We hear about resource crises almost every day. If you think you have not heard about it don’t worry. We will tell you examples with which you can correlate. The recent oil and wheat crisis due to the Russia-Ukraine war, the water crisis that Chennai faced, the coal shortage faced by India in 2022, etc., these examples force us to think about how to allocate resources efficiently. So, in this article, we will discuss what is resource allocation, and why we need to allocate resources efficiently. Let’s also explore the challenges in resource allocation, and how to allocate resources efficiently via a resource allocation plan example.
1. What is Resource Allocation?
The practice of assigning and managing resources in a way that meets an organization’s strategic planning objectives is known as resource allocation. It includes both tangible resources such as coal and intangible resources such as human intelligence. (See What are physical resources?)
2. What are the Various Ways to Allocate Resources Efficiently?
There are various ways to allocate these resources. Some of them are competition, sharing, command, lottery, majority rule, first come first served, price, and others. (See Who receives the goods and services produced?)
3. Why do we need to Allocate Resources Efficiently?
Let us take examples from the world and India to understand why we need to allocate resources efficiently.
- Examples from the world: The oil crisis that the world faced in 1973 was managed by making vehicles that use fuel efficiently. Venezuela at present is facing extremely high inflation because of improper resource utilization. Japan has very limited resources but has huge GDP because of its technological efficiency. China which has the world’s largest human resources utilized them effectively and has the 2nd largest GDP today.
- Example from India: India in 1991 had limited resources but its decision to allocate resources efficiently led to high growth in its GDP. For example, Ladakh which has limited water in its area uses Zing for water management. Earlier, many dynasties in India failed because of the poor land allocation system they followed.
4. How is Resources Allocation in Economics made by Governments across the World?
All the government in the world aims to allocate resources efficiently. Let us look at various ways in which it was done by governments across the world.
Some government follows the free market model though not strictly. An example of this is Singapore whose economy is considered the freest as per the Heritage Foundation Index. Other countries follow the state intervention model and the rest follows a mixed model to ensure economic growth along with human development such as Norway, Vietnam, England, France, India, USA, and others. (See What is Scarcity and choice in economics?)
5. How is Resources Allocation in Economics done by the Government in India?
Let us look at how to allocate resources efficiently done by the government in India.
- Free trade agreements: India has signed free trade agreements so, the one who uses the resources more effectively continues and the others fail. This also increases the competition among the companies which ultimately leads to new ideas for efficient resource utilization.
- Privatization: Except few, all the sectors are open for private companies to do business. Even public-sector undertaking face competition from the private sector and this increased their efficiency. As the private sector has engaged, new technology is developing at a fast pace because of the efficiency that the private sector brings with it.
- Labor laws made: Labor laws are made to ensure that both labor and the private sector remain protected. Maternity benefit acts were made by the parliament so women remain engaged in the labor force. The child labor prohibition act was made so the young people of India get educated and becomes highly efficient human resources.
6. What are the Challenges in Resource Allocation in Economics?
Well, all the economies in the world aim to allocate resources efficiently but they face several challenges in it.
Let us look at some of the challenges first to understand how to allocate resources efficiently:
- Changing needs of the economy as the country becomes developed from its previous stage of development.
- Shortage of human resources.
- Unskilled labor force.
- Increasing environmental concerns due to global warming.
- An abrupt change in government policy.
- Miscommunication also creates a challenge.
- Project managers may fail to allocate the proper resources where they are required as a result of poor visibility into the specifics of how a project is proceeding.
7. How to Allocate Resources Efficiently? Resource Allocation Plan Example in OrganizationPicture by Rodnae Productions Pexels
Let us take a resource allocation plan example to resolve the challenges.
- Planning: Project managers must first create or plan a project map. They must break the project down into individual tasks and decide which talents are required. They must also look at any restrictions, such as budget and deadlines.
- Under or overusing of resources: Each project’s resources are allocated equally, ensuring that no employee is overworked or underworked.
- Scheduling: Tasks are assigned, and project schedules are created by managers. It leads to the proper allocation of time to plan which is of critical importance.
- Tracking: It is important to track and monitor the progress of workers. This can be done by business intelligence tools and project management software.
- Evaluating: When the project gets completed it is important to take feedback from workers, customers, and other stakeholders. It leads to improvement in the next project.