Chapter 3: Business Functions and Supply Chains

TRUE/FALSE

	1.	“Productivity tools” are software applications that help workers produce more in less time.

ANS:	T	PTS:	1	REF:	78

	2.	Serving customers better and faster, as well as learning more about their experiences and preferences, is facilitated by decision support systems (DSSs).

ANS:	F	PTS:	1	REF:	78

	3.	The purpose of marketing is to track every financial transaction within a company, from a few cents to multimillion dollar purchases, from salaries and benefits to the sale of every item.

ANS:	F	PTS:	1	REF:	80

	4.	Human Resources ISs are used extensively for managerial purposes, assisting in organizing quarterly and annual budgets for departments, divisions, and entire corporations.

ANS:	F	PTS:	1	REF:	81

	5.	A brokerage house can make a profit of several thousand dollars within two minutes of buying and selling several million dollars’ worth of foreign currency.

ANS:	T	PTS:	1	REF:	82

	6.	Material requirements planning (MRP) programs use long-range forecasts to put long-lead material on order.

ANS:	T	PTS:	1	REF:	86

	7.	Ideally, the ISs of manufacturing organizations and their suppliers would be linked in a way that makes them subsystems of one large system.

ANS:	T	PTS:	1	REF:	87

	8.	When the process of marketing products is complete, the next link in the supply chain is shipping.

ANS:	F	PTS:	1	REF:	88

	9.	The most important development in software to support SCM has been a technology called radio frequency identification (RFID).

ANS:	F	PTS:	1	REF:	90

	10.	Modern CRM systems can help capture the entire customer experience with an organization, from response to an online advertisement to automatic replenishment of products, to proactive service.

ANS:	T	PTS:	1	REF:	91

	11.	Through interviews with producers and manufacturers, market researchers collect information on what consumers like and dislike about products.

ANS:	F	PTS:	1	REF:	92

	12.	The business research firm Gartner estimates the average invoice-to-payment cycle at 11 days, while online invoice and payment shortens the period by at least six days.

ANS:	F	PTS:	1	REF:	95

	13.	Automating the personnel selection process significantly minimizes time and money spent on recruitment and does not even require that a current database be maintained.

ANS:	F	PTS:	1	REF:	96

	14.	Most companies insist on receiving paper applications and résumés.

ANS:	F	PTS:	1	REF:	97

	15.	With newer technology, such as RFID, you will be aware of who and when information is collected about you.

ANS:	F	PTS:	1	REF:	100

	16.	ERP applications are expensive.

ANS:	T	PTS:	1	REF:	105

MULTIPLE CHOICE

	1.	____ defines the degree to which a goal is achieved.
a.	Efficiency	c.	Enhancement	
b.	Productivity	d.	Effectiveness	

ANS:	D	PTS:	1	REF:	78

	2.	____ is determined by the relationship between resources expended and the benefits gained in achieving a goal.
a.	Efficiency	c.	Productivity	
b.	Effectiveness	d.	Enhancement	

ANS:	A	PTS:	1	REF:	78

	3.	____ specifically refers to the efficiency of human resources.
a.	Efficiency	c.	Enhancement	
b.	Productivity	d.	Effectiveness	

ANS:	B	PTS:	1	REF:	78

	4.	CRM and supply chain management (SCM) systems combined are often referred to as ____.
a.	decision support systems (DSSs)	
b.	enterprise resource planning (ERP) systems	
c.	business intelligence (BI) systems	
d.	geographic information systems (GISs)	

ANS:	B	PTS:	1	REF:	78

	5.	The purpose of ____ is to track every financial transaction within a company, from a few cents to multimillion dollar purchases, from salaries and benefits to the sale of every item.
a.	human resources	c.	accounting	
b.	marketing	d.	project management	

ANS:	C	PTS:	1	REF:	80

	6.	Typically, ____ ISs receive records of routine business transactions—such as the purchase of raw materials or services, or the sale of manufactured goods—from transaction processing systems (TPSs).
a.	sales	c.	marketing	
b.	human resources	d.	accounting	

