Critical resource

From CEOpedia | Management online

Critical resource is everything that can reduce our ability to accept orders from clients. Managers use a plan that is a mechanism showing whether we have sufficient critical resources to meet demand[1]. According to Philip Robinson: "A critical resource could therefore be a piece of equipment, a production line, people, space or even the capacity of a vendor. Any bottleneck is, inevitably, a critical resource"[2]. A critical resource is a limitation in making decisions in further operations, and hence it is a limitation for the entire company. The planning process is investigating why a resource is critical[3].

Resource estimation

Every critical resource must be estimated, so for each one must find a way to estimate it. To know how much resource is consumed for production for each family. When we already have knowledge of the amount of our critical resource consumed, we call it the resource profile of the family. There are various ways to access the resource profile. For a typical product, you can specify resources by looking at routes and bill of materials, if there is a typical family member. If there is no typical product, we must use a weighted average or estimate consumption. All data that we estimate can be checked based on history because the feedback is three periods of history for us[4].

According to Philip Robinson: "Many industries have a tradition of measuring their production in terms of the amount of product produced. For instance output could be measured in gallons of oil, kilograms of chocolate, square meters of material, garments per operator per hour, bottles per second and so on[5].

Person managing critical resources

There is a person whose job is to balance production capacity during the production planning process, it is the agent who manages critical resources[6]. Proper management of critical resources can[7]:

  • reduce operational costs
  • facilitate the operation of systems involved in production
  • improve the use of resources
  • improve the performance of these systems
  • find various problems that appear in the running process and correct them

The agent provides feedback, checks the results, balances the resources capabilities and assesses whether the results obtained meet the capabilities of critical resources[8].

Examples of Critical resource

  • Human Resources: This includes the workers and personnel required to complete the tasks necessary to fulfill orders. This could include employees in customer service, production, and distribution roles.
  • Raw Materials: The materials needed to produce a product or service must be available in order to meet customer demand.
  • Equipment and Machinery: The tools and machines used to create products or services must be in working condition in order to complete orders.
  • Transportation: The means of transportation necessary to get products and services to customers must be available in order to satisfy demand.
  • Financing: Cash flow is necessary to purchase supplies, hire personnel, and pay for other overhead costs associated with completing orders.
  • Information Technology: Computing and communication systems are vital for tracking orders, managing customer records, and providing customer service.
  • Warehouse Space: If products are being stored prior to delivery, space must be available to house them.
  • Logistics: The process of scheduling and coordinating all of the above resources must be in place in order to meet customer demand.

Advantages of Critical resource

Having a plan for critical resources is beneficial in many ways. It allows managers to better anticipate and plan for customer demand, identify areas of potential risk, and ensure that the necessary resources are available to meet customer requirements. Some of the advantages of having a critical resource plan include:

  • Improved forecasting and planning: Managers can better anticipate customer demand by understanding the current capacity of critical resources, and then plan accordingly to meet that demand.
  • Risk mitigation: By having a plan for critical resources, managers can identify and address potential risks before they become an issue, such as a shortage of critical resources or an unexpected increase in customer demand.
  • Increased customer satisfaction: When resources are available to meet customer requirements, customers are more likely to be satisfied with their purchase, as they know that the necessary resources are available to fulfill their orders.
  • Cost savings: By having a plan for critical resources, managers can better anticipate and plan for customer demand, and therefore save on costs related to additional resources or over-ordering of resources.

Limitations of Critical resource

Critical resources have certain limitations that can prevent us from meeting demand from clients. These limitations include:

  • Insufficient availability: Critical resources may not be available in sufficient quantities to meet the demand, due to limited production capacity, lack of availability in the market, or other factors.
  • Cost: Critical resources may be expensive, making them difficult to obtain or use for a long time.
  • Time: Critical resources may take time to be produced or obtained, which can delay the process of fulfilling orders from clients.
  • Flexibility: Critical resources may lack the flexibility needed to adapt to changing demand or customer needs, making it difficult to adjust production or delivery.
  • Risk: Critical resources may be subject to risks, such as theft, damage, or obsolescence, which can further reduce the availability of resources and lead to further delays.

Other approaches related to Critical resource

  • One approach to Critical resource planning is to evaluate the availability of resources. This can include inventory levels, number of employees, and any other resources needed to meet customer demands.
  • Capacity planning is another approach that can be used to assess the required production and labor capacity to meet customer orders.
  • Forecasting can be used to predict customer demand and to determine when additional resources need to be acquired.
  • Just-in-time inventory management is a useful approach to ensure that the right amount of resources are available when they are needed.
  • Finally, simulation models can be used to simulate different scenarios and see how resources are impacted.

Through the approaches listed above, managers are able to identify and manage critical resources, ensuring that customer orders can be met in a timely manner.


Critical resource — recommended articles
Dependent demand — Contract logistics — Master production schedule — Production logistics subsystem — Inventory value — Departmental planning — Production reserve — Planning and control — Uniformity of production

References

Footnotes

  1. ↑ Robinson P.(1997)
  2. ↑ Robinson P.(1997)
  3. ↑ Robinson P.(1997)
  4. ↑ Robinson P.(1997)
  5. ↑ Robinson P.(1997)
  6. ↑ Zhang J.(2017)
  7. ↑ Zhang J.(2017)
  8. ↑ Zhang J.(2017)

Author: Oliwia Kamińska

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