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Inside the world's quietest room

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Breaking the habit: From oiloholics to e-totallers

What changes in driving habits and improved batteries might do to oil demand

It has been a bad couple of years for those hoping for the death of driving. In America, where cars are an important part of the national psyche, a decade ago people had suddenly started to drive less, which had not happened since the oil shocks of the 1970s. Academics started to talk excitedly about “peak driving”, offering explanations such as urbanisation, ageing baby-boomers, car-shy millennials, ride-sharing apps such as Uber and even the distraction of Facebook.

Yet the causes may have been more prosaic: a combination of higher petrol prices and lower incomes in the wake of the 2008-09 financial crisis. Since the drop in oil prices in 2014, and a recovery in employment, the number of vehicle-miles travelled has rebounded, and sales of trucks and SUVs, which are less fuel-efficient than cars, have hit record highs.

This sensitivity to prices and incomes is important for global oil demand. More than half the world’s oil is used for transport, and of that, 46% goes into passenger cars. But the response to lower prices has been partially offset by dramatic improvements in fuel efficiency in America and elsewhere, thanks to standards like America’s Corporate Average Fuel Economy (CAFE), the EU’s rules on CO₂ emissions and those in place in China since 2012.

The IEA says that such measures cut oil consumption in 2015 by a whopping 2.3m b/d. This is particularly impressive because interest in fuel efficiency usually wanes when prices are low. If best practice were applied to all the world’s vehicles, the savings would be 4.3m b/d, roughly equivalent to the crude output of Canada. This helps explain why some forecasters think demand for petrol may peak within the next 10-15 years even if the world’s vehicle fleet keeps growing.

Occo Roelofsen of McKinsey, a consultancy, goes further. He reckons that thanks to the decline in the use of oil in light vehicles, total consumption of liquid fuels will begin to fall within a decade, and that in the next few decades driving will be shaken up by electric vehicles (EVs), self-driving cars and car-sharing. […]

(Dated Nov 24th, 2016. From https://www.economist.com/news/specialreport/21710635-what-changes-driving-habits-and-improved-batteries-might-dooil-demand-coming. Accessed July 18th, 2017)

The Operations Function

Although somewhat ‘invisible’ to the marketplace the operations function in a typical company accounts for well over half the employment and well over half the physical assets. That, in itself, makes the operations function important. In a company’s organization chart, operations often enjoys parity with the other major business functions: marketing, sales, product engineering, finance control (accounting), and human resources (personnel, labor relations). Sometimes, the operations function is organized as a single entity which stretches out across the entire company, but more often it is embedded in the district, typically product-defined divisions into which most major companies are organized.

In many service businesses, the operations function is typically more visible. Service businesses are often organized into many branches, often with geographic responsibilities – field offices, retail outlets. In such tiers of the organization, operations are paramount.

The operations function itself is, often divided 

.................two major groupings .................tasks:

line management and support services. Line management generally refers.................those managers directly concerned................the manufacture of the product or the delivery of the service. They are the ones who are typically close enough to the product or service that they can ‘touch’ it. Line management supervises the hourly, blue-collar workforce. In a manufacturing company, line management frequently extends to the stockroom (where material, parts, and semi-finished products – termed ‘work-in-process inventory – are stored), materials handling, the tool room, maintenance, the warehouse (where finished goods are stored), and distribution, as well as the so-called ‘factory floor’. In a service operation, what is considered line management can broaden considerably. Often, order-taking roles, in addition to orderfilling roles, are supervised by service line managers.

Support services for line management’s operations can be numerous. Within a manufacturing environment, support services carry titles such as quality control, production planning and scheduling, purchasing, inventory control, production control (which determines the status of jobs in the factory and what to do about jobs that may have fallen behind schedule), industrial engineering (which is work methods oriented), manufacturing engineering (which is hardware-oriented), on-going product engineering, and field service. In a service environment, some of the same roles are played but sometimes under vastly different names.

Thus, the managers for whom operational issues are central can hold a variety of titles. In manufacturing, the titles can range from vice-president – manufacturing, works manager, plant manager, and similar titles at the top of the hierarchy, through such titles as manufacturing or production manager, general superintendent, department manager, materials manager, director of quality control, and down to general foreman or foreman. Within service businesses, ‘operations manager’ is sometimes used but frequently the title is more general – business manager, branch manager, retail manager, and so on.

SCHMENNER, Roger W. Production/Operations Management. 5th Edition. Prentice-Hall, 1993.