Estimating Start-up Resource Utilization in a Newly Formed Organization

When a business is acquired, important operational aspects of the business are not always conveyed to the acquiring organization. Determining adequate levels of resources (materials, labor, supplies, and machine time) depends on many variables other than the demand for finished product. Some production systems absorb and reclaim resources in such intricate ways that the best managers cannot estimate the resources necessary. One approach to determining the start-up levels of resources for a new business involves combining two quantitative techniques, input-output analysis and goal programming, to generate realistic estimates. These combined techniques were used in a division of the North American Youth Ministries Distribution Center, a large distributor of specialized felt products, to reveal excess inventory, to identify future inventory item shortages, to plan production, and to reduce management planning time.