, continuous, and technological
5) Input, transformation, and output
5. Which of the following industries is likely to have low equipment utilization?
1) Auto manufacturing
2) Commercial baking
3) Television manufacturing
4) Chemical processing
5) Restaurants
4.
A product-focused process is commonly used to produce
1) High-volume, high-variety products
2) Low-volume, high-variety products
3) High-volume, low-variety products
4) Low-variety products at either high- or low-volume
5) High-volume products of either high- or low-variety
7. Governmental attitudes toward issues such as private property, intellectual property, zoning, pollution,
and employment stability may change over time. The term associated with this phenomenon is
a) Bureaucratic risk
b) Political risk
c) Legislative risk
d) Judicial risk
e) Democratic risk
8. A manufacturing firm finds a location that has a significant cost advantage over alternatives, but rejects
that location because the educational infrastructure was insufficient to train the firm's workers in its
special production technologies. The firm's action illustrates the link between __________ and
location.
1) Innovation
2) Clustering
3) Tax incentives
4) Globalization
5) Proximity
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9. Visibility throughout the supply chain is a requirement among supply chain members for
1) Mutual agreement on goals
2) Mutual trust
3) Compatible organizational cultures
4) Local optimization
5) The bullwhip effect
10. According to research, which of the following is the most common reason cited for outsourcing
failure?
1) Core competencies identified as non-core
2) Erratic power grids in foreign countries
3) Unable to control product development, schedules, and quality
4) Decisions made without sufficient understanding of the options through quantitative analysis
5) Political and exchange rate uncertainty
11. Operations management is applicable
1) Mostly to the service sector
2) To services exclusively
3) Mostly to the manufacturing sector
4) To all firms, whether manufacturing and service
5) To the manufacturing sector exclusively
12. Which of the following are the primary functions of all organizations?
1) Operations, marketing, and human resources
2) Marketing, human resources, and finance/accounting
3) Sales, quality control, and operations
4) Marketing, operations, and finance/accounting
5) Research and development, finance/accounting, and purchasing
13. Reasons to study Operations Management include
1) Studying why people organize themselves for free enterprise
2) Knowing how goods and services are consumed
3) Understanding what human resource managers do
4) Learning about a costly part of the enterprise
5) All of the above
14. The five elements in the management process are
1) Plan, direct, update, lead, and supervise
2) Accounting/finance, marketing, operations, and management
3) Organize, plan, control, staff, and manage
4) Plan, organize, staff, lead, and control
5) Plan, lead, organize, manage, and control
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15. The Ten Critical Decisions of Operations Management include
1) Layout strategy
2) Maintenance
3) Process and capacity design
4) Managing quality
5) All of the above
16. The three major types of forecasts used by business organizations are
1) Strategic, tactical, and operational
2) Economic, technological, and demand
3) Exponential smoothing, Delphi, and regression
4) Causal, time-series, and seasonal
5) Departmental, organizational, and territorial
17. For a given product demand, the time series trend equation is 53 - 4 X. The negative sign on the
slope of the equation
1) Is a mathematical impossibility
2) Is an indication that the forecast is biased, with forecast values lower than actual values
3) Is an indication that product demand is declining
4) Implies that the coefficient of determination will also be negative
5) Implies that the RSFE will be negative
18. In which stage of the product life cycle should product strategy focus on process modifications?
1) Introduction
2) Growth
3) Maturity
4) Decline
5) None of the above
19. Which of the following statements regarding product life cycle and profitability is true?
1) Profit is highest in the growth life cycle phase because the product is new and unique.
2) Profit is lowest in the growth stage of the life cycle because costs are so high.
3) Profit is at its greatest in the decline stage of the product life cycle.
4) Breakeven is attained in the growth stage of the product life cycle.
5) Cash flow turns positive in the maturity phase.
20. Which of the following represent an opportunity for generating a new product?
1) Understanding the customer
2) Demographic change, such as decreasing family size
3) Changes in professional standards
4) Economic change, such as rising household incomes
5) All of the above are such opportunities.
