Production and Operations Management Marketing Is an

Production and Operations Management Marketing is an important function and acts a key contributor in success of any product. A good marketing strategy can make a not so good product become a blockbuster while a bad marketing strategy can put an excellent product down the drain. Marketing is an amalgamation of various elements that lead with different aspects of getting the product to the consumer. One of the major elements of this marketing mix is the product placement.

Placement involves determining where the product will be sold and how will be it be transported to that selling point in a manner that efficiently reaches the potential consumer and is profitable to the company. Over a period of time, various channels of distribution and transportation methods have evolved depending upon the nature of product and suiting the other external requirements of the region where the product is supposed to be transported. Not all distribution methods and transportation methods suit every product.

Each product has its own requirements and similarly each geographical region also has its own requirements. Crude oil, also referred to as 'black gold' is one product that is the key demand of any and every country around the world. Some countries, who own the reserves, produce it while a large remainder of the world imports the oil from the oil producing countries.

More than fifty percent of the major oil reserves are located in the Middle East, while the rest of the minority of reserves is located in other parts of the world. Besides Middle East, major exploited oil reserves are located in Canada and Mexico. The recent oil spill in the gulf of Mexico from a deep sea oil well owned by the British Petroleum has raised serious environmental concerns as far as distribution and transportation of oil is concerned.

The recent oil spill is seen as one of the world manmade disasters in the history and its impact on the environment are speculated to last for centuries. Moreover, the infamous oil spill not only damaged the natural environment of the affected region, but also incurred huge losses to the British Petroleum.

The damages that were imposed on British Petroleum are one of the highest corporate fines ever paid and as a consequence British Petroleum had to close down its operation and sell its assists in many parts of the world. This paper evaluates the oil distribution and transportation system of Marathon, the largest oil product company in the United States of America. Transportation Time As mentioned earlier, Marathon is a pioneer oil company of the United States of America.

It has the largest oil distribution system and oil transportation fleet and owns fifty percent of the oil pipeline in the United States of America. United States of America is one of the largest consumers of oil in the world and most of its oil demand is met by imported oil as the local oil reserves do not have capacity to meet the country's huge demand. A large part of U.S. oil demand is met by imports from Middle East (Shojai, 1995.).

However, after the North American Free Trade Agreement came in force, United States of America shifted its dependence of oil import from Middle East to Mexico and Canada. This enabled United States of America to reduce on its shipping, handling and other transportation costs as the two trade allies were geographical neighbors and oil transport became much cheaper.

Having said that, the increasingly growing demand of oil did not allow USA to become completely dependent on one single source and thus, it still continues to import oil from the Middle East. Much of the imported oil is transported into the United States territory using the Very Large Crude Carriers (VLCC), which cannot be handled by the local port facilities.

As a result, oil is discharged from these super tankers into the Louisiana Offshore Oil Port (LOOP) pipeline, 50.7% of which is owned by the Marathon Petroleum Company (Marathon Petroleum Company, 2009). From LOOP, the oil is further transported to oil refinery, from where it is further transported to oil retailers and stations through road tankers and railcars. The whole procedure can take a time period of 30 to 50 days depending upon the mode of transport used. In general, a longer transportation time would mean an increase in distribution cost.

If we study the whole production process, from the time oil gets into LOOP to the time it gets to the final consumer, we notice that most of the production time is consumed in offloading the product from the transport container into the storage or from the storage into the transport container. This means that Marathon can reduce a significant amount of time if it reduces it handling time. This can be done by using transport and storage containers that takes lesser offloading or discharge time.

For example, a road tanker takes only 15 minutes to load while a rail car may take two to four hour to load. While the capacity of a road tanker is twice that of a road tanker, within two hours time four road tankers can be loaded, which makes it twice the amount that is loaded in rail car (Scazzeiri, 1993). This will reduce the time by a considerable amount.

Relationship between Gasoline and Crude Oil Prices Since Gasoline is a final product made out of crude oil, the international prices of crude oil have a significant impact on the retail prices of Gasoline. While Gasoline price include several other costs such as taxes, marketing and distribution costs, the price of crude oil is the price of raw material in this case and thus have an immense impact (Jorge and Caralino, 1997).

A rise in international crude oil price would mean that the price of purchasing raw material has increased and in turn, this would be reflected on the final price of Gasoline. In case crude oil prices shoot up by 10%, this will be replicated over the price of gasoline. If Marathon tries to keep retail prices at the same level, its profitability will be affected. In case, it replicates the impact and increases the retail price revenues might fall due to fall in demand.

This would mean it Marathon will have to take measures so as to keep the retail price stable without letting the impact replicate on its profit margins. In order to do so, Marathon can reduce on its other costs and wastages. Marathon can try to reduce on its storage and transportation costs by using containers that have higher storage capacity. This will enable Marathon to achieve economies of increased dimension where a small increase in the container's dimension can increase its volume by a significant amount.

Therefore, the 10% increase in the raw material, in this case crude oil prices, can be offset by reductions in other costs. Deep Water Drilling Moratorium Following the devastating oil spill in the Gulf of Mexico, President Obama imposed a six-month moratorium.