ANS:	D	PTS:	1	REF:	80

	7.	____, used to accumulate data about costs involved in producing specific products, make excellent use of IT to compile pricing data.
a.	ERP systems	c.	Human resources systems	
b.	Cost-accounting systems	d.	SCM systems	

ANS:	B	PTS:	1	REF:	81

	8.	The goal of financial managers, including ____ and treasurers, is to manage an organization’s money as efficiently as possible.
a.	controllers	c.	project managers	
b.	auditors	d.	supervisors	

ANS:	A	PTS:	1	REF:	81

	9.	Systems that deal specifically with cash are often called ____.
a.	decision support systems (DSSs)	c.	cash management systems (CMSs)	
b.	business intelligence (BI) systems	d.	expert systems (ESs)	

ANS:	C	PTS:	1	REF:	82

	10.	The time between generating an idea for a product and completing a prototype that can be mass-manufactured is known as engineering lead time, or ____.
a.	time to sell	c.	time to produce	
b.	time to distribute	d.	time to market	

ANS:	D	PTS:	1	REF:	83

	11.	The process of a group of colleagues meeting and working collaboratively to generate creative solutions and new ideas is known as ____.
a.	teleconferencing	c.	group-think	
b.	brainstorming	d.	think-tank	

ANS:	B	PTS:	1	REF:	83

	12.	In its fundamental form, a ____ consists of three phases: procurement of raw materials, processing the materials into intermediate and finished goods, and delivery of the goods to customers.
a.	supply chain	c.	supply link	
b.	sales chain	d.	sales link	

ANS:	A	PTS:	1	REF:	85

	13.	While ____ participate in physical activities such as cutting and welding, other information systems help to plan and monitor manufacturing.
a.	CAD systems	c.	CAM systems	
b.	ERP systems	d.	CRM systems	

ANS:	C	PTS:	1	REF:	85

	14.	MRP programs use ____ to put long-lead material on order.
a.	short-range forecasts	c.	past consumption	
b.	long-range demands	d.	long-range forecasts	

ANS:	D	PTS:	1	REF:	86

	15.	The ____ is an important input to MRP applications which includes a list of all raw materials and subcomponent demands.
a.	bill of raw materials (BORM)	c.	economic order quantity (EOQ)	
b.	bill of materials (BOM)	d.	convenient order quantity (COQ)	

ANS:	B	PTS:	1	REF:	86

	16.	Some ____ applications are tied to a purchasing IS, to produce purchase orders automatically when the quantity on hand reaches a reorder level.
a.	CAM	c.	MRP	
b.	MRP II	d.	MPS	

ANS:	C	PTS:	1	REF:	86

	17.	Successful MRP II systems have made a significant contribution to ____ manufacturing, where suppliers ship parts directly to assembly lines, saving the cost of warehousing raw materials, parts, and subassemblies.
a.	quality	c.	just-in-time (JIT)	
b.	ahead-of-time (AOT)	d.	productivity	

ANS:	C	PTS:	1	REF:	87

	18.	____ tags contain circuitry that allows recording of information about a product.
a.	DI	c.	RFID	
b.	IRID	d.	WID	

ANS:	C	PTS:	1	REF:	90

	19.	A(n) ____ tag can include the date of manufacturing, the plant in which the product was made, lot number, expiration date, destination, and many other details that help track its movement and sale.
a.	UPC	c.	EPC	
b.	RFID	d.	ID	

ANS:	B	PTS:	1	REF:	90

	20.	Mostly, customer relationship management (CRM) systems support three areas: ____, sales, and customer service.
a.	marketing	c.	manufacturing	
b.	human resources	d.	processing	

ANS:	A	PTS:	1	REF:	91

	21.	Casinos embed ____ in betting chips and antennas in betting tables to receive signals from the chips.
a.	UPC tags	c.	labels	
b.	bars	d.	RFID tags	

ANS:	D	PTS:	1	REF:	92

	22.	____ help to find the populations and regions that are most likely to purchase a new product or service.
a.	Process research systems	c.	Process systems	
b.	Market research systems	d.	Expert systems (ESs)	

