Chapter 1Goods, Services, and Operations Management

TRUE/FASE
1. Operations management is focused primarily on the application of technology in manufacturing.
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2. To apply the principles of operations management, managers need to understand people, processes,
and technology.
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. !"ery #o$ entails some aspect of operations management.
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%. !mployees &ho &or' in financial and accounting functions of organi(ations need little 'no&ledge of
operations management.
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). !nsuring that a credit card has accurate customer information and is deli"ered *uic'ly to the customer
is an e+ample of in"entory management in O,.
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-. A product that typically lasts at least three years is called a dura$le good.
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.. A tooth$rush is an e+ample of a nondura$le good.
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/. 0oth goods and ser"ices can $e standardi(ed for the mass mar'et or customi(ed to indi"idual needs.
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1. 2ustomer participation in manufacturing processes and acti"ities is generally high.
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13. 2ustomers and ser"ice pro"iders often &or' together to co4produce a ser"ice.
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11. Ser"ices al&ays in"ol"e direct customer contact.
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OM3 Test Bank Chapter 1 1
12. ,oments of truth consist of one or more ser"ice encounters.
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1. A ser"ice encounter is any interaction $et&een a customer and the ser"ice pro"ider.
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1%. The demand for ser"ices is usually easier to predict than the demand for goods.
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1). Ser"ice facilities must $e physically located close to the customer.
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1-. The greater the customer participation, the more uncertainty the firm has &ith respect to ser"ice time.
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1.. A customer $enefit pac'age 520P6 consists of $oth a primary good and a primary ser"ice.
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1/. The a$ility to do&nload music onto a cell phone &ould $e considered a primary ser"ice.
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11. Peripheral goods and ser"ices are not essential to a primary good or ser"ice.
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23. ,any products that appear to $e only physical goods often include $undled ser"ices.
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21. Process thin'ing is the traditional &ay of "ie&ing an organi(ation $y function.
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22. 7alue creation processes focus on primary goods and ser"ices.
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2. A process can $e designed $y operations managers independently of the choice of a customer $enefit
pac'age, &hich is chosen e+clusi"ely $y mar'eting staff.
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2%. Ta'ing a customer order at a *uic' ser"ice restaurant &ould generally $e "ie&ed as a support process.
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OM3 Test Bank Chapter 1 2
2). 8uality has $een a principal focus of operations management since the industrial re"olution.
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2-. The reason that many 9apanese firms captured ma#or shares of &orld mar'ets in the 11.3s &as the
result of their focus on *uality rather than efficiency.
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2.. As manufacturers sought to customi(e products for glo$al mar'ets and increase goods and ser"ice
"ariety, they &ere a$le to le"erage the mass production methods that are "ery efficient and cost4
effecti"e.
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2/. Today, almost half the :.S. economy is in"ol"ed in ser"ice industries.
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21. ,any $usiness4to4$usiness manufacturers thin' of the physical good they produce as peripheral to
their ser"ice offerings.
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3. Time4$ased competition means pro"iding ne& and inno"ati"e products that surprise and delight
customers.
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1. Operations management is the only function $y &hich managers can directly affect the "alue pro"ided
to all sta'eholders ; customers, employees, in"estors, and society.
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MUT!"E C#O!CE
1. <hich one of the follo&ing statements is false=
a. Ser"ice encounters can $e $et&een a customer and a $uilding.
$. >igh customer contact systems generally ha"e high process efficiency.
c. A hotel room is a perisha$le asset.
d. The demand for ser"ices is time4dependent, especially o"er the short term.
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2. <hich one of the follo&ing statements is false=
a. Ser"ice that do not in"ol"e significant interaction &ith customers can $e managed much
the same as goods in a factory.
$. A ser"ice is any primary or complementary acti"ity that does not directly produce a
physical product.
c. Some "ery significant differences e+ist $et&een goods and ser"ices that create different
demands on the operations function.
d. ?esigning and managing operations in a goods4producing firm is *uite similar to that in a
ser"ice4pro"iding organi(ation.
OM3 Test Bank Chapter 1 3
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. <hich one of the follo&ing statements is true=
a. A "ariant is al&ays a dura$le good &ith ne& features.
$. An automo$ile is a nondura$le good.
c. ?emand for goods is more difficult to predict than demand for ser"ices.
d. Normally patents do not protect ser"ices.
