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Money-Management Articles >> Resource Management
By Jay Jacobus Managers in
companies often feel that they are jack of all trades.
At times they must be foremen. At other times they need to be Human
Resource directors. They may be process engineers, designers, production
planners, programmers, schedulers, set-up men, inspectors, consultants,
trainers, writers and may other specialists. Every day they wear as many
hats as are needed by their companies.
Still, I offer one more hat that many managers should wear. They should
wear a resource manager’s hat.
A resource manager is a person that specializes in getting the most out of
a company’s facilities, equipment and personnel. He (or she) seeks to
maximize the utility of every resource and to consider what additional
resources would improve the company’s efficiency, productivity and
capabilities. In essence the resource manager improves the company by
making the most out of available resources.
If the resource manager does his (her) job right, the company will realize
the following benefits:
1-the company’s capacity will grow,
2-the company’s production will grow,
3-personnel will produce more per hour,
4-the workspace will be organized for efficiency,
5-the work environment will complement the workers’ capabilities and
6-profits will grow.
I have been told by many of my customers that they, as good managers,
already optimize their facilities, equipment and personnel. They are
convinced that every day they are constantly aware of the shortcomings of
their resources and, when they get more time or more money, they will make
the appropriate changes.
They are often partially right but many of them miss something important
if they do not take a careful inventory from time to time. Without such an
inventory they may react to the most obvious problems instead of the most
beneficial changes. The foresighted manager prepares a list of potential
changes and ranks the changes in order of expected financial returns.
When taking stock of resources, here are some considerations to look for:
Make a list of the resources that are underutilized. These are usually
machines (and less often people) that sit idle for a substantial portion
of the work day. They may be old machines that are no longer needed or
they may be machines that have been acquired to do a specific job but were
never fully utilized or they may be machines that work faster than other
machines in a plant and finish their work early. Whatever the reason for
being underutilized they represent the excess capacity of the plant.
Once the opportunity to work has passed, any unused capacity is lost
forever. If a machine sits idle for 60% of the day, that production is
gone and can not be recovered.
Sometimes machines sit idle by design. Management may buy a machine with
the realization that it won’t be utilized 100%. They may buy the machine
because outside services are expensive or unavailable. They may buy the
machine as a backup to machines that are overloaded. Or they may buy the
machine in anticipation of increased sales.
It doesn’t really matter why the machine was bought and it doesn’t matter
why the machine sits idle for part of the day. What matters is that the
company management knows where they have excess capacity. If they know
about it, they can make plans to utilize it better.
It is important to note that utilizing an idle machine is cheaper than
buying a new machine. The costs of the idle machine are being covered by
existing production. The machine already has floor space and the excess
overhead associated with the machine is going to waste. Any new production
will require the cost of labor and material only. For these reasons,
excess capacity is inexpensive and the opportunity for profit is greater
than it would be on a new machine.
Excess capacity creates an opportunity to make larger profits by seeking
to sell the services of underutilized machines.
The principle is an easy one to understand if you own a seasonal business.
If you do, you must cover all your costs during your in-season because the
business will not bring in any money during your off-season. Yet some of
the costs are incurred during the off season. With no revenue coming in,
these costs create a loss on your books; a loss that must be covered
before your on-season can make profits.
Smart businessmen will think of ways to get some money out of their
resources during the off-season. The ski store may sell patio furniture in
the summer, the summer resort may host a beauty pageant in the fall, the
cruise line may sell discounted staterooms in the spring, the fisherman
may work different waters, the farmer may make furniture and the teacher
may find work at a resort.
Typically, the proprietor makes less money in the off-season than he does
during the in-season but he is better off if he can utilize his resources
and cover his marginal costs with something left over for profit. While it
is not quite as obvious for the typical year round business, the same is
true of any idle resource: the proprietor is better off if he can cover
his marginal costs and have something left over for profit.
To put an idle machine to work the proprietor may be willing to lower
prices, pay more for sales, make and store a stock product (products can
be stored while unused capacity cannot), reduce outside services or be a
subcontractor for an overworked manufacturer.
A list of excess capacity is a good thing for management to have because
good managers will steadily reduce idle resources and, by doing so,
increase productivity.
Management should also have a list of resources that are being
inefficiently used. An $18 an hour foreman working part of a day at a $12
an hour production job is an example of an inefficiently used resource. A
machine capable of producing 100 parts an hour but only producing 50 parts
an hour is another example of an inefficient resource. A pump that fills
drums slowly, a manual operation that could be automated, a computer that
takes minutes to calculate or a set-up that takes a day are all examples
of inefficiencies that management should be aware of.
