Supply and Demand can play an essential part in the success of any production line or project. By learning effective capacity management techniques and planning best practices, your team can ensure theyre focused on working on tasks at just the right time and place.
This article highlights the many advantages associated with having an effective capacity planning system and describes how they can be achieved.
What Is Capacity Planning?
Capacity planning is the process of matching supply with Demand of resources. In other words, capacity planning aims at ensuring your work plan receives enough resources from people, equipment, or materials; ultimately, this determines your capability of offering service or products to customers at maximum capacity, thereby increasing revenue streams through each sale made by your business.
There Are Three Types Of Capacity Planning
Workforce Capacity Planning
Planning your workforce capacity can help ensure you have enough people available for future tasks, giving an indication as to whether you have enough staff with relevant skills in each job role to meet the future workload.
Need more staff? No worries: with all the data at hand and enough time, hiring more should be easy. Or your current numbers reveal an overstaffed situation where some employees need to go back into hiding, or their roles should change within your company.
Plan your workforce with an eye toward the larger picture. Aim not simply at hiring enough staff; aim instead at having the very best people at exactly the right moment to meet the organizations objectives, whether that means providing outstanding client service, completing more project schedule and within budget, or anything in between.
Having enough employees on hand at just-the-right moments ensures success when reaching organizational objectives such as delighting clients through exceptional service or meeting budget and schedule.
It all boils down to having enough of the right talent in place - or whether that be delighting clients with exceptional service or delivering more projects on budget and resource schedule.
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Tool Capacity Planning
Tool Capacity Planning involves procuring tools and equipment necessary for you to fulfill the services or products offered to your customers in the future, from computers and specialist machines to vehicles.
Product Capacity Planning
Planning product capacity requires identifying what materials and products will be necessary to satisfy Demand, particularly relevant for product-oriented companies such as manufacturing or increasingly online commerce.
Product capacity planning in manufacturing requires organizing raw materials, so you always have enough components, like ingredients, for your product to meet customer requirements.
Suppliers play a crucial role in meeting customer demands by providing products they need - seasonal swimsuits in the summertime, wooly hats in wintertime, jeans or trainers that remain evergreen, and more.
What Is The Purpose Of Capacity Planning?
Capacity planning often aims to solve two costly and common problems:
- Insufficient resources can lead to problems with performance and delivery.
- A surplus of capacity in an environment leads to a waste of money.
Assuming you already have too much work on your plate. You want to gauge whether you can manage more; it is vitally important that you determine how long each project will take and determine which skills and staff members will be needed to complete them cost-effectively.
A capacity planning framework offers capacity planning tools necessary for making informed decisions and solving these problems efficiently. You can answer these questions with capacity planning:
- Are we able to take on new projects?
- Which skill sets do you find most useful/used?
- Are we able to provide enough staff with those skills?
- Are we hiring new employees?
- Does every resource have the right job assigned?
It can be done with software that allows you to create heat maps or charts of groups. Efficiency and productivity are the main concerns of capacity-based planning:
- It is efficient because the resources are not idled or overbooked.
- Productivity is achieved when people are pushed to their limits but not pressed too far.
It is important to plan properly to ensure client projects meet clients satisfaction and spend the budget wisely, which could leave key members not available when needed and additional staff necessary for specific tasks sitting idle, wasting valuable resources.
Examples Of Capacity Planning
Two examples of capacity planning are used in real life. Capacity planning empowers companies to take advantage of opportunities for revenue and business expansion confidently.
Capacity Planning Example 1 - IT Agency
Capacity planning can help an IT company determine whether it has enough capacity to take on new projects. Since DevOps Engineers are always in high Demand, management knows they will require more for new projects; similarly, they only need one Manager per four projects - thus leading them to determine if other resources might also be required and ensure their timely acquisition.
Capacity Planning provides the answer. Managers can use one of several frameworks available to predict their resource requirements, then use that data as the foundation for starting acquisition procedures.
Your Human Resources team should be informed about which skills, competencies, and people they will require (workforce planning).
Involve purchasing in providing additional workstations (tool planning).
Capacity Planning Example 2 - Food Manufacturer
Food producers who can supply new products to retailers are another prime example of planning capacity. Such producers must comprehend how increased production might alter resource needs fully.
