Production and Operations Management

Marathon Oil's product process appears to be a well functioning and smooth operating system. Their revenues and incomes, noted in the billions of dollars, represents the hard work of the management and its contributions to the company and is ultimately demonstrated in this pipeline system. Marathon has six phases of transforming crude oil into a deliverable product that takes approximately 5 weeks to accomplish. The six phases include: Crude oil, Crude oil Pipeline, Refining, Production Pipelines, Terminals, and the final stage Stations. During these six separate events the true efficiency of the system is tested.

It is worthwhile to analyze and dissect each of these phases in order to test for weaknesses and investigate ways to improve efficiency that will contribute to the profits of this organization. Each one of these phases has, in my opinion, certain strengths and weaknesses. Some phases seem to have more moving parts than others while complex human and technological systems dominate different sub-phases of each parent phase as well. It is my opinion that the final phase of delivering oil, the Stations phase, provides the greatest number of efficiency improvements. The unique opportunity to sell and provide the actual product to the consumer, it is the end result of any business transaction, lies within this phase and provides the best learning experience to improve upon supply-chain economics.

The balance between material and human interaction is most important in any system in my opinion. The five previous phases of Marathon's pipeline procedure leading up to the Station phase are dominated more by technology and mechanical operations. As the oil progresses eventually to urban and suburban areas technology falls more to the wayside and the ability to rely on human interaction increases the efficiency of the operation. When there are more human, and therefore error-prone, variables within a system, efficiency will suffer. Eliminating human interaction in dealing with these types of problems will serve Marathon Oil best in my opinion.

Question 2

The relationship between the retail price of gasoline and the world demand for crude oil may be interpreted in many different ways. It is obvious however that supply and demand economics do not sufficiently explain this relationship in a way for many people to understand and often causes confusion. Understanding first that the price of oil is based on the United States, or American dollar's strength amongst other global currencies sheds new light upon this problem for those having a hard time to understand why Americans are paying more for gas during this current time period. Since oil is a global product and is harvested around the world, a unifying currency is needed to help expedite the bartering and trading processes. The United States dollar is mostly chosen as this currency for those wishing to participate within the global market for oil causing this industry to rely upon its strength and to give it definition.

This relationship is explicitly found in the American dollar's standing today in currency markets contrasted with domestic gasoline prices of today. Additionally, as a good corporation should, profits are protected and promoted as primary objectives, making the price of gasoline artificially higher than its true worth on any global market. Creating a reliance on a certain currency seems to be more important than any particular product being traded and ultimately will reflect any price fluctuations in any market.

The demand for crude oil has significantly increased as well causing more pressure to a paralyzed system and possibly made to seem as a scapegoat for the entire problem. While it is impossible to ignore that technology has expanded over the globe and therefore energy and fossil fuels would increase, it appears that stockpiling the oil and market manipulation are more to blame than this current upswing in demand. Prohibiting competition from entering the market has served the oil industry well in past generations and this trend will most likely be followed if the market reacts in this seemingly paradoxical manner.

Question 3

In order to protect its profits during a production decrease of 10%, Marathon Oil should investigate and explore new opportunities to sustaining competitive advantage within this global industry. Production decreases are often hard to predict due to the varying conditions of the surfacing of oil. Besides the complexities in political and social organizations, oil tends to pop up all around the globe and disappear simultaneously in other sections. New oil discoveries around the North Pole and in different other areas in South America tend to shake and unnerve traditional oil supplies and their accompanying systems as seen in the Middle East and in America.

If oil production slips and Marathon oil falls in jeopardy of losing a competitive edge, I would recommend becoming more flexible in its approach. Eliminating human error, and human labor when possible seems to lessen the risk and responsibility of providing back into the community. The cost of human resources is large and dominating to companies wishing to exploit profits to their best abilities. Mechanically or robotically automating all systems within Marathon Oil would serve to protect against such unpredictable behavior that is evident in running a large corporation. While some tasks will never be able to be conducted other than by humans, it is important to continually look for new ways to efficiently reduce unpredictable behavior and risk within any system or way of thinking.

Question 4

Almost one year ago in June, President Obama imposed a six-month deep water drilling moratorium around his responsible territories. The impact of deep water drilling and it's relationship to gas prices is currently being understood in the present. Gas prices today are extremely high and threatened to exceed previous records with inflation added examination of the numbers. Is this a cause of or a result of where we attain our oil? America does in fact receive most of its oil from domestic shores and land. Our dependence on foreign oil is relatively small compared to Europe and other parts of the world. Europe tends to pay more for its oil and gasoline as well signifying a relationship to the advantages of not having to import large amounts of oil. Therefore, putting a moratorium on accumulating a resource in the cheapest and most efficient manner will definitely have a negative impact on the market at least from a consumer of oil's point-of-view.