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%. @n relating operations management and the customer $enefit pac'age 520P6, &hich is the correct
timing se*uence=
a. Operating system processes lead to customer needs and e+pectations, &hich lead to
customer $enefit pac'age.
$. 2ustomer $enefit pac'age leads to customer needs and e+pectations, &hich lead to
operating system processes.
c. 2ustomer needs and e+pectations lead to customer $enefit pac'age, &hich leads to
operating system processes.
d. 2ustomer needs and e+pectations lead to operating system processes, &hich lead to
customer $enefit pac'age.
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). <hich of the follo&ing is not true regarding the differences $et&een goods and ser"ices=
a. ?emand for ser"ices is easier to forecast.
$. 2ustomers participate in many ser"ices.
c. Ser"ices cannot $e stored as physical in"entory.
d. Patents do not protect ser"ices.
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-. <hich of the follo&ing is not a 'ey acti"ity of an operations manager=
a. translating mar'et 'no&ledge into goods, ser"ices, and processes
$. continually learning and adapting to glo$al and en"ironmental changes
c. managing cash flo&s and strategic in"estments
d. e+ploiting technology to impro"e producti"ity
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.. 2omputer soft&are &ould $e an e+ample of
a. an intangi$le good
$. a nondura$le good
c. a ser"ice
d. a "alue creation process
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/. <hich one of the follo&ing has the lo&est goods content=
a. automo$ile muffler replacement
$. computer diagnosis and repair
c. mo"ie presentation
d. fast food restaurant
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1. <hich one of the follo&ing has the highest goods content=
a. medicine prescription
$. computer repair
c. automo$ile loan
d. symphony performance
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13. Ser"ice organi(ations generally
a. are in close pro+imity to the customer
$. rely on physical in"entory
c. ta'e ad"antage of patents
d. can delegate human $eha"ior and mar'eting s'ills
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11. A customer $enefit pac'age 520P6 includes
a. only core offerings
$. only peripheral offerings
c. either core or peripheral offerings $ut not $oth
d. $oth core offerings as &ell as peripheral offerings
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12. Support processes &ould typically include all of the follo&ing e+cept
a. in"entory management
$. customer help des' operations
c. research and de"elopment
d. manufacturing and assem$ly
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1. <hich of the follo&ing is the correct se*uence descri$ing the e"olution of operations management=
a. efficiency, customi(ation, *uality, ser"ice, sustaina$ility, time4$ased competition
$. *uality, efficiency, time4$ased competition, sustaina$ility, customi(ation, ser"ice
c. efficiency, *uality, customi(ation, time4$ased competition, ser"ice, sustaina$ility
d. *uality, ser"ice, customi(ation, time4$ased competition, efficiency, sustaina$ility
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1%. The follo&ing terms 44 interchangea$ility of parts, di"ision of la$or, highly repetiti"e tas's 44 $est
relate to a focus on
a. *uality
$. efficiency
c. *uality
d. time
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1). The *uality re"olution is most related to
a. continuous impro"ement
$. mass production
c. time4$ased competition
d. ser"ice
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1-. <hich of the follo&ing is not a current challenge to O,=
a. glo$ali(ation
$. technology
c. *uality
d. mass production
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1.. A "alue creation process could $e any of the follo&ing e+cept
a. shipping a customerAs order
$. pro"iding a home mortgage
c. assem$ling a dish&asher
d. purchasing production material
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1/. <hich is generally related to ser"ice operations=
a. tangi$le product
$. need for fle+i$le capacity
c. separation of production from consumption
d. large amount of in"entory
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11. A support process could $e any of the follo&ing e+cept
a. assem$ling automo$iles
$. purchasing materials and supplies
c. managing in"entory
d. installing a product
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23. <hich of the follo&ing &ould $e the lo&est in goods content and highest in ser"ice content=
a. fast food restaurant
$. attending a theater production
c. getting an oil change for your car
d. filling a medical prescription
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21. Ser"ice management s'ills &ould include all of the follo&ing e+cept
a. accounting and finance
$. 'no&ledge and technical e+pertise a$out operations
c. mar'eting and cross4selling
d. human interaction
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22. A golf simulator in a retail sports store is an e+ample of
a. non4 dura$le goods replacing ser"ices
$. primary good
c. goods content
d. $i(tainment
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2. <hich one of the follo&ing is not an e+ample of $i(tainment=
a. iPhone applications
$. automo$ile leasing
c. product demonstrations
d. "irtual factory tours
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2%. <hich one of the follo&ing statements a$out the structure of the :.S. economy is true=
a. A$out 11 percent of all :.S. #o$s are in ser"ice4pro"iding processes.
