The implication resource allocation at the level of an economy and and at the level of activities if individual managers are quite different.
When we speak of efficient allocation of resource in economics, we are focusing on maximising the value of total output generated by the whole economy. Thus we may talk of allocating the resources of a country among various activities like such as agriculture, industry, service sector, education and defence.
At manager's level the issues are quite different. The purpose for which the resources are to be used by managers are decided first, and then decision is taken on resources to be allocated on the basis of what is needed by a manager do fulfil the task set for him or her.
One of the main problems faced by a project manager is resource allocation. With the help of the network techniques the project manager can identify the critical activities. For completing the project in time, he must have the required resources at his disposal.
A project manager frequently comes across resource constraints. There may be delay in the arrival of building materials. The available personnel may fall short of the requirement on some days and there may be excess personnel available on some other days. The job of the project manager is to plan and allocate the resources for the different activities so that the resource utilization is optimized.
With regard to resource constraints, a project manger may face one of the following two situations:
1) Resource leveling,
2) Resource smoothing (also called ‘Fixed Resource Limit Scheduling’).
1) Resource Leveling: There are situations demanding that the project should be completed by a specified due-date. The due-date for project completion is decided by the management for various reasons. For example, a canal lining project might be required to be completed before the monsoon sets on; a school building might be required to be completed before the school re-opens after vacation. Under such situations, project completion time is the constraint, i.e., the project is to be completed at any cost by the due-date. A project manager often comes across mismatch between the availability of resources and the requirement of resources. This means that there are surplus resources available on some days and there is shortage of resources on some other days.
Since the personnel requirement varies from day to day, the project manager should plan properly in such a way that optimum utilization of available personnel is achieved.
There are many different techniques available for handling such problems. There are different heuristics available for resource smoothing, devised by different experts in the field. These rules vary greatly in their complexity and obviously a more complex set of rules is bound to give a better solution since it will take care of many aspects of the problem as compared to a simple set of rules. However, when the size of the project is not small, it will become highly difficult and time-consuming to apply the more complex rules and arrive at a solution manually (i.e., without the use of computers). Inspite of all these, there is no guarantee that a given set of rules will always give the optimum resource allocation, irrespective of the complexity of the problem. It can only be said that heuristics give a reasonably ‘good’ solution which may or may not be the optimum solution.