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21. Quality function deployment (QFD)
1) Determines what will satisfy the customer
2) Translates customer desires into the target design
3) Is used early in the design process
4) Is used to determine where to deploy quality efforts
5) All of the above
22. Products are more "environmentally friendly" when they are made
1) Using cheaper materials
2) Using less energy
3) According to OSHA standards
4) Where environmental regulations are lax
5) More difficult to disassemble
23. Group technology requires that
1) Each component be identified by a coding scheme that specifies the type of processing and the
parameters of the processing
2) A specific series of engineering drawings be prepared
3) All bills of material be prepared using the same format
4) Engineering change notices be linked to each of the bills of material and engineering notices
5) The final products be standardized
24. Which of the following statements best describes the relationship between quality management and
product strategy?
1) Product strategy is set by top management; quality management is an independent activity.
2) Quality management is important to the low-cost product strategy, but not to the response or
differentiation strategies.
3) High quality is important to all three strategies, but it is not a critical success factor.
4) Managing quality helps build successful product strategies.
5) Companies with the highest measures of quality were no more productive than other firms.
25. Three broad categories of definitions of quality are
1) Product quality, service quality, and organizational quality
2) User-based, manufacturing-based, and product-based
3) Internal, external, and prevention
4) Low-cost, response, and differentiation
5) Pareto, Shewhart, and Deming
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SECTION B
[75 Marks]
QUESTION 1
[20 Marks]
(a) In a supply chain, how are outsourcing and vertical integration related? Can a single firm successfully
do both?
(10 marks)
(b) In a developing economy, identify and discuss five risks in outsourcing.
(5 marks)
(c) State and discuss five ethical principles that apply to outsourcing as a strategy in a developing
economy.
(5 marks)
QUESTION 2
[25 Marks]
Globalcast was one of the world’s largest manufacturers of metal and plastic moulded components to
almost every industry, including automotive, consumer durables, telecommunications, computers, power
tools, etc. With over 100 manufacturing facilities, it operated on every continent, usually in areas of
established or emerging industrialization. In Europe there were large factories in the UK, Germany,
France, Spain and Italy, and smaller ones in Scandinavia, Austria, Turkey and Israel. Every factory was
considered to be a semi-autonomous profit centre and was headed up by a general manager. Each
reported to a regional manager of one of the divisions (for example, Plastic Division). New business was
generated both by national marketing and by word-of-mouth recommendations from existing customers,
but most orders were for regular repeat business or for new designs from existing customers. The role of
the small technical sales team at each factory was to follow up enquiries with technical advice visits to the
customer, followed by the preparation of quotations. In many cases, Globalcast provided design
assistance to the customers. It was the role of the advisor to suggest ways of simplifying the overall
design which would be cheaper for the customer, whilst being fast, easy and profitable to produce in the
factory. Mould costs were calculated and quoted too, and in most cases the customer would pay for the
moulds from the outset, retaining ownership. Globalcast organized the purchase of the moulds, costing up
to 50 000 each, and could make a small profit on this activity.
In the late 1990s, the market started to change rapidly. First, major customers such as Hewlett Packard,
Dell, Ford, GM and Black and Decker started building new factories in developing countries. These were
being established both to exploit the benefits of lower wages and overheads and as market-entry points
for these rapidly developing economies. In most cases, however, large proportions of their output would
serve existing markets throughout the world. Because Globalcast was one of the most important suppliers
(only about five competitors had worldwide coverage), it was often encouraged by its customers to
established supply factories in the same regions, ideally on adjacent sites. Customers explained that
business was, I part, being transferred to their new sites, and since Globalcast had been selected as a
preferred supplier, it had the opportunity to benefit from ongoing business development and growth.
Attractive forecasts were provided, but not guaranteed. ‘Partnership’ would be established where Global
cast had the benefit of sole-supplier status to the customer’s local plant.
