Section 4: Process Design, Capacity Planning, and Location Analysis

Question 1

Which type of business is best suited to an assembly line operation?

1. An automobile manufacturer
2. A surgical center
3. A movie production
4. A sculptor’s studio

Answer 1

An automobile manufacturer

An assembly line operation is ideal for businesses like automobile manufacturing where standardized parts and repetitive tasks can be organized efficiently to produce vehicles in large quantities.

Question 2

Which type of business is best suited for a continuous flow operation?

1. A building construction
2. An oil refinery
3. An emergency room
4. A washing machine manufacturer

Answer 2

An oil refinery

Continuous flow operations are ideal for industries like oil refining, where materials move continuously through various stages of production in a consistent, unbroken flow.

Question 3

Which type of business is best suited for a batch flow process?

1. An oil refinery
2. A ship building operation
3. An automobile manufacturer
4. A food production cookie maker

Answer 3

A food production cookie maker

Batch flow processes are ideal for food production where different types of cookies or flavors can be produced in separate batches based on demand.

Question 4

Flexible manufacturing systems are a process option designed to ____.

1. Produce continuous flow products
2. Produce one-of-a-kind products
3. Produce low-cost products that meet varying customer requirements
4. Produce high-volume, low-variety products

Answer 4

Produce low-cost products that meet varying customer requirements

Flexible manufacturing systems are designed to adapt to different customer requirements while maintaining efficient production processes, helping to produce a variety of products at lower costs.

Question 5

Historically, different manufacturing systems have been employed to improve productivity.

How can companies attain economies of scope?

1. By purchasing more equipment to increase production volumes
2. By diversifying their product line using the same equipment
3. By producing only one type of product
4. By reducing output to avoid hiring more workers

Answer 5

By diversifying their product line using the same equipment

Economies of scope involve producing a variety of products using the same equipment or resources, thereby maximizing the use of these resources and reducing per-unit costs.

Question 6

Which process utilizes economies of scale?

1. Project flow
2. Group technology
3. Continuous flow
4. Job shop

Answer 6

Continuous flow

Continuous flow processes involve consistent production in high volumes, allowing the business to achieve economies of scale by spreading fixed costs over a large output.

Question 7

What is the first step in the theory of constraints process?

1. Ignore the constraint
2. Identify the constraint
3. Correct the constraint
4. Subordinate the constraint

Answer 7

Identify the constraint

The first step in the theory of constraints process is to identify the constraint. This means finding the most significant limiting factor in the system that is holding back performance.

Question 8

What is the primary purpose of the “elevate the constraint” step?

1. Correct the constraint
2. Find ways to make the constraint less of a limiting factor
3. Make sure that the team knows what the constraint is
4. Discover the constraint

Answer 8

Find ways to make the constraint less of a limiting factor

The primary purpose of the “elevate the constraint” step is to find ways to improve or eliminate the constraint so that it no longer limits the performance of the system.

Question 9

How many types of primary constraints are there in a system?

1. 3
2. 1
3. 10
4. 5

Answer 9

3

In the theory of constraints, there are three primary types of constraints: physical, market, and policy constraints. These are the main areas where constraints can occur in a system.

Question 10

Which type of constraint is directly affected by a lack of workers?

1. Resource
2. Process
3. Identify
4. Exploit

Answer 10

Resource

A resource constraint is directly affected by a lack of workers since workers are a key resource in most operations. When there is a shortage of workers, it creates a resource constraint.

Question 11

What is the next step a manager should take in the theory of constraints process after identifying the constraint?

1. Celebrate the discovery
2. Stop, because the process is over
3. Exploit the constraint
4. Elevate the constraint

Answer 11

Exploit the constraint

After identifying the constraint, the next step is to exploit the constraint, which means making the best use of it to maximize performance until you can elevate or remove it.

Question 12

What is often a key aspect in capacity planning for services that is unlike capacity planning for goods?

1. Customers’ demand for services is seasonal.
2. Employees require specialized training to produce services.
3. Inventory cannot be built ahead for most services.
4. Customers are more likely to be dissatisfied by services.

Answer 12

Inventory cannot be built ahead for most services.

In services, inventory cannot be created ahead of time like it can be with goods. Services must often be provided on demand because they cannot be stored, making capacity planning different from goods.

Question 13

Which capacity planning strategy anticipates an increase in demand?

1. Lag
2. Special
3. Match
4. Lead

Answer 13

Lead

The lead strategy anticipates an increase in demand and increases capacity ahead of time. This approach allows a business to prepare for future demand increases.

Question 14

Which layout is used when there is a high demand for the same product?

