Chapter 18 – Global Manufacturing and Supply Chain Management

 

Multiple Choice Questions

 

WHAT IS THE GLOBAL SUPPLY CHAIN?

 

1.      A company’s _______________ encompasses the coordination of materials, information, and funds from the initial raw material supplier to the ultimate customer.

a.      supply chain (easy, page 541)

b.      distribution strategy

c.       manufacturing strategy

d.      mission statement

 

2.      An important dimension of the supply chain is _______________, which is also sometimes called materials management.

a.       the vertical hierarchy

b.      logistics (easy, page 541)

c.       virtual manufacturing

d.      outsourcing

 

3.      _______________ is that part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customer requirements.

a.       The production strategy

b.      The distribution strategy

c.       Logistics (moderate, page 541)

d.      Outsourcing

 

DIFFERENTIATE AMONG THE FOLLOWING MANUFACTURING STRATEGIES:  EFFICIENCY, DEPENDABILITY, QUALITY, FLEXIBILITY, AND INNOVATION.

 

4.      The success of a global manufacturing strategy depends on all of the following key factors EXCEPT:

a.       compatibility

b.      configuration

c.       coordination

d.      comparability (moderate, page 543)

 

5.      _______________ is the degree of consistency between the foreign investment decision and the company’s competitive strategy.

a.      Compatibility  (moderate, page 543)

b.      Configuration

c.       Coordination

d.      Control

 

6.      Company strategies that managers must consider in order to achieve manufacturing compatibility include all of the following EXCEPT:

a.       efficiency/cost

b.      speed (moderate, page 543)

c.       dependability

d.      flexibility


 

7.      The competitive strategy that focuses on the reduction of manufacturing costs is known as:

a.       quality.

b.      flexibility.

c.       efficiency. (easy, page 543)

d.      dependability.

 

WHAT IS MEANT BY OFFSHORE MANUFACTURING, AND WHY WOULD A COMPANY PURSUE THAT STRATEGY?

 

8.      Which manufacturing strategy most closely describes setting up a plant in a low-cost foreign country followed by importation back into the home country?

a.       Manufacturing interchange

b.      Offset

c.       Rationalization

d.      Offshore manufacturing (easy, page 543)

 

9.      The manufacturing of Nike shoes in Vietnam most closely describes:

a.      offshore manufacturing. (moderate, page 543)

b.      logistics.

c.       offset.

d.      manufacturing interchange.

 

10.    A manufacturing operation established outside of the United States, primarily in Mexico, to which components are shipped from the United States duty free for assembly is known as:

a.       manufacturing interchange.

b.      maquiladora. (moderate, page 543)

c.       sonora.

d.      duty drawback.

 

11.    Which of the following accurately describes maquiladora operations?

a.       They are established to reduce growing pollution along the Mexico–U.S. border.

b.      They are declining in importance, as Mexican wages along the border are now nearly equal to those of U.S. workers along the border.

c.       They are able to export products to the United States, and duties only apply on the value added in Mexico. (difficult, page 543)

d.      NAFTA will increase the importance of maquiladoras as duties fall on goods traded between Mexico and the United States.

 

WHAT ARE THE DIFFERENT WAYS A COMPANY CAN CONFIGURE ITS MANUFACTUING FACILITIES WORLDWIDE?

 

12.    Which of the following manufacturing configurations is common for new-to-export companies to use through their home-country manufacturing facilities?

a.       Use regional manufacturing facilities to serve customers within a specific region.

b.      Use country-specific manufacturing facilities to meet local needs.

c.       Have centralized manufacturing and offer a selection of highly customized, high-priced products to different markets. 

d.      Have centralized manufacturing and offer a selection of standard, lower-priced products to different markets.  (difficult, page 543)


 

13.    Which of the following is NOT one of the three different ways a company can configure its manufacturing facilities worldwide?

a.      Have centralized manufacturing and offer a selection of highly customized, high-priced products to different markets.  (difficult, page 543)

b.      Have centralized manufacturing and offer a selection of standard, lower-priced products to different markets.

c.       Use regional manufacturing facilities to serve customers within a specific region.

d.      Use country-specific manufacturing facilities to meet local needs.

