One of the main reasons for not achieving the expected profit in any large company, is over spending on resources required to do the work. This can take the form of weak purchasing processes, production waste or using too many resources to do the job. This white paper will focus on the last of these and how to avoid it by doing detailed Resource Balancing (RB).
What is Resource Balancing?
Resource Balancing is the process of calculating the correct amount of resources required to perform a job. Too many resources can create a safety margin but it can be extremely costly. Too little resources on the other hand will lead to either not delivering the target or to potential quality issues. Resource Balancing removes any ambiguity about the quantity of raw materials that should be ordered, how many staff are needed to perform a job or how many loads a truck must deliver (regardless of the industry gold mine, drinks manufacture or your local hair salon) for the plant to accomplish its performance target. It gives exact figures on what is required to deliver the work. A Resource Balancing tool is usually built in excel and shows the requirements for each time frame it is based on. Resource Balancing is sometimes called a Master Schedule. It is related to resource levelling within project management but it is not the same thing.
Benefits of Resource Balancing
Companies that use strict Resource Balancing tend to be able to reduce their cost by up to 12-15%. This is done through:
- Lower cost of capital
- Reduced waste
- Decreased amount of quality issues
- Decreased staff numbers
- Reduced storage need
Resource Balancing is only one aspect of successful operations management. It can tell how much of what resources are required but it does not generate the benefits on its own. It still requires good active management to ensure that the work is done correctly.
How do you build a Resource Balancing Tool?
To build an RB tool, one requires detailed sales and production forecast, job standards (in the form of time and human resources required), process flow and timing stats, the raw material requirement per item, stats on unavoidable waste. The design is done in the following steps:
- The first step is to create resource requirement for production of one item. This needs to be as detailed as possible
- The result is then connected to the predicted required volumes
- Next, a volume rounding needs to take place. This is done for situations where the resources cannot be divided into smaller parts (i.e. humans)
- As a next step, illness and annual leave must be taken into account
- Finally the now generated volumes need to be smoothed over time to reduce seasonality impacts
The RB is usually based on a shift by shift basis. In some cases it is created for longer periods enabling its use in the long term planning process.
Excelr8 and Resource Balancing
Excelr8 sees Resource Balancing as one of the most important elements of a Management System and Operational Excellence. It is a vital for a successful function of any modern and profitable organisation. Our specialists have many years experience in developing Resource Balancing tools and are happy to share their knowledge and skills. To discuss the concept of Resource Balancing in more detail or to find out how we can help, please contact us contact us here .