

Service Operations Management
Midterm Exam
Course Introduction
Service Operations Management focuses on the strategic and tactical decisions involved in designing, delivering, and improving service processes. The course explores concepts unique to service organizations, such as intangibility, customer participation, and variability, and examines methods for managing quality, capacity, demand, and customer experience. Students will analyze service operations using tools like process mapping and queuing theory, and will consider the role of technology and innovation in service delivery. Through case studies and projects, learners gain practical skills to enhance efficiency, effectiveness, and competitiveness in sectors such as healthcare, hospitality, finance, and retail.
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2

Chapter 1: Operations and Productivity
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Sample Questions
Q1) Operations managers should be well versed in what disciplines in order to make good decisions?
Answer: Management science, information technology, and often one of the biological or physical sciences.
Q2) "How much inventory of this item should we have?" is within the critical decision area of managing quality.
A)True
B)False
Answer: False
Q3) Which of the following is <b>not</b> one of The Ten Critical Decisions of Operations Management?
A) layout strategy
B) maintenance
C) process and capacity design
D) mass customization
E) supply-chain management
Answer: D
Q4) Identify the three productivity variables used in the text. Answer: The three common variables are labor, capital, and management.
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Chapter 2: Operations Strategy in a Global Environment
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Sample Questions
Q1) Boeing's new 787 Dreamliner
A) is assembled in Washington, D.C.
B) uses engines from Japan
C) has its fuselage sections built in Australia
D) has increased efficiency from new engine technology
E) results from a partnership of about a dozen companies
Answer: D
Q2) Manufacturing organizations have ten strategic OM decisions, while service organizations have only eight.
A)True
B)False
Answer: False
Q3) One reason to globalize is to learn to improve operations.
A)True
B)False
Answer: True
Q4) Are strategies static or dynamic?
What are the forces that lead to this result?
Answer: Strategies should be dynamic because of changes within the organization and changes in the environment.
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Chapter 3: Project Management
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Sample Questions
Q1) Two critical path activities are candidates for crashing on a CPM network. Activity details are in the table below. To cut one day from the project's duration, activity _________ should be crashed first, adding _________ to project cost.
\[\begin{array} { | c | c | c | c | c | }
\hline \text { Activity } & \text { Normal Time } & \text { Normal Cost } & \text { Crash Time } & \text { Crash Cost } \\
\hline \text { B } & 4 \text { days } & \$ 6,000 & 3 \text { days } & \$ 8,000 \\
\hline \text { C } & 6 \text { days } & \$ 4,000 & 4 \text { days } & \$ 6,000 \\ \hline \end{array}\]
A) B; $2,000
B) B; $8,000
C) C; $1,000
D) C; $2,000
E) C; $6,000
Answer: C
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Page 5

Chapter 4: Forecasting
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Q1) __________ is a forecasting technique based upon salespersons' estimates of expected sales.
Q2) Linear regression is known as a(n) __________ because it incorporates variables or factors that might influence the quantity being forecast.
Q3) The two general approaches to forecasting are
A) qualitative and quantitative
B) mathematical and statistical
C) judgmental and qualitative
D) historical and associative
E) judgmental and associative
Q4) Which of the following statements about time-series forecasting is true?
A) It is based on the assumption that future demand will be the same as past demand. B) It makes extensive use of the data collected in the qualitative approach.
C) It is based on the assumption that the analysis of past demand helps predict future demand.
D) Because it accounts for trends, cycles, and seasonal patterns, it is always more powerful than associative forecasting.
E) All of the above are true.
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6

Chapter 5: Design of Goods and Services
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Q1) In which stage of the product life cycle should product strategy focus on process modifications as the product is being "fine-tuned" for the market?
A) introduction
B) growth
C) maturity
D) decline
E) none of the above
Q2) An assembly drawing
A) shows, in schematic form, how the product is assembled
B) shows an exploded view of the product
C) lists the operations, including assembly and inspection, necessary to produce the component with the material specified in the bill of material
D) provides detailed instructions on how to perform a given task
E) describes the dimensions and finish of each component
Q3) Computer-aided design (CAD) refers to the use of specialized computer programs to direct and control manufacturing equipment.
A)True
B)False
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Chapter 6: Managing Quality
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Sample Questions
Q1) A Six Sigma program has how many defects per million?