 

14.    Having centralized manufacturing and offer a selection of standard, lower-priced products to different markets is a manufacturing configuration commonly used by:

a.       large companies only.

b.      new-to-export companies.  (moderate, page 543)

c.       small companies only.

d.      companies experienced in exporting.

 

15.        When demand in a specific market becomes significant, one might argue for the following manufacturing configuration.

a.    Have centralized manufacturing in the home country and offer a selection of standard, lower-price products to the market.

b.         Export so as to avoid risk.

c.     Adopt a multidomestic approach to meet local needs. (moderate, p. 543)

d.                            None of the above.

 

WHAT ARE THE DIFFERENT ELEMENTS OF GLOBAL SUPPLY CHAIN MANAGEMENT?

 

16.    Which of the following is NOT an element of a comprehensive global supply chain strategy?

a.       customer service requirements

b.      plant and distribution center network design

c.       inventory management

d.      all selections are elements of global supply chain management  (moderate, page 544)

 

17.    All of the following are elements of global supply chain management EXCEPT:

a.       outsourcing and third-party logistics relationships

b.      key customer and supplier relationships

c.       quality circles  (moderate, page 544)

d.      business processes

 

18.    A comprehensive global supply chain strategy includes all of the following elements EXCEPT:

a.      focus groups  (moderate, page 544)

b.      information systems

c.       organizational design and training requirements

d.      performance metrics

 

HOW DOES A COMPANY’S INFORMATION SYSTEM ADD TO THE EFFICIENCY OF GLOBAL SUPPLY CHAIN MANGEMENT?

 

19.    Which of the following best describes the key to making a global information system work?

a.       Financial resources

b.      Information (easy, page 545)

c.       Management

d.      Technology


 

20.    All of the following are examples of drawbacks for electronic data interchange EXCEPT:

a.       it is relatively inflexible

b.      it provides basic information but does not adapt easily to rapidly changing market conditions

c.       it focuses more on dealing effectively with end-use customers rather than the business-to-business value chain (difficult, page 545)

d.      it is based on proprietary rather than widely accepted standards

 

 

21.    Following electronic data interchange (EDI), the next wave of technology affecting the global supply chain, was the implementation of packaged information technology packages known as:

a.       commercial data interchange.

b.      facility layout.

c.       critical control planning.

d.      enterprise resource planning. (moderate, page 545)

 

22.    _______________ is essential for bringing together the information inside the firm, but its inability to tie into the customer and take advantage of e-commerce has been a problem.

a.      Enterprise resource planning (moderate, page 545)

b.      Commercial data interchange

c.       Electronic data interchange

d.      Critical control planning

 

HOW DOES QUALITY AFFECT THE GLOBAL SUPPLY CHAIN, AND WHAT ARE SOME INTERNATIONALLY-RECOGNIZED QUALITY STANDARDS?

 

23.    A quality system that deals with defects through repair facilities and service warranties is known as:

a.       just-in-time.

b.      acceptable quality level. (moderate, page 546)

c.       total quality management.

d.      ISO 9000.

 

24.    A quality system that is designed to eliminate all defects and ensure customer satisfaction is known as:

a.       just-in-time.

b.      ISO 9000.

c.       total quality management. (moderate, page 546)

d.      acceptable quality level.

 

25.    Which of the following best describes a set of five universal standards for a Quality Assurance system that is accepted around the world?

a.       Acceptable quality level

b.      Just-in-time

c.       Total quality management

d.      ISO 9000 (moderate, page 546)

 

26.    Which of the following accurately describes ISO 9000?

a.      Companies must document how workers perform every function that affects quality and install mechanisms to ensure that they follow through on a documented routine. (difficult, page 546)

b.      It relates primarily to manufacturing rather than service companies.

c.       Once a company achieves ISO 9000 certification, it can adopt that certification at all of its facilities.

d.      It can be achieved through filling out a self-study questionnaire.


