The Influence of Project Resource Allocation on the Resource Capacity of the Business Processes

Abstract

In small and medium enterprises, resources from within the company are often used to fulfil small-scale projects. This paper discusses the influence of project resource allocation on the operational workflow of small and medium enterprises based on a case study. More precisely, the capacity of certain business operations will be lowered due to the allocation of scarce resources to projects. Subsequently, this might result in a temporarily lower throughput in the business processes and thus a potential loss of profitability. As a result, project scheduling and resource management have a clear impact on the planning and execution of the daily operations. In case that the deterministic estimates of project durations and costs are used, without accounting for risk and uncertainty, project delays are highly likely. Given the relation between project and business resource allocation, project delays might lead to difficulties in meeting targets in the daily operations. This paper presents an approach to incorporate the above effect in the decision-making process of portfolio management, i.e. the choice to initiate a project given the negative impact on the business processes. The decision-making process that results from this fundamental trade-off is demonstrated using a real-life project, which could provide valuable insights to project managers in small and medium enterprises.