As part of expanding their product lines, increasing production will require purchasing additional raw materials and hiring more employees (workforce planning) or additional equipment into production lines.
Capacity Planning Vs. Resource Planning: Whats Capacity in that capacity planning and resource management are very similar.
People often interchange the two terms. Theres a big difference that you should know:
- Planning resources is about assessing a resources capacity.
- Planning the capacity for a workplace or department is called Capacity Planning.
Simplifying matters might help. Focus on tasks and projects instead, or consider different forms of strategies or tactics as ways forward.
Capacity planning should be seen as a strategy. To effectively do so, organizations or departments need to perform an internal or departmental-wide analysis of all their projects to ascertain what resources will be needed to complete them.
For more information about strategic capacity planning, please read our article about capacity planning strategies.
Resource planning from an operational viewpoint involves looking at individual tasks within a project to ascertain whether there are sufficient resources available for their completion.
Although we prefer more appropriate phrases, it utilizes the term "resources" to refer to human resources. Resource planning refers to planning the capacity of employees in your team for specific tasks in a project.
In contrast, capacity planning outlines everyones capabilities to complete your strategic goal.
Capacity planning often follows resource planning. Senior managers evaluate capacity to decide if projects should be relocated or extra staff hired; individual project managers then allocate resources and assign tasks accordingly.
What Is The Importance Of Resource Capacity Planning?
Automation can significantly boost your companys productivity and efficiency, helping deliver priority projects on budget and schedule.
Furthermore, automation ensures you utilize resources as efficiently as possible - improving efficiency overall in business efficiency.
Once implemented correctly, employee engagement surveys can help project-based businesses uncover growth opportunities by seeing whether their team has enough capacity to take on additional projects and raising employee morale through decreased boredom or burnout.
Capacity planning can also enhance transparency between departments in this age of geographically distributed teams and remote work, where it may take effort to ascertain who exactly works at any one time in an office space.
A capacity management system will give you greater insight into your company while helping you make informed, data-driven decisions.
Benefits Of Capacity Planning
Project Margins Can Be Increased
Plan your projects strategically so they take full advantage of available and affordable individual resources. When starting a new project next week with only one senior developer available, capacity planning may help determine if you have enough staff available to start it and assign competent junior programmers - helping prevent delays or over serving clients.
Project Reliability
Resource availability plays a huge part in project completion times. Knowing that all necessary resources will always be on hand can be very reassuring; capacity planning provides this service by consolidating all available resource information into one easily visible plan of resources.
As a manager, its vitally important that a reliable project strategic plan is in place.
Skill Management And Hiring
Planning for capacity can help your team manage and anticipate its talents more easily. Suppose one DevOps Engineer consistently causes bottlenecks or is highly in Demand; hiring more of a similar skill may be required.
In that case, capacity planning software provides valuable data regarding skill usage to assist hiring decisions more accurately.
Intelligent Resource Allocation
Booking and allocating resources ahead of time can be invaluable; knowing they will always be there when needed gives peace of mind that all projects receive attention from MVPs.
Furthermore, being able to identify resource risks such as bottlenecks or clashes enables you to plan accordingly and reduce lost productivity.
Staff Retention
Burnout is one of the primary drivers behind staff turnover in service companies. According to research, 77% of professionals and 50% of millennials report being burnt out at work; and 69% feel their employer isnt doing enough to prevent burnout; with unrealistic deadlines, an overwhelming workload, or long working hours being primary contributors.
Avoiding Project Management Pitfalls
Project managers can avoid the three biggest mistakes that could undermine project success by planning their capacity.
- Overestimating Resource Availability - This can be problematic as it leads to bottlenecks and delays in projects. It may also lead to burnout.
- Mismatching Skills And Tasks - A mismatch between skills and tasks is another pitfall. This occurs when project tasks are assigned to individuals who need to gain the required skills. It can affect the quality of a project and reduce customer satisfaction.
- Overservicing Contracts - Last but not least, the overservicing contract is a pitfall. It is easy, without capacity planning to waste too much time and effort on client deliverables. It can also reduce the profitability of projects.
