Business Essentials, 13e (Ebert/Griffin)

Chapter 7 Operations Management and Quality

1) Explain what is meant by the term utility. What type of utility is created when a
pharmacy changes its evening schedule to remain open for an extra hour in response to
customer needs?

Utility: product’s ability to satisfy human want/need

Type of utility: Time

2) Describe the difference between the make-to-order and make-to-stock production

processes.
Make-to-order operations: activities for one-of-a-kind or custom-made production
Make-to-stock operations: activities for producting standardized products for mass production
- We can classify goods production into broad groupings by asking whether its operations
process has a make-to-order or a make-to-stock emphasis.

- We can classify services according to the extent of custmomer contact required.

Example:
Clothing, such as evening gowns, is available either off-the-shelf in department stores or custom-
made at a designer or tailor shop. The designer or tailor's make-to-order operations respond to
one-of-a-kind gown requirements including unique patterns, materials, sizes, and shapes,
depending on customers' characteristics.
Make-to-stock operations, in contrast, produce standard gowns in large quantities to be stocked
on store shelves or in displays for mass consumption.
The production processes are quite different for the two settings, including procedures for
designing gowns; planning for materials purchases; equipment and work methods for cutting,
sewing, and assembling gowns; and employee skills for production.

3) Describe the role of the customer in the operations process of a service.

ð Supplier of process inputs?

1
Copyright © 2022 Pearson Education, Inc.
4) Why is it important that a firm use long-range capacity planning?

The amount of a product that a company can produce under normal conditions is its CAPACITY.
A firm’s capacity depends on how many people the firm employs and the number and size of its
facilities.

Long-range capacity consider both current and future requirements.

ð If capacity is too small for demand, the company must turn away (deny) customers, a
situation that cuts into profits and alienates both customers + salespeople.
ð If capacity greatly exceeds demand, the firm is wasting money by maintaining facilities
that are too large, keeping excess machinery online, or employing too many workers.

The stakes are high in capacity decisions: While expanding fast enough to meet future demand
and to protect market share from competitors, managers must also consider the costs of
expanding. When markets are growing, greater capacity is desirable. In troubled times, however,
existing capacity may be too large and too expensive to maintain, requiring a reduction in size.

5) Describe two alternatives for production facility layouts.

In a custom-products layout (process layout), equipment and people are grouped according to
function.
In a same-steps layout (product layout), equipment and people are set up to produce one type of
product in a fixed sequence of steps and are arranged according to production requirements.
A custom-products layout is well suited for make-to-order shops while a same-steps layout is
efficient for make-to- stock operations.

6) Describe how a Gantt chart and a PERT chart are similar, and how they are different.

Both are scheduling tools used in project management, and both break down a project into the
steps to be performed and show the time needed for each step.

The PERT chart shows the necessary sequence of activities and identifies the critical path, which
is the most time-consuming set of activities and the Gantt chart doesn't. Thus, the PERT chart
provides even more information than the Gantt chart.

Project managers may use these tools to reassign workers and equipment to speed up late
activities and stay on schedule.

2
Copyright © 2022 Pearson Education, Inc.
7) Describe the purpose of a master operations schedule and its relationship to other
scheduling tools.

Answer: Once managers and their teams have determined the operations plans, they then develop
timetables for implementing the plans. This aspect of operations, called operations scheduling,
identifies times when specific activities will occur.

There are four types of schedules:

(1) The master schedule is "the game plan" for deciding the volume of upcoming activities for
months ahead.

(2) Detailed schedules show day-to-day activities that will occur in production.

(3) Staff schedules identify who and how many employees will be working, and when.

(4) Finally, project schedules provide coordination for completing large-scale projects.

Scheduling of operations occurs at different levels. First, a top-level master operations schedule
shows which services or products will be produced and when, in upcoming time periods.

8) Describe the purpose of quality control for goods and services.

Answer: Quality control is taking action to ensure that operations produce goods or services that
meet specific quality standards.

The high quality of customer-employee interactions is no accident in firms that monitor customer
encounters and provide training for employee skills development. Many managers realize that
without employees trained in customer-relationship skills, quality suffers, and businesses, such
as airlines and hotels, can lose customers to better- prepared competitors.

9) In a total quality management environment, what are some steps that companies use to
emphasize the importance of quality?

PRINCIPLES OF TQM
1. Customers requirements - ( both internal & external) must be met first time & every time
2. Everybody must be involved
3. Regular two way communication must be promoted
4. Identify the training needs and supply it to the employees
5. Top management commitment is must
6. Every job must add value
3
Copyright © 2022 Pearson Education, Inc.
7. Eliminate waste & reduce total cost
8. Promote creativity
9. Focus on team work.

10) Describe the five most commonly used tools for TQM.

Competitive Product Analysis

– process by which a company analyzes a competitor’s products to identify desirable
improvements

Value-Added Analysis
– process of evaluating all work activities, materials flows, and paperwork to determine the value
that they add for customers

Quality Improvement Team

– TQM tool in which collaborative groups of employees from various work areas work together
to improve quality by solving common shared production problems

ISO 9000
– program certifying that a factory, laboratory, or office has met the quality management
standards set by the International Organization for Standardization

ISO 14000
– certification program attesting to the fact that a factory, laboratory, or office has improved its
environmental performance

Business Process Reengineering

– rethinking and radical redesign of business processes to improve performance, quality, and
productivity

________________________________

66) A process flowchart identifies the sequence of production activities, movements of materials,
and work performed at each stage of the process. Answer:TRUE

67) A fixed-position layout is most effective when there is a large-volume make-to-stock

operation in place. Answer:FALSE

68) Quality includes factors such as price and dependability in delivering the promised benefits.
Answer:TRUE

1) In operations control, production managers monitor production performance by which

method?
A) Comparing results with detailed plans and schedules
B) Checking on each worker on the production floor
4
Copyright © 2022 Pearson Education, Inc.
C) Observing activities from a platform above the workers
D) Constantly talking with employees involved
E) Performing spot checks of worker performance
Answer:A

92) What is the name for a production system in which all the needed materials and parts arrive
at the precise moment they are required for each production stage?
A) Quality control system
B) Process control system
C) Just-in-time production
D) Standardized production
E) Custom-products production
Answer:C

93) Which type of system is designed for smooth production flow to avoid inefficiencies,
eliminate unnecessary inventories, and continuously improve production processes?
A) Quality system
B) Lean system
C) Managed system
D) Production system
E) Flexible system
Answer:B

94) Which term refers to the acquisition of the raw materials a company needs to produce its
products?
A) Development
B) Purchasing
C) Goods control
D) Quality control
E) Wholesaling
Answer:B

95) Which of the following refers to the receiving, storing, handling, and counting of all raw
materials, partly finished goods, and finished goods?
A) Materials handling
B) Inventory control
C) Quality control
D) Wholesaling
E) Distribution control
Answer:B

5
Copyright © 2022 Pearson Education, Inc.
114) Which of the following terms includes all activities involved in getting quality products into
the marketplace?
A) Quality control
B) Quality reliability
C) Total quality management
D) Performance quality
E) Quality overview
Answer:C

115) What should a firm use to evaluate the work activities, materials flow, and paperwork in an
effort to determine how those activities provide benefit for the customers?
A) Value-added analysis
B) Benchmarking
C) Getting closer to the customer
D) Supply chain management
E) Follow-up
Answer: A

6
Copyright © 2022 Pearson Education, Inc.