 

27.    The cornerstone of total quality management, kaizen, is

a.       six sigma.

b.      the process of continuous improvement. (difficult, page 547)

c.       an award given to the Japanese company that demonstrates the highest degree of improvement in a given year.

d.      customer satisfaction.

 

28.     The ISO 9000 quality system:

a.    applies uniformly to companies in any industry and of any size. (difficult, page 547)

b.    is applicable only to European firms.

                    c.    aims for zero defects.

d.    accepts defects and focuses on correction through repair and service warranties.

 

WHAT OPTIONS ARE AVAILABLE TO A COMPANY IN SOURCING MANTERIALS AND PARTS?

 

29.    The primary benefits of decentralizing subsidiary purchasing decisions include all of the following EXCEPT:

a.       increased production facility control over purchases

b.      better responsiveness to facility needs

c.       increased leverage with suppliers (difficult, page 549)

d.      more effective use of local suppliers

 

30.    The primary benefits of centralizing subsidiary purchasing decisions include all of the following EXCEPT

a.       getting better prices.

b.      eliminating administrative duplication.

c.       reducing the number of orders processed.

d.      better responsiveness to facility needs. (difficult, page 549)

 

31.    All of the following are major sourcing strategies that companies pursue as they move into foreign buying as part of procurement strategy and integration of global procurement strategy EXCEPT

a.      eliminate all domestic sourcing and use only foreign sourcing. (difficult, page 552)

b.      use foreign subsidiaries or business agents.

c.       establish international purchasing offices.

d.      assign the responsibility for global sourcing to a specific business unit or units.

 

WHAT ARE THE MAJOR INTERNATIONAL CHALLENGES TO INVENTORY MANAGEMENT OF MNEs?

 

32.    An inventory system that delivers inputs to production as they are needed is known as:

a.       acceptable quality level.

b.      just-in-time. (moderate, page 554)

c.       ISO 9000.

d.      total quality management.

 

33.    Which of the following implies that inventories must be small, even though foreign sourcing almost always requires large inventories to counteract the risk of interruption in supply?

a.       acceptable quality level.

b.      ISO 9000.

c.       just-in-time. (moderate, page 554)

d.      total quality management.

 

34.     A major problem with just-in-time inventory in a foreign manufacturing context is that:

a.   the firm needs safety stocks due to international issues, even though safety stocks are not usually part of JIT. (moderate, page 555)

b.   it usually isn’t possible to store parts in warehouses where you can avoid paying or delaying payment of duties.

c.    it is impossible to have good quality when sourcing internationally.

d.    it usually takes several weeks for parts to be shipped from Asia to the United States or Europe.

 

WHAT ARE FOREIGN TRADE ZONES?  HOW ARE THEY PRIMARILY USED?

 

35.    A special area designated by a government where tariffs can be delayed or avoided is known as:

a.       tariff zones.

b.      manufacturing interchanges.

c.       flexibility zones.

d.      foreign trade zones. (moderate, page 555)

 

36.    Which of the following best describes the type of zones that are intended to encourage companies to locate in the country by allowing them to defer duties, pay less duties, or avoid certain duties completely?

a.       a foreign trade zone (moderate, page 555)

b.      a tariff zone

c.       a manufacturing interchange

d.      a match-up zone

 

37.    A foreign trade zone usually established near a port of entry and usually consisting of a distribution facility or an industrial park is known as:

a.       a port of entry zone.

b.      a general-purpose zone. (moderate, page 555)

c.       an exporting zone.

d.      a subzone.

