Resource Management: Managing Non-Financial and Financial Resources - Essay Example

Resource Management Unit 5004 Resource Management unit 5004 is about is identifying, planning using and evaluating resources to meets the objectives.Resource Management is the efficient and effective deployment for an organization's resources when they are needed and these are utilized to achieve objectives. Such resources may include financial resources, inventory, human skills, production resources, or information technology (IT). In the realm of project management, processes, techniques and philosophies as to the best approach for allocating resources have been developed. Resource management is a key element to activity resource estimating and project human resource management. Both are essential components of a comprehensive project management plan to execute and monitor a project successfully. As is the case with the larger discipline of project management, there are resource management software tools available that automate and assist the process of resource allocation to projects and portfolio resource visibility including supply and demand of resources. This unit is about the generic principles, methods and techniques for planning, managing and analyzing the use of any and all resources available to the manager. This includes physical, financial and human resources, and the factors affecting their use - organizational, legal, ethical and environmental.The main purpose of this unit is to manage non- financial resource and manage financial resources.. 1.1 Identify those resources to achieve objectives: Management is about getting thing done by other through the resources such as people equipment and materials. So these resources should be utilized to the maximum to achieve the objectives. Managers are responsible for planning, organizing leading and controlling the efforts of organization members and using all the organizational resources to achieve organizational objectives. So the need to achieve the goals from this optimum resource arose. The need for operations managers to reduce manufacturing costs, optimize productivity and improve product quality in order to stay in the market has become imperative. Operations management is the management of direct resources such as machine, material and manpower which are required to produce goods and services. It involves planning, operating, controlling, directing and coordinating all the activities of production systems, which convert resource inputs into services. The transformation process helps the operation manager an immediate sense of the importance of having the right resources in place whenever required. In most of the private sector companies outputs are given more importance than inputs. 1.2 Explain the process of planning resource use to achieve the objectives Planning process The strength and weakness has to cover the organization's products or services, people, resources and should examine the structure of the organization and ability of the organization to cope with the change. Market segment analysis is the useful technique for looking at products or services as it focuses its attention on markets and their potential. Different factors are considered for each market segment. The market segment analysis covers market share, profitability, reliance on segment, geographic spread, size, skills, market emphasis, and style and future intentions. Planning processes is important in an organization for the following reasons Extension organizations have too few financial resources, given the nature and size of their missions and many of them doesn't know to use in an appropriate manner Managers and other staff members do not know how many resources are available for use in dealing with a particular problem or program activity. Many of them do not know the costs of carrying out various activities or whether a particular approach is a cost-effective way to deliver programming. Money may be committed almost totally to salaries, leaving little to cover operating and other costs. Financial allocation decisions are made by people who are not in a position to know best how the money should be spent and the ways to spend. Little is known about whether work is being carried out efficiently or what has been the impact of organization programmes. Financial resources are wasted or may be corrupted Resources are used misappropriate. The strategic planning process as shown in fig, 1.2 gives direction to and organization Opportunities & threat in strength &weakness Customer Requirements the external environment internally Competitor information (Leech 2006). Any organization needs a mission, goals and corporate objectives. The organization should know what future plan, their goals and their objectives is. Profitability is one of the important goals for any business organization. Financial goals are aimed at profitability and non financial goals are aimed at abstract elements which cannot be quantified in money terms. Mission, corporate objectives (Leech 2006). Objectives are set only if the mission is capable of being achieved. Business will be provided with a coherent policy if the objectives set are disseminated and the management efforts should be directed properly. It should provide means for assessing the performance. The objectives should be acceptable to the manager's of business, realistic in terms of resources and timing, measurable and ranked so that it would solve any conflicts that would arise at the time of implementation. The objectives are based on short term, medium term and long term criteria. 1. Identification and evaluation of possible strategies After establishing current and intended future positions, the next step will be to formulate alternative strategies in order to enable the business to move from one position to another. (Barnes 1990, p. 4). 1.3 Identify the costs associated with the resources required to achieve objectives To plan effectively an organization also needs to understand its cost base and be able to assess and measure the impact of its work. "Full cost funding: Understanding and costingthe full overhead costs of activities and services provided, such as: the cost of management and leadership; research, development and innovation; and support functions - the price of premises, financial and personnel management, is essential to the ongoing sustainability of organisations. Outcome funding: Focusing on outcomesis a way of focusing not so much on what we do as what we achieve. Outcome funding refers to the process whereby funders fund for the change brought about (the 'outcomes')by particular activities(the 'outputs'),not simply the delivery of outputs themselves." (Bentz). 