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The second change was the trend for customers’ products to be of globally standard designs. This
allowed buyers to purchase components for their many factories around the world, from virtually any
approved supplier anywhere. Therefore they were in a powerful position to restrict the number of
suppliers, as well as demanding a single global, low price. For Globalcast this provided a new set of
problems; its costs had varied widely around the world, depending mainly on local labour and overhead
costs. Selling prices had varied according to costs and local commercial conditions, but detailed costs of
production had never been disclosed to customers. However, customers would now be able to ‘shop
around’ and find the lowest Globalcast price for themselves. At the same time, each Globalcast general
manager had tried to defend his or her business, even if that involved buying in the components from
other company sites and adding a profit before selling to the customer. This was now becoming too
obvious to large customers. The third significant market trend was that customers increasingly wanted
suppliers to do more assembly (‘value-added’) work. At its simplest, this could involve simply snapping
together two parts. Alternatively, it could require complex purchasing, assembly and testing of major subassemblies. To do this, Globalcast would need to invest in assembly lines, testing equipment, storage,
component and finished goods inventory, and systems to support purchasing and logistics. Specific
approved suppliers were usually dictated by customers. Lead times from these global suppliers could be
up to 12 weeks. Customers’ initial delivery schedules were often stable and close to forecast levels, but
could vary wildly as competitive forces affected customers’ sales. But, overall, this type of work did appear
commercially attractive, typically bringing in up to 10 times the revenue of a simple moulded part. The
opportunity to become a ‘first-tier’ supplier to some of the world’s leading manufacturers was hard to
resist. Indeed, supplying global customers was the mainstay of the strategic plan for the new decade.
QUESTION
a) Evaluate the company’s relationship with its large global customer. What does this imply about
Globalcast potential to support its customer’s requirements in intensely price-sensitive global markets?
(10 marks)
b) Would you describe Globalcast strategic supply chain management decision as more proactive or
reactive, and why?
(7 marks)
c) Are there other ways in which the company could organise itself to meet the challenges and market
trends described in this case?
(8 marks)
(TURN OVER)
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QUESTION 3
[30 Marks]
Handles and Hinges Ltd (H&H) was established in Birmingham, England, by two young entrepreneurs,
Dave Philips and Chris Agnew, both experienced in the hardware trade. The business specialised in the
‘designer’ market for polished metal (brass or stainless steel) door handles, cupboard knobs, furniture
fittings (mostly used in shop/office furniture) and hinges. Their company was successful, was based on
H&H‘s reputation for high-quality, unique designs of both traditional and modern product, many of which
were selected and specified by architects for large and prestigious projects such as new office
developments in London’s Docklands. Dave, the Chief Executive Officer, with responsibility for sales,
believed that most orders from construction companies were placed with H&H because they assumed
they had no other choice once the H&H products had been specified. Larger companies would sometimes
suggest to the architect that similar products were available at less than half the price. This advice was
invariably ignored as the architect would be attracted by H&H designs and quality, and would be reluctant
to risk ‘spoiling’ multi-million pound projects for the sake of saving a few thousand pounds. Dave outlines
the characteristics of the changing market place.
‘During a recession in the construction industry, particularly in office building, we expanded our direct
sales to large UK hardware retail companies, which now account for about 40 per cent of our sales value,
but only about 15 per cent of our gross profit. This segment is much more price-sensitive, so we must be
able to manufacture good-quality, simple, standard products at low costs comparable to those of our
competitors. Some of the reduced costs have been achieved by using thinner and cheaper materials
similar to those used in our competitors’ products. We have just received our first consignment of brass
sheet from Poland with a saving of over 10 per cent in this case. We also had to reorganise to reduce our
processing costs. Chris has done a great job of changing all production to modern batch methods.
However, I am concerned that we are often late delivering to our UK retail customers, and this makes it
difficult to keep good relationships and to get repeat orders. Fast delivery of relatively small quantities is
required in the “retail segment”, whereas the construction/contractors market allows very long production
lead times. Dependable delivery is crucial to avoid completion delays, for which we have been held
financially accountable on some occasions!
