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Resource allocation is the process of determining the best way to use available assets or resources in the completion of a given project. Companies attempt to allocate resources in a manner that helps to minimize costs while maximizing profits, typically by using strategic planning methods to structure the operation, establish operational guidelines, and implement policies and procedures that move the business toward the achievement of its goals. The actual process will vary, depending on the type of project undertaken and the collection of tangible and intangible assets on hand.
As it relates to project management in general, resource allocation involves the scheduling and use of materials, equipment, and labor in order to achieve the identified goal. This means that the allocation process will require determining how to arrange the plant floor to its best advantage, so that raw materials can move through the manufacturing process with the greatest degree of efficiency. At the same time, designing tasks so that employees can achieve the highest levels of production is also important. With the proper allocation and use of resources, it is possible to limit the waste of raw materials, generate high production rates per hour, and, in general, allow a company to produce more finished goods during a typical production day.
While the focus of this process is often on assigning or allocating tangible resources to different tasks necessary to the success of the project, this type of management strategy also takes into consideration intangible assets that may be present. For example, a new business that is attempting to make the best use of available resources may note that a particular employee has inherent talents that would benefit the company over the long term. Here, the company may choose to assist that employee in developing his or her talents, ultimately earning a return on the resources devoted toward that development. Many companies use this model to develop employees for promotion to supervisory and management positions in later years, effectively providing the business with a consistent supply of full-qualified leaders for the next generation.
Resource allocation often focuses on what is happening today, but the process can also be used to prepare for future scenarios. For example, a business may put together a contingency plan that allows for the redistribution of resources in the event that one or more of its product lines experiences a significant decrease in sales. Companies that operate multiple locations often design contingency plans that help to redistribute or reallocate resources in the event one of those locations is rendered inoperable by some type of disaster. This type of allocation preparedness allows the business to continue providing goods and services to customers with a minimum of interruption, which in turn helps to minimize losses and keep profits as high as possible under the new circumstances.