Production and Operations Management - Essay Example

1. Analyze Marathon’s product process and determine which phase is open to the greatest number of efficiency improvements. Explain your rationale. Ifwe list down the top crude oil refineries of the United States of America than Marathon will be amongst the top leaders. With various operations falling in its portfolio which majorly include excavation of energy resources like oil, gas, sand etc. and the entire process from collecting the resource in raw form to its refining, transportation and then marketing and selling the final product. 2. Analyze the relationship between the retail price of gasoline and the world demand for crude oil.

To understand the relationship between the price of gasoline and the demand for crude oil , we’ll first need to understand the dynamics of both gasoline and crude oil individually. Like many commodities being traded in the global market like gold, silver, rice, wheat etc. crude oil is also traded. The main reason for it being traded in the global market is that it’s one of those commodities which is unevenly distributed on the surface of earth. It can found in much abundance in one place which cease to exist at some other country.

This instability in the geographic distribution of crude oil makes it quite an important resource to be present in any country. The countries with its abundant deposits are on the top of the food chain economically and the countries with lesser deposits of it are quite weak economically. Hence proving the significance of crude oil for economies. Now crude oil is not only used for production of Gasoline but many other petroleum products are extracted from it. From this we can extract that crude oil has more demand as a commodity and is not only required for the production of gasoline.

Gasoline is a refined form of crude oil. Crude oil is extracted or purchased in raw form and goes through various refining processes to produce gasoline. Gasoline has become as the basic commodity which has been in use for decades now as the primary fuel for powering transportation. The transportation requirements have been increasing each year as the population of the world increases by a significant percentage each year. Hence increasing the amount of fuel being consumed each year and the demand for gasoline.

Now gasoline and crude oil have developed a relationship in which the demand for both are increasing but Gasoline is dependent on crude oil for its production hence making it the dependent product. The global demand for both gasoline and crude oil is on the rise and with no new large deposits being excavated the supply is not increasing much and the demand is growing making the prices for both oil and gasoline head upward. The gasoline we purchase majorly includes the cost of Crude oil , the refining , marketing and distribution and the taxes.

So from this we can infer that there is a inversely relationship between the supply of crude oil and the price of gasoline. Also in the years we have seen where the oil prices have dropped but gasoline prices have risen which is due to the fact that there are disruptions in the supply of oil due to unrest in the middle east. (Fuel, 2011) We also can observe this for a fact that the prices of gasoline rise accordingly with the rise of crude oil price but they don’t fall at the same rate when price of crude oil falls.

The matter behind this fact is that when prices are high , the retailer have to increase it so that they cover up for their profit margins but what makes the retailers bring price down when the price for crude oil falls is competition. In competition the retailers bring down a few cents to draw in more customers and so on the process continues until they reach a point where they reach their original profit margins or the price of crude oil again increases. Also the demand imbalance of gasoline across various seasons also has an effect on retail pricing of gasoline.

(US Energy Information Administration, 2003) 3. Explain what Marathon could do to keep the price at the pump the same without losing profits if global crude production decreased by 10%. In such a situation strategic alliances should be formed on the basis of which Marathon can make bulk purchases and at cheaper rates. If such step is not taken then Marathon will not be able to maintain a stable profit margin. By doing this Marathon will be able to purchase inventory to stock up at cheaper costs and also at the same time have enough fuel supply which would be enough to carry out operations even if there is a supply disruption of crude oil.

Marathon can employee the use of sales trend forecasting strategies through which they can track the historic track of their sales made at various sites across the nation and keep milestone in number of sales in gallons which a pump will have to achieve in order to stay on the same track of profit margins. To increase sales various offers should be introduced to attract more crowds. Marathon should make smart choices and search for cheaper yet effective alternatives for saving money. Lavish offices and office sites should not be the prime concern for the company but instead they should select something that fulfils their need which maintains their brand image and saves cost.

Employees should be hired on pay-scale and the employees who are overpaid should be given a regular pay which satisfies their needs rather than which provides them luxury. The company should identify processes where they could cut of time to reduce costs. Lay off employees performing redundant jobs. The target will be reduce costs in a way which makes marathon earn profit on the same scale while the operations of the company are not effected. 4. In June 2010, President Obama imposed a six-month deep-water drilling moratorium.

Determine the impact of another moratorium on deep-water drilling for retail gas prices in the U.S. should the government determine this necessary. The moratorium on deep water drilling was imposed after the BP oil leak/spill incident. On analysis it can be seen that the moratorium was imposed to avoid any such further incidents in future. Now due to this moratorium the companies cannot drill for oil anywhere domestically which would create scarcity and shortage of oil needed for usage in the US hence causing an increase in the retail price of gas.

Before imposing another moratorium the US government should conduct a survey of the consequences of it. Also industry wide standards should be established regarding the security measures that shall be deemed necessary for companies who operate in deep water to drill oil. After all these checks if the Government still thinks it’s necessary to impose a moratorium then it should be imposed against those companies who violate the standards established and don’t have an emergency plan in case any mishap occurs.

All these factors have to be looked up because of another major reason i.e. the employment which these oil refineries provide. The moratorium is imposed in the gulf of mexico and the companies are not allowed to Drill in these waters forcing these companies to move elsewhere in the world and start their operations over there and employing domestic employees hence increasing the unemployment rate in USA. About 12000 to 19000 US employees working at these sites have been expected to lose their jobs as the result of this moratorium.

The loss in revenues earned through taxes is estimated around $500 million. (LaRocco, 2011) Sources : Fuel, P. o. (n.d.). What Affects Fuel Pricing. Retrieved from The Price of Fuel: http://www.thepriceoffuel.com/whataffectsfuelpricing/#content US Energy Information Administration. (n.d.). Retrieved from A PRIMER ON GASOLINE PRICES : http://www.pueblo.gsa.gov/cic_text/cars/primer-gas/primergas.htm LaRocco, L. A. (2011, March). Joe Mason: The Gulf Drilling Moratorium Is Costing US a Billion Dollars a Year.

Retrieved from CNBC: http://www.cnbc.com/id/42248042/Joe_Mason_The_Gulf_Drilling_Moratorium_Is_Costing_US_a_Billion_Dollars_a_Year