Resource allocation is a process and strategy involving a company deciding where scarce resources should be used in the production of goods or services. A resource can be considered any factor of production, which is something used to produce goods or services.
In strategic planning resource allocation is a plan for using available resources, for example human resources, especially in the near term, to achieve goals for the future. It is the process of allocating scarce resources among the various projects or business units. In economics, resource allocation is the assignment of available resources to various uses. In the context of an entire economy, resources can be allocated by various means, such as markets or central planning. In project management, resource allocation or resource management is the scheduling of activities and the resources required by those activities while taking into consideration both the resource availability and the project time.
Types of resource allocation:
- Allocation by Merit: This can be seen as a rewards system of sorts. This view suggests that rewards should be distributed according to productivity, effort, or demonstrated ability.
- Allocation by Social Worth: Allocation by social worth tends to take a practical view toward resources, directing them toward those who appear most likely to contribute to the common good. This view suggests that resources should move in directions that ultimately do the greatest good for the largest number of people. Criteria for social worth can include age, seniority, rank, and expertise.
- Allocation by Need: Allocation by need tends to view resources in terms of basic human rights. This view suggests that every person has the same right to some minimal level of a given resource. Obvious examples include food, shelter, and clothes.
Advantages of resource allocation methods:
- Peak resources demands are reduced.
- Resources demand over the life of the project are reduced.
- Fluctuation in resources demand minimized.
Disadvantages of resource allocation methods:
- Loss of flexibility that occurs from reducing slack.
- Increases in the criticality of all activities .
A list of eight different price mechanisms critical to an understanding of politico-economic and socio-economic allocation. (1) the economic market with a price system; (2) voting procedures; (3) bidding; (4) bargaining; (5) allocation by higher authority, fiat, or dictatorship; (6) allocation by force, fraud, and deceit; (7) allocation by custom, including gifts and inheritance; and (8) allocation by chance.