1. Special layout
2. Combination product and process layout
3. Process layout
4. Product layout

Answer 14

Product layout

Product layouts are organized around a specific product or product line and are efficient for high-demand, standardized products.

Question 15

Which capacity planning strategy reacts to demands in the market?

1. Lag
2. Match
3. Adjustment
4. Lead

Answer 15

Lag

A lag strategy reacts to demands in the market by waiting for actual demand to increase before adjusting capacity.

Question 16

A delivery-only pizza parlor provides a combination of a good (the pizza) and a service (the delivery).

Which aspect of capacity decisions is not a consideration for capacity planning for this business?

1. Managing a high degree of producer-consumer interactions
2. Managing capacity to have enough for peak demand
3. Having adequate space for the customer in the service delivery system
4. Managing processing time to provide the service

Answer 16

Having adequate space for the customer in the service delivery system

Since the pizza parlor only offers delivery service, it does not need to accommodate customers within the service delivery system. Adequate space for customers is irrelevant in this scenario.

Question 17

The manufacturer plans to produce 400 doors per day. On average, it tends to actually produce 380 to 390 doors. In ideal conditions, the manufacturer can produce 500 doors per day.

400 doors per day is the manufacturer’s _______.

1. Capacity
2. Effective capacity
3. System capacity
4. Design capacity

Answer 17

Effective capacity

Effective capacity refers to the realistic output level that a system can maintain over time, accounting for factors like downtime and maintenance. The manufacturer’s plan to produce 400 doors per day is an example of effective capacity.

Question 18

On an ongoing basis, when production processes are stable, effective capacity will be _ design capacity.

1. Greater than
2. Equal to
3. Less than

Answer 18

Less than

Effective capacity is typically less than design capacity because it accounts for potential constraints, such as maintenance, breaks, or other disruptions, which limit the actual output.

Question 19

An oil change shop is open for business eight hours a day. The shop has four service bays and enough employees to work all four service bays. It takes an average of 30 minutes to complete an oil change, including the time to set up and transfer from one car to the next. The oil change shop has enough demand to meet its design capacity. Typically, the shop completes 52 oil changes per day.

Capacity utilization for this shop is _____, rounded to the nearest whole percent.

1. 43%
2. 62%
3. 82%
4. 31%

Answer 19

82%

First, calculate the total available capacity: 4 service bays × 8 hours per day × 2 oil changes per hour (since it takes 30 minutes per oil change) = 64 oil changes per day. Next, calculate capacity utilization: (52 oil changes per day / 64 oil changes per day) × 100% ≈ 81.25%, rounded to the nearest whole percent, which is 82%.

Question 20

If a manager needs to know how a business is performing within a normal reporting time, what is the best indicator of this activity?

1. Capacity utilization
2. Efficiency rate
3. Design capacity
4. Proper product layout structure

Answer 20

Capacity utilization

Capacity utilization measures how much of its available capacity a business is actually using. This provides insight into how the business is performing within a specific time period.

Question 21

A customer goes to a coffee shop, and the barista asks the customer if they want to “leave room for cream” in the coffee order. The customer refuses and instead asks to fill the coffee cup to the rim of the cup.

This customer is asking for what to be put in the coffee cup?

1. Lead capacity
2. Effective capacity
3. Efficiency rate
4. Design capacity

Answer 21

Effective capacity

Effective capacity refers to the maximum volume of liquid a coffee cup can hold under realistic conditions, including going without cream.

Question 22

Which factor usually impacts service operations specifically as they make location decisions?

1. Proximity to customers
2. Government incentives
3. Site considerations
4. Proximity to suppliers

Answer 22

Proximity to customers

Proximity to customers is crucial for service operations because services often need to be delivered in person. Being close to customers ensures easy access to the service and helps attract more clients.

Question 23

Which factor usually impacts manufacturers specifically as they make location decisions?

1. Quality-of-life
2. Government incentives
3. Proximity to suppliers
4. Proximity to customers

Answer 23

Proximity to suppliers

Manufacturers often rely on raw materials and components from suppliers. Being close to suppliers reduces transportation costs and improves supply chain efficiency.

Question 24

Why might the location of competitors be an important factor in making a location decision for service operations?

1. Because competitors always cluster together so that customers can compare their choices
2. Because competitors who are located close to one another sometimes find it useful to advertise together
3. Because having competitors in the immediate area might negatively impact sales

Answer 24

Because having competitors in the immediate area might negatively impact sales

If competitors are located nearby, they may draw away potential customers, leading to decreased sales for your business.

