Basic 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.
With insightful guidance many companies can unlock profits, start new initiatives and release hidden potentials. Jay Jacobus is a consultant who advocates basic concepts, uncomplicated methods, clear explanations and confidence building results. Learn how to improve resources, controls, operations, results, sales or productivity. Jay has a background in management, ISO 9000, quality and consulting. Go to his website to learn how to get your own improvement project started. Contact through http://www.mgm-in-a-nutshell.com