Introduction
Resource allocation is imperative for turning inputs into outputs. Still, it is paramount to focus on particular strategies and procedures used for estimating the effectiveness of resource allocation and utilization generally referred to as analytical techniques for resource allocation (Longest & Darr, 2014). Some useful strategies are critical path analysis based on Gantt charts, SWOT analysis, inventory analysis, decision matrix analysis, linear programming, regression analysis, decision trees, queuing, etc. However, this paper aims at reviewing the most efficient analytical tools such as capital investment analysis, simulation, volume analysis, and cost-benefit analysis and determining how and why they are helpful.
Capital Investment Analysis
Capital investment is a ranking analytical strategy. In most cases, it is beneficial for estimating resource allocation alternatives related to purchasing fixed assets such as machinery, real estate, or equipment. The idea behind this method is to compare several options under consideration and identify the most promising and profitable one (Longest & Darr, 2014). The most significant advantage of this technique is its applicability to assessing long-term projects, as all properties mentioned above are usually bought for long-term use. Moreover, it is useful for detecting any potential risks connected to acquiring fixed assets and finding ways to minimize or avoid them by making well-considered decisions regarding the allocation of the organization’s resources.
Simulation
Simulation is one of the most useful analytical techniques for resource allocation. The rationale for highlighting its significance is the fact that it is appropriate for the visualization of changes in resource allocation. It means that this strategy is commonly used for finding the answers to “what if” questions (Longest & Darr, 2014). For instance, an organization might choose this tool for finding out the impact of transformations without actually implementing them. It becomes possible by drawing assumptions and testing them in current operating conditions. Some suitable examples include the assessment of the potential effects of employing more staff on decreasing waiting time or increasing patient satisfaction with provided healthcare services (Longest & Darr, 2014).
Volume Analysis
There are two types of volume analysis with including or excluding revenue as a variable being the primary difference between the two. Based on the evaluation of revenues, these analytical techniques are useful for achieving different purposes. That said, volume analysis with revenue as a variable is a tool usually deployed for estimating the effectiveness and economic validity of resource allocation alternatives. For example, it is suitable for determining the profitability of buying new equipment or adding new products or services to the assortment of an organization (Longest & Darr, 2014). As for volume analysis without revenue as a variable, it is commonly chosen when evaluation of implications of operational process changes or introducing new goods and services is required or resource allocation alternatives differ in characteristics related to fixed and variable costs (Longest & Darr, 2014).
Cost-Benefit Analysis
Cost-benefit analysis is another useful analytical technique for resource allocation. The idea behind this method is to compare and contrast allocation options and select the most profitable one. Its primary advantage is the opportunity to compare alternatives under consideration with current conditions and identify which one is appropriate for increasing benefits and decreasing losses and risks. The major significance of the tool is the fact that the number of options compared is unlimited so that an organization can select the most productive resource allocation strategy (Longest & Darr, 2014).
References
Longest, B. B., & Darr, K. (2014). Managing health services organizations and health systems (6th ed.). Baltimore, MD: Health Professions Press.