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What is Resource Allocation?

Malcolm Tatum
Updated May 17, 2024
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Resource allocation is the process of determining the best way to use available assets or resources in the completion of a given project. Companies attempt to allocate resources in a manner that helps to minimize costs while maximizing profits, typically by using strategic planning methods to structure the operation, establish operational guidelines, and implement policies and procedures that move the business toward the achievement of its goals. The actual process will vary, depending on the type of project undertaken and the collection of tangible and intangible assets on hand.

As it relates to project management in general, resource allocation involves the scheduling and use of materials, equipment, and labor in order to achieve the identified goal. This means that the allocation process will require determining how to arrange the plant floor to its best advantage, so that raw materials can move through the manufacturing process with the greatest degree of efficiency. At the same time, designing tasks so that employees can achieve the highest levels of production is also important. With the proper allocation and use of resources, it is possible to limit the waste of raw materials, generate high production rates per hour, and, in general, allow a company to produce more finished goods during a typical production day.

While the focus of this process is often on assigning or allocating tangible resources to different tasks necessary to the success of the project, this type of management strategy also takes into consideration intangible assets that may be present. For example, a new business that is attempting to make the best use of available resources may note that a particular employee has inherent talents that would benefit the company over the long term. Here, the company may choose to assist that employee in developing his or her talents, ultimately earning a return on the resources devoted toward that development. Many companies use this model to develop employees for promotion to supervisory and management positions in later years, effectively providing the business with a consistent supply of full-qualified leaders for the next generation.

Resource allocation often focuses on what is happening today, but the process can also be used to prepare for future scenarios. For example, a business may put together a contingency plan that allows for the redistribution of resources in the event that one or more of its product lines experiences a significant decrease in sales. Companies that operate multiple locations often design contingency plans that help to redistribute or reallocate resources in the event one of those locations is rendered inoperable by some type of disaster. This type of allocation preparedness allows the business to continue providing goods and services to customers with a minimum of interruption, which in turn helps to minimize losses and keep profits as high as possible under the new circumstances.

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Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including WiseGeek, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By whiteplane — On Oct 28, 2012

Can anyone point me towards some case studies of real resource allocation efforts in action? I am writing a paper and have to find some more sources. Thanks!

By disciples — On Oct 27, 2012

Resource allocation is often thought of in a business context, but it has applications in many different fields, particularly agriculture and ecology.

In the future, as resources like land, water, and energy become increasingly scarce we will have to think more seriously about how we share these things. They are important to both business interests and the broader public good. It will be a complicated and ongoing issue but one that we have to confront.

By croydon — On Oct 26, 2012

I actually think most businesses could afford to be more thrifty with their resource allocation. Particularly when it comes to what might be seen as waste materials.

For example, I've heard of a factory where they produce a lot of waste water, which is basically clean, but very hot. They used to just dump it into the river, until someone had the bright idea that it was a shame to waste the water.

So, they allowed someone to start farming alligators near the factory to take advantage of the unique micro-climate. I know that sounds bizarre, but it's a unique way of allocating available resources that provides a plus for everyone.

By pleonasm — On Oct 26, 2012
@pastanaga - Unfortunately, there are some serious drawbacks to that kind of position though. For one thing, I'll bet he doesn't really get to see much of the places he visits. I've known people with that kind of job as well and they are treated really well, but they are expected to work really hard in return.

They fly into a place, work twelve hour days and then fly out without seeing anywhere except the office and the hotel.

The other drawback to being a precious resource for your company is that if you're hoping to go up in the ranks, you might have a long wait. There's no point in putting you up into a management position and having to train up a whole other person to take your place if you don't have to do that, after all.

By pastanaga — On Oct 25, 2012

One of my friends is lucky enough to work for a company that treats him like a very precious resource and they make sure that he's kept happy and well trained.

He also gets to travel all over the place, training other people to do his job in their areas. I'm pretty jealous, to be honest, as he's been to several continents, including places I'd love to go, simply because it is more efficient for the company to send him than to do it any other way.

I guess the trick is to find a job and become the best person in the company at that job so that they will treat you the same way.

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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