A) 3.4
B) 34
C) 1000
D) 6 times the standard deviation
E) none of the above
Q2) A group of employees that meet on a regular basis with a facilitator to solve work-related problems in their work area is a(n) __________.
Q3) __________ is the Japanese word for the ongoing process of incremental improvement.
Q4) Quality circles empower employees to improve productivity by finding solutions to work-related problems in their work area.
A)True
B)False
Q5) __________ costs result from production of defective parts or services before delivery to the customer.
Q6) In a sentence or two, summarize the contribution of Philip Crosby to quality management.
Q7) What steps can be taken to develop benchmarks?
Page 8
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Chapter 7: Statistical Process Control
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Sample Questions
Q1) An operating characteristics curve shows
A) upper and lower product specifications
B) product quality under different manufacturing conditions
C) how the probability of accepting a lot varies with the population percent defective
D) when product specifications don't match process control limits
E) how operations affect certain characteristics of a product
Q2) A run test is used
A) to examine variability in acceptance sampling plans
B) in acceptance sampling to establish control
C) to examine points in a control chart to check for natural variability
D) to examine points in a control chart to check for nonrandom variability
E) none of the above
Q3) The __________ is the lowest level of quality that we are willing to accept.
Q4) Natural variations
A) are variations that are to be identified and investigated
B) are variations that can be traced to a specific cause
C) are the same as assignable variations
D) lead to occasional False findings that processes are out of control
E) play no role in statistical process control
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Chapter 8: Process Strategy
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Sample Questions
Q1) One use of camera-and-computer-based vision systems is to replace humans doing tedious and error-prone visual inspection activities.
A)True
B)False
Q2) A non-profit organization is planning a raffle to raise money. It has two options for tickets. The first option is to do the tickets by hand, with fixed costs of $50 and variable costs of $.05 per ticket. The second option is to outsource production. This would result in fixed costs of $500 and variable costs of $.01. If the organization plans to sell 10,000 tickets which option should it choose?
Q3) One essential ingredient of mass customization is modular design. A)True
B)False
Q4) The typical full-service restaurant uses a product-focused process. A)True
B)False
Q5) A(n) __________ uses an automated work cell controlled by electronic signals from a common centralized computer facility.
Q6) Describe Value-Stream Mapping. Explain how it is different from process mapping.
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Chapter9: Capacity and Constraint Management
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Sample Questions
Q1) A capacity alternative has an initial cost of $50,000 and cash flow of $20,000 for each of the next four years. If the cost of capital is 5 percent, the net present value of this investment is
A) greater than $80,000
B) greater than $130,000
C) less than $30,000
D) Impossible to calculate, because no interest rate is given.
E) Impossible to calculate, because variable costs are not known.
Q2) A fleet repair facility has the capacity to repair 800 trucks per month. However, due to scheduled maintenance of their equipment, management feels that they can repair no more than 600 trucks per month. Last month, two of the employees were absent several days each, and only 400 trucks were repaired. What are the utilization and efficiency of the repair shop?
Q3) A good capacity decision requires that it be tightly integrated with the organization's strategy and investments. But there are other "considerations" to making a good capacity decision. Name them. Describe each in a sentence or two.
Q4) A factory outputs 1000 units a month. If design capacity is 3000 and efficiency is 50% find utilization and effective capacity.
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11

Chapter 10: Location Strategies
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Sample Questions
Q1) Which of the following statements regarding Starbucks Coffee is False?
A) The firm plans to open three new cafes per day around the world.
B) The firm uses GIS to evaluate every site decision.
C) The firm's cafes are exclusively in traditional settings: malls, tourist areas, and airports.
D) The firm places cafes into ever more innovative locations.
E) The firm put cafes in Japan, even though that country had no GIS data available.
Q2) Consider the list of Key Success Factors in your textbook. Why do some items appear at the country level only, while others are present at both country and regional levels? Select one KSF as an example, and use it in your discussion.
Q3) What are the advantages and disadvantages of the use of factor-rating schemes?
Q4) Location analysis techniques typically employed by service organizations include
A) factor rating method
B) center-of-gravity method
C) purchasing power analysis of area
D) traffic counts
E) all of the above
Q5) Labor cost per unit is also referred to as __________.
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Page 12

Chapter 11: Layout Strategies
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Sample Questions
Q1) A work cell is scheduled to build 120 digital light processor (DLP) assemblies each week. These assemblies are later installed into home theater projection systems. The work cell has 7.5 hours of productive work each day, six days per week. What is takt time for this cell?