ANS:	B	PTS:	1	REF:	92

	23.	Computer telephony integration (CTI) is a technique enabling a computer to use the digital signal coming through a telephone line as ____ in a computer system.
a.	output	c.	identification	
b.	input	d.	feedback	

ANS:	B	PTS:	1	REF:	94

	24.	The FAQ pages of many companies have been replaced with options for ____; instead of looking up a question that is similar to what you would ask, you can simply type in your question.
a.	questionnaires	c.	forms	
b.	open-ended questions	d.	short questions	

ANS:	B	PTS:	1	REF:	95

COMPLETION

	1.	____________________ improves when fewer workers are required to produce the same amount of output.

ANS:	Productivity

PTS:	1	REF:	78

	2.	With a(n) ____________________ system, totals of accounts receivable and accounts payable can be automatically transferred to a balance sheet.

ANS:	accounting

PTS:	1	REF:	80

	3.	One common use for a CMS is to execute cash transactions in which financial institutions transfer huge amounts of money using ____________________.

ANS:	
EFT
electronic funds transfer
electronic funds transfer (EFT)

PTS:	1	REF:	82

	4.	____________________ refers to creating one-of-a-kind products to test design in three dimensions.

ANS:	Rapid prototyping

PTS:	1	REF:	83

	5.	In retail, the manufacturing phase does not exist, so the term “____________________” refers only to purchasing of finished goods and the delivery to customers of those goods.

ANS:	supply chain

PTS:	1	REF:	85

	6.	The ____________________ of a specific raw material is the optimal quantity that allows a business to minimize overstocking and save cost, without risking understocking and missing production deadlines.

ANS:	
EOQ
economic order quantity
economic order quantity (EOQ)

PTS:	1	REF:	86

	7.	The variables that affect the cost and speed of ____________________ are numerous: length of routes, sequence of loading and unloading, type of shipped materials, fuel prices, road tolls, terrain and restricted roads, and many more.

ANS:	shipping

PTS:	1	REF:	88

	8.	When a pattern of defects is discovered in a product, ____________________ helps pinpoint the plant at which it was produced and the particular lot from which it came.

ANS:	
RFID
radio frequency identification
radio frequency identification (RFID)

PTS:	1	REF:	91

	9.	____________________ systems are designed to support any and all relationships with customers.

ANS:	
CRM
Customer relationship management
Customer relationship management (CRM)

PTS:	1	REF:	91

	10.	____________________ (marketing over the telephone) makes extensive use of IT.

ANS:	Telemarketing

PTS:	1	REF:	93

	11.	Many salespeople carry laptop computers or ____________________ with all the information they need and that allow them to connect to their organizational information systems through the Internet.

ANS:	
PDAs
personal digital assistants
personal digital assistants (PDAs)

PTS:	1	REF:	95

	12.	____________________ (intraorganizational networks that support Web applications) help HR managers post position vacancy announcements for employees to peruse and consider from their own PCs.

ANS:	Intranets

PTS:	1	REF:	96

	13.	____________________ software emulates situations in which an employee must act and includes tests and modules to evaluate a trainee’s performance.

ANS:	Training

PTS:	1	REF:	98

	14.	To optimize employee benefits, some companies use special software, incorporating a(n) ____________________ (IS that emulates human expertise) that determines the optimal health and retirement plans for each employee based on factors such as marital status, age, occupation, and other data.

ANS:	
ES
expert system
expert system (ES)

PTS:	1	REF:	99

	15.	Several enterprise applications, such as ____________________ systems, also serve as SCM systems.

ANS:	
ERP
enterprise resource planning
enterprise resource planning (ERP)

PTS:	1	REF:	101

	16.	Companies can reduce their inventory by communicating to their suppliers through a shared ____________________ system the exact number of units of each item they need and the exact time they need them.