Question 25

Variable costs are those costs that can be described as the following:

1. Costs that remain the same in all business conditions
2. Costs that change and can be adjusted as business conditions change
3. Costs that are sometimes stable and other times change
4. Costs that change regardless of the business condition

Answer 25

Costs that change and can be adjusted as business conditions change

Variable costs fluctuate based on production levels or business activity. These costs increase or decrease depending on how much the business produces or sells.

Question 26

Fixed costs are those costs that can be described as what?

1. Costs that change and can be adjusted as business conditions change
2. Costs that remain the same in all business conditions
3. Costs that are sometimes stable and other times change
4. Costs that change regardless of the business condition

Answer 26

Costs that remain the same in all business conditions

Fixed costs remain constant regardless of production levels or other business conditions. These costs include rent, salaries, and other overhead expenses.

Question 27

Which quantity is an example of a capacity measurement?

1. Processed units per hour
2. Changeover time per day
3. Profit generated per quarter
4. Product returns per quarter

Answer 27

Processed units per hour

Capacity is a measure of maximum output. In manufacturing, capacity may measure units produced per unit of time. For service organizations, capacity may measure customers served or tasks completed per unit of time.

Question 28

A t-shirt printing company has a design capacity of 40,000 shirts per month. Accounting for planned delays, the capacity is 31,000 shirts per month. Actual output is 26,000 shirts per month.

What is the efficiency rate?

1. 84%
2. 78%
3. 19%
4. 65%

Answer 28

84%

The efficiency rate is found by dividing actual (or average) output by the effective capacity and expressing the result as a percentage.

Question 29

Which step comes directly before subordination in the theory of constraints?

1. Elevation
2. Exploitation
3. Identification
4. Repetition

Answer 29

Exploitation

Exploitation is the second step, followed by subordinating everything to the constraint.

Question 30

There are three primary types of constraints in a system. What is one of them?

1. Managerial
2. Time
3. Quality
4. Product

Answer 30

Product

The three primary constraints in a system are market (demand), process (throughput), and product (supply).

Question 31

A company that produces power tools wants to hold very little inventory. Because of this, the company wants to align capacity with demand as closely as possible.

What is the appropriate capacity planning strategy for this situation?

1. Lead
2. Constant
3. Lag
4. Match

Answer 31

Match

The match strategy is a moderate strategy that adds capacity in small amounts in response to changing market demands, as shown in the given scenario.

Question 32

Which company has implemented the match strategy of capacity planning?

1. A footwear company produces a large amount of a new shoe model with the expectation that the new model will be very popular.
2. A clothing company increased the output for a popular jacket model after the jackets have consistently been sold out for months.
3. A lumber mill decides to reduce production after the level of inventory has been maxed out for several months.
4. A food processing facility follows a regular pattern of production so that the output of frozen yogurt changes with the seasons.

Answer 32

A food processing facility follows a regular pattern of production so that the output of frozen yogurt changes with the seasons.

The match strategy is a moderate strategy that adds capacity in small amounts in response to changing market demands.

Question 33

A facility produces one type of natural gas in high volumes.

Which process should be used?

1. Assembly line
2. Continuous flow
3. Project
4. Batch flow

Answer 33

Continuous flow

A continuous flow process is used for products with little to no variety, high volume, and typically no identification of individual units.

Question 34

A company refines oil with no variety and high volume.

Which facility layout should be used for this type of process?

1. Product
2. Process
3. Fixed
4. Random

Answer 34

Product

A product layout involves arranging equipment to best facilitate the standardized production of a product, minimizing transportation and material handling costs.

Question 35

A fast food restaurant owner is exploring the possibility of opening a second restaurant.

What is a major factor in the decision for the location of the second restaurant?

1. Costs of utilities
2. Transportation costs
3. Proximity to customers
4. Convenience for workers

Answer 35

Proximity to customers

A restaurant is primarily concerned with a location that is best for customers. Major factors influencing the location decision include customer convenience, proximity to customers, population preferences, and proximity to competitors.

Question 36

A company owns and operates several large retail department stores. The company is looking to open another department store and is trying to decide where to place it.

What is a major factor in the location decision?

1. Construction costs
2. Proximity to suppliers
3. Utility costs
4. Proximity to customers

Answer 36

Proximity to customers

Department stores must be close to customers with enough space for customers to park. The owners of these stores are likely concerned with locations that have lower crime rates to avoid theft. They also likely benefit from being located near competitors to attract more customers.

Question 37

A manufacturer is reworking production processes with the goal of achieving economies of scale.

Which result is gained with economies of scale?

1. Greater product demand
2. Reduced cost per unit
3. Improved process quality
4. Greater product variety

Answer 37

Reduced cost per unit

Economies of scale and economies of scope both achieve lower unit costs through high-volume production.