Q2) The __________ is a non-numeric method for determining which departments are located near one another, and which departments are kept farther apart.
Q3) Which of the following is not one of the factors complicating the techniques for addressing the fixed position layout?
A) The volume of materials is dynamic.
B) At different stages of a project, different materials are needed; therefore, different items become critical as the project develops.
C) Takt times at workstations are dynamic.
D) There is limited space at virtually all sites.
E) All of the above are complicating factors.
Q4) CRAFT is software for balancing assembly lines.
A)True
B)False
Q5) Identify the four requirements for cellular production.
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Chapter 12: Human Resources, Job Design, and Work Measurement
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Sample Questions
Q1) What are predetermined time standards?
Q2) A(n) __________ is a group of empowered individuals working together to reach a common goal.
Q3) An advantage of work sampling is that
A) no observation is required
B) it involves study of the equipment only
C) a performance rating is necessary
D) the time spent observing the employee is relatively short
E) it is more effective than time studies when task times are short
Q4) What are the advantages and the disadvantages of the employment-stability policy "holding employment constant?
"

Q5) A time study of a certain service task found an average time of 15 minutes, with a standard sample large enough that we are 95% confident that standard time is within 5% of its true value?
Q6) __________ refers to a work schedule that deviates from the normal or standard five 8-hour days.
Page 14
Q7) Properly set labor standards represent the amount of time that it should take an average employee to perform specific job activities under __________.
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Chapter 13: Supply-Chain Management
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Sample Questions
Q1) Outsourcing refers to transferring a firm's activities that have traditionally been internal to external suppliers.
A)True
B)False
Q2) Which of the following best describes vertical integration?
A) to sell products to a supplier or a distributor
B) to develop the ability to produce products which complement the original product
C) to produce goods or services previously purchased
D) to develop the ability to produce the specified good more efficiently than before
E) to build long-term partnerships with a few suppliers
Q3) A carpet manufacturer has delivered carpet directly to the end consumer rather than to the carpet dealer. The carpet manufacturer is practicing
A) postponement
B) cross-docking
C) channel assembly
D) drop shipping
E) float reduction
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Chapter 14: Outsourcing as a Supply-Chain Strategy
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Sample Questions
Q1) A manufacturing plant is considering outsourcing its production of tires. There are 5 risk areas in which the decision will be based. The current plant had scores of 1, 2, 4, 8, 2 while the outsourced plant had scores of 3, 2, 4, 2, 5. What is the current plant's score if high scores indicate low risk and an unweighted factor method is applied?
A) 14
B) 15
C) 16
D) 17
E) none of the above
Q2) A company that had previously sent its call center business to India has now brought that business back to small towns in the U.S. such as Dubuque, Iowa. This is an example of
A) return outsourcing
B) inshoring
C) offshoring
D) outsourcing
E) backsourcing
Q3) __________ is the number-one reason driving outsourcing for many firms.
Q4) Identify several risks in outsourcing.
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Chapter 15: Inventory Management
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Sample Questions
Q1) Inventory that separates various parts of the production process performs a __________ function.
Q2) A disadvantage of the fixed-period inventory system is that
A) it involves higher ordering costs than the fixed quantity inventory system
B) additional inventory records are required
C) the average inventory level is decreased
D) since there is no count of inventory during the review period, a stockout is possible E) orders usually are for larger quantities
Q3) In the simple EOQ model, if the carrying cost were to double, the EOQ would also double.
A)True
B)False
Q4) The main trait of a single-period model is that
A) inventory has limited value after a certain period of time
B) it has the largest EOQ sizes
C) the order quantity should usually equal the expected value of demand
D) supply is limited
E) all of the above
Q5) How sensitive is the EOQ to variations in demand or costs?
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Chapter 16: Aggregate Planning
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Sample Questions
Q1) The __________ strategy sets production equal to forecasted demand.
Q2) Which of these is <b>not</b> a characteristic that makes yield management attractive to organizations that have perishable inventory?
A) demand can be segmented
B) service can be sold in advance of consumption
C) capacity is easily changed
D) variable costs are low and fixed costs are high
E) demand fluctuates
Q3) What conditions make yield management of interest?
