Organisations develop strategies every time to aid in achieving their vision and mission, which means implementing a series of action plans that will enable the organisation’s goals to be achieved. Strategies may include production strategy, financial strategy, marketing strategy, sales strategy, human resource strategy and even strategy that affects processes. In all of these, the implementation of these strategies requires resources, be it data, people, funds, machinery etc to be available to ensure the success of the strategy implementation. However, the sad reality is that in most cases organisations will not always have the required resources they need to fully implement their supposed strategy, this means they must optimise the allocation of these resources in a way that will still provide maximum benefits.
Having said that, for the concept of optimal allocation of resources to ensure optimal benefit to be considered, there has to be a shortfall in the availability of resources needed which will be a constraint to ensuring the organisation achieve its objectives. These constraints could also be termed limiting factors. This means that if there is no shortfall of resources, there is no optimisation problem. It should be emphasised that the issue of resource optimisation cuts across all industries, especially considering that all organisations need one form of resource or the other to thrive.
With specific reference to the manufacturing industry, they always encounter the optimising problem in their bid to meet their market demands. Limiting factors in this context could be labour hours, machine capacity hours, raw materials, funds etc. With this problem, resources have to be allocated to ensure getting the best possible contribution from the sale of the products we are allocating these limited resources to.
There are various techniques available to assist in solving the optimisation problem which include contribution margin per limiting factor method and the linear programming method. In practice, contribution margin per limiting factor Is less popular since it only deals with an optimisation problem involving just one constraint or limiting factor, but ideally, an organisation faces more than one limiting factor all the time while carrying out their activities. This is where linear programming comes into play as it helps to formulate our problem into a model which we can then go ahead to analyse and solve to produce a result that will aid our decisions. With the advent of technology and improvement in software, we have applications that will easily analyse the linear programming problem and produce results within seconds, we only need to feed the right inputs into the application. In fact, the Microsoft Excel application can also run the model perfectly using the “Solver” add-in. The problem of resource optimisation is common to all industries and even individuals face this problem at one point or the other.
In conclusion, the problem of limited resources is not strange in the economic world as factors of production are not in abundant supply, however, with the aid of the concept of resource optimisation and linear programming as a technique in solving this problem, companies can still make the best use of the limited resources they have to generate the best possible profit.