The corrections to all these inefficiencies are either streamlining or
re-assignment.
Streamlining focuses on the unproductive (or underproductive) time that a
resource is employed. A salesman who works 60% of his time on paperwork,
researching new leads, traveling, data entry and leg work is only truly
productive for the 40% of his time spent with the clients. An experienced
resource manager will see this inefficiency as an opportunity to improve
results. He may hire a sales assistant, buy new software, institute
advantageous travel planning, contract for lead generating services and /
or buy time-saving hardware.
As a result he may chop the salesman’s unproductive time down to 20% or
even less. When he does, the salesman will spend 80% or more of his time
with customers and presumably make twice the number of sales. This is a
clear win when the cost of improving productivity is less than the gain in
sales.
The same type of thinking applies to both workers and machines. For
example, a machine that runs 50% slower than the other machines in a
factory should be upgraded with new tooling, faster cycling and more
modern attachments if the costs of upgrading can be paid for in increased
productivity.
Sometimes the inefficiency is too much machine for the job and sometimes
the inefficiency is too much job for the machine, A five ton machine being
utilized to do a ½ ton machine’s job is inefficient. Five presses that
could be replaced by one progressive stamping operation is inefficient. A
five axis CNC machine used for tapping holes is inefficient. Two thousand
3 page reports on a desk top printer is inefficient. Delivering small
packages on an 18 wheel tractor trailer is inefficient.
Management may have valid reasons for using inefficient machines. They may
not have outside sources for some operations, they may be backing up some
resources or they may not have enough appropriate work for a resource and
want to keep the resource busy. Nevertheless, management should have a
list available so that they are reminded of possible improvements.
The resource manager can list the inefficient resources and the cost of
improvements so that the company’s top management will be aware of where
improvements / changes will pay off the most. By steadily correcting the
inefficient resources the good manager will increase output.
Another condition that the resource manager will consider is bottlenecks.
Bottlenecks slow an operation down.
Bottlenecks in a production line will be obvious because the work piles up
at the bottleneck. Management will automatically take care of these
obvious production slow spots.
Unfortunately, most companies do not resolve the bottlenecks in the office
or in the executive wing. These problems may go unnoticed. A general
manager may be working 14 hours a day and six days a week. While his work
ethic is laudable, the impact on productivity must not be restrictive. He
must keep up with his administrative work to keep the place humming. If he
is late with quoting, scheduling, presentations, processing or any other
critical jobs, he can cause delays in the overall operation. Someone must
(gently) tell him to make some changes.
It is up to the resource manager (or the manager acting in a resource
manager’s capacity) to recognize the slowdown and suggest changes to the
general manager.
I should also point out that the sales function can be considered a
bottleneck when the plant as a whole is running below capacity. This means
that the resources in the sales department become a key area of concern to
the manager in charge of resource analysis.
In most departments, output is a direct function of input, but in sales
departments this is not always true because sale’s orders are not
dependent on effort alone. Rather, sales orders are also dependent on
economic conditions, supply and demand curves, competitive innovations and
repeat customers’ markets. Because of shifting conditions, the sales
manager’s goals and the resource manager’s goals with regard to sales
resources should be flexible, ie, the amount of required sales effort may
change up or down depending on erratic demand.
What this means is that, although the sales resources can be optimized
with a given set of salesmen, the resource manager and the sales manager
may need to agree on a plan to acquire temporary sales resources when
demand falls off. This is only sensible.
Everything about resource management is sensible: utilize underutilized
resources, streamline operations to get the most out of resources,
eliminate bottlenecks in the office and the sales department and my last
point: fix the facilities to provide a beneficial environment for getting
work done.
This means that the resource manager must locate stumbling blocks in the
workplace. He must find and resolve comfort problems, distraction
difficulties, work flow slowdowns and layout inefficiencies.
It is up to the manager to see the many possibilities and to consider the
best arrangements for the operation. In an existing operation it will
often help to observe the work flow for a day or two; carefully noting
where the inefficiencies occur. Time and productivity may change in
unexpected ways and the manager can use his observations to improve his
understanding of how one layout is better than another.
In the end the astute manager who optimizes resources will find that the
overall efficiency of his operation will steadily improve as the list of
inefficient resources gets resolved.
Perhaps, resource management is not as important to the manager as process
controls, continuous improvement, training, quality management and
customer satisfaction, but it is fairly easy to do and can provide new
options for change. Moreover, it provides another perspective that will
complement the standard perspectives that the intelligent manager has at
his disposal when controlling and improving his operations. It is,
therefore, one more advantageous strategy.
This article was added on: April 16, 2006.
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