Demystifying Capacity Planning – Importance, Steps, and Benefits of Capacity Planning

Importance of Capacity Planning

Before starting any project or production system design, what do you do? You make a plan considering what are the inputs needed, what's the conversion process, and what'll be the output. After taking into account the forecast and long-term planning, a business should go for resource capacity planning. But before that, let's see what we mean by capacity.

Capacity is the ability of any business to achieve, produce, or store. In other words, a system can produce output in a specific period. Capacity planning and capacity management are vital to determine optimum resource utilization. It plays a key role in decision-making, for instance, change in the product lines, introducing new products, an extension of existing operations, etc

Defining Capacity Planning

signifies the arrangement in which companies or businesses map their employees with the requirements of a particular project. Capacity is measured in how much work is carried out by employees and planning means web-based resource scheduling work hours for a specified projector work.

Consider an example of a start-up that has a team of 10 employees working for 20 hours a week. The firm will have a weekly working capacity of 200, which means the company manages up to 200 hours in a week comfortably.

Why is Capacity Planning Important?

How will be an agency's workflow entirely depends on how balanced their demand and supply. You might be good at business development and adding new projects to your portfolio. But if you don't enough resources to complete the tasks then you'll end up overburdening your team members and the deliveries will also get delayed.

However, it's not as simple as it sounds. Typically, project managers calculate the billable utilization, plan resources, and track employees' productive hours, etc. But is that enough?

Why is Capacity Planning Important?

The best way is to strike a balance between the profit margins and your team resources, and this is the area where we can see the importance of capacity planning.

Resource capacity planning presents a clear view of the amount of work a team can deliver without being over-pressurized and maintaining quality. It's not possible for most agencies to hire a dedicated person for capacity planning or capacity management. This is where capacity planning software comes into play.

Concepts of Capacity Planning

Concepts of Capacity Planning

Let's now see the concepts of capacity involved in capacity planning:

Design Capacity

The ideal situation is where the maximum output possible can be produced in a specified period of time.

Effective Capacity

Less than the design capacity, this one is a more realistic view. It means the maximum output possible with assumed amendments in product mix, planning, management problems, resource challenges, etc.

Actual Output

The rate of output achieved in reality. Actual output cannot go beyond effective capacity because of issues like machine breakdowns, employee absenteeism, unusual delay in the supply of material, and equipment, or any unforeseen challenges like power breakdown, etc.

The Three Types of Capacity Planning

If you have planned well in terms of all three types of capacity planning, then you can rest assured that you would have enough of three key resources in the long- and short-term.

1. Product capacity planning

ensures the availability of enough products or resources you need to deliver your projects or task properly.

2. Workforce capacity planning

ensures the availability of enough people and work hours to complete certain tasks or jobs. Workforce or team management in capacity planning helps you to raise a flag on when and how soon you should hire more employees so that your deliverables are not affected.

3. Tool capacity planning

ensures that you have all the tools needed to complete a task. This includes any hardware, software, or machinery you would require for delivering your product.

Three Capacity Planning Strategies for Expanding Capacity

The main three strategies that any business can use for expanding capacity planning are as follows:

Capacity Planning Strategies

Lead Strategy

One of the most aggressive strategies is where the business foresees an increase in demand and accordingly increases its production capacity much in advance. This strategy is used to attract customers toward a company's products and drive them away from the products of competitors, mainly because of inventory shortages in high-demand periods. This way stockout costs are minimized.

Lag Strategy

In this case, the organization responds to the high demand by increasing its production capacity after the business is running at full power. However, a business does not boost its production just on assumptions. Rather, it seeks proper facts and figures, and only then does it begin to act on them. The advantages of this strategy are that the business would not carry any additional inventory. Hence, there is the least risk of overproduction, and large investments also can be put off till essential.

Match Strategy

A moderate enterprise resource scheduling strategy is an amalgamation of both Lead and Lag strategies. Here, a business does not start building on anticipating very high demand, nor does it not act at all until the high demand phase knocks at your door. In this strategy, a business makes small modifications depending on the changing market conditions. This is tough to implement, but the risk is quite less comparatively.

Besides these three strategies for expanding capacity or capacity planning, many organizations follow adjustment and dynamic strategies too. In Adjustment Strategy, they either reduce or add to the capacity in small amounts as per the prevalent consumer demand.

