January 25, 2014 / Cost Management, resource allocation
Strategic allocation of resources is critical in today’s competitive marketplace. As customers continue to demand tighter tolerances and faster turnaround, operations managers need to be tactical with their existing assets while also knowing when it is time to make some upgrades. The challenge, of course, is making the right call by investing in the areas of your operation that will bring the best return.
While there is always an element of risk to any strategic decision, the following are a few best practices today’s managers should consider as they allocate resources in their operations:
- Proper allocation requires measurement. One of the first steps in proper resource allocation is identifying where improvement is needed, and the only way to do that is to measure your processes. In other words, you need a baseline for comparison. As described in a recent white paper from LENOX Institute of Technology, this can be done with sophisticated software or manually. In a metal-cutting operation, for example, managers can use software to automatically track the number of square inches processed by each saw and each blade. This allows managers to easily track trends and quickly detect problem areas. The same procedure can be done manually with a stopwatch. Regardless of your method, the goal is to measure productivity. Once a baseline is established, managers can start to effectively evaluate equipment, tooling, and operators.
- Think beyond cost. The term “investment” doesn’t always refer to money. In the aforementioned scenario, tracking software will require financial investment, while manual measurement will require time and human capital. While at face value the financial investment of software may seem high, there are “costs” associated with the manual strategy as well. The goal is to think long-term while also being realistic about the capabilities of your workforce. As demonstrated in this article from Manufacturing.net, the choice to automate (or not) takes careful consideration. For example, if you take the plunge to automate, what type of training will your workforce need when the new system is installed? Successful managers look beyond the initial benefits and the price tag of an investment and weigh the long-term pros and cons as well.
- Consider all of your options. At the end of the day, budget constraints are a real issue. However, just because you can’t afford a specific piece of equipment or technology doesn’t mean there aren’t alternative solutions out there. Perhaps used machinery is an option. This article from Forge Magazine provides some great reasons to contemplate second-hand machinery, as well as ten critical factors to consider before making a purchasing decision. Managers also shouldn’t underestimate the benefits of investing in human capital. Upgrades in areas such as training and safety can provide huge gains in efficiency and quality. Like any strategic decision, resource allocation requires an open mind. In the spirit of continuous improvement, best-in-class managers need to explore all of the ways they can save their operation time and money.