Q4) A firm uses the pure chase strategy of aggregate planning. It produced 1000 units in the last period. Demand in the next period is estimated at 800, and demand over the next six periods (its aggregate planning horizon) is estimated to average 900 units. In following the chase strategy, the firm will
A) add 100 units to inventory in the next period
B) add 200 units to inventory in the next period
C) hire workers to match the 100 unit difference
D) lay off workers to match the 200 unit difference
E) implement a lower price point to increase demand
Q5) What is the typical planning horizon for aggregate planning?
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Chapter 17: Material Requirements Planning MRP and ERP
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Q1) The extension of MRP which extends to resources such as labor hours and machine hours, as well as to order entry, purchasing, and direct interface with customers and suppliers is
A) MRP II
B) enterprise resource planning
C) the master production schedule
D) closed-loop MRP
E) not yet technically possible
Q2) Closed-loop MRP systems allow production planners to move work between time periods to smooth the load or to at least bring it within capacity.
A)True
B)False
Q3) Planning bills of material are bills of material for "kits" of inexpensive items such as washers, nuts, and bolts.
A)True
B)False
Q4) MRP is an excellent tool for scheduling products with variable lead times.
A)True
B)False
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Chapter 18: Short-Term Scheduling
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Sample Questions
Q1) What are some limitations of rule-based scheduling systems? What alternatives are there to rules-based scheduling systems?
Q2) Delta uses mathematical short-term scheduling techniques and a high-tech nerve center to manage the rapid rescheduling necessary to cope with weather delays and similar disruptions.
A)True
B)False
Q3) The critical ratio sequencing rule prioritizes the jobs based on the importance or value of the customers who have placed the orders.
A)True
B)False
Q4) Which critical ratio value implies that a job is already late?
A) more than 100
B) 1
C) less than 1
D) 10
E) none of the above
Q5) Because facility capacity, set-up time, and run time are usually known, scheduling is often straightforward in __________ facilities.
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Chapter 19: Just-In-Time and Lean Options
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Sample Questions
Q1) A scheduler may find that freezing the portion of the schedule closest to the due dates allows the production system to function and the schedule to be met.
A)True
B)False
Q2) Which of the following is<b> not</b> characteristic of a TPS employee?
A) knowledgeable
B) strict job classifications
C) know more about their job than anyone else
D) empowered
E) All of the above characterize a TPS employee.
Q3) A certain product has been effectively managed in the past, according to its managers. The previous technique used the economic production quantity model, and resulted in an optimum lot size of 100. For this product, setup time is directly proportional to setup cost, and setup time is currently 40 minutes per batch. How much must setup time decline in order for the lot size to fall to 50 units?
25 units?
10 units?
Q4) What are the goals of JIT partnerships?
Q5) What is a kanban?
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Chapter 20: Maintenance and Reliability
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Sample Questions
Q1) What is FR(N)?
How is it calculated?
How are FR(N) and MTBF related?
Q2) Ten high-technology batteries are tested for 200 hours each. One failed at 50 hours; all others completed the test. FR(%) is __________ and FR(N) is __________.
A) 10%; 1/1850
B) 10%; 1/2000
C) 25%; 1850 hours
D) 90%; 1/2000
E) Indeterminate; no standard deviation is given.
Q3) Ten high-technology batteries are tested for 200 hours each. One failed at 20 hours; another failed at 140 hours; all others completed the test. FR(%) is __________ and MTBF is __________.
A) 20%; 880 hours
B) 10%; 1980 hours
C) 20%; 1760 hours
D) cannot calculate from information provided E) 80%; 920 hours
Q4) How do expert systems improve maintenance systems?
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Chapter 21: Decision-Making Tools
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Q1) __________ is the difference between the payoff under perfect information and the payoff under risk.
Q2) The likelihood that a decision maker will ever receive a payoff precisely equal to the EMV when making any one decision is
A) low (near 0%)
B) high (near 100%)
C) dependent upon the number of alternatives
D) dependent upon the number of states of nature
E) none of the above
Q3) Suppose a manufacturing plant is considering three options for expansion. The first one is to expand into a new plant (large) , the second to add on third-shift to the daily schedule (medium) , and the third to do nothing (small) . There are three possibilities for demand. These are high, medium, and low with each having an equal likelihood of occurring. Suppose that the profits for the expansion plans are as follows (respective to high, medium, low demand). The large expansion profits are $100000, $10000, -$10000, the medium expansion choice $40000, $40000, $5000 and the small expansion choice $15000, $15000, $15000. Calculate the EMV of each choice. Which of the expansion plans should the manager choose?
