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Operations Management Chapter 8

Location decisions are basically one-time decisions usually made by new organizations.
FALSE Most organizations face location decisions over time.
The fact that most types of firms are located in every section of the country suggests that in many cases, location decisions are not overly important; one location typically is as good as another.
FALSE Many factors make locations relatively more or less attractive.
You can’t make a mistake by locating where labor costs are low.
FALSE Labor costs are only occasionally a primary consideration in location decisions.
Advanced communications has aided globalization.
TRUE Globalization has been helped along by advances in communication technology.
The first step in developing location alternatives is identifying important factors.
FALSE The first step is deciding on the criteria for evaluating the alternatives.
An example of a regional factor in location planning is the location of our markets (either existing or potential).
TRUE Market location is a regional factor.
A strategy that emphasizes convenience for the customers would probably select a single very large facility.
FALSE Convenience for customers would tend to necessitate small, dispersed facilities.
For service organizations, the dominant factors in location analysis usually are market-related.
TRUE Market considerations are dominant in service location decisions.
Global Positioning Systems (GPS) use the Center of Gravity method to establish starting grid co-ordinates.
FALSE GPS uses satellite transmissions for its grid coordinates.
Labor laws are an important site-related factor.
FALSE Labor laws are country- or region-related factors.
Web-based, retail businesses should be located near the customer to reduce their long distance phone charges.
FALSE Centralized locations are appropriate for web-based retail businesses.
For service and retail stores, a prime factor in location analysis is customer access.
TRUE Customer access is a critical consideration in services and retailing.
Retail businesses generally prefer locations that are not near other retailers, as this reduces their competition.
FALSE Retailers prefer to locate near customers, which means they often locate near one another.
Technology has made communication with global operations as easy as local communication.
FALSE While technology has made some facets of global operations easier, other facets are still difficult.
Factor rating is limited to quantitative information concerning location decisions.
FALSE Qualitative considerations can be brought into factor rating approaches.
As a result of the factor rating analysis, a manager may sometimes reject all of the alternatives under consideration when the composite scores are below the minimum threshold value.
TRUE If a minimum score is necessary, no alternative may be suitable.
The lower cost of foreign labor is often offset by lower levels of productivity.
TRUE Foreign labor often is cheaper but less productive than domestic labor.
The center of gravity method is a location planning technique that determines a composite score from weighted factor evaluation.
FALSE Factor scoring determines a composite score from weighted factor evaluation.
The center of gravity method is useful in location planning for the location of a distribution center.
TRUE It optimizes the location for a distribution center.
The center of gravity method of location planning is accurate only when the quantities to be shipped to each location are equal.
FALSE Center of gravity approaches factor in differences in quantities being shipped.
Location decisions are closely tied to an organization’s strategies.
TRUE An organization’s strategy should inform location decisions.
A “micro-factory” is a small, automated facility with a narrow product focus located near major markets.
TRUE Micro-factories serve narrow slices of a market very efficiently.
One of the reasons for the importance of location decisions is its strategic importance to the supply chains.
TRUE A firm’s supply chain performance is strongly affected by location decisions.
Nearness to raw materials would be most important to a
A. grocery store
B. tax preparation service
C. manufacturing company
D. post office
E. hospital
C. manufacturing company
Manufacturers especially value proximity to raw materials.
A one-hour photo processing machine in a Wal-Mart store is an example of a _________.
A. micro-factory
B. downsize strategy
C. diversified strategy
D. lean production system
E. falling price strategy
A. micro-factory
A micro-factory is a very efficient means of serving a small slice of a broad market.
Which statement best characterizes a typical search for location alternatives?
A. identify the best location choice
B. minimize cost consequences
C. maximize associated profits
D. locate near markets
E. identify acceptable locations
E. identify acceptable locations
Finding alternatives requires that we find which alternatives might be suitable and which might not.
Which of the following is not a location option that management can consider in location planning?
A. expand an existing facility
B. add a new location
C. relocate from one location to another
D. do nothing
E. All are possible options.
E. All are possible options.
All of these should or might be considered.