However, Dynamic Strategy is a lot more secure and forecast-driven as here, a business adds capacity based on actual demand and sales forecast figures, a little before it is required.

The Benefits of Resource Capacity Planning

If you want to develop your project plans and resource schedules more accurately, then capacity planning and capacity management are imperative. The key benefit of resource capacity planning is that it ensures you have resources or team members who have the right skills as required.

As a project manager, you should keep your team occupied and fully utilized (but not over-utilized), and that's where team capacity planning and tracking employee capacity helps. It also helps in enhancing project efficiency for an agency and simplifying the process of planning for the future. So, consider using a capacity planning tool to gain the following benefits:

Benefits of Resource Capacity Planning

Know the Capacity

Imagine if you knew the time it would take your team to perform a certain task. Wouldn't that make your life so easy? Especially for the service industry, it is very beneficial to know how many tasks or projects each team member can take on to deliver the project on time.

One of the biggest advantages of workforce capacity planning is it helps organizations sort business priorities and understand overall employee capacity. With business capacity management, organizations can stay informed about what each team member is working on and forecast future workload based on current production capacity and historical data.

Cutting the resource Costs

With efficient workforce capacity planning, businesses can manage their human resources and ensure they have enough resources to meet future resource requirements.

Having a capacity management software handy invariably and implicitly leads to effective workforce capacity planning which can aid organisations to cut overheads.

With a capacity management tool, businesses can assess resource usage, time, and effort used by each team member to do a task and then make necessary adjustments to reduce overall business costs.

Get Real-Time Data

You might know that one of your main employees is not going to be available. But that won't help you complete your project or goals in terms of resource planning.

Make sure that you have real-time data to work from, for example, schedules, vacation plans, and utilization of all team members, and also ensure that everyone is committed to uniformly using one system. Remember, any tool is only as accurate or effective as the data going into it.

Consider Employee Skills

In an organizational landscape, every employee is unique and someone could indeed be better at some tasks than others. With capacity management, project managers can better identify the skills needed to execute a campaign and pick the right resources required to meet and exceed customer demand.

For instance, when enterprises have a capacity planning process at their disposal or an efficient workforce capacity planning tool in their arsenal, they can get a good graphic designer for a graphic-intensive project, or skilled writers and editors for a content-heavy campaign.

Ensure Availability

Before signing the dotted line for that coveted contract, think if you are really sure that you can pull this project off. Doing capacity planning will highlight what scope you should define for your new projects. Then, you should be sure that your team members are available, or can you get in extra resources for the project.

Now, that's a great use of capacity management!

Plan Better

Be aware of the demand and then plan for it. Incorporate holidays, internal projects and initiatives, any events, or new projects coming up. As a project manager, being able to plan more efficiently means accurate and streamlined forecasting for all your team's resources and projects. This, in turn, leads to greater probability and better reviews from your clients.

Manage Your Skills Inventory

Capacity planning also has a strong association with your team's skills inventory, so you can manage customer demand effortlessly. Maintaining a skills inventory is very beneficial as this record of which team members can do which task, or what skills they possess is quite helpful in planning for a project, so you can create resource plans according to future customer demand.

For an IT project, you should list down the expertise of your team members to see who is adept at web designing, technical programming, IT architecture, or developing system security and managing system testing. This will help you to quickly allocate tasks to suitable people. You can use this inventory to also check which skills are suitable to deliver your strategic initiatives, then you can take steps accordingly.

Maximize Utilization

Most businesses face a challenge with team capacity planning or tracking employee capacity or resource availability. If you get a clear view of which team members are available and when you can easily maximize the team utilization by planning accordingly.

By maximizing the utilization, workforce capacity planning helps organizations get more work done and accomplished with the same resources. This, as a result, enhances your chances for on-time deliveries and project success.

Production cycles

Do you have any idea about the kind of money organizations lose during production cycles because they can't forecast future workload? Well fortunately, with efficient capacity management, they can avoid this.

Capacity management helps an organization maintain the required production cycle so that it doesn't lag behind in periods of high demand. So, if you have a business of certain products that have seasonal demand, use capacity planning to function as per the expected demands. Capacity planning tools also help you in gauging the downward trend so that you can stop the manufacturing process.