ANS:	
SCM
supply chain management 
supply chain management (SCM)

PTS:	1	REF:	102

ESSAY

	1.	What is the purpose of accounting?

ANS:	
The purpose of accounting is to track every financial transaction within a company—from a few cents expenditure to a multimillion dollar purchase, from salaries and benefits to the sale of every item. Without tracking the costs of labor, materials, and purchased services using a cost-accounting system, a company might discover too late that it sells products below what it costs to make them. Without a system of accounts receivable, managers might not know who owes the company how much money and when it is due. Without an accounts payable system, they cannot know how much money the company owes suppliers and when payments are due. Without a system that records and helps plan cash flow, managers cannot keep enough cash in the bank to make payments on schedule. At the year’s end, the company cannot present a picture of its financial situation—called a balance sheet—and a profit-and-loss report, unless it maintains a general ledger to record every transaction with a financial impact. Accounting systems are required by law and for proper management. General ledger, accounts receivable, accounts payable, and cash-flow books conveniently lend themselves to computerization and can easily generate balance sheets and profit-and-loss statements from records.

PTS:	1	REF:	80

	2.	What are the phases of a supply chain?

ANS:	
In its fundamental form, a supply chain consists of three phases: procurement of raw materials, processing the materials into intermediate and finished goods, and delivery of the goods to customers. Processing raw materials into goods is manufacturing. Supply chain management (SCM) consists of monitoring, controlling, and facilitating supply chains. Supply chain management (SCM) systems are information technologies that support SCM. SCM systems have been instrumental in reducing manufacturing costs, including the costs of managing resources and controlling inventory. In retail, the manufacturing phase does not exist, so the term “supply chain” refers only to the purchasing of finished goods and the delivery to customers of those goods. In the service industries the term “manufacturing” is practically meaningless because no raw materials are purchased and processed.

PTS:	1	REF:	85

	3.	Discuss the main characteristics of radio frequency identification (RFID).

ANS:	
The most important development in hardware to support SCM has been a technology called radio frequency identification (RFID). RFID tags contain circuitry that allows recording of information about a product. When attached to a product, it contains an electronic product code (EPC), which replaces the universal product code (UPC) with much more information. The tag can include the date of manufacturing, the plant in which the product was made, lot number, expiration date, destination, and many other details that help track its movement and sale. The information can be read and also revised by special RFID transceivers (transmitter-receiver devices). Items with rewritable tags can contain the maintenance history of products, which helps optimize maintenance of the items.

PTS:	1	REF:	90

	4.	What is privacy, in the context of information?

ANS:	
In the context of information, privacy is your right to control information about yourself. For example, you keep your privacy if you keep to yourself your college grades, medical history, or the name of the organization with which you interviewed for a position. Someone who receives such information without your permission is violating your privacy.

PTS:	1	REF:	100

	5.	What difficulties do organizations face for implementing an enterprise resource planning (ERP) system?

ANS:	
ERP packages are quite complex. Because they are not tailored to the needs of specific clients, they often require adjustment and fine-tuning for specific organizations. Therefore, their installation and testing involve experts who are usually employees of the software vendor or professionals who are certified for such work by the vendor. 

Even with adjustments—often called “tweaking”—potential adopters must remember that
the system was designed for an entire industry, not for the way an individual organization does
business. If the organization has a competitive advantage thanks to a unique set of business
processes, this advantage may diminish or disappear when the system is installed, because to a large degree the system dictates how business processes should be conducted. The system
requirements are quite rigid, and therefore customization of ERP systems is limited.

ERP applications are expensive; modules cost millions of dollars. Buyers usually must allocate
several more million dollars to pay for installation and modifications. Installation often takes
many months to complete, and budget and time overruns are common.

Implementation of ERP systems can fail because of formidable challenges: the gap between system capabilities and business needs, lack of expertise on the consultant’s part, and mismanagement of the implementation project. The business research firm Standish Group found that only 10 percent of ERP implementation projects are completed as planned, on time, and within budget. Fifty-five percent are completed late or over budget (which usually means loss of business and revenue), and the other 35 percent of such projects are canceled because of difficulties. At Hewlett-Packard, one of the world’s largest computer and IT equipment makers, a $400 million loss in the third quarter of 2004 was blamed on poorly managed migration to a new ERP system.

PTS:	1	REF:	105