 

38.    The exports for which foreign trade zones are used can fall into any of the following categories EXCEPT:

a.       foreign goods processed in U.S. zones, then transshipped abroad

b.      foreign goods processed or assembled in U.S. zones with some domestic materials and parts, then re-exported

c.       foreign goods transshipped through U.S. zones to be sold in the United States (difficult, page 555)

d.      domestic goods moved into a U.S. zone to achieve export status prior to their actual exportation.

 

Essay Questions

 

39.    Differentiate among the following manufacturing strategies:  efficiency, dependability, quality, flexibility, and innovation.

 

         Answer

a.       Efficiency/cost – reduction of manufacturing costs

b.      Dependability – degree of trust in a company’s products and its delivery and price promises

c.       Quality – performance reliability, service quality, speed of delivery, and maintenance quality of the product

d.      Flexibility – ability of the production process to make different kinds of products and to adjust the volume of output

e.       Innovation – ability to develop new products and ideas

(moderate, page 543)


 

40.    In a short essay, discuss the four key factors that the success of a global manufacturing strategy depends upon.

 

         Answer

a.       Manufacturing compatibility—Compatibility in this context is the degree of consistency between the foreign investment decision and the company’s competitive strategy. Company strategies that managers must consider are efficiency/cost, dependability, quality, flexibility, and innovation.

b.      Manufacturing configurations—There are three basic configurations MNEs consider as they establish a global manufacturing strategy. The first is to have centralized manufacturing and offer a selection of standard, lower-prices products to different markets. The second configuration is the use of regional manufacturing facilities to serve customers within a specific region. Third, market expansion in individual countries, especially when the demand in those countries becomes significant, might argue for a multidomestic approach in which companies manufacture products close to their customers, using country-specific manufacturing facilities to meet local needs.

c.       Coordination and control—Coordinating is the linking or integration of activities into a unified system. The activities include everything along the global supply chain from purchasing to warehousing to shipment. Once the company determines the manufacturing configuration that it will use, it must adopt a control system to ensure that company strategies are carried out.

d.      Plant location strategies—Once MNEs determine that they will engage in FDI to supply foreign markets, they need to determine which countries to invest in, and where in specific countries. Selecting the number of plants and their locations depends on factors such as transportation costs, duties, the need to be close to the market, foreign-exchange risk, economies of scale in the production process, technological requirements of the manufacturing process, government incentives, proximity to shipping routes, climate, proximity to competitors and supplier, and national image.

      (difficult, page 543)

 

41.       What factors should influence a company’s plant location strategies?

 

Answer

There are three basic configurations MNEs consider as they establish a global manufacturing strategy.   The first is to have centralized manufacturing and offer a selection of standard, lower-priced products to different markets. The second configuration is the use of regional manufacturing facilities to serve customers within a specific region. Third, market expansion in individual countries, especially when the demand in those countries becomes significant, might argue for a multidomestic approach in which companies manufacture products close to their customers, using country-specific manufacturing facilities to meet local needs.  Some key factors are the importance of standardized products versus products that must be adapted to each market, the size of each individual market in comparison with the domestic market, the existence of several markets in one region versus a few markets interspersed throughout the world. 

           (moderate, page 543)

 

42.    In a short essay, discuss the various elements of a comprehensive supply chain strategy.

 

         Answer

a.       customer service requirements

b.      plant and distribution center network design

c.       inventory management

d.      outsourcing and third-party logistics relationships

e.       key customers and supplier relationships

f.       business processes

g.       information systems

h.      organizational design and training requirements

i.        performance metrics

j.        performance goals

         (moderate, page 544)

 

43.    In a short essay, discuss total quality management.

 

         Answer

Total quality management (TQM) is a process that stresses three principles: customer satisfaction, employee involvement, and continuous improvements in quality. The goal of TQM is to eliminate all defects. TQM often focuses on benchmarking world-class standards, product and service design, process design, and purchasing. The center of the entire process, however, is customer satisfaction, which to achieve may raise production costs. The difference between acceptable quality level (AQL) and TQM centers on the attitude toward quality. In AQL, quality is a characteristic of a product that meets or exceeds engineering standards. In TQM, quality means that a product is “so good that the customer wouldn’t think of buying from anyone else.” TQM is the process of continuous improvement at every level of the organization. TQM does not use any specific production philosophy or require the use of other techniques such as a just-in-time system for inventory delivery. TQM is a proactive strategy. TQM means that a company will try to be better than the best.

