Chapter 14, Problem 1.1ASC

Summary Introduction

Case summary:

Company C is the largest oil company involved in every stage of oil from exploration to sales.  It source crude oil from the United States, United Kingdom, Saudi Arabia, Nigeria, Mexico, Russia, and Canada. Company C created a production planning software called Petro. It is a massive linear programming model that is used at all levels model of sales and operation planning. It sets apart Company C is how the company uses the software. Analysts sit next to traders in each of Company C’s commodity trading locations and, through real-time connections. Petro data is constantly being updated with lab analysis of crude from different locales, changes in refinery process capabilities, changes in government or industry specifications, economic ups and downs, seasonal demand patterns, and price structures in the industry.

To determine: Outside factors that affect Company C’s allocation in its production

Explanation of Solution

Outside factors that affect productivity are:

Government Policies: Since Company C is a multinational company that operates in different countries have to make structural changes in productivity according to the country’s regulations, laws to render the service in that country.

Economy: The economy of the nation decides by the productivity of the country. The efficiency of the productivity calculates the inputs (labors and capital) and output. Sometimes inflation and deflation in the country also decide productivity.

Resources: Raw materials are the main input source in production it decides the quality of the final output, manpower is the most important source in productivity proper skills, education and training to them will result in a high productivity, the drastic change in investment from the men to machines increases the productivity at high rate, and the land is the fundamental components of production.