$. All goods4producing #o$s account for 2) percent of total :.S. #o$s.
c. All ser"ice4pro"iding #o$s account for -) percent of total :.S. #o$s.
d. The largest :.S. industry &ith respect to :.S. #o$s is manufacturing.
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2). The three issues that are at the core of operations management include all of the follo&ing e+cept
a. cost
$. *uality
c. utili(ation
d. efficiency
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S#ORT A$S%ER
1. ?efine O, and pro"ide some e+amples of &hat operations managers do.
ANS:
Operations management &OM' is the science and art of ensuring that goods and ser"ices are created
and deli"ered successfully to customers. Some e+amples of O, acti"ities are:
Translating mar'et 'no&ledge of customers to design and manage goods, ser"ices and
processes.
>elping organi(ations do more &ith less.
!nsuring that resources 5la$or, e*uipment, materials, and information6 and operations are
coordinated.
!+ploiting technology to impro"e producti"ity.
0uilding *uality into goods, ser"ices, and processes.
:nderstanding ho& to determine resource capacity and schedules.
2reating a high4performance &or'place.
2ontinually learning and adapting the organi(ation to glo$al and en"ironmental changes.
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2. ?ifferentiate $et&een a good and a ser"ice. <hat is the difference $et&een a dura$le and nondura$le
good. Bi"e an e+ample of each.
ANS:
A good is a physical product you can see, touch or possi$ly consume. A service is any primary or
complementary acti"ity that does not directly produce a physical product. Ser"ices represent the non4
goods part of a transaction $et&een a $uyer 5customer6 and a seller 5supplier6.
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A d(ra)*e good is a product that typically lasts at least three years. 7ehicles, dish&ashers and
furniture are e+amples of dura$le goods. A nond(ra)*e good is perisha$le and generally lasts for less
than three years. !+amples include toothpaste, soft&are, shoes and fruit.
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. Though there are similarities $et&een goods and ser"ice, there are significant differencesC discuss fi"e.
ANS:
Boods are tangi$le &hile ser"ices are intangi$le.
2ustomers participate in many ser"ice processes, acti"ities and transactions.
The demand for ser"ices is more difficult to predict than the demand for goods.
Ser"ices cannot $e stored as physical in"entory.
Ser"ice management s'ills are paramount to a successful ser"ice encounter.
Ser"ice facilities typically need to $e in close pro+imity to the customer.
Patents do not protect ser"ices.
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%. Delate a ser"ice encounter to a moment of truth. ?o they ha"e to $e person4to4person= !+plain.
ANS:
A service enco(nter is an interaction $et&een the customer and the ser"ice pro"ider. Ser"ice
encounters consist of one or more moments o+ tr(th 4 any episodes, transactions or e+periences in
&hich a customer comes into contact &ith any aspect of the deli"ery system, ho&e"er remote, and
there$y has an opportunity to form an impression. !mployees &ho interact directly &ith customers,
such as airline flight attendants, nurses, la&yers, fast food counter employees, telephone customer
ser"ice representati"es, dentists and $an' tellers, need to understand the importance of ser"ice
encounters on their customers. >o&e"er, human interaction, either face4to4face or through a contact
technology such as a telephone line, is not re*uired to esta$lish a ser"ice encounter. A ser"ice
encounter also includes the interaction the customer has &ith $uildings, e*uipment, ad"ertisements,
$rochures, etc. For e+ample, &hile dri"ing, a customer might see a large sign for a store 5one moment
of truth6 $ut o$ser"e that the storeEs par'ing lot is poorly4lit 5a second moment of truth6C and so,
$elie"ing the area is not safe, the customer decides to 'eep dri"ing and not stop to shop at that store.
2ustomers #udge the "alue of a ser"ice and form perceptions through ser"ice encounters.
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). !+plain a customer $enefit pac'age 520P6. Also, differentiate a primary good or ser"ice from a
peripheral good or ser"ice.