Companies use three main strategies for planning spare capacity. Here, we will review these approaches before moving on to our step-by-step plan for capacity planning.
The Three Effective Capacity Planning Strategies
Organizations typically take one of three approaches when planning capacity: lead, lag, or match. It would be best if you choose which approach will work best for your company according to its risk tolerance level and type.
Lag Strategy
A lag strategy involves planning to meet actual, not anticipated, Demand; thus ensuring you will have adequate resources available to complete projects booked in.
The Lag Strategy has quickly become one of the most prevalent methods used for saving resources by ensuring you dont over-commit and underutilize. By keeping resources busy instead of lying idle for too long, this plan ensures your budget will stay manageable.
Should a sudden increase in future Demand occur, your delivery actual time might experience some delay as additional resources are deployed to meet it.
Unfortunately, meeting deadlines might prove challenging, or you could risk disappointing customers, hence the term "lag strategy," or creating delays due to unexpected demands.
Capacity planning strategies ensure resources are allocated according to actual needs rather than projected estimates, making this method appropriate for small organizations with modest requirements.
Businesses with predictable needs for resources or higher demands without sudden spikes can benefit from adopting a lag strategy.
Lead Strategy
Leading strategy requires looking ahead, while planning capacity requires looking ahead. Both approaches focus on anticipating Demand rather than meeting it immediately.
Capacity planning strategies rely on having enough resources available to anticipate Demand. Should it increase unexpectedly, capacity planning strategies may prove useful, as any excess capacity will cover any increases in Demand.
As a leader, your ability to respond swiftly to any additional demand or unexpected resource demands makes you invaluable; but on the flip side, when your needs do not match expectations, you could leave financial resources idle if Demand falls short of meeting them.
Match Strategy
The match strategy lies between lag and leading strategies in its business goals of swiftly meeting increased Demand while keeping idle resources available for use when available.
Thus its name is "match strategy," as it aims to align supply as closely with Demand as possible. Forecasting demand and monitoring current consumption requires more planning and time commitment; but will give greater project budget stability, increased flexibility, and reduced budget risk.
Project managers need to follow both lead capacity planning strategies and lag planning strategies in their planning strategies for optimal capacity adjustments.
By keeping an eye on actual Demand and forecasts as well as market trends, project managers will know exactly how best to adjust their capacity levels. The appropriate time frames are set for the expansion or contraction of capacities.
How To Make A Capacity Planning?
You now know more about the importance of capacity planning. Its time for you to create one. This includes knowing the exact amount of work that your staff can handle at any given time.
It is important to know this information to avoid resource conflicts and to be able to create project resource plans that you can adhere to. Start with these seven simple steps.
Calculate Current Capacity
Consider Your Team in what period of time frames is the team capable of accomplishing? Dont assume every second is dedicated solely to project work; dont overlook administrative, emailing, and attendance to meetings activities as part of daily activity as well as holidays or sick leave taken by members - calculate how much project time each project team member has available realistically.
Record Staff Skills
Staff availability isnt the only thing affecting their participation in a project; their skillset is just as crucial.
You should learn about each resources experience and expertise so you can select those best-suited to each job, then understand how capacity planning impacts supply-side impacts through capacity strategic planning if combined together.
Project Requirements Analysis
Step two involves selecting your teams focus by employing either of two strategies - lagged-based (for projects with realistic critical paths) or lead-based (to forecast resource needs of future projects).
Once this step has been taken, Demand can now become obvious.
Make Your Visibility Visible
Once you understand both the demand and supply sides of a project equation, assessing capacity becomes much simpler.
Senior managers need a system in place that allows them to match project needs with available project resources - this may involve moving, deferring, or declining certain projects altogether or hiring more employees, for example.
What To Use
Planning capacity requires various approaches: spreadsheets, Kanban boards, and individual Gantt charts can all help, although dedicated capacity planning software provides the optimal approach.
A project involves many moving parts; even minor adjustments like changes in scope or absences of staff members can have drastic effects on its critical path and have ripple-down impacts on other upcoming projects which share resources with you.
Manual adjustments take much too long in complex environments compared to resource management software which automatically adjusts capacity plans with just a couple of clicks.
