Resource leveling matches resource demand with availability to ensure resources are ready for use. It involves accurately projecting future needs and acquiring resources to benefit production. It requires accounting for changes in demand and delivery schedules to keep production flowing and minimize tax burdens.
Resource leveling is a type of allocation process that seeks to match the demand for specific resources with the availability of those same resources. The idea is to ensure that when and however these resources are needed, as part of the daily business process, they are available and ready to use. Managing this balance between demand and availability often requires accurately projecting future needs and taking steps to acquire resources in a way that benefits the production process.
One way to understand the concept of resource leveling is to consider a factory that requires certain raw materials to produce a line of goods. To keep costs within reason, the company will project the flow of customer orders and the number of completed units needed to fill those orders in a timely manner. This information is used to determine the volume of raw materials needed to create these units within the allotted time frame. Orders are placed for raw materials to arrive just before they are needed to keep production flowing without interruption.
It is important to note that resource leveling is not just about knowing what is needed to keep the production line running, but when to have those resources delivered and available. In many countries, taxes are assessed on stocks of raw materials that are kept on hand. By structuring the delivery of these materials so that they don’t sit in a warehouse for weeks on end before entering the production process, companies enjoy a lower tax burden, a measure that helps increase the overall profitability of the operation.
At the same time, resource leveling requires accounting for any changes in demand that would also affect the arrival of resources at the factory site. For example, if a large customer cancels an order, the company, in turn, would revise the delivery schedule for several batches of raw materials so that only the resources needed to fill other orders are received. If a new customer places a large order and requests delivery as quickly as possible, it may be necessary to work with suppliers to increase the frequency of material deliveries to keep up with increased demand. From this perspective, resource leveling should be seen as a continuous process and not as a single event considered complete at any given time.
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