ANS:
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A c(stomer )ene+it pac,age &C-"' is a clearly defined set of tangi$le 5goods4content6 and intangi$le
5ser"ice4content6 features that the customer recogni(es, pays for, uses or e+periences. @n simple terms,
it is some com$ination of goods and ser"ices configured in a certain &ay to pro"ide "alue to
customers. A 20P consists of a primary good or ser"ice, coupled &ith peripheral goods andFor
ser"ices. A primar. good or service is the GcoreG offering that attracts customers and responds to
their $asic needs. For e+ample, the primary ser"ice of a personal chec'ing account is con"enient
financial transactions. "eriphera* goods or services are those that are not essential to the primary
good or ser"ice $ut enhance it. A personal chec'ing account might $e supported and enhanced $y such
peripheral goods as a printed monthly account statement, designer chec's and chec'$oo's, a special
credit card and such peripheral ser"ices as a customer ser"ice hotline and online $ill payment. Finally,
processes create and deli"er each primary or peripheral good or ser"ice, and process design and
management is a 'ey focus of O,. A variant is a 20P feature that departs from the standard 20P and
is normally location4 or firm4specific such as a fishing pond at an auto dealership.
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-. ?efine a process. Then differentiate among a "alue creation process, a support process, and a general
management process.
ANS:
A process is a se*uence of acti"ities that is intended to create a certain result such as a physical good,
a ser"ice or information. A va*(e creation process focuses on primary goods or ser"ices such as
assem$ling dish&ashers or pro"iding a home mortgage. A s(pport process focuses on peripheral
goods and ser"ices such as purchasing materials and supplies, managing in"entory, installation,
customer support, technology ac*uisition and research and de"elopment. A genera* management
process includes accounting and information systems, human resource management and mar'eting.
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.. @n the last century, operations management sa& si+ ma#or themes. <hat are they= 0riefly discuss each.
ANS:
A focus on efficiency. As international trade gre& in the 11-3s, the emphasis on
operations efficiency and cost reduction increased. ,any companies mo"ed their factories
to lo&4&age countries. ,anagers $ecame enamored &ith computers, ro$ots, and other
forms of technology, <hile ad"anced technology continues to re"olutioni(e and impro"e
production, in the 11-3s and 11.3s technology &as "ie&ed primarily as a method of
reducing costs.
The *uality re"olution. As 9apan &as re$uilding from the de"astation of <orld <ar @@,
t&o :.S. consultants, <. !d&ards ?eming and 9oseph 9uran, &ere sought e+tensi"ely $y
9apanese industry. ?eming and 9uran told 9apanese e+ecuti"es that continual impro"ement
of *uality &ould open &orld mar'ets, free up capacity, and impro"e their economy. The
9apanese eagerly em$raced that message. They em$ar'ed on a massi"e effort to train the
&or'force, using statistical tools de"eloped at <estern !lectric and other inno"ati"e
management tools to identify causes of *uality pro$lems and fi+ them. They made steady
progress in reducing defects and paid careful attention to &hat consumers &anted. Those
efforts continued at a relentless pace until, $y the mid411.3s, the &orld disco"ered that
9apanese goods had fe&er defects, &ere more relia$le, and $etter met consumer needs
than American goods. As a result, 9apanese firms captured ma#or shares of &orld mar'ets
in many different industries such as automo$iles and electronics. Therefore, *uality
$ecame an o$session &ith top managers of nearly e"ery ma#or company.
2ompeting through customi(ation and design. As the goals of lo& cost and high product
*uality $ecame Ggi"ens,G companies $egan to emphasi(e inno"ati"e designs and product
features to gain a competiti"e edge. 8uality meant much more than simply defect
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reductionC *uality meant offering consumers ne& and inno"ati"e products that not only
met their e+pectations, $ut also surprised and delighted them. @nfle+i$le mass4production
methods that produced high "olumes of standardi(ed goods and ser"ices using uns'illed
or semis'illed &or'ers and e+pensi"e single4purpose e*uipment, though "ery efficient and
cost4effecti"e, &ere inade*uate for the ne& goals of increased good and ser"ice "ariety
and continual product impro"ement. The operating system had to change. Ne& types of
operating systems emerged that ena$led companies to manufacture goods and ser"ices
$etter, cheaper, and faster than their competitors, &hile facilitating inno"ation and
increasing "ariety. The @nternet $egan to help companies customi(e their goods and
ser"ices for glo$al mar'ets.
Time4$ased competition. As information technology matured, time $ecame an important
source of competiti"e ad"antage. 8uic' response is achie"ed $y continually impro"ing
and reengineering processesC that is, fundamentally rethin'ing and redesigning processes
to achie"e dramatic impro"ements in cost, *uality, speed, and ser"ice. That tas' includes
de"eloping products faster than competitors, speeding ordering and deli"ering processes,
rapidly responding to changes in customersE needs, and impro"ing the flo& of paper&or'.
