Resource Capacity Planning Spreadsheets, the instrument used by management to identify, measure and manage resource consumption, can be considered to be an important tool for effective resource management. These tools are based on two assumptions: first, that resource usage will be constant; second, that resource consumption is proportional to production.
The first assumption, that resource consumption will continue to increase over time, depends upon the assumption that the costs of production of a good are higher than the cost of its use. In other words, if the resources of production are limited, it is assumed that they will be consumed at an exponential rate in the future. If this assumption is not correct, the strategy adopted by management can be quite incorrect, since the resource values that are required to achieve production quotas will not be available to increase production.
The second assumption is that the resource values are proportional to the number of goods produced. If the assumptions are not correct, the use of a Resource Capacity Planning Spreadsheet will not generate the desired results, since the optimum use of a given product must also be considered.
The cost of using up resources can be estimated by using the Resource Capacity Planning Spreadsheet. The costs include capital, labor, raw materials, equipment, and the costs of goods sold by the firm.
The figures in the spreadsheet include the price of the resource in terms of the unit of the product of consumption, as well as the cost of the same unit of the resource. A Resource Capacity Planning Spreadsheet is used to estimate the initial value of the product in terms of its use; the difference between this initial value and the final value of the product is called the residual value.
To use the spreadsheet properly, it is necessary to include in the spreadsheet the average cost of the product at which it is to be consumed, the discount rate for goods sold, the number of people employed in the firm, the hourly rate of wages paid, and the expense of raw materials. These figures will help management to determine the proper allocation of the resources available to the firm and determine the optimal use of the remaining resources.
Resource Capacity Planning Spreadsheets can help managers calculate the values of different resources, such as gas, water, land, machinery, food, etc. These figures can then be used by management to decide on the optimal use of these resources.