Calculate Accurate Workload

It's important to ascertain the kind of workload your team or resources can manage. After evaluating each person's skills, strengths, and weaknesses, calculate the time it would take for your team to handle each task. One thing that should be avoided in the long run is multiple unplanned projects which can lead your team to burn out.

Dig deeper into your long-term projects, see how many are new clients, or new products, and how many are existing ones. Then, check your team's ability to manage these projects. Finally, estimate what resources would you need to devote to the tasks. If this sounds tricky, rely on capacity planning work schedule apps and software or tools that can assist you with perfect calculations.

Organize Your Time

Your team members would be more productive and happier when they are aware of what they should be working on and when. Make a plan for each task and how much time will take. A project manager should know what each team member has on their to-do list and accordingly prioritize their workload. If they wait for instructions for you each time, there will be a lot of time and effort wasted.

Steps in the Capacity Planning Process

Steps in the Capacity Planning Process

If your agency wants to leverage the benefits of capacity planning, then, you must first create a process. This process has the following four steps:

Step 1: Identify all existing and new projects and tasks

The first step is to know what is it that you're going to plan for. It's important to make a detailed outline of all the tasks that need to be done while taking a long-term view. Check your pipeline and what all projects are there in the coming 3-6 months.

Then, start to calculate how much effort and time each project will take by breaking them down into smaller tasks or milestones. It's also vital that you share this outline with your team as they will be the ones actually doing the work, and hence, they can verify if the plan is accurate and possible or not.

Also, remember the scope of each project to calculate the number of resources needed to complete each task.

Step 2: Decide a strategy

Which strategy will you pick - lead, lag, or match? Determine which strategy will work the best for your agency and will fit into the decided budget. Note that though a lag strategy is not that risky, a match strategy will enable you to use capacity planning for your gain.

The strategy you opt for will determine your approach toward capacity planning, and if you have the bandwidth to take up additional projects and resources without going into any risk.

Step 3: Create a realistic resource schedule

The next step is to create a realistic working schedule based on the outline you made in Step 1. As capacity planning is related to your team's skillsets and availability, the resource schedule must consider other aspects such as the project type, tasks, budget, and hours or effort required. Let's take an example. Suppose you have 10 programmers who can dedicate 50% of their time to a new prestigious project in the next couple of months. Use that availability to estimate how many full-time programmers can work on this project as 10 programmers working at 50% capacity = 5 full-time programmers available. So, 5 full-time programmers putting in 40 hours of effort every week for 2 months leaves you with 1600 hours that you can utilize on the project.

Step 4: Track down minute details

Capacity planning is a continuous process where an agency monitors how its projects are progressing to ensure capacity is not exceeding the ideal resource utilization rate. Without the right capacity planning software, this task will become very easy. Using IT resource allocation tools helps you to automatically track your capacity planning and management efforts.

Using Enbraun's eResource Scheduler will enable you to calculate your team's capacity, effort, utilization, etc automatically. You can therefore ensure that you're not over-allocating any tasks to any member. The public holidays, personal vacations, and other events will be baked in automatically which makes it easy to find if you need to add any extra resources.

Capacity Management with eResource Scheduler

eResource Scheduler (eRS) is a leading multi-user and collaborative scheduling, IT capacity planning, and time tracking app. This tool is specially designed to enable organizations to schedule their resources on various projects efficiently. That's not all. The client-server architecture of this capacity planning tool permits multiple users to work together and share data in real time.

It's a simple process to configure eResource Scheduler if you need to schedule employees or custom-defined resources like meeting rooms, equipment, or vehicles. This best-in-class employee scheduler also helps in maximizing your utilization and productivity at all levels of the organization. There's nothing technical about understanding it and it's very simple to use too which makes it very popular among organizations of various sizes and industries.

Also read:

CEO & Founder
Rudraksh Vyas
Rudraksh Vyas, an accomplished CEO at ENBRAUN since 2011, has a proven track record in leading and growing technology-driven businesses. His expertise lies in product development, client management, and implementing effective business strategies, ensuring robust financial and resource management. Prior to his current role, Rudraksh honed his skills in business development, where he excelled in account management and export marketing. He holds a PMP certification from the Project Management Institute and an MBA in International Business from the University of Technology Sydney. Rudraksh's journey reflects a deep commitment to excellence and innovation in the tech industry, making him a respected leader and visionary in his field.

Maximize resource utilization now

One place to schedule, plan and track all your resources