2.1 Evaluate sources of supply to meet planned objectives Sources of supply mean that there is always a competitor ready to undermine a firm's supply base even though an organization believes that it has assembled a world class core of suppliers. Supplying the resources in the organization should develop a firm specific model that all employees can understand, internalize, and use to identify, source, measure and control supply management risks. 2.2 explain processes to manage the supply, continuity and quality of resources to meet plans Managing the supply process is a flow of activities with the goal of meeting the requirements of a customer. It includes both internal and external functions and all internal functions such as logistics, distribution, sourcing, customer service, sales, manufacturing and accounting. It includes external companies. The series flows backward from delivering each resource as the customer order and each order as demanded back through the performance of suppliers to provide needed finished products, components, parts and assemblies. A supply chain process is the flow of materials, information, and services and the monitoring and control of this flow, which includes raw materials, procurement, production, inventory management, order processing, warehousing, transportation, and distribution. Supply process has a definite structure. This compares what some companies call "supply process" which may be a series of repetitive, standalone transactions. Supply Process has standardization with its understanding of what must be done. With that in place, it also has flexibility to handle exceptions and changes that are a reality of doing business. (Craig 2003). In order to ensure the continuity and quality of resources to meet plans, we need to manage those resources for the effective use. So it contains four elements such as: Plan the use of resources available: we need to identify those resources available with us. Look at the past resources that are already used and trends and developments which may effect to choice the resources. Obtain the resources: this includes estimating the cost and potential benefits and make requests to the relevant people. This helps to see that the resources available are sufficient to support all the activities. Ensure the availability of supplies: This include identifying what is required and ensure that suppliers provide equipments and materials of right quality. To do this we need to negotiate with suppliers and reach at the agreements that provide good value to meet the organizational and legal requirements and also ensure that supplies meet agreed standards. In order to ensure the continuity of resources we need to keep accurate records of supplies and take appropriate action in the event of problems with supplies. Monitor the use of resources: make sure that the resources are used efficiently with minimum adverse impact on the environment. We need to monitor the quality of resources continuously and make sure of the standards of services and the products that are delivered and are maintained. (EFSM12 -Manage the Effective use of Resources). 2.3 Predicting and managing disruption in the resource supply: Uncertainties plague all business organizations and it can happen in the supply of resources as well. An organization may have planned everything in great detail making sure that there is no problem with making available planned resources. But even so there are many internal and external factors that can cause disruption of supply of resources (including financial ones). This will turn out to be a major problem in the day to day affairs of the organization since it depends on availability of finance for its day to day operations. The internal and factors that can cause disruption of resources are given below along with ways to manage them. The additional costs involved in successfully managing disruption will also be discussed. External factors: A break or stoppage in production or manufacture due to non-availability of raw materials is one way that financial disruption can occur. If raw materials are not readily available, production is affected, and hence finished goods cannot be supplied according to schedule. One alternative is to source them from other suppliers. In case it is not available, sales will be affected. The organization would have planned monthly sales targets and would have planned on using income from the sales for meeting expenses of the organization. As mentioned above, it can source the raw materials from another source at a higher cost. For example if 10,000 of a raw material is available to a company for 40,000 dollars, but due to disruption, an alternative source will cost 50,000 for the same volume. Then the company will incur costs of disruption to the tune of 10,000 dollars. Factors like increase in energy costs can also result in increase in expenditure across many areas of business. Amounts scheduled to be spent on a particular area will then be used to meet the additional costs. An industrial dispute can affect production which again will result in disruption of income from sales. Government policies, availability of alternative products from competitors are other avenues resulting in disruption. For example, a new credit policy by the central bank may result in not getting the planned finance from a particular financial institution. Alternatively, the finance might be still available, but at a higher cost. In the first instance the company has to look for alternative finance. In the second case, it will have to pay a higher rate of interest. In both cases, costs of disruption of finance will occur. The only difference is that the excess amount incurred as costs will vary. These are just a few instances where disruption can occur and is given to illustrate the problems that will be faced by a company in such instances. Internal factors: An example would be revised wage structure resulting from an unexpected strike by employees. A strong trade union can influence or coerce the management into increasing wages. This will definitely cause disruption to the volume of the increase in pay that the company will have to shell out. An accident or disaster will cause disruption at least temporarily (if it is insured). In case it is insured the loss will be recouped but after some delay. In case it is not insured, the company will have to bear the costs resulting in diversion of funds. This will ultimately cause temporary disruption of resources. Managing disruption: As mentioned earlier, there are no real fool proof methods to predict a possible disruption. Of course, knowledge about the market and other factors like future policy changes can to a certain extent help in this regard. But the fact under discussion is managing of disruption of resources (through expected and unexpected