While generating sales and turning a profit are primary goals of just about any company, it's important to remember that sales and profits are the result of a long line of decisions. Before they're in your customers' hands, your products must move through several other stages, including research and development, testing, manufacturing, marketing, and fulfillment. Success across all of these stages depend on effective resource management.
In this guide, you'll learn the definition of resource management, why it's important, and how to use key resource management techniques to run your business more profitably and efficiently.
What is resource management?
Resource management, or resource planning, is the process by which businesses plan, schedule, and allocate resources in order to achieve the highest organizational value. Those resources can be intangible, such as skills and time, or tangible, such as equipment, materials, and finances.
Essentially, resource management means planning so that the right resources are assigned to the right tasks at the right time. Managing resources involves creating schedules and setting budgets for people, projects, equipment, and supplies.
Why is resource management important?
The resource management process is crucial to the success of any business because it reduces cost and wasted effort. By following resource management techniques, you gain insight on what's required to complete products and deliver projects, as well as the skills to make it happen regardless of external factors.
- Eliminates waste: With proper resource management, you can maximize resource efficiency across a variety of categories, ensuring that none of the equipment, space, or material you've invested in goes unused.
- Optimizes time: Resource planning ensures the team members you've hired understand their roles and spend their time on projects that add the most value. Instead of saying yes to everything, resource managers can schedule and prioritize projects based on real-time data.
- Minimizes risk: Poor resource allocation can lead to situations where a business does not have enough available resources (e.g. labor, raw materials, equipment) to meet its objectives or fulfill its obligations. Resource management reduces this risk.
- Maximizes profit: Even if your sales are high and your pricing is perfect, poor resource management can result in excess costs further upstream, cutting into your bottom line.
Resource management areas
While it is often used in reference to project management, resource management applies to many other areas of business administration. A small business, in particular, will pay attention to resource management in a number of areas:
- Finances – Can we meet current expenses? Can we afford to invest in new equipment or staff training? Are our funding sources reliable?
- Staffing – Do our team members' skills line up with the work at hand? If not, should we train them, or higher new team members? Will we have enough staff if we get that new client, and if so, what skills will those people need to have?
- Physical space – Is the company’s office or manufacturing space configured so that other resources can be managed for maximum efficiency? Are we expanding too quickly relative to demand for our products, or not quickly enough?
- Equipment – Do we have the equipment needed to do what’s required in the most cost effective way? If so, are we leveraging the full potential of that equipment to achieve our goals?
- Technology – What software or devices do our employees need to communicate effectively and execute tasks? Should financial resources be reallocated to fund what’s missing?
Resource management techniques
Resource managers employ a variety of techniques to There are a variety of ways to think about resource management. Two of the most popular resource management techniques are resource leveling, resource smoothing, and resource forecasting.
Resource leveling is a resource management technique designed to avoid shortages or excess inventory by keeping the stock of project resources at a level that avoids both problems. Specialized resource management software can help determine that level with tools that use real-time data to provide resource forecasting and risk management.
Resource leveling also used in reference to the time it takes to complete a project. With leveling, the start and finish dates are adjusted so that they mesh with resource availability. Leveling might extend the project timeline, but with a view toward eliminating excess costs along the way.
Resource smoothing is a resource management solution that relies on scheduling. That is, resource smoothing attempts to meet a specified deadline while avoiding peaks and valleys on the resources. While resource leveling is focused on achieving the right amount of each resource, the goal of resource smoothing is a constant rate of resource demand and/or resource utilization over time.
Whereas many resource management techniques concern themselves with allocating resources in the present, resource forecasting predicts the resources needed in the future and creates a resource management plan to account for them. Using your current capacity, upcoming projects, and external trends, accurate forecasting solutions help project managers identify future conflicts and opportunities to ensure your resource allocation and utilization are aligned with your long-term goals.
At its simplest level for small businesses, resource management is about making sure that a company is using its talents and materials wisely and effectively.