Which of the following is the last step in the procedure for making location decisions?
A. determine the evaluation criteria
B. identify important factors
C. develop location alternatives
D. evaluate alternatives and make a selection
E. request input regarding alternatives
D. evaluate alternatives and make a selection
When all alternatives have been evaluated it is time to make a decision.
When a location evaluation includes both quantitative and qualitative inputs, a technique that can be used is ___________.
A. Linear programming
B. Consumer surveys
C. Factor rating
D. Transportation models
E. Center of gravity methods
C. Factor rating
Factor rating approaches can incorporate both quantitative and qualitative considerations.
The center of gravity method is used to _______ travel time, distance and costs.
A. Normalize
B. Eliminate
C. Average
D. Minimize
E. Document
D. Minimize
The center of gravity method minimizes travel time, distance and costs.
In location planning, the location of raw materials, the location of markets, and labor factors are:
A. regional factors
B. community factors
C. site-related factors
D. national factors
E. minor considerations
A. regional factors
These are regional factors.
Software systems known as GIS help in location analysis. The initials GIS stand for _______.
A. Graphic Interface Systems
B. Global Integrated Software
C. Graded Information Systems
D. Geo Intensive Software
E. Geographical Information System
E. Geographical Information System
GIS stands for Geographical Information System.
Facilities, personnel and operations that are located around the world are called:
A. non-domestic
B. diversified operations
C. globalization
D. worldwide presence
E. virtual organization
C. globalization
Globalization involves facilities, personnel and operations that are located around the world.
Some communities offer financial and other incentives to ______ new businesses.
A. Tax
B. Attract
C. Marginalize
D. Incorporate
E. Zone
B. Attract
Businesses often weigh such incentives in their location decision processes.
Location options don’t usually include:
A. expansion
B. a contract
C. adding new facilities
D. moving
E. doing nothing
B. a contract
A contract has little to do with location options.
Cultural differences, Customer preferences, Labor and Resources are factors relating to:
A. Regional choices
B. Site selection
C. Zoning
D. Product design
E. Foreign locations
E. Foreign locations
Foreign locations concerns with respect to these issues.
The method for evaluating location alternatives which uses their total cost curves is:
A. cost-volume analysis
B. transportation model analysis
C. factor rating analysis
D. linear regression analysis
E. MODI analysis
A. cost-volume analysis
Cost-volume analysis is based on total cost curves.
The method for evaluating location alternatives which minimizes shipping costs between multiple sending and receiving locations is:
A. cost-volume analysis
B. transportation model analysis
C. factor rating analysis
D. linear regression analysis
E. MODI analysis
B. transportation model analysis
Transportation model analysis minimizes shipping costs between multiple sending and receiving locations.
The method for evaluating location alternatives which uses their composite (weighted-average) scores is:
A. cost-volume analysis
B. transportation model analysis
C. factor rating analysis
D. linear regression analysis
E. MODI analysis
C. factor rating analysis
Factor rating analysis evaluates by using their composite (weighted-average) scores.
An approach to location analysis that can include both qualitative and quantitative considerations is:
A. location cost-volume
B. factor rating
C. transportation model
D. expected value (net present value)
E. financial analysis
B. factor rating
Factor rating can include both qualitative and quantitative considerations.
Which of the following circumstances would be least likely to lead to a need for a new location?
A. Shifting of markets.
B. Depletion of basic inputs.
C. Growth in demand that is leading to greater utilization of existing capacity.
D. The need to expand into new markets.
E. The opportunity to take advantage of globalization trends.
C. Growth in demand that is leading to greater utilization of existing capacity.
Greater utilization does not necessarily mean that new capacity is needed.
Which of the following is least important as a consideration for a firm at the beginning of a supply chain?
A. Access to end consumers
B. Access to resources
C. Proximity to customers
D. Access to transportation infrastructure
E. Access to productive labor
A. Access to end consumers
Firms at the beginning of the supply chain are far-removed from final consumers.

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