reasons). The only thing a company can do is to find alternative sources that can supply funds in an emergency situation. It can have agreements with financial institutions, it can sell assets, it can avail other avenues like private or individual financiers, it can float new shares in the market etc. there are many ways in which to arrange alternate finance. But in each case, the cost of arranging alternate finance or in other words managing the costs of disruption of resources will always be high. 3.1 Actual resource usage versus planned usage: This is another problem area with regard to resources. All well run organizations will have planned their resource usage through budgeting. But due to many factors, actual usage may differ from planned usage. In case actual usage is lower than planned usage, the organization can increase its cash reserves. If it is excess of planned usage, then it will result in a depletion of financial (and other) resources. In such a case, a similar situation like that of disruption of resources will occur. The organization then will have to follow the same steps mentioned above with regard to managing disruption of resources. But if actual usage is lower than planned usage, there could sometimes be some underlying problems. For example, if a company had planned to produce 100,000 units of a product for the year. It would have in such and instance also planned for resources to cover the costs of raw materials, labour, and other direct and indirect costs to manufacture the planned number of units. In case, orders for only 50,000 units materialize, the company will face a situation where actual costs will be less than budgeted figures in the areas mentioned above. The company will find that its raw material costs have come down. But this is not actually a profit for the company. It would have earned more if the expenditure of raw material had actually been spent and the resulting products had been sold. So, an organization has to be careful in both cases, i.e. exceeding budgeted figures and incurring expenses lower than budgeted figures. In the latter case, if the figure is lower due to increased efficiency, then it is fine. But if it is due to lower volumes of business, some corrective action to increase it has to be taken. In case the expenses are more than planned figures, then the company should seriously look into it. Increasing its operational efficiency can probably help in correcting this difference. In any case, any difference, whether resources exceed or is lower than planned usage needs serious consideration and corrective action in most cases. 3.2 Methods of recording and reporting resource use: All organizations have stakeholders interested in its success and growth. Many of them would have spent resources in terms of money and effort to see that it succeeds. For example, shareholders would have spent money in buying stocks so that they can get some returns on the money spent. Employees would have given their efforts and time in exchange for salaries and wages. So it is essential that some form of recording be done in order to show the stakeholders that the resources are managed efficiently. More importantly the board of directors and top management directly involved in running the day to day affairs of the company will need to have information on the availability of resources and also how it is utilized. Hence all organizations need to have some method to record and report resource use. For internal purposes, the books of accounts as prescribed by policies and statutes will record all financial transactions out of which resource use effectiveness can be calculated. These include legers, day books, and the year end financial statements like profit and loss account and balance sheet. For other stakeholders, reporting of resource use is more important. For this purpose, annual reports are the most common form of information. A knowledgeable person can understand resource use to a large extent by analyzing an annual report. But the information provided in the report is solely dependent on the top management. An example where stockholders have been cheated is the Enron collapse which is an epitome of corporate greed and lack of corporate governance and controls. 3.3 Methods of using resource information to inform future actions: The most common way that corporation use to inform future actions is through its annual reports. The director's/chairman's/ CEO's reports is the most practical way to inform stakeholders about future actions. Strategic planning within an organization is another method by future actions can be conveyed. But in this case, the parties involved will be the management and employees. Apart from imparting information through its annual reports, information regarding future actions that affect resources includes in-house communication, press briefings, and publicity through any practical means. For example, a company can announce a takeover (which requires resource use) through a press conference or as a news release. It cannot introduce a new product (again requiring resource use) through an advertisement or through other product promotion strategies. It will depend on individual circumstances and policies to gauge the extent of publicity with regard to future actions. An acquisition of another company which requires resource may not be announced until the right time for fear of competitive bids. A product launch will usually be announced when the prototype is ready to be displayed. Even though there are many ways in which future actions can be announced, it all depends on individual circumstances. Bibliography BARNES, Martin. (1990). Financial Control. [online]. Thomas Telford. P. 4. Last accessed 24 April 2009 at: http://books.google.co.in/booksid=XIH9E8TtKuAC&printsec=frontcover&dq=Keeping+financial+control&lr=#PPA4,M1 BENTZ, Robert P. Chapter 16 - Acquiring and Managing Financial Resources. [online]. FAO Corporate Document Repository. Last accessed 24 April 2009 at: http://www.fao.org/docrep/W5830E/w5830e0i.htm CRAIG, Thomas. (2003). 3 Issues to Supply Chain Management Success-Process, People, Technology. [online]. World Wide Shopping. Last accessed 24 April 2009 at: http://www.ltdmgmt.com/mag/072503.htm EFSM12 -Manage the Effective use of Resources. [online]. EFS Management NOS - EFSM12.doc. Last accessed 24 April 2009 at: http://www.cheshirefire.co.uk/uploadedDocs/IPDS_Documents/EFSM12.pdf LEECH, Corinne. (2006). Pathways to Management and Leadership. [online]. CMI Enterprises Limited. Last accessed 24 April 2009 at: http://72.14.235.132/searchq=cache:Kz1oEM5vmVEJ:www.managers.org.uk/client_files/Learning_Materials_Dec08/Unit%25205004%2520Resource%2520Management_sample.pdf+resource+management+unit+5004&cd=6&hl=en&ct=clnk Read More