The ser"ice re"olution. <hile the goods4producing industries &ere getting all the attention
in the $usiness community, the popular press, and in $usiness school curricula, ser"ice
industries &ere *uietly gro&ing and creating many ne& #o$s in the :.S. economy. @n
233/, a$out four of e"ery fi"e :.S. #o$s are in ser"ices.
Sustaina$ility. Sustaina$ility refers to an organi(ationAs a$ility to strategically address
current $usiness needs and successfully de"elop a long4term strategy that em$races
opportunities and manages ris' for all products, systems, supply chains, and processes to
preser"e resources for future generations. Sustaina$ility can $e "ie&ed from three
perspecti"es: en"ironmental, social, and economic. These three dimensions of
sustaina$ility are often referred to as the Htriple $ottom line.I
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/. For each of the three dimensions of sustaina$ility 5en"ironmental, social, and economic6, pro"ide three
e+amples of $usiness practices that support it.
ANS:
Environmenta*/
<aste management ; reduce &aste and manage recycling efforts.
!nergy optimi(ation ; reduce consumption during pea' demand times.
Transportation optimi(ation ; use efficient "ehicles and design routes to sa"e fuel.
Technology upgrade ; clean and reuse &ater in manufacturing processes.
Air *uality ; reduce greenhouse gas emissions.
Sustaina$le product design ; design goods &hose parts can $e recycled or safely disposed of.
Socia*/
Product safety ; ensure consumer safety in using goods and ser"ices.
<or'force health and safety ; ensure a healthy and safe &or' en"ironment.
!thics and go"ernance ; ensure compliance &ith legal and regulatory re*uirements and transparency
in management decisions.
2ommunity ; impro"e the *uality of life through industry4community partnerships.
Economic/
Performance e+cellence ; $uild a high4performing organi(ation &ith a capa$le leadership and
&or'force.
Financial management ; ma'e sound financial plans to ensure long4term organi(ational sur"i"al.
Desource management ; ac*uire and manage all resources effecti"ely and efficiently.
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!mergency preparedness ; ha"e plans in place for $usiness, en"ironmental, and social emergencies.
PTS: 1
1. <hat are the four 'ey current challenges in O, that managers need to understand=
ANS:
Technology has $een one of the most important influences on the gro&th and
de"elopment of O, during the second half of the 23th century. ,icroprocessors ha"e
$ecome u$i*uitous in most consumer products and industrial processes. Ad"ances in
design and fa$rication of goods as &ell as ad"ances in information technology to enhance
ser"ices ha"e pro"ided the a$ility to de"elop products that one could only dream of a fe&
decades ago. They also ena$le managers to more effecti"ely manage and control
e+tremely comple+ operations.
Blo$ali(ation has changed the &ay companies do $usiness and must manage their
operations. <ith ad"ances in communications and transportation, &e ha"e passed from
the era of huge regional factories &ith large la$or forces and tight community ties to an
era of the G$orderless mar'etplace.G No longer are GAmericanG or G9apaneseG products
manufactured e+clusi"ely in America or 9apan.
2onsumersE e+pectations ha"e risen dramatically. They demand an increasing "ariety of
products &ith ne& and impro"ed features that meet their changing needs. They e+pect
products that are defect4free, ha"e high performance, are relia$le and dura$le, and are easy
to repair. They also e+pect rapid and e+cellent ser"ice for the products they $uy. For the
ser"ices they $uy, customers e+pect short &aiting and processing times, a"aila$ility &hen
needed, courteous treatment from employees, consistency, accessi$ility and con"enience,
accuracy, and responsi"eness to une+pected pro$lems. 2ompanies must no& compete on
all these dimensions.
TodayEs &or'ers are differentC they demand increasing le"els of empo&erment and more
meaningful &or'. TodayEs &or' re*uires constant learning and more a$stract thin'ing and
on4the4spot decision4ma'ing s'ills. Ser"ice plays a much greater role &ithin
organi(ations. Finally, the en"ironment is differentC &e li"e in a glo$al $usiness
en"ironment &ithout $oundaries.
8uality continues to $e a challenge. ?espite significant ad"ances, organi(ations cannot
ta'e *uality for granted and must continue to focus on it &hen designing goods and
ser"ices, operations, and management systems.
Perhaps the $iggest challenge that O, faces in modern <estern nations is the loss of
manufacturing #o$s.
PTS: 1
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