Allocate Resources
Allocating resources involves first knowing what resources are available before considering project needs, business priorities, and resource availability.
Remember that this process is ongoing: your plan may need to change as things develop, or you might require using matching strategies in planning capacity for forecasts/allotments on and on Management.
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Capture Key Within Indicators
No management plan works without measuring. Therefore, you must establish the Key Performance Indicators(s) you will monitor to gauge if and how effectively your plan has succeeded.
Well discuss them further below.
Best Practices For Capacity Planning
Team capacity planning is complex and involves many factors. There are many moving parts to it, including project planning, analysis of resources, management of those resources, and good communication.
Capacity planning is based on the following core tasks:
- Analyze the current use of resources.
- Forecasting future resource demands.
- Compare the forecasts to budgeted amounts.
- Identifying problems before they happen so that they can be dealt with.
The best process of capacity planning for one project can be imperfect for another. The following general tips will help you improve your capacity planning process across projects.
Multi-Functional Resources
Planning your project requires having resources that can perform multiple functions; having those with more versatility is especially important when dealing with employees - always strive to expand staff members skill sets for mutual company expansion and professional advancement.
Create A Pool Of Resources
At its core, a company or portfolios pool of resources encapsulates all available resources within its project portfolio.
While tracking everything would be impossible in practice, highlighting estimates for key resources first would help identify whos working on what.
It is estimated how long each member would devote to every project are often ineffective at doing this since some individuals will tend to be highly sought after across several tentative projects; these could include subject matter specialists that must serve multiple projects at the same time, often being used as bottlenecks.
Capturing resource estimates efficiently will deliver greater value while simultaneously decreasing noise. No, it matters whether everyone is present or if these resources need to be more utilized.
These resources determine how quickly an entire project can be finished and whether its execution goes smoothly.
Determine The Level Of Granularity For Allocation
Understanding your resources and their abilities is vitally important, both staffing capacities and those of other resources.
Being informed allows for proper project plans with achievable timelines that adhere to these resources.
For organizational resources to be assessed accurately, tracking them on an organizational-wide scale requires choosing whether you will track them weekly, monthly, or quarterly basis - these will vary based on dependent tasks and projects assigned separately.
To get this right, you should decide your tracking frequency accordingly.
Allocate Projects
Assign your individual team members to specific projects if you still need to know which projects your future and current team members will work on but want their time scheduled over five weeks - your resource management strategy would then become comprehensive.
Allocate Tasks
Task allocation is the practice of assigning work tasks among team members, with optimal results achieved when you can convert customer requirements directly into workable tasks in advance.
As part of your resource forecasting business strategy, we suggest collecting resource forecasts on both project- and phase-level.
It can only be possible to collect more detailed data for task-by-task forecasts as this requires you to predict resource availability using task assignments several months in advance.
This projection may or may not be accurate and will require frequent adjustment in the future.
Blocking Out Operating Time
Please take into consideration how each employee spends their time performing operational tasks; few employees devote all of their working hours towards projects alone.
Consider daily tasks, email exchanges, and meetings when tracking how resources spend their time. You dont need to track every resource every minute they are present at work.
Identify The Role Of Each Project
You can then look to acquire the necessary resources. Its crucial to include your remote team in this process to help the client determine how long it will take them to finish the package of work.
Prioritize Projects
Its important to understand which projects have the greatest impact on your business when you are allocating resources.
It makes perfect sense to focus on projects with the greatest impact on your company.
Allocate Resources
Allocating resources requires knowledge of available resources, project needs, and business priorities. Capacity planning offers one way of allocating these resources efficiently: focus your efforts on projects which are most vital for the business by using this method and ensure they receive necessary resources at their appropriate times.
Having such an instrument on hand also reduces human error while making managing all these variables simpler.
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Conclusion
Capacity planning can have an immense effect on both efficiency and productivity in any organization, helping ensure projects are completed on schedule without exceeding budgetary restrictions.
Capacity planning has never been easier thanks to an intelligent, visual tool for capacity planning. Reduce cost overruns while guaranteeing vital projects receive enough resources.
Furthermore, this solution fosters staff satisfaction through more production workloads. Contact one of our capacity planners now to discover how this can work to your benefit.