Q4) In the context of decision-making, define alternative.
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Chapter 22: Linear Programming
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Q1) A linear programming problem contains a restriction that reads "the quantity of X must be at least three times as large as the quantity of Y." Which of the following inequalities is the proper formulation of this constraint?
A) 3X Y
B) X 3Y
C) X + Y 3
D) X - 3Y 0
E) 3X Y
Q2) An iso-profit line
A) can be used to help solve a profit maximizing linear programming problem
B) is parallel to all other iso-profit lines in the same problem
C) is a line with the same profit at all points
D) all of the above
E) none of the above
Q3) What are corner points?
What is their relevance to solving linear programming problems?
Q4) Explain how to use the iso-profit line in a graphical maximization problem.
Q5) __________ are restrictions that limit the degree to which a manager can pursue an objective.
Page 24
Q6) What is the usefulness of a shadow price (or dual value)?
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Chapter 23: Transportation Models
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Sample Questions
Q1) Source A has capacity of 15, Source B has capacity of 30, Destination 1 has demand of 5 and Destination 2 has demand of 20. Fill in the following table with the correct initial solution for a Northwest-corner method approach.
\[\begin{array} { | l | c | c | c | }
\hline & \text { Destination 1 } & \text { Destination 2 } & \text { Dummy Destination } \\
\hline \text { Source A } & 5 & 10 & \\
\hline \text { Source B } & & 10 & 20 \\
\hline \end{array}\]
Q2) The transportation model is a special class of linear programming models. A)True B)False
Q3) When using the stepping-stone method, the improvement index for an unused cell equals the shipping cost associated with that cell. A)True
B)False
Q4) The elements of a transportation problem that supply goods are referred to as
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Chapter 24: Waiting-Line Models
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Q1) A waiting line meeting the M/M/1 assumptions has an arrival rate of 10 per hour and a service rate of 12 per hour. What is the average time a unit spends in the system and the average time a unit spends waiting?
Q2) Which of the following is a measure of queue performance?
A) utilization factor
B) average queue length
C) probability of a specific number of customers in the system
D) average waiting time in the line
E) all of the above
Q3) Genco, Inc., a small manufacturer of diesel-generator sets has four shearing machines. Because of the age of these machines, they need minor repairs after 30 hours of use. Analysis of previous breakdowns indicates that breakdowns follow a Poisson distribution. The facility employs one repairman specifically to repair these machines. Average repair time is two hours following an exponential distribution.
a. What is the service factor for this system?
b. What is the average number of these machines in service?
c. What is the impact of adding a second repairman?
Q4) Why does it matter whether a population of arrivals is limited or unlimited?
Compose your answer in a well-organized, convincing paragraph.
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Chapter 25: Learning Curves
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Q1) The first unit of a product took 832 hours to build, and the learning curve is 75%. How long will it take to make the 30th unit? (Use at least three decimals in the exponent if you use the logarithmic approach.)
A) less than 200 hours
B) from 200 to 225 hours
C) from 225 to 250 hours
D) from 2501 to 275 hours
E) 275 or more hours
Q2) Learning curves can be applied to a variety of purposes internal to a firm, including A) labor forecasting
B) scheduling
C) establishing costs
D) establishing budgets
E) all of these
Q3) In the logarithmic approach formula to compute the time for the Nth unit, TN = T N , the exponent b is the learning curve rate L, expressed as a decimal.
A)True
B)False
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Chapter 26: Simulation
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Q1) From a portion of a probability distribution, you read that P(demand = 0) is 0.05 and P(demand = 1) is 0.10. The <b>cumulative </b>probability for demand 1 would be
A) 0.05
B) 0.075
C) 0.10
D) 0.15
E) cannot be determined
Q2) Which of the following is true regarding simulation?
A) Small problems can be done by hand.
B) Most simulations are computerized.
C) Real-world complications can be included in simulation models.
D) Simulation is most suitable where standard analytical models are too complex.
E) All of the above are true.
Q3) Define simulation.
Q4) A reason for the use of simulation in queuing is that the four standard queuing models do not allow for unusual arrival and service distributions.
A)True
B)False
Q5) What is the Monte Carlo method?
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