         (moderate, page 546)

 

44.    In a short essay, discuss the three different levels of quality standards.

 

         Answer

The first level is a general standard, such as the Deming Award, which is presented to firms demonstrating excellence in quality, and the Malcolm Baldridge National Quality Award, which is presented annually to companies that demonstrate quality strategies and achievements. In addition to the general standards, there are industry-specific standards for quality, especially for suppliers to follow. In addition, individual companies set their own standards for suppliers to meet if they are going to continue to supply them.

         (moderate, page 547)

 

45.    In a short essay, why might a Canadian-based company source production in Mexico and Brazil instead of just sourcing production in Canada? 

 

         Answer

a.       to reduce costs

b.      to improve quality

c.       to increase exposure to worldwide technology

d.      to improve delivery of supplies

e.       to strengthen the reliability of supply by supplementing domestic with foreign suppliers

f.       to gain access to materials only available abroad, possibly because of technical specifications or product capabilities

g.       to establish a presence in a foreign market

h.      to satisfy offset requirements

i.        to reach to competitors’ offshore sourcing practices

               (easy, page 549)

 

46.    In a short essay, discuss the three major configurations of outsourcing that have emerged.

 

         Answer

a.       Vertical integration—where the company owns the entire supplier network or at least a significant part of it. It may have to purchase raw materials from outside suppliers, but the company produces the most expensive parts.

b.      Arm’s length purchases—A purchase between two companies that do not have an ownership interest in each other.

c.       The Japanese keiretsu—A group of independent companies that work together to manage the flow of goods and services along the entire value-added chain.

         (moderate, page 552)

 

47.    In a short essay, discuss the four phases purchasing typically goes through before becoming “global.”

 

         Answer

a.       domestic purchasing only

b.      foreign buying based on need

c.       foreign buying as part of procurement strategy

d.      integration of global procurement strategy

               (easy, page 552)

 

48.    In a short essay, discuss just-in-time systems, and what are the risks of using JIT when a firm sources inputs internationally?

 

         Answer

 “Just-in-time (JIT) systems focus on reducing inefficiency and unproductive time in the production process to improve continuously the process and the quality of the product or service.”  The JIT systems gets raw materials, parts, and components to the buyer “just in time” for use, sparing companies the cost of storing large inventories. However, the use of JIT means that parts must have few defects and must arrive on time. Foreign sourcing can create big risks for companies that use JIT, as interruptions in the supply line can cause havoc. Quality of inventory is important, because inventory with significant amounts of defects with create problems with JIT.

         (moderate, page 554)

 

49.    In a short essay, what are some ways that a company can use foreign trade zones to store parts or final goods inventory, and why would it do so? 

 

         Answer

Foreign trade zones (FTZs) are areas in which domestic and imported merchandise can be stored, inspected, and manufactured free from formal customs procedures until the goods leave the zones. The zones are intended to encourage companies to locate in the country by allowing them to defer duties, pay less duties, or avoid certain duties completely. Sometimes inventory is stored in an FTZ until it needs to be used for domestic manufacture. FTZs can be general-purpose zones or subzones. A general-purpose zone usually is established near a port of entry, such as a shipping port, a border crossing, or an airport, and usually consists of a distribution facility or an industrial park. A subzone usually is physically separate from a general-purpose zone, but is under the same administrative structure.

         (moderate, page 555)