‘When customers complain about delivery or about faulty products, we try to compensate them in some
way to keep their business-for example, by credit notes or discounts on the next order. Our
representatives each spend about one day a week dealing with the consequences of late deliveries, but
on the positive side, a meeting with a client is an opportunity to get the next order. The hardware retail
companies often require very quick delivery; which is often only achieved by switching production to the
item which is required first.
‘Really, I am more concerned about reports of quality problems; an increasing number of construction
companies to us about dented or stretched handles, but our production department assures us that they
left the factory in good condition and must have been damage on site; which is to be expected on a large
construction site. The Quality Control Manager says, however, he cannot give an absolute guarantee that
they were all OK, because we only do sampling of final production, if more than a few in a sample are
found at final inspection to be sub-standard, the whole batch is rejected, re inspected, sorted and
reworked.
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Using express courier transport and overtime in the factory, rework can usually be done in about a week,
but invariably the contractors complain to the architect, perhaps because they dislike being told who to
buy from. This can lead to lots of correspondence and meetings between H&H, the contractor and the
architect, when we could be doing other things. This problem seems to have got worse in the last two
years; often it’s also difficult to agree if the product is sub-standard. It is frequently just a question of how
shiny (or matt) the polish and lacquer finish is; at other times there are scratches in area that really can’t
been seen in use. Often the customers are too fussy, anyway.’
Chris (the Manufacturing Director) put a different perspective on the problem. ‘The sales catalogue shows
pictures of our products prepared for photography; special effects are used to give a bright polished finish
but we actually use a matt finish. The samples used by sales are specially made by experienced
craftsmen to eliminate any scratching or minor faults; of course, we cannot always repeat that standard
with the modern batch production methods. We were aware that the reorganization of production methods
could lead to qualify problems, so I introduced statistical control, a subject I studied extensively in a
quantitative methods course at the local college. Our inspectors now take random samples of batches of
components and measure important dimension such as the diameter or length of brass handles, the
thickness of the incoming materials, etc. Batches which fail are either rejected or reworked, and all
material where we have identified any fault at all is returned to the supplier, and our buyers routinely
threaten to place orders elsewhere. I instructed the supervisors to inspect press tooling just before the
start of each production batch to ensure that there are no surface faults, so I think it is unlikely that the
dents and blemishes are caused in production. I must make a point of checking that this is happening.
Anyway, our final inspection sampling has been changed to give an acceptable quality level (AQL) of 2
per cent whereas until recently it was only 5 per cent. We have had to increase the number of final
inspectors by four at a cost of 15 000 each per annum, but all the management team agrees that with
quality products we must be confident of the final quality before packing. We trained some of our best
assemblers in SPC and made them full-time inspectors; the combination of their technical and statistical
skills ensures that we have the right people for this job. We could not rely on our operators to do any
dimensional checks; hardly any of them know how to measure using a metric rule; let alone a micrometer
or gauge. I t is best to keep them concentrating on achieving correct output targets. I believe that most
quality problems here must be caused by occasional operator carelessness.
‘The batch method of production has given us much more control over operations. No longer do we have
to rely on hard-to recruit craftsmen who did everything slowly and unpredictably. Now we make the most
of economic batches at each stage, benefiting from the economies of scale of longer runs and cheaper
unskilled labour. With incentive bonuses based on effective performance against agreed standard times,
all our people are working faster to achieve the company’s goal of higher productivity. There is no doubt
that our operations are now more productive than they’ve ever been. With high quality and low costs, we
are now set for a major assault on the competition. We expect our profits to rise dramatically from the
currently inadequate 1 per cent return on sales.’
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a) How does the company compete in its market place, and what is the role of ‘quality in its competitive
strategy?
(10 marks)
b) Do you think that the company’s use of statistical quality control is sensible? Justify your answer.
(5 marks)
c) Apply the gap model of quality diagnostics to